<PAGE>
As filed with the Securities and Exchange Commission on May 9, 2000
Registration Statement No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
Nassau Broadcasting Corporation
(Exact Name of Registrant as Specified in Its Charter)
Delaware 4832 Applied for
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification Number)
Incorporation or Classification Code
Organization) Number)
619 Alexander Road
Princeton, New Jersey 08540
(609) 452-9696
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------
Michael S. Libretti
Executive Vice President and
Chief Financial Officer
Nassau Broadcasting Corporation
619 Alexander Road
Princeton, New Jersey 08540
(609) 452-9696
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------
Copies to:
Phyllis G. Korff, Esq. Michael J. Schiavone, Esq.
Skadden, Arps, Slate, Meagher & Shearman & Sterling
Flom LLP 599 Lexington Avenue
Four Times Square New York, New York 10022
New York, New York 10036-6522 Tel: (212) 848-4000
Tel: (212) 735-3000 Fax: (212) 848-7179
Fax: (212) 735-2000
--------------
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, as amended, check the following box: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box: [_]
--------------
CALCULATION OF REGISTRATION FEE
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
Title of Each Class of Proposed Maximum Aggregate Amount of Registration
Securities To Be Registered Offering Price(1) Fee
- --------------------------------------------------------------------------------
<S> <C> <C>
Class A common stock, $.01
par value................. $190,000,000 $50,160
- --------------------------------------------------------------------------------
</TABLE>
(1)Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(o) of the Securities Act.
--------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion
Preliminary Prospectus dated May 9, 2000
P R O S P E C T U S
Shares
Nassau Broadcasting Corporation
Class A Common Stock
-----------
This is Nassau's initial public offering. Nassau is selling all of the
shares. The U.S. underwriters are offering shares in the U.S. and
Canada and the international managers are offering shares outside the
U.S. and Canada.
We expect the public offering price to be between $ and $ per share.
Currently, no public market exists for the shares. After pricing of the
offering, we expect that the shares will be quoted on the Nasdaq National
Market under the symbol "NBCR."
Investing in the class A common stock involves risks that are described in
the "Risk Factors" section beginning on page 13 of this prospectus.
-----------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public offering price............................. $ $
Underwriting discount............................. $ $
Proceeds, before expenses, to Nassau.............. $ $
</TABLE>
The U.S. underwriters may also purchase up to an additional shares from
Nassau at the public offering price, less the underwriting discount, within 30
days from the date of this prospectus to cover over-allotments. The
international managers may similarly purchase up to an additional shares
from Nassau.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
The shares of class A common stock will be ready for delivery on or about
, 2000.
-----------
Merrill Lynch & Co. Salomon Smith Barney
-----------
Banc of America Securities LLC
-----------
The date of this prospectus is , 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary.................................................................. 1
Risk Factors............................................................. 13
Reorganization........................................................... 20
Pending Acquisitions..................................................... 21
Use of Proceeds.......................................................... 24
Dividend Policy.......................................................... 24
Capitalization........................................................... 25
Dilution................................................................. 26
Unaudited Pro Forma Consolidated Financial Data.......................... 28
Selected Historical Financial Data....................................... 31
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 33
Industry Overview........................................................ 42
Business................................................................. 44
Management............................................................... 65
Related Party Transactions............................................... 74
Principal Stockholders................................................... 75
Description of Capital Stock............................................. 77
Shares Eligible for Future Sale.......................................... 82
Material United States Federal Tax Consequences to Non-U.S. Holders of
Our Class A Common Stock................................................ 84
Underwriting............................................................. 86
Legal Matters............................................................ 90
Experts.................................................................. 90
Where You Can Find Additional Information................................ 90
Index to Financial Statements............................................ F-1
</TABLE>
---------------
You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate only as of the date on
the front cover of this prospectus. Our business, financial condition, results
of operations and prospects may have changed since that date.
Special note regarding forward-looking statements
This prospectus contains forward-looking statements that relate to future
events or our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expect," "plan," "anticipate," "believe," "estimate," "forecast," "predict,"
"intend," "potential" or "continue" or the negative of such terms or other
comparable terminology. These forward-looking statements are based on current
expectations about future events. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements. The risks set
forth under "Risk Factors" and elsewhere in this prospectus could cause our
future operating results to differ materially from those contemplated by our
forward-looking statements. In addition, factors that we are not currently
aware of could harm our future operating results.
i
<PAGE>
SUMMARY
This is only a summary and does not contain all of the information that
may be important to you. You should read the entire prospectus, including the
risk factors section and our financial statements and related notes, before
making an investment decision.
Nassau Broadcasting Corporation
We are a radio broadcasting company focused on building local radio
station clusters in demographically attractive suburban areas surrounding major
metropolitan markets in the northeastern United States. Pro forma for pending
acquisitions, we will own and/or operate 17 FM and 15 AM stations located in
nine markets in New Jersey, Pennsylvania, New York and Connecticut. We have
assembled market-leading radio station clusters that serve highly populated
suburban areas characterized by above average affluence and retail sales per
capita. We believe that these market characteristics provide us with
significant growth potential. On a historical basis, we had net revenues of
$31.4 million and broadcast cash flow of $10.6 million for the year ended
December 31, 1999 and net revenues of $7.3 million and broadcast cash flow of
$2.0 million for the three months ended March 31, 2000. After giving effect to
a recent tower-related asset sale and our pending acquisitions, each of which
we describe more fully below, we would have had, on a pro forma basis, net
revenues of $55.9 million and broadcast cash flow of $20.6 million for the year
ended December 31, 1999 and net revenues of $12.9 million and broadcast cash
flow of $4.5 million for the three months ended March 31, 2000.
By acquiring, developing and operating radio stations in high growth
suburban markets, we have substantially increased the net revenues and
broadcast cash flow of our stations resulting in 21.0% and 33.0% two-year
compound annual same station net revenue and same station broadcast cash flow
growth, respectively. We have organized our stations into four clusters:
Northern, Northwestern, Central and Shore. We also have a division called the
Jersey Radio Network that markets all of our stations to national advertisers.
After giving effect to our pending acquisitions, our stations will cover over
6.7 million listeners.
Competitive Strengths
We believe that the following competitive strengths have been critical to
our success:
. Strengthening underperforming stations. We have a demonstrated record
of developing and strengthening underperforming radio stations into
viable, competitive local brands that produce significant revenue and
cash flow increases;
. Identifying and developing markets. We have been able to identify and
define markets that were previously underdeveloped in terms of their
total radio revenues. We seek markets that have lower radio market
revenue relative to total retail sales as compared to the national
average and/or where radio has historically captured only a small
portion of total local advertising expenditure.
. Covering contiguous suburban markets. We provide comprehensive
coverage of suburban markets surrounding the New York and Philadelphia
metropolitan areas, which we believe are demographically attractive
and have strong revenue growth potential;
. Operating stations effectively. We have generated consistent organic
growth on a same station basis at both our developing and established
stations; and
3
<PAGE>
. Acquiring and integrating stations. We have successfully acquired and
integrated 19 stations during the past five years.
The combination of operating our stations in market clusters and having
advertising, sales and programming expertise has enabled us to achieve the
following growth:
. same station net revenues increased 25.0% from 1998 to 1999; and
. same station broadcast cash flow increased 42.0% from 1998 to 1999.
We calculated same station results for the periods presented above for
stations we operated as of January 1, 1998 and continued to operate through
December 31, 1999.
Operating Strategy
We intend to continue to grow our business, both organically and through
acquisitions, by pursuing the following strategies:
. Building station clusters. We operate multiple stations within each of
our markets and cluster them to provide coverage over a series of
geographically adjacent markets. This clustering strategy provides
beneficial operating efficiencies and delivers extensive coverage of
diverse and attractive demographic groups to advertisers in a cost-
effective manner.
. Improving station programming. We recognize the importance of radio
stations to the local markets and continue to increase the local
content of our station programming. In addition, we focus on
continually enhancing our stations programming to increase our
audience share.
. Enhancing brand awareness. We brand and market individual stations to
improve audience recognition, loyalty and ratings. We have branded our
national sales force as the Jersey Radio Network to provide radio
advertising schedules that compliment traditional metro market
schedules in New York and/or Philadelphia. We intend to re-brand our
national sales force after we complete our acquisition.
. Cultivating a broad base of advertisers. We continue to develop our
sales force to proactively service local and national advertisers.
Acquisition Strategy
We intend to continue to expand our presence in demographically
attractive suburban areas surrounding major metropolitan markets, primarily in
the Northeast. We target markets that have lower radio market revenue relative
to total retail sales as compared to the national average and/or where radio
has historically captured only a small portion of total local advertising
expenditure. We seek to acquire stations that enable us to strengthen further
our presence in existing markets or to create leadership positions in new,
complementary markets. Frequently, the suburban areas we target are markets
that have fragmented ownership of radio stations or a limited number of fully
developed local stations. We are especially attracted by the opportunity to
acquire underperforming stations with the potential for significantly increased
revenues. We have an established process to integrate new stations into our
portfolio, culture and operating philosophy. As we integrate our acquisitions,
we involve senior management in the design and execution of plans to revitalize
any underperforming stations and transform them into more profitable ones.
4
<PAGE>
Pending Acquisitions
We have signed definitive purchase agreements in connection with the
following acquisitions:
. all of the outstanding equity interests of Aurora Communications, LLC,
which owns nine stations in the Westchester, New York, Bridgeport,
Connecticut and Danbury, Connecticut markets, for approximately $185.0
million, of which $178.0 million remains due;
. two radio stations located in Allentown, Pennsylvania from Clear
Channel Communications, Inc. for approximately $30.0 million, of which
$24.0 million remains due;
. seven radio stations that we currently operate under local marketing
agreements, for a total of approximately $46.6 million, of which $18.9
million remains due;
. all of the outstanding stock of Manahawkin Communications Corporation,
which owns a construction permit to build a new radio station, WCHR
(FM), in the New Jersey market of Monmouth and Ocean counties, for
approximately $4.7 million, of which $2.6 million remains due; and
. one radio station located in Mount Pocono, Pennsylvania from Tiab
Communications Corporation for $100.
We have not received regulatory approvals in connection with any of these
acquisitions and, with respect to some of them, we have not yet applied to the
Federal Communications Commission, or FCC, for approval. We cannot assure you
that any regulatory body will grant final orders approving these acquisitions
or that we or any other relevant party will be able to satisfy all of the other
conditions required to close these acquisitions. The completion of this
offering is not conditioned upon the consummation of any of the pending
transactions.
5
<PAGE>
Station Portfolio
The following table sets forth information as of the date of this
prospectus with respect to stations we own, operate or have agreed to acquire:
<TABLE>
<CAPTION>
1999
Radio Group
1999 1999 1999 Stations Rank in
Market Radio Market Number of Radio Market --------- Market
Market Rank Revenue Rank Listeners Revenue Growth FM AM Revenue
------ ------ ------------ --------- -------------- -- ---- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Northern (1)
Westchester, NY (2)..... 1 2 161,600 16.8% 2 1 N/A
Bridgeport, CT.......... 112 91 320,100 5.6% 1 1 1
Danbury, CT............. 189 190 148,600 8.0% 2 2 2
Northwestern
Sussex, NJ.............. 239 250 188,900 16.7% 3 1 1
Newburgh-Middletown,
NY..................... 141 258 18,500 9.8% 1 1 5
Wilkes Barre-Scranton,
PA..................... 64 77 64,900 11.3% 1 2 4
Allentown, PA (3)....... 67 76 235,100 6.8% 1 1 3
Central
Trenton, NJ............. 138 100 858,800 14.6% 2 4 1
Shore
Monmouth-Ocean, NJ (4).. 47 83 419,300 21.3% 4 2 1
--------- ---- ----
Total................. 2,415,800 17 15
========= ==== ====
</TABLE>
- --------
(1) Consists of the nine radio stations we expect to acquire through our
acquisition of Aurora Communications, LLC.
(2) Falls within the greater New York market.
(3) Consists of the two stations we expect to acquire from Clear Channel
Communications, Inc.
(4) Includes the construction permit of WCHR (FM), which we will acquire upon
the completion of our acquisition of Manahawkin Communications Corporation.
6
<PAGE>
History, Recapitalization and Reorganization
Louis F. Mercatanti, Jr., our President and Chief Executive Officer,
acquired WPST (FM) and WHWH (AM) in Trenton, New Jersey through the purchase of
Nassau Broadcasting Company in 1986. Nassau Broadcasting Partners, L.P. was
formed in December 1995 to consolidate the radio assets that Mr. Mercatanti had
acquired through that time.
In May 2000, we undertook a recapitalization in which, among other
things, we:
. entered into a new credit facility that provides for borrowings of up
to $144.0 million;
. issued and sold units consisting of senior discount notes and limited
partnership units for gross proceeds of $60.0 million. The limited
partnership units were converted into shares of our class A common
stock as of the date of this offering;
. repaid all outstanding obligations under our old credit facility and
all $42.4 million of our outstanding subordinated discount notes which
had been issued to our existing stockholders; and
. redeemed $2.5 million of equity interests of, and paid a $2.9 million
preferred distribution to, Mr. Mercatanti, one of our stockholders.
Until immediately prior to this offering, we were a limited partnership
whose principal subsidiaries were single-member limited liability companies. In
connection with this offering, we have terminated our limited partnership
status and have become a corporation. Before giving effect to this offering,
each of our stockholders owns an amount of our common stock representing its
previous economic interest in Nassau Broadcasting Partners, L.P. Most of our
existing stockholders own class B common stock, which has 10 votes per share
and provides them with majority voting control of the corporation.
In February 2000, we completed the sale of our tower-related assets to
affiliated entities controlled by Mr. Mercatanti for $10.0 million. These
affiliated entities then immediately transferred the bulk of these assets to
Pinnacle Towers Inc., which has in turn leased tower space back to us. In
addition, these affiliates have leased some assets to us.
Our principal executive offices are located at 619 Alexander Road,
Princeton, New Jersey 08540, our telephone number is (609) 452-9696, and the
address of our website is www.nassaubroadcasting.com. The information on our
website is not part of this prospectus.
7
<PAGE>
The Offering
Class A common stock offered by us:
<TABLE>
<C> <S>
U.S. offering....................... shares
International offering.............. shares
----------------
Total........................... shares
Shares outstanding after the offering.. shares of class A common stock
shares of class B common stock
shares of class C common stock
Voting rights.......................... Class A common stockholders have one
vote for each share, class B common
stockholders have ten votes for each
share and class C common stockholders
have no votes.
Conversion rights...................... Class B common stockholders may at any
time convert their shares into shares
of class A common stock on a one-for-
one basis. In addition, the shares of
class B common stock convert
automatically into shares of class A
common stock on a one-for-one basis
upon their transfer to someone other
than a permitted transferee. Class C
common stockholders may only convert
their shares into shares of class A or
class B common stock at the option of
the holders upon satisfying conditions
specified in our certificate of
incorporation.
Use of proceeds........................ We estimate that our net proceeds from
this offering without exercise of the
underwriters' over-allotment options
will be approximately $ million. We
intend to use these net proceeds:
. to redeem all of our outstanding
senior discount notes;
.to finance a portion of the
acquisition of Aurora Communications;
. to finance most of the acquisition
of two Allentown, Pennsylvania
radio stations; and
. to pay transaction costs and
provide for general corporate
purposes.
Risk factors........................... See "Risk Factors" and other
information included in this
prospectus for a discussion of factors
you should carefully consider before
deciding to invest in shares of our
class A common stock.
Nasdaq National Market symbol.......... NBCR
</TABLE>
The number of shares of class A common stock outstanding after the
offering excludes:
. shares of class A common stock we have reserved for issuance under
our stock incentive plan, of which options to acquire shares have
already been issued under this plan at a weighted average option price
of $ ; and
. up to additional shares of class A common stock issuable upon
exercise of the underwriters' over-allotment options.
8
<PAGE>
Summary Pro Forma Consolidated Financial Data
In the table below, we provide you with our summary unaudited pro forma
consolidated financial data as of the dates and for the periods indicated. Our
unaudited pro forma consolidated statement of operations data for the year
ended December 31, 1999 and for the three months ended March 31, 2000 give
effect to the following transactions as though they had occurred on January 1,
1999 and January 1, 2000, respectively:
. our recapitalization and reorganization;
. the completion of this offering and the application of the net
proceeds as described in this prospectus;
. the completion of our acquisition of Aurora Communications;
. the completion of our acquisition of two radio stations in Allentown,
Pennsylvania;
. the completion of our acquisitions of WILT (AM) and WCHR (FM);
. the completion of our acquisitions of seven stations that we currently
operate under local marketing agreements; and
. our tower-related asset sale.
Our unaudited pro forma consolidated balance sheet data as of March 31,
2000 gives effect to those of the transactions listed above that are expected
to occur after March 31, 2000, as if they had occurred on March 31, 2000. We
have included all adjustments, consisting only of normal recurring adjustments,
which, in the opinion of management, are necessary for a fair presentation of
this data. We based the pro forma adjustments on available information and on
assumptions that we believe are reasonable under the circumstances.
We provide you with our summary unaudited pro forma consolidated
financial data for illustrative purposes only and not to indicate what our
results of operations or financial position would have been if the transactions
described above had been consummated on the date indicated or to indicate
future results of operations or financial positions. The summary unaudited pro
forma consolidated financial data are based on assumptions and adjustments
described in the notes to the unaudited pro forma consolidated financial data
included elsewhere in this prospectus.
You should read the following data in conjunction with the historical
financial statements and related notes, the unaudited pro forma consolidated
financial statements and related notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
in this prospectus.
9
<PAGE>
Summary Pro Forma Consolidated Financial Data
<TABLE>
<CAPTION>
Year Ended Three Months Ended
December 31, 1999 March 31, 2000
----------------- --------------------
(unaudited)
(dollars in thousands, except per
share data)
<S> <C> <C>
Statement of Operations Data:
Gross revenues......................... $ 60,868 $14,153
Less agency and outside commissions.... 4,990 1,239
-------- -------
Net revenues......................... 55,878 12,914
-------- -------
Operating expenses..................... 35,230 8,427
Depreciation and amortization.......... 14,649 3,862
Corporate general and administrative
expenses.............................. 2,280 587
Local marketing agreement fees......... 700 175
-------- -------
Total operating expenses............. 52,859 13,051
-------- -------
Operating income (loss)............ 3,019 (137)
-------- -------
Other income (expense)
Investment income.................... 2,562 453
Gain on sale of assets............... 567 1,633
Interest expense..................... (12,711) (3,228)
Total other expense.................. (9,582) (1,142)
-------- -------
Loss before extraordinary items...... $ (6,563) $(1,279)
======== =======
Basic and diluted net loss per common
share................................. $ $
======== =======
Weighted average shares used in
determining net loss per share........
======== =======
Other Data:
Broadcast cash flow (1)................ $ 20,648 $ 4,487
EBITDA (1)............................. 18,368 3,900
After-tax cash flow (1)................ 7,519 950
<CAPTION>
As of March 31, 2000
--------------------
(unaudited)
(in thousands)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.............. $ 2,001
Working capital........................ 5,932
Total assets........................... 305,950
Total indebtedness..................... 130,714
Stockholders' equity................... 68,473
</TABLE>
- --------
(1) The term "broadcast cash flow" means operating income (loss) before
depreciation and amortization expense, corporate general and administrative
expenses and local marketing agreement fees. The term "EBITDA" means
operating income (loss) before depreciation and amortization expense and
local marketing agreement fees. The term "after-tax cash flow" means income
(loss) before extraordinary items, minus net gain on sale of assets, plus
depreciation and amortization expense. Although broadcast cash flow, EBITDA
and after-tax cash flow are not measures of performance calculated in
accordance with GAAP, we believe that they are useful to an investor in
evaluating our performance because they are measures widely used in the
broadcasting industry to evaluate a radio company's operating performance.
However, you should not consider broadcast cash flow, EBITDA and after-tax
cash flow in isolation or as substitutes for net income, cash flow from
operating activities and other income or cash flow statement data prepared
in accordance with GAAP, or as measures of liquidity or profitability.
Broadcast cash flow, EBITDA and after-tax cash flow, as we define these
terms, may not be comparable to similarly titled measures used by other
companies.
10
<PAGE>
Summary Historical Financial Data
In the table below, we provide you with our summary historical financial
data as of the dates and for the periods indicated. The historical financial
data that appear below are those of Nassau Broadcasting Partners, L.P. We have
derived the statement of operations data for each of the years in the three-
year period ended December 31, 1999 from the financial statements of Nassau
Broadcasting Partners, L.P. included elsewhere in this prospectus. We have
derived the statement of operations data for the three months ended March 31,
1999 and 2000 and the balance sheet data as of March 31, 2000 from the
unaudited financial statements of Nassau Broadcasting Partners, L.P. which have
been prepared on the same basis as the audited financial statements and reflect
all adjustments, consisting only of normal recurring adjustments, which, in the
opinion of management, are necessary for a fair presentation of this data.
Results for the three-month period ended March 31, 2000 are not necessarily
indicative of results that may be expected for the entire year or for any
future period. You should read the following data in conjunction with the
historical financial statements and related notes, the unaudited pro forma
consolidated financial statements and related notes, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended March 31,
-------------------------- -----------------
1997 1998 1999 1999 2000
-------- ------- ------- ------- --------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Gross revenues................. $ 20,891 $27,349 $34,295 $ 6,811 $ 7,893
Less agency and outside
commissions................... 1,812 2,353 2,893 544 612
-------- ------- ------- ------- --------
Net revenues.................. 19,079 24,996 31,402 6,267 7,281
-------- ------- ------- ------- --------
Operating expenses............. 13,437 17,227 20,794 4,570 5,318
Depreciation and amortization.. 2,139 2,364 2,634 603 822
Corporate general and
administrative expenses....... 1,995 1,825 2,280 500 587
Local marketing agreement
fees.......................... 1,666 2,271 2,517 725 640
-------- ------- ------- ------- --------
Total operating expenses...... 19,237 23,687 28,225 6,398 7,367
-------- ------- ------- ------- --------
Operating income (loss)...... (158) 1,309 3,177 (131) (86)
-------- ------- ------- ------- --------
Other income (expense)
Investment income............. 530 992 2,562 154 453
Gain on sale of assets........ -- 3,176 567 142 1,633
Interest expense.............. (6,367) (8,781) (10,946) (2,718) (3,024)
Special management fee........ (744) -- -- -- --
-------- ------- ------- ------- --------
Total other expense.......... (6,581) (4,613) (7,817) (2,423) (938)
-------- ------- ------- ------- --------
Income (loss) before
extraordinary item.......... (6,739) (3,304) (4,640) (2,554) (1,024)
Extraordinary loss on early
retirement of debt............ -- (677) -- -- --
-------- ------- ------- ------- --------
Net loss..................... $ (6,739) $(3,980) $(4,640) $(2,554) $(1,024)
======== ======= ======= ======= ========
Other Data:
Broadcast cash flow (1)........ $ 5,642 $ 7,769 $10,608 $ 1,697 $ 1,963
EBITDA (1) 3,647 ,944 8,328 1,197 1,376
After-tax cash flow (1)........ (4,600) (4,116) (2,573) (2,093) (1,835)
Net cash provided by (used in)
Operating activities.......... (3,393) (1,408) (165) 104 117
Investing activities.......... (18,541) 3,90 (8,68) (6,892) (4,577)
Financing activities.......... 17,172 3,847 2,071 (536) 6,269
</TABLE>
footnote on following page
11
<PAGE>
<TABLE>
<CAPTION>
As of March 31, 2000
--------------------
(unaudited)
(in thousands)
<S> <C>
Balance Sheet Data:
Cash and cash equivalents.................................. $ 2,397
Working capital............................................ 8,428
Total assets............................................... 82,686
Total indebtedness......................................... 97,412
Stockholders equity........................................ (21,489)
</TABLE>
- --------
(1) The term "broadcast cash flow" means operating income (loss) before
depreciation and amortization expense, corporate general and administrative
expenses and local marketing agreement fees. The term "EBITDA" means
operating income (loss) before depreciation and amortization expense and
local marketing agreement fees. The term "after-tax cash flow" means income
(loss) before extraordinary items, minus net gain on sale of assets, plus
depreciation and amortization expense. Although broadcast cash flow, EBITDA
and after-tax cash flow are not measures of performance calculated in
accordance with GAAP, we believe that they are useful to an investor in
evaluating our performance because they are measures widely used in the
broadcasting industry to evaluate a radio company's operating performance.
However, you should not consider broadcast cash flow, EBITDA and after-tax
cash flow in isolation or as substitutes for net income, cash flow from
operating activities and other income or cash flow statement data prepared
in accordance with GAAP, or as measures of liquidity or profitability.
Broadcast cash flow, EBITDA and after-tax cash flow, as we define these
terms, may not be comparable to similarly titled measures used by other
companies.
11--1
<PAGE>
Market and Industry Data and Industry Terms
Local Marketing Agreements. We use the term local marketing agreement in
various places in this prospectus. A typical local marketing agreement is an
agreement under which a FCC licensee of a radio station makes available, for a
fee, air time on its station to another person. This person provides
programming to be broadcast during this air time, collects revenues from
advertising it sells for broadcast during this programming and pays related
expenses.
Statistics. Unless otherwise indicated:
. we based metropolitan statistical areas on the Arbitron Radio Metro
and Television Market Population Estimates 1999;
. we obtained radio market rankings, radio market revenue rankings,
radio market revenue growth and other radio market data from BIA
Research, Inc., or BIA, a recognized broadcasting research firm;
. we calculated our revenue rankings in each radio market by aggregating
radio revenues of all radio stations in that market, as derived from
BIA, and calculating each radio station's percentage share of this
aggregate revenue. The radio station with the highest percentage share
is ranked first in the market, the radio station with the second
highest percentage share is ranked second, and so forth;
. we obtained total industry listener and revenue levels from the Radio
Advertising Bureau, a national trade organization;
. we derived number of listeners data from the Fall 1999 Arbitron Market
Report;
. we derived all audience share data and audience rankings, including
ranking by population, from surveys of people 12 years of age and
older, listening Monday through Sunday, 6 a.m. to 12 midnight, and
based on the Fall 1999 Arbitron Market Report pertaining to each
market, as reported by BIA; and
. we obtained all county-wide retail sales information from the 1999
edition of Sales and Marketing Management, a recognized publication
containing market and economic research data.
Information About Financial Data
As you review the financial information contained in this prospectus, you
should note the following:
. the term "net revenues" means gross revenues less agency and outside
commissions incurred for selling air time;
. the term "broadcast cash flow" means operating income (loss) before
depreciation and amortization expense, corporate general and
administrative expenses and local marketing agreement fees;
. the term "EBITDA" means operating income (loss) before depreciation
and amortization expense and local marketing agreement fees; and
. the term "after-tax cash flow" means income (loss) before
extraordinary items, minus net gain on sale of assets, plus
depreciation and amortization expense.
12
<PAGE>
RISK FACTORS
You should consider the risks described below before making an investment
decision. We believe that the risks and uncertainties described below are the
principal material risks facing us as of the date of this prospectus. In the
future, we may become subject to additional risks that are not currently known
to us. If any of the following risks occur, our business, financial condition
or results of operations could be materially adversely affected. The trading
price of our class A common stock could decline due to any of the following
risks, and you might lose all or part of your investment.
Risks relating to our business
We have a history of losses that if continued could adversely affect the market
price of our class A common stock and our ability to raise capital.
Since our inception, we have incurred substantial net losses and have
never generated positive cash flow from operations. We believe that we will
continue to incur losses while we pursue our strategy of acquiring radio
stations and developing our network. We will also incur losses during the
initial reformatting and assimilation process with respect to the radio
stations that we acquire. We cannot be certain that we will become profitable
or generate positive cash flow. Our inability to become profitable may
adversely affect the market price of our class A common stock, which in turn
may adversely affect our ability to raise additional capital through debt or
equity issuances.
Our substantial level of debt could limit our ability to grow and compete.
As of March 31, 2000, after giving pro forma effect to our pending
acquisitions, our recapitalization and reorganization and this offering, we
would have had outstanding long-term debt (inclusive of current portion) of
approximately $130.7 million.
Our substantial level of debt could have adverse consequences to holders
of our class A common stock, including the following:
. it may be difficult for us to obtain additional financing in the
future for working capital, capital expenditures, acquisitions,
general corporate or other purposes;
. we may have to dedicate a substantial portion of cash flow from our
operations to make interest and principal payments on our debt;
. if we are unable to service our debt, we may be forced to sell some
of our assets because our credit facility is secured by substantially
all of our assets; and
. we may be more vulnerable to economic downturns, limited in our
ability to withstand competitive pressures and less flexible in
adjusting rapidly to changing business and economic conditions.
Our ability to satisfy all of our debt obligations depends upon our
future operating performance, which will be affected by general economic
conditions and financial, business and other factors, many of which are beyond
our control.
13
<PAGE>
Our acquisition strategy may not yield the results that we anticipate.
We have experienced rapid growth and intend to continue to grow by
acquiring radio stations in suburban areas surrounding major metropolitan
markets, primarily in the Northeast. This strategy is subject to a variety of
risks, including:
. a reduction in the number of suitable acquisition targets resulting
from continued industry consolidation;
. increases in prices for radio stations due to increased competition
for acquisition opportunities;
. an inability to negotiate definitive purchase agreements on
satisfactory terms;
. our failure to complete, or unanticipated delays in completing,
acquisitions due to difficulties in obtaining regulatory approval;
. difficulty in integrating the operations, systems and management of
our acquired stations and absorbing the increased demands on our
administrative, operational and financial resources;
. the diversion of management's attention from their other business
concerns;
. the loss of key employees of acquired stations; and
. an inability to strengthen underperforming stations.
If we are not able to address successfully these risks, it could
materially harm our business and impair the value of our class A common stock.
We may not be able to close our pending acquisitions.
Our pending acquisitions will not close unless we and the other relevant
parties satisfy or waive all the conditions to closing. In addition, we cannot
waive legal and regulatory requirements, such as FCC approval. To date, we have
not received final orders from the FCC approving any of our pending
acquisitions. As a result, we cannot assure you that we will be able to close
any of these acquisitions within the expected time frame or at all. In
addition, we may be subject to further examination by the Department of Justice
or the Federal Trade Commission pursuant to federal antitrust laws. Any
decision by the Department of Justice or the Federal Trade Commission to
challenge any proposed acquisition could affect our ability to close our
pending acquisitions. Depending on the size of the acquisition, a failure to
close, or a substantial delay in closing, could have a material adverse effect
upon our business prospects, financial condition and results of operations. The
completion of this offering is not conditional upon the consummation of any of
our pending acquisitions.
Our inability to manage effectively our rapid growth could adversely affect our
operations.
We have experienced rapid growth in a relatively short period of time and
expect to continue to experience rapid growth in the future. The management of
this growth will require, among other things, continued development of our
financial and management controls and management information systems, stringent
cost controls, increased marketing activities, the ability to attract and
retain qualified management personnel and the training of new personnel. We
intend to hire additional personnel in order to manage our expected growth and
expansion. Failure to successfully manage our rapid growth or difficulties in
managing a larger number of radio stations could have a material adverse effect
on our business and the value of our class A common stock.
Our ability to raise additional financing for future growth may be limited.
We may require financing in excess of that provided under our new credit
facility. We cannot assure you that our new credit facility or any other
agreements to which we are a party will permit additional financing or that
additional financing will be available to us or, if available, that the
financing would be on terms acceptable to us. If we are unable to finance our
growth strategy, we may be unable to compete successfully with other
broadcasters and as a result we may lose audience share and advertisers which
would lead to a decline in our revenues.
14
<PAGE>
Our operations are concentrated in a limited number of markets. A downturn in
any of our markets could adversely affect our revenue and cash flow.
Our stations are located in a limited number of markets in the
northeastern United States. Upon completion of our pending acquisitions, we
will own and/or operate stations in nine markets. A significant decline in net
broadcasting revenue from our stations in any one of these markets, and
particularly in our two largest existing markets, the Trenton, New Jersey and
the Monmouth-Ocean, New Jersey markets, could have a material adverse effect on
our operations and financial condition.
The loss of key personnel and on-air radio talent could disrupt our business
and result in a loss of advertising revenue.
Our business depends on the continued efforts, abilities and expertise of
our senior officers, key employees and on-air radio talent. The loss of our key
personnel or talent could result in a loss of our listening audience and
consequently a loss of advertising revenue. We believe that our future success
will depend on our ability to:
. attract and retain highly skilled and qualified management personnel;
. expand, train and manage our employee base; and
. develop, attract and retain on-air radio talent.
The terms of our debt restrict the decisions we can make about our business.
Our new credit facility contains covenants that restrict our ability to:
. incur additional indebtedness, contingent liabilities and liens;
. redeem or repurchase capital stock and redeem, repurchase or prepay
subordinated debt;
. pay cash dividends or make other distributions on our capital stock;
. enter into specified investments or joint ventures;
. consolidate, merge or effect asset sales;
. make capital expenditures;
. enter into sale and leaseback transactions;
. sell or discount accounts receivable;
. enter into transactions with stockholders and affiliates; and
. change the nature of our business.
In addition, our new credit facility requires us to maintain financial
ratios with respect to interest coverage, fixed charge coverage and senior and
total debt. A breach of any of these covenants could result in a default under
our new credit facility. Upon the occurrence of an event of default under our
new credit facility, the lenders could elect to declare this debt to be due and
payable immediately and could terminate their commitments to make further
extensions of credit. If the debt under our new credit facility were
accelerated, we cannot assure you that our assets would be sufficient to repay
in full this debt and our other debt.
Our quarterly results are subject to seasonal fluctuations; these fluctuations
could cause volatility in the market price of our class A common stock.
Typically, our revenues are lowest in the first quarter and highest in
the fourth quarter. This seasonality could cause fluctuations in the market
price of our class A common stock, including a drop in the market price of our
class A common stock in response to our first quarter earnings.
15
<PAGE>
Risks relating to our industry
If we are unable to compete effectively against other radio stations and other
media companies, we may suffer a decrease in advertising revenue.
Radio broadcasting is a highly competitive business. The
Telecommunications Act of 1996 facilitates the entry of other radio
broadcasting companies into the markets in which we operate or may operate in
the future. The financial success of each of our radio stations will depend, to
a significant degree, upon our audience ratings, our share of the overall radio
advertising revenue within each geographic market and the economic health of
that market. In addition, our advertising revenues depend upon the
attractiveness to advertisers of our audience demographic groups. Our radio
stations compete for audience share and advertising revenue directly with other
FM and AM radio stations as well as with other advertising media within their
respective markets, including the following:
. newspapers;
. billboard advertising and mass transit;
. broadcast and cable television;
. magazines;
. direct mail; and
. the Internet.
Some of these radio stations have the same broadcasting formats as our
radio stations and compete for the same audience demographic groups in the same
market. In addition, many of these entities are larger and have significantly
greater resources than we do and as a result we may be unable to compete
successfully with them. If we are unable to compete successfully, we will lose
audience share and advertisers and our revenues will decline.
We must be able to respond to rapidly changing technology, services and
standards which characterize our industry in order to remain competitive.
The radio broadcasting industry is subject to rapidly changing
technology, services and standards. The FCC has authorized the satellite
delivery of digital audio broadcasting and is considering ways to introduce new
technologies to the radio broadcast industry, including terrestrial delivery of
digital audio broadcasting and the standardization of available technologies
which significantly enhance the sound quality of AM and FM broadcasts. We
cannot predict the effect that new technology will have on our industry,
financial condition and results of operations. Several new media technologies
are currently being developed. For example:
. cable television operators have introduced a service commonly
referred to as "cable radio" which provides cable television
subscribers with several high-quality music, news and other
information channels;
. direct satellite broadcast television companies are supplying
subscribers with several high-quality music channels;
. the Internet offers new and diverse forms of audio content
distribution;
. satellite digital audio radio technology, initially developed for
automotive applications, could result in new satellite radio
services; and
. the introduction of in-band on-channel digital radio and new low-
power FM radio could result in additional radio services being
broadcast on the frequencies currently occupied by traditional FM and
AM radio services.
16
<PAGE>
We cannot assure you that we will be able to adopt new technologies on a
timely basis, or at all, in order to compete effectively with other
participants in the radio broadcast industry.
We may not receive regulatory approval for transfers of licenses related to
pending and future acquisitions.
The Communications Act of 1934 and FCC rules and regulations limit the
number of stations that one individual or entity can own, directly or by
attribution, in a market, and requires FCC approval for transfers of control of
FCC licensees and assignments of FCC licenses. The filing of petitions or
complaints against us or any FCC licensee from which we propose to acquire a
station could result in the FCC delaying the grant of, refusing to grant, or
imposing conditions on its consent to the assignment or transfer of control of
FCC licenses.
The Federal Trade Commission and the Department of Justice evaluate
acquisitions to determine whether they serve the public interest and whether
they should be challenged under federal antitrust laws. After the passage of
the Telecommunications Act of 1996, the Department of Justice has become more
aggressive in reviewing proposed acquisitions of radio stations and radio
networks. The Department of Justice is particularly concerned when the proposed
buyer already owns one or more radio stations in the market of the station it
is seeking to buy. Recently, the Department of Justice has challenged a number
of radio broadcasting transactions. Some of those challenges ultimately
resulted in consent decrees requiring, among other things, divestitures of
certain stations by the proposed buyer. In general, the Department of Justice
has more closely scrutinized radio broadcasting acquisitions that result in
market shares in excess of 40% of local radio advertising revenue in a given
market. Similarly, the FCC has announced new procedures to review proposed
radio broadcasting transactions even if the proposed acquisition otherwise
complies with the FCC's ownership limitations. In particular, the FCC, as part
of its initial analysis, may invite interested parties to submit comments
regarding ownership concentration concerns in a particular local radio market.
Because our operations are concentrated in the northeastern suburban markets,
we cannot assure you that our activities will not be reviewed or that the FCC
will grant us the necessary approvals to implement our acquisition strategy. If
we are unable to obtain these approvals, we may have to alter our business
plan.
If we fail to maintain our licenses, the FCC could terminate our ability to own
and operate our radio network.
In order to operate, radio broadcasters must maintain radio broadcasting
licenses issued by the FCC. These licenses are ordinarily issued for a maximum
term of eight years and may be renewed. Although we may apply to renew these
licenses, third parties may challenge our renewal applications. We cannot
assure you that our licenses will be renewed. In addition, if we or any of our
officers, directors or significant stockholders violates the FCC's rules and
regulations or the Communications Act, is convicted of a felony, or is
otherwise found to be disqualified from being a party to a FCC license, the FCC
may commence a proceeding to impose sanctions against us.
The broadcasting industry is subject to extensive and changing federal
regulation.
The Communications Act requires prior approval from the FCC for the
issuance, renewal, modification, transfer of control or assignment of
broadcasting station operating licenses. The Telecommunications Act and FCC
rules limit the number of broadcasting properties that we may acquire in any
market, and regulate operating practices of radio stations. Additionally, the
Communications Act and FCC rules and regulations impose limitations on non-U.S.
ownership and voting of our capital stock. The Telecommunications Act creates
significant new opportunities for broadcasting companies, but also creates
uncertainties as to how the FCC and the courts will enforce and interpret the
Telecommunications Act.
The number of radio stations we may acquire or operate pursuant to local
marketing agreements in any market, overall and in each of the AM and FM
services is limited by the Telecommunications Act and FCC rules and
regulations. That number may vary depending upon whether the interests in other
radio stations or certain other media properties of certain of our affiliates
are attributable to those affiliates under FCC rules. The
17
<PAGE>
FCC generally applies its ownership limits to "attributable" broadcast
interests held by an individual, corporation, partnership or other association.
The interests of our officers, directors and stockholders with five percent or
greater voting power are generally attributable to us. Certain of our officers
and directors, and at least one of our stockholders, have attributable
broadcast interests outside of their involvement with us. These attributable
interests may limit the number of radio stations that we may acquire or own in
any market in which these officers or directors (or stockholders) hold or
acquire outside attributable broadcast interests.
Governmental regulations and policies may change over time and such
changes could have a material adverse impact upon our business, results of
operations or financial condition. For example, the FCC has recently indicated
it may propose new rules to define a "market" for purposes of the local radio
station ownership limits in the Telecommunications Act and the FCC's multiple
ownership rules, which if adopted could reduce the number of stations that we
would be allowed to acquire in some markets.
Risks relating to our ownership structure
Our class B common stockholders will continue to control our company, which
could adversely affect you.
The holders of our class B common stock, which has 10 votes per share,
will own % of the outstanding voting power of our common stock, will be able
to exercise a controlling influence over us and generally will be able to
determine the outcome of all corporate actions requiring stockholder approval.
As a result, these holders will be in a position to continue to control all
matters affecting us, including:
. composition of our board of directors and, through it, our direction
and policies, including the appointment and removal of officers;
. mergers or other business combinations involving us;
. acquisition or disposition of assets;
. future issuances of common stock or other securities;
. incurrence of debt;
. amendments, waivers and modifications to our agreements; and
. the payment of dividends on our common stock.
The interests of our class B common stockholders may conflict with your
interests.
The extra voting rights of the class B common stockholders and our
ability to issue additional shares of class B common stock could adversely
affect the value of the class A common stock. Additional shares of class B
common stock can be authorized by the majority vote of voting stockholders
acting together as one class. As a result, class A common stockholders
generally will not be able to prevent the authorization of additional shares of
class B common stock.
18
<PAGE>
Risks relating to our class A common stock
Sales of class A common stock after this offering could cause the market price
of our class A common stock to decline.
If our stockholders sell substantial amounts of our class A common stock
in the public market following this offering, including shares issued upon the
exercise of outstanding options, the market price of our class A common stock
could decline. These sales also might make it more difficult for us to sell
equity or equity-related securities in the future at a time and price that we
deem appropriate. The shares sold in this offering will be freely tradeable
immediately upon completion of this offering. In addition, no later than the
181st day after completion of this offering, our existing stockholders will be
able to sell their shares of our common stock, and have the right to
require us to register those shares for sale to the public. Our existing
stockholders would be able to sell their shares before the 181st day if the
underwriters waive contractual lockup restrictions. Sales of these shares could
cause the market price of our class A common stock to decline.
In addition, following the completion of this offering, we intend to
register under the Securities Act the shares of class A common stock
reserved for issuance under our stock incentive plan. Options to acquire
shares of class A common stock have already been issued under this plan at a
weighted average exercise price of $ . Once the stock incentive plan shares
are registered, the class A common stock issued upon exercise of the options
will be freely tradeable beginning on the 181st day after completion of this
offering or earlier if the underwriters waive contractual lockup restrictions.
Provisions of our organizational documents, Delaware law and federal law may
have anti-takeover effects that could prevent a change in control, even if this
would be beneficial to stockholders.
Provisions of our organizational documents and Delaware law could make it
more difficult for a third party to acquire us, even if doing so would be
beneficial to our stockholders. Provisions in our organizational documents
include:
. a classified board of directors, in which our board is divided into
three classes with three-year terms with only one class elected at
each annual meeting of stockholders, which means that a holder of a
majority interest in our common stock will need two annual meetings
of stockholders to gain control of the board;
. a provision which prohibits our stockholders from acting by written
consent without a meeting;
. a provision which permits only the board of directors, the president
or the chairman to call special meetings of stockholders; and
. a provision which requires advance notice to the company of items of
business to be brought before stockholders' meetings.
19
<PAGE>
REORGANIZATION
Immediately prior to this offering, we effected a reorganization in which
all equity holders of Nassau Broadcasting Partners, L.P. contributed their
equity interests in the limited partnership to Nassau Broadcasting Corporation,
a newly formed corporation, in exchange for common stock of Nassau Broadcasting
Corporation. As a result of the reorganization, Nassau Broadcasting Partners,
L.P. is terminated, all of the assets previously held by Nassau Broadcasting
Partners, L.P. are now held by Nassau Broadcasting Corporation and the limited
liability companies which were wholly owned subsidiaries of Nassau Broadcasting
Partners, L.P. are now wholly owned subsidiaries of Nassau Broadcasting
Corporation.
Before giving effect to this offering, each of our stockholders owns an
amount of our common stock representing its previous economic interest in
Nassau Broadcasting Partners, L.P. The following table shows the common stock
issued in the reorganization.
<TABLE>
<CAPTION>
Pre-offering
Economic Number Of Shares Of Class A,
Interest In Our Common Class B
Limited Stock Issued In The Or Class C
Partnership (1) Reorganization Common Stock
--------------- ------------------- ------------
<S> <C> <C> <C>
Spectrum Equity Investors,
L.P......................... 30.0%
Spectrum Equity Investors II,
L.P......................... 17.0
Grotech Partners IV, L.P..... 12.7
Toronto Dominion Capital
(U.S.A.), Inc............... 12.7
Louis F. Mercatanti, Jr...... 20.3
Others (2)................... 7.3
----- ----- -----
Total...................... 100.0%
===== ===== =====
</TABLE>
(1) On May 4, 2000, we redeemed $2.5 million of equity interests in Nassau
Broadcasting Partners, L.P. which were held by Louis F. Mercatanti, Jr. Mr.
Mercatanti also has a right to require Nassau Broadcasting Partners to
redeem a further $5.0 million of his equity interests at any time, provided
there is no existing event of default under our new credit facility, and no
new event of default would result. We calculated these percentages assuming
that as of the date of our reorganization, we have redeemed $7.5 million of
Mr. Mercatanti's equity interests.
(2) Includes shares of our class A common stock issued upon conversion of
limited partnership units which we issued to Merrill Lynch Capital
Corporation, an affiliate of Merrill Lynch, Pierce, Fenner & Smith
Incorporated, on May 4, 2000.
20
<PAGE>
PENDING ACQUISITIONS
We have several acqusitions currently pending which, if completed, will
result in the purchase by us of ten FM and ten AM radio stations. Consummation
of these pending acquisitions is subject to receipt of final regulatory
approvals.
The table below sets forth information regarding each of the pending
acquisitions.
<TABLE>
<CAPTION>
No. of Call Purchase
Seller Market Stations Letters Price
------ ------ -------- ------- -------------
(in millions)
<S> <C> <C> <C> <C>
Owners of Aurora Westchester, NY 3 WFAS (FM) $185.0 (1)
Communications, LLC ... WFAF (FM)
WFAS (AM)
Bridgeport, CT 2 WEBE (FM)
WICC (AM)
Danbury, CT 4 WAXB (FM)
WRKI (FM)
WINE (AM)
WPUT (AM)
Clear Channel Allentown, PA 2 WODE (FM) 30.0
Communications, Inc. .. WEEX (AM)
Owners of Manahawkin
Communications
Corporation............ Monmouth-Ocean, NJ 1 WCHR (FM) (2) 4.7
Tiab Communications
Corporation............ Wilkes Barre-Scranton 1 WILT (AM) --
Multicultural Radio Trenton, NJ 1 WJHR (AM) 2.5
Broadcasting, Inc......
Port Jervis Broadcasting Newburgh-Middletown, NY 2 WTSX (FM) 2.7
Co., Inc............... WDLC (AM)
Great Scott Broadcasting Trenton, NJ 2 WNJO (FM) 20.0
Ltd.................... WCHR (AM)
Owners of North Shore
Broadcasting Corp. and Monmouth-Ocean, NJ 2 WOBM (FM) 21.4
Seashore Broadcasting WOBM (AM)
Corp. .................
</TABLE>
- --------
(1) Purchase price is subject to a working capital adjustment.
(2) Construction permit.
Regulatory Filings
We filed an application for consent to acquire WNJO (FM) and WCHR (AM)
with the FCC on September 10, 1998. The FCC issued a letter of inquiry dated
March 1, 1999 seeking additional information on the radio market concentration
in Trenton, New Jersey, which we subsequently provided. The application remains
pending before the FCC.
We filed an application for consent to acquire control of Manahawkin
Communications Corporation, which holds the construction permit for WCHR (FM),
with the FCC on September 13, 1999. New Jersey Broadcasting Partners, L.P. and
Jersey Shore Broadcasting Corp. challenged this transfer of control application
before the FCC on the grounds of premature transfer of control and undue market
concentration. We filed a response to this challenge but the transfer
application remains pending before the FCC. In addition, on June 23, 1999, New
Jersey Broadcasting Partners, L.P. filed a complaint against this acquisition
with the Merger Task Force, Antitrust Division, U.S. Department of Justice. To
date, the Department of Justice has taken no action on this complaint.
21
<PAGE>
On March 10, 2000, we filed an application with the FCC to acquire two
radio stations from Clear Channel Communications, Inc. The FCC placed this
assignment application on public notice on April 4, 2000. Interested parties
had until May 4, 2000 to challenge our acquisition of these stations. To date,
no party has challenged this application. In addition, we filed an application
with the Department of Justice for approval of the acquisition under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976. The Department of Justice has
not yet given this approval.
On April 3, 2000, we filed applications with the FCC to acquire nine
stations from Aurora Communications, LLC. The FCC placed these applications on
public notice on April 25, 2000. Interested parties have until May 25, 2000 to
challenge our acquisition of these stations. In addition, we filed an
application with the Department of Justice for approval of the acquisition
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The Department
of Justice has not yet given this approval.
On April 18, 2000, we filed an application with the FCC to acquire WILT
(AM) in Mount Pocono, Pennsylvania from Tiab Communications Corporation. The
FCC has not yet placed the application on public notice.
All of these assignment applications remain pending before the FCC. We
expect the FCC will approve all of these acquisitions, but we cannot assure
you that we will obtain any or all of the regulatory approvals we seek.
We have not yet applied for FCC approval of our acquisitions of the
seven radio stations that we currently operate under local marketing
agreements. We intend to file our applications to acquire these stations
shortly after we complete this offering. Once we file our applications, third
parties may file petitions to deny or a request for reconsideration or
judicial review or the FCC may reject our applications.
In addition, other factors beyond our control may delay or prevent the
closing of these acquisitions.
Acquisition Agreements
Aurora Communications, LLC. On March 24, 2000, we entered into a
purchase and exchange agreement with the owners of Aurora Communications to
purchase all of their equity interests, and thereby acquire its nine stations,
for total consideration of $185.0 million, consisting of $35.0 million in our
equity, $85.0 million in cash and $65.0 million in assumed debt. The cash
amount is subject to a working capital adjustment. We have irrevocably
deposited $7.0 million toward the purchase of Aurora Communications.
WODE (FM) and WEEX (AM), Allentown, Pennsylvania. On February 29, 2000,
we entered into an asset purchase agreement with Clear Channel to purchase
these stations for total cash consideration of $30.0 million. We have
irrevocably deposited $6.0 million toward the purchase of these stations.
WCHR (FM), Manahawkin, New Jersey. On August 25, 1999, we entered into a
stock purchase agreement with the owners of all the outstanding stock of
Manahawkin Communications Corporation, the holder of a construction permit in
the Monmouth-Ocean market, for total cash consideration of $4.7 million, of
which $2.1 million has been paid. This permit allows the holder to construct
and operate a radio station on a temporary basis. Once the radio station has
begun operating, the holder can apply to the FCC for a broadcast license.
WILT (AM), Mount Pocono, Pennsylvania. On January 31, 1999, we entered
into an agreement with Nassau Broadcasting Holdings, Inc. to acquire WILT (AM)
for total consideration of $100, as well as approximately $130,000 paid to
Nassau Broadcasting Holdings Inc. to fund the restructuring plan of WILT (AM),
which we have paid in full.
WJHR (AM), Flemington, New Jersey. On January 21, 1999, we entered into
an asset purchase agreement with Multicultural Radio Broadcasting, Inc. to
purchase this radio station for total cash consideration of $2.5 million. We
have irrevocably deposited $130,000 toward the purchase of this station.
22
<PAGE>
WTSX (FM) and WDLC (AM), Newburgh-Middletown, New York. On August 7,
1998, we entered into an asset purchase agreement with Port Jervis Broadcasting
Co., Inc., to acquire these radio stations for total cash consideration of
approximately $2.7 million. We have irrevocably deposited $600,000 toward the
purchase of these stations.
WCHR (AM) and WNJO (FM), Trenton, New Jersey. On August 30, 1996, we
entered into an asset purchase agreement with Great Scott Broadcasting Ltd. to
acquire these radio stations for total cash consideration of $20.0 million. We
have either paid or placed in escrow the full acquisition price of these
stations.
WOBM (FM) and WOBM (AM), Toms River, New Jersey and Lakewood, New
Jersey. On July 1, 1996, we entered into a stock purchase agreement to purchase
all of the outstanding stock of North Shore Broadcasting Corp. and Seashore
Broadcasting Corp., the owners of these stations, for total consideration of
$21.4 million. We have irrevocably deposited $2.0 million and paid a total of
$5.0 million in scheduled monthly payments toward the purchase of these
stations.
23
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds from the sale of shares of our
class A common stock, after deducting the underwriting discount and estimated
offering expenses, will be approximately $ million, assuming an initial
offering price of $ per share, the midpoint of the range set forth on the
cover page of this prospectus. If the underwriters exercise their over-
allotment options in full, we estimate that the net proceeds we will receive
will be approximately $ million.
We will use the net proceeds in the following manner:
. $60.0 million plus approximately $2.0 million of accretion to redeem
all of our outstanding senior discount notes issued to repay
subordinated discount notes held by some of our existing stockholders
and to repay a portion of the borrowings under our old credit
facility;
. $78.0 million to finance a portion of the acquisition of Aurora
Communications;
. $24.0 million to finance a portion of the acquisition of the
Allentown, Pennsylvania radio stations; and
. the remainder to pay transaction costs and provide for general
corporate purposes.
The following table illustrates how we intend to finance the acquisitions
of Aurora Communications and the Allentown, Pennsylvania radio stations:
<TABLE>
<CAPTION>
Sources of Funds
----------------
<S> <C>
New credit facility:
Term loan A-1........... $ 33,000,000
Term loan A-2........... 5,000,000
Term loan C............. 25,000,000
------------
63,000,000
This class A common stock
offering................ 102,000,000(1)
Cash on hand............. 2,000,000
------------
Total.................... $167,000,000
============
</TABLE>
<TABLE>
<CAPTION>
Uses of Funds
-------------
<S> <C>
Aurora Communications acquisition:
Cash.................. $ 78,000,000(1)
Assumption and
repayment of
liabilities........... 65,000,000
------------
143,000,000(2)
Acquisition of
Allentown,
Pennsylvania radio
stations:
Cash.................. 24,000,000(3)
------------
Total.................. $167,000,000
============
</TABLE>
- --------
(1) These amounts are subject to a working capital adjustment.
(2) Does not include $7.0 million irrevocably deposited toward the Aurora
Communications purchase price and $35.0 million of such purchase price that
we expect to pay for in shares of our class C common stock.
(3) Does not include $6.0 million irrevocably deposited toward the purchase
price of these stations.
If the Aurora Communications or the Allentown, Pennsylvania stations
acquisitions do not close, then we will use the proceeds intended for these
transactions to pay down additional debt, possibly to finance other
acquisitions, to provide for general corporate purposes or for any combination
of these proposed uses. Other than the pending acquisitions described elsewhere
in this prospectus, we have not entered into any agreements, arrangements or
understandings to proceed with any acquisitions.
We intend to invest the net proceeds in U.S. government securities or
other interest bearing short-term investment grade securities until the
proceeds are used for the purposes described above.
DIVIDEND POLICY
We do not expect to pay any cash dividends or distributions on our
capital stock for the foreseeable future. We currently intend to retain future
earnings, if any, to finance the expansion of our business. Our credit facility
restricts our ability to pay cash dividends.
24
<PAGE>
CAPITALIZATION
The following table sets forth our actual capitalization as of March 31,
2000, our capitalization as adjusted to give effect to the offering but not the
application of the proceeds from this offering as contemplated, and our pro
forma capitalization, as adjusted, as of March 31, 2000 as if the following
events that occurred or will occur after March 31, 2000 occurred on March 31,
2000:
. our recapitalization and reorganization;
. the completion of this offering and the application of the net
proceeds as contemplated;
. the completion of our acquisition of Aurora Communications;
. the completion of our acquisition of two radio stations in Allentown,
Pennsylvania;
. the completion of our acquisitions of WILT (AM) and WCHR (FM); and
. the completion of our acquisitions of seven stations that we
currently operate under local marketing agreements.
You should read this table together with the sections of this prospectus
entitled "Unaudited Pro Forma Consolidated Financial Data," "Selected
Historical Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the historical financial
statements and related notes and the unaudited pro forma consolidated financial
statements and related notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
As of March 31, 2000
---------------------------
(unaudited)
(in thousands)
Pro
Forma,
As As
Actual Adjusted Adjusted
-------- -------- --------
<S> <C> <C> <C>
Old credit facility................................ $ 56,139 $ $
New credit facility................................ --
Senior discount notes.............................. --
Subordinated discount notes........................ 40,159
Other debt......................................... 1,114
-------- ----- -----
Total long-term debt........................... 97,412
Partners' deficit.................................. (21,489)
Stockholders' equity (1):
Preferred stock, $.01 par value; shares
authorized; none issued and outstanding......... --
Class A common stock, $.01 par value; shares
authorized; shares issued and outstanding as
adjusted; shares issued and outstanding pro
forma as adjusted............................... --
Class B common stock, $.01 par value; shares
authorized; shares issued and outstanding as
adjusted; shares issued and outstanding pro
forma as adjusted............................... --
Class C common stock, $.01 par value; shares
authorized; shares issued and outstanding as
adjusted; shares issued and outstanding pro
forma as adjusted............................... --
Paid-in capital.................................. --
-------- ----- -----
Total stockholders' equity..................... --
-------- ----- -----
Total capitalization........................... $ 75,923 $ $
======== ===== =====
</TABLE>
- --------
(1) Does not include (i) shares of class A common stock issuable upon
exercise of options granted or which may be granted under our stock
incentive plan, and (ii) up to shares of class A common stock issuable
upon the exercise of the underwriters' over-allotment options.
25
<PAGE>
DILUTION
Purchasers of the shares of class A common stock offered by this
prospectus will experience an immediate and substantial dilution in net
tangible book value per share. Dilution is the amount by which the initial
public offering price paid by the purchasers of the shares of our class A
common stock will exceed the net tangible book value per share of our common
stock after the offering. The net tangible book value per share of our common
stock is determined by subtracting total liabilities from the total book value
of the tangible assets and dividing the difference by the number of shares of
our common stock deemed to be outstanding on the date the book value is
determined.
As of March 31, 2000, we had a deficit in pro forma net tangible book
value of approximately $(222.0) million, or $ per share, after giving effect
to the following, but excluding this offering:
. our recapitalization and reorganization;
. the completion of our acquisition of Aurora Communications;
. the completion of our acquisition of two radio stations in Allentown,
Pennsylvania;
. the completion of our acquisitions of WILT (AM) and WCHR (FM); and
. the completion of our acquisitions of seven stations that we
currently operate under local marketing agreements.
Assuming the sale of shares of our class A common stock at the
initial public offering price of $ per share and, the conversion of all
outstanding shares of class B and class C common stock into shares of class
A common stock, and deducting the underwriting discount and estimated offering
expenses, our pro forma net tangible book value as of March 31, 2000 would have
been a deficit of $ , or $ per share. This represents an immediate
increase in pro forma net tangible book value to existing stockholders of $
per share and an immediate dilution to new investors of $ per share.
The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...................... $
Pro forma net tangible book value deficiency per share as of March
31, 2000.......................................................... $
Increase in pro forma net tangible book value per share
attributable to new investors purchasing shares in the offering...
----
Pro forma net tangible book value deficiency per share after the of-
fering..............................................................
----
Pro forma dilution per share to new investors........................ $
====
</TABLE>
26
<PAGE>
The following table summarizes, on a pro forma basis as of March 31,
2000, the differences between existing common stockholders immediately prior to
this offering and new investors purchasing class A common stock in connection
with this offering, with respect to the number of shares of our common stock
purchased, the total consideration paid and the average price per share paid.
The table assumes no exercise of the underwriters' over-allotment options.
<TABLE>
<CAPTION>
Shares
Purchased Consideration
-------------- ------------- Average Price
Number Percent Paid Percent Per Share
------ ------- ----- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders................ % $ % $
New investors........................
---- ----- ----- -----
Total.............................. 100.0% $ 100.0%
==== ===== ===== =====
</TABLE>
The foregoing discussion and tables assume no exercise of any stock
options outstanding. There are options outstanding to purchase shares of
our class A common stock at a weighted average exercise price of $ per
share. To the extent that any of these options are exercised, there will be
further dilution to the new investors.
27
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
Our historical financial statements and the historical audited financial
statements of some of the businesses we plan to acquire are included elsewhere
in this prospectus. The unaudited pro forma consolidated financial data
presented here should be read together with those financial statements and
related notes.
The unaudited pro forma consolidated statement of operations data for the
year ended December 31, 1999 and for the three months ended March 31, 2000 give
effect to the following transactions as if they had occurred on January 1, 1999
and January 1, 2000, respectively:
. our recapitalization and reorganization;
. the completion of this offering and the application of the net
proceeds as described in this prospectus;
. the completion of our acquisition of Aurora Communications;
. the completion of our acquisition of two radio stations in Allentown,
Pennsylvania;
. the completion of our acquisitions of WILT (AM) and WCHR (FM);
. the completion of our acquisitions of seven stations that we
currently operate under local marketing agreements; and
. our tower-related asset sale.
The unaudited pro forma consolidated balance sheet as of March 31, 2000
gives effect to those of the transactions listed above that are expected to
occur after March 31, 2000, as if they had occurred on March 31, 2000. We have
included all adjustments, consisting of normal recurring adjustments, which, in
the opinion of management, are necessary for a fair presentation of this data.
We based the pro forma adjustments on available information and on assumptions
that we believe are reasonable under the circumstances.
The pro forma consolidated financial data are not necessarily indicative
of the results of operations or financial position that we would have achieved
had the transactions described above occurred on the dates indicated, and
should not be construed as being representative of future results of
operations. Our results of operations for the three months ended March 31, 2000
and for any future quarters are not necessarily indicative of results that may
be expected over the entire year or for any future period.
28
<PAGE>
NASSAU BROADCASTING CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Nassau Aurora Allentown Pro Forma Consolidated
Broadcasting Stations(1) Stations Adjustments Pro Forma
------------ ----------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Gross revenues.......... $ 34,295 $ 23,245 $ 4,135 $ (807)(2) $ 60,868
Less agency and outside
commissions............ 2,893 1,729 368 -- 4,990
-------- -------- ------- ------- --------
Net revenues........ 31,402 21,516 3,767 (807) 55,878
-------- -------- ------- ------- --------
Operating expenses...... 20,794 12,250 2,282 (96) 35,230
Depreciation and
amortization........... 2,634 2,324 705 8,985 (3) 14,649
Corporate general and
administrative
expenses............... 2,280 2,863 -- (2,863)(4) 2,280
Local marketing
agreement fees......... 2,517 -- -- (1,817)(5) 700
-------- -------- ------- ------- --------
Total operating
expenses........... 28,226 17,437 2,987 4,209 52,859
-------- -------- ------- ------- --------
Operating income
(loss)............. 3,176 4,079 780 (5,016) 3,019
-------- -------- ------- ------- --------
Other income and
(expenses):
Investment income..... 2,562 1,157 29 (1,186)(6) 2,562
Gain on sale of
assets............... 567 -- -- -- 567
Interest expense...... (10,946) (6,618) -- 4,853 (7) (12,711)
Loss on impairment of
intangibles.......... (13,250) 13,250 (8) --
-------- -------- ------- ------- --------
Total other income
(expenses)......... (7,817) (18,711) 29 16,917 (9,582)
-------- -------- ------- ------- --------
Net income (loss)... $ (4,641) $(14,632) $ 809 $11,901 $ (6,563)
======== ======== ======= ======= ========
Net earnings per common
share--basic and
diluted................
======== ========
Weighted average shares
outstanding--basic and
diluted................
======== ========
</TABLE>
- --------
(1) The financial information shown for Aurora Communications is based on the
historical audited financial statements of the seller and the seller's
predecessor entities as follows: Westchester Radio LLC; Capstar Trust;
WEBE/WICC (Division of Media Partners, L.P.).
(2) We have eliminated tower revenues (807) and expenses (96) to give effect to
the sale of the tower-related assets.
(3) We have adjusted depreciation and amortization to (i) eliminate the
depreciation and depreciation expense recorded by Aurora Communications and
the Allentown, Pennsylvania stations (3029); (ii) eliminate the
depreciation of tower-related assets (43); (iii) eliminate our amortization
of deferred finance costs on our old credit facility (560); (iv) record
depreciation and amortization expense on the acquisitions (12,000); and (v)
record amortization of the financing costs incurred for our new credit
facility (617).
(4) We have eliminated the corporate general and administrative expenses
recorded by Aurora Communications (2863).
(5) We have eliminated all local marketing agreement fees, except those
relating to WSBG (FM) and WVPO (AM), as there is no agreement to purchase
those stations (1817).
(6) We have eliminated investment income recorded by Aurora Communications and
the Allentown, Pennsylvania stations (1186).
29
<PAGE>
(7) We adjusted interest expense to (i) eliminate interest related to the tower
assets (181); (ii) eliminate interest recorded by Aurora Communications
(6618); (iii) eliminate interest for the debt that has been fully paid off
in connection with our recapitalization (10,404), and (v) to record
interest on our new credit facility assuming $130 million outstanding
(12,350).
(8) We have eliminated loss on the impairment of intangibles recorded by
Westchester Radio LLC, the predecessor of Aurora Communications (13,250).
(9) The Aurora purchase agreement requires a termination payment to one of its
senior executives in the approximate amount of $1,000. We have not included
this amount in the accompanying unaudited pro forma consolidated financial
statements.
(10) We incurred financing costs in the approximate amount of $3,000 in
connection with our new credit facility. Since the subordinated discount
notes were paid off from the proceeds of the offering, we did not reflect
these expenses in the accompanying unaudited pro forma consolidated
financial statements.
(11) Prior to the offering, we intend to convert to a corporation which will be
subject to income tax at the corporate level. For pro forma purposes, we
have established a valuation allowance to the extent of the net deferred
tax asset, which primarily relates to net operating losses.
29--1
<PAGE>
NASSAU BROADCASTING CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS
Three Months Ended March 31, 2000
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Nassau Aurora Allentown Pro Forma Consolidated
Broadcasting Stations(1) Stations Adjustments Pro Forma
------------ ----------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Gross revenues.......... $ 7,893 $ 5,511 $ 875 $ (126)(2) $14,153
Less agency and outside
commissions............ 612 551 76 1,239
------- ------- ----- ------ -------
Net revenues........ 7,281 4,960 799 (126) 12,914
------- ------- ----- ------ -------
Operating expenses...... 5,318 2,639 487 (17)(3) 8,427
Depreciation and
amortization........... 822 756 177 2,107 3,862
Corporate general and
administrative
expenses............... 587 568 -- (568)(4) 587
Local marketing
agreement fees......... 640 -- -- (465)(5) 175
------- ------- ----- ------ -------
Total operating
expenses........... 7,367 3,963 664 1,057 13,051
------- ------- ----- ------ -------
Operating income
(loss)............. (86) 997 135 (1,183) (137)
------- ------- ----- ------ -------
Other income and
(expenses):
Investment income..... 453 5 -- (5)(6) 453
Gain on sale of
assets............... 1,633 -- -- -- 1,633
Interest expense...... (3,024) (1,977) -- 1,773 (7) (3,228)
------- ------- ----- ------ -------
Total other income
(expenses)......... (938) (1,972) -- 1,768 (1,142)
------- ------- ----- ------ -------
Net income (loss)... $(1,024) $ (975) $ 135 $ 585 (8) $(1,279)
======= ======= ===== ====== =======
Net earnings per common
share--basic and
diluted................ $ $
======= =======
Weighted average shares
outstanding--basic and
diluted................
======= =======
</TABLE>
- --------
(1) The financial information shown for Aurora stations is based on the
historical audited financial statements of the seller and the seller's
predecessor entities as follows: Westchester Radio LLC; Capstar Trust;
WEBE/WICC (Division of Media Partners, L.P.).
(2) We have eliminated tower revenues (126) and expenses (17) to give effect to
the sale of the tower-related assets.
(3) We have adjusted depreciation and amortization expense to (i) eliminate the
depreciation recorded by Aurora Communications and the Allentown,
Pennsylvania stations (933); (ii) eliminate our amortization of deferred
finance costs on our old credit facility (114); (iii) record depreciation
and amortization expense on the acquisitions (3,000); and (iv) record
amortization of the financing costs incurred for our new credit facility
(154).
(4) We have eliminated the corporate general and administrative expenses
recorded by Aurora Communications (568).
(5) We have eliminated all local marketing agreement fees, except those
relating to WSBG (FM) and WVPO (AM), as there is no agreement to purchase
those stations (465).
(6) We have eliminated investment income recorded by Aurora Communications (5).
(7) We have adjusted interest expense to (i) eliminate interest related to the
tower assets (29); (ii) eliminate interest recorded by Aurora
Communications (1,977); (iii) eliminate interest for the debt that has been
fully paid off in connection with our recapitalization (2,599); (iv)
eliminate the expense of our subordinated discount notes associated with
our old credit facility (225) and (v) record interest on our new credit
facility assuming $130 million outstanding (3,057).
30
<PAGE>
(8) The Aurora purchase agreement requires a termination payment to one of its
senior executives in the approximate amount of $1,000. We have not included
this amount in the accompanying unaudited pro forma consolidated financial
statements.
(9) We incurred financing costs in the approximate amount of $3,000 in
connection with our new credit facility. Since the subordinated discount
notes were paid off from the proceeds of the offering, we did not reflect
these expenses in the accompanying unaudited pro forma consolidated
financial statements.
(10) Prior to the offering, we intend to convert to a corporation which will be
subject to income tax at the corporate level. For pro forma purposes, we
have established a valuation allowance to the extent of the net deferred
tax asset, which primarily relates to net operating losses.
30--1
<PAGE>
NASSAU BROADCASTING CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED
BALANCE SHEET
As of March 31, 2000
(dollars in thousands)
<TABLE>
<CAPTION>
Pro Forma Pro Forma Pro Forma
Adjustments Pro Forma Adjustments Adjustments
Nassau For The For The For The For The Consolidated
Historical Recapitalization Recapitalization Offering(5) Acquisitions(8) Pro Forma
---------- ---------------- ---------------- ----------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash....................... $ 2,397 $ (996)(1) $ 1,401 $108,700 $(108,100) $ 2,001
Marketable securities...... 2,100 (2,100)(1) -- -- -- --
Accounts receivable, net... 5,456 -- 5,456 -- -- 5,456
Prepaid and other current
assets.................... 652 -- 652 -- -- 652
-------- ------- -------- -------- --------- --------
Total Currents Assets.... 10,605 (3,096) 7,509 108,700 (108,100) 8,109
Property and Equipment, net.. 5,672 -- 5,672 -- 16,500 22,172
OTHER ASSETS:
Deferred costs, net........ 1,040 5,660 (2) 6,700 (3,000) -- 3,700
Intangibles, net........... 26,317 -- 26,317 -- 245,502 271,819
Deposits................... 38,902 -- 38,902 -- (38,902) --
Other assets............... 150 -- 150 -- -- 150
-------- ------- -------- -------- --------- --------
Total Assets............. $ 82,686 $ 2,564 $ 85,250 $105,700 $ 115,000 $305,950
======== ======= ======== ======== ========= ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accounts payable and
accrued expenses.......... $ 1,705 $ -- $ 1,705 $ -- $ -- $ 1,705
Capitalized lease
obligations, current...... 472 -- 472 -- -- 472
-------- ------- -------- -------- --------- --------
Total Current Liabilities.. 2,177 -- 2,177 -- -- 2,177
Senior Debt.................. 56,139 (6,539)(3) 49,600 -- 80,000 129,600
Subordinated Debt............ 40,159 17,219 (3) 57,378 (57,378) -- --
Capitalized Lease
Obligations, Long Term...... 642 -- 642 -- -- 642
Deferred Income.............. 5,058 -- 5,058 -- -- 5,058
-------- ------- -------- -------- --------- --------
Total Liabilities........ 104,175 10,680 114,855 (57,378) 80,000 137,477
-------- ------- -------- -------- --------- --------
EQUITY:
Stockholders' Equity....... -- 133,473 (7) 35,000 168,473
Partners' deficit.......... (21,489) (8,116)(4) (29,605) 29,605 (6) -- --
-------- ------- -------- -------- --------- --------
Total Equity............. (21,489) (8,116) (29,605) 163,078 35,000 168,473
-------- ------- -------- -------- --------- --------
Total Liabilities And
Equity.................. $ 82,686 $ 2,564 $ 85,250 $105,700 $ 115,000 $305,950
======== ======= ======== ======== ========= ========
</TABLE>
- --------
(1) Cash used in the recapitalization resulted from (i) the proceeds of our
senior discount notes and our new credit facility (109,600); (ii) payoff of
our old credit facility and our subordinated discount notes (100,538);
(iii) the payment of a redemption of some equity interests and a preferred
distribution to Louis F. Mercatanti, Jr. (5,458) and (iv) the financing
costs incurred in the recapitalization (6,700).
30--2
<PAGE>
(2) We expensed previously deferred finance costs on our old credit facility
(1,040) and deferred financing costs incurred in our recapitalization
(6,700).
(3) We paid off our old credit facility (56,139) and our subordinated discount
notes (40,158) from the proceeds of our senior discount notes (49,600) and
our new credit facility (57,378).
(4) The increase in partners' deficit resulting from the recapitalization was
due to the distributions to the equity holder (5,458); the accretion and
other costs on the new credit facility (5,280) and the proceeds allocated
to limited partnership units issued in connection with the new credit
facility (2,622).
(5) The offering was recorded as follows:
<TABLE>
<S> <C>
Gross proceeds.................................................. 190,000
Costs of offering............................................... (14,300)
Repayment of subordinated discount notes........................ (62,000)
Redemption of some equity interests............................. (5,000)
--------
Net proceeds.................................................... $108,700
========
</TABLE>
(6) We converted to a corporation immediately prior to this offering.
(7) The financing costs associated with our new credit facility were written
off when our old credit facility was repaid (3,000). The accretion on the
repayment of subordinated debt (4,622) was also charged to accumulated
deficit.
(8) We financed and recorded the acquisitions as follows:
<TABLE>
<CAPTION>
Other Stations
Including those
Under Local
Aurora Allentown Marketing
Stations Stations Agreements Total
-------- --------- --------------- --------
<S> <C> <C> <C> <C>
Cash payments...................... $ 83,000 $24,000 $ 1,100 $108,100
Reduction of deposits.............. 7,000 6,000 25,902 38,902
Increase in debt................... 60,000 -- 20,000 80,000
Issuance of common stock........... 35,000 -- -- 35,000
-------- ------- ------- --------
Total............................ $185,000 $30,000 $47,002 $262,002
======== ======= ======= ========
</TABLE>
Professional fees associated primarily with the stations under local
marketing agreements, in the approximate amount of $1,100, are included as
deposits in the table above.
30--3
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The table below sets forth selected historical financial data of Nassau
Broadcasting Partners, L.P. and its predecessors, Nassau Broadcasting Company,
Inc. and Nassau Broadcasting Holdings, Inc., as of the dates and for the
periods indicated. The selected combined statement of operations data for the
year ended December 31, 1995 are derived from audited financial statements of
Nassau Broadcasting Company, Inc. and Nassau Broadcasting Holdings, Inc. which
are not included in this prospectus. The selected consolidated statement of
operations data for the year ended December 31, 1996 and the consolidated
balance sheet data as of December 31, 1995, 1996 and 1997 are derived from
audited financial statements of Nassau Broadcasting Partners, L.P. which are
not included in this prospectus. The statement of operations data for the years
ended December 31, 1997, 1998 and 1999 and the balance sheet data as of
December 31, 1998 and 1999 have been derived from audited financial statements
of Nassau Broadcasting Partners, L.P. and are included elsewhere in this
prospectus. The statement of operations data for the three months ended March
31, 1999 and 2000 and the balance sheet data as of March 31, 2000 have been
derived from the unaudited financial statements of Nassau Broadcasting
Partners, L.P. which, in the opinion of management, have been prepared on the
same basis as the audited financial statements and reflect all adjustments,
consisting of normal recurring adjustments, which, in the opinion of
management, are necessary for a fair presentation of this data. Results for the
three-month period ended March 31, 2000 are not necessarily indicative of
results that may be expected for the entire year or for any future period.
You should read the following data in conjunction with the historical
financial statements and related notes, the unaudited pro forma consolidated
financial statements and related notes, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
in this prospectus.
<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended March 31,
-------------------------------------------------- -----------------
1995 1996 1997 1998 1999 1999 2000
------- ------- ------- -------------- -------- ------- --------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Gross revenues.............. $ 5,999 $12,906 $20,891 $27,349 $ 34,295 $ 6,811 $ 7,893
Less agency and outside
commissions................ 487 1,082 1,812 2,353 2,893 544 612
------- ------- ------- ------- -------- ------- --------
Net revenues.............. 5,512 11,824 19,079 24,996 31,402 6,267 7,281
------- ------- ------- ------- -------- ------- --------
Operating expenses.......... 3,916 7,001 13,437 17,227 20,794 4,570 5,318
Depreciation and
amortization............... 274 851 2,139 2,364 2,634 603 822
Corporate general and
administrative expenses.... 370 1,583 1,995 1,825 2,280 500 587
Local marketing agreement
fees....................... -- 1,307 1,666 2,271 2,517 725 640
------- ------- ------- ------- -------- ------- --------
Total operating expenses.. 4,560 10,742 19,237 23,687 28,225 6,398 7,367
------- ------- ------- ------- -------- ------- --------
Operating income........ 952 1,082 (158) 1,309 3,177 (131) (86)
------- ------- ------- ------- -------- ------- --------
Other income (expenses)
Investment income......... -- -- 530 992 2,562 154 453
Gain on sale of assets.... -- -- -- 3,176 567 142 1,633
Interest expense.......... (2,042) (2,334) (6,367) (8,781) (10,946) (2,718) (3,024)
Write-off of debt offering
costs.................... -- (851) -- -- -- -- --
Special management fee.... -- -- (744) -- -- -- --
------- ------- ------- ------- -------- ------- --------
Total other income
(expenses)............. (2,042) (3,185) (6,581) (4,613) (7,817) (2,423) (938)
------- ------- ------- ------- -------- ------- --------
Income (loss) before
extraordinary item..... (1,090) (2,103) (6,739) (3,304) (4,640) (2,554) (1,024)
Extraordinary loss on early
retirement of debt......... -- -- -- (677) -- -- --
------- ------- ------- ------- -------- ------- --------
Net income (loss)....... $(1,090) $(2,103) $(6,739) $(3,981) $ (4,640) $(2,554) $ (1,024)
======= ======= ======= ======= ======== ======= ========
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Three Months
Ended March
Year Ended December 31, 31,
------------------------------------------- ---------------
1995 1996 1997 1998 1999 1999 2000
------ -------- -------- ------ ------- ------- ------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Other Data:
Broadcast cash flow
(1).................... $1,596 $ 4,823 $ 5,642 $7,769 $10,608 $ 1,697 $1,963
EBITDA (1).............. 1,225 3,240 3,647 5,944 8,328 1,197 1,376
After-tax cash flow
(1).................... (817) (1,252) (4,600) (4,116) (2,573) (2,093) (1,835)
Net cash provided by
(used in)
Operating activities.. (897) (1,362) (3,393) (1,408) (165) (281) (754)
Investing activities.. (3,480) (28,061) (18,541) 3,902 (8,368) (6,429) (6,082)
Financing activities.. (4,341) (33,893) 17,172 3,847 2,071 (104) (7,060)
</TABLE>
<TABLE>
<CAPTION>
As of
As of December 31, March 31,
--------------------------------------------- -----------
1995 1996 1997 1998 1999 2000
------- ------- ------- -------- -------- -----------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents............ $ 1,000 $ 5,471 $ 747 $ 7,090 $ 587 $ 2,397
Working capital......... 612 7,018 6,046 12,897 7,278 8,546
Total assets............ 9,599 44,503 57,445 69,835 74,768 82,686
Total indebtedness...... 14,597 50,113 65,299 82,808 90,445 97,412
Partners' deficit....... (5,789) (7,793) (9,032) (15,595) (19,510) (21,489)
</TABLE>
- --------
(1) Although broadcast cash flow, EBITDA and after-tax cash flow are not
measures of performance calculated in accordance with GAAP, management
believes that they are useful to an investor in evaluating our performance
because they are measures widely used in the broadcasting industry to
evaluate a radio company's operating performance. However, you should not
consider broadcast cash flow, EBITDA and after-tax cash flow in isolation
or as substitutes for net income, cash flow from operating activities and
other income or cash flow statement data prepared in accordance with GAAP,
or as measures of liquidity or profitability. Broadcast cash flow, EBITDA
and after-tax cash flow, as we define these terms, may not be comparable to
similarly titled measures used by other companies.
32
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis together with
"Unaudited Pro Forma Consolidated Financial Data," "Selected Historical
Financial Data" and the financial statements and the related notes included
elsewhere in this prospectus. This discussion contains forward-looking
statements that involve risks and uncertainties. The statements are based on
current expectations and actual results could differ materially from those
discussed here. Factors that could cause or contribute to such difference
include, but are not limited to, those discussed below and elsewhere in this
prospectus, particularly in the "Risk Factors" section.
Overview
We were founded in December 1986 with the purchase of WPST (FM) and WHWH
(AM) in Trenton, New Jersey by Louis F. Mercatanti, Jr., our President and
Chief Executive Officer. With the enactment of the Telecommunications Act of
1996, industry deregulation has allowed us to create a unified regional radio
broadcasting group with 21 clustered radio stations. Today, we are a radio
broadcasting company focused on building local radio station clusters in
demographically attractive suburban areas surrounding major metropolitan
markets in the northeastern United States. We currently own and/or operate
11 FM and 10 AM stations in five markets. We are currently in the process of
acquiring Aurora Communications, LLC, which operates nine stations in three
markets, and two Allentown, Pennsylvania stations from Clear Channel
Communications, Inc. Following these and other pending acquisitions, we will
own and/or operate 17 FM and 15 AM stations in nine markets.
We have increased the net revenues and broadcast cash flow of our
stations resulting in 21.0% and 33.0% two-year compound annual same station
broadcast cash flow growth, respectively. For the year ended December 31, 1999,
giving pro forma effect to our recent tower-related asset sale, our
recapitalization and reorganization and our pending acquisitions, as if we had
completed these transactions as of January 1, 1999, we would have had net
revenues of $55.9 million, broadcast cash flow of $20.6 million and a net loss
of $6.6 million. For the three months ended March 31, 2000, giving pro forma
effect to our recent tower-related asset sale, our recapitalization and
reorganization and our pending acquisitions, as if we had completed these
transactions as of January 1, 2000, we would have had net revenues of $12.9
million, broadcast cash flow of $4.5 million and a net loss before
extraordinary items of $1.3 million.
In May 2000, we undertook a recapitalization in which we:
. entered into a new credit facility that provides for borrowings of up
to $144.0 million;
. issued and sold units consisting of senior discount notes and limited
partnership units for gross proceeds of $60.0 million. The limited
partnership units were converted into shares of our class A common
stock as of the date of this offering;
. repaid all outstanding obligations under our old credit facility and
all our $42.4 million of outstanding subordinated discount notes
which had been issued to our existing stockholders; and
. redeemed $2.5 million of equity interests of, and paid a $2.9 million
preferred distribution to, Mr. Mercatanti, one of our stockholders.
Until immediately prior to this offering, we were a limited partnership
whose principal subsidiaries were single-member limited liability companies.
The limited partnership, Nassau Broadcasting Partners, L.P., was a flow-through
entity for federal and some state and local income tax purposes, and the
limited liability companies were disregarded for federal and some state and
local tax purposes. As a result, our net income (loss) for
33
<PAGE>
federal and some state and local income tax purposes had been reported by, and
taxed directly to, our equity holders, rather than by and to us. In connection
with this offering, we have terminated our limited partnership status and have
become subject to federal and applicable state and local corporate income tax
as a subchapter C corporation.
Our principal source of revenue is the sale of broadcasting time on our
radio stations for advertising. As a result, our revenue is affected primarily
by the advertising rates our radio stations charge. Advertising rates charged
by a radio station are based primarily on the station's ability to attract
listeners in a given market and on the attractiveness to advertisers of the
station's listener demographics. Rates vary depending upon a program's
popularity among the listeners an advertiser is seeking to attract, the number
of advertisers vying for available air time and the availability of advertising
time on other radio stations and alternative media in the market. Radio
advertising rates generally are highest during the morning and afternoon drive-
time hours which are the peak hours for radio listening. The number of
advertisements that a radio station can broadcast within any given time period
without jeopardizing listener levels, and the resulting ratings, are limited in
part by the format of that station. Each of our stations has a general
predetermined level of on-air inventory that it makes available for
advertising. Available inventory may vary at different times of the day but
tends to remain stable over time. Much of our selling activity is based on
demand for our radio stations' on-air inventory and, in general, we respond to
this demand by varying prices rather than by changing the available inventory.
Radio stations often utilize trade or barter agreements to exchange
advertising time for goods or services, such as other media advertising, travel
or lodging, in lieu of cash. In order to preserve most of our on-air inventory
for cash advertising, we generally enter into trade agreements only if we will
use the goods or services bartered to us in our business. We have minimized our
use of trade agreements and in 1999 we sold over 96% of our advertising time
for cash. In addition, we generally do not preempt advertising spots paid for
in cash with advertising spots paid for in trade.
Historically, our broadcast revenues have varied through the year. As is
typical in the radio broadcasting industry, we expect our first calendar
quarter to produce the lowest revenues for the year, and we expect the fourth
calendar quarter to produce the highest revenues for the year. Our operating
results in any period may be affected by the incurrence of advertising and
promotion expenses that do not necessarily produce commensurate revenues until
the impact of the advertising and promotion is realized in future periods.
In 1999, we derived approximately 75% of our gross revenues from the sale
of local advertising, and approximately 25% from the sale of national
advertising. Local advertising, which is sold primarily by each station's sales
staff, is important to us because it represents a stable revenue source which
is less affected by economic downturns. We receive higher rates for national
advertising and consequently we also focus on obtaining national advertisers.
However, we believe that the volume of national advertising revenue is more
susceptible to changes in the economic environment and a less reliable source
over the long-term. To generate national advertising sales, we engage Katz
Communications, Inc., a national advertising representation firm. In addition,
we have created a division called Jersey Radio Network to market to national
advertisers the importance of utilizing our radio stations to complement any
New York-Philadelphia radio schedule. In 1999, no single advertiser accounted
for 1% of our gross revenue.
Our operating expenses are primarily sales commissions and programming,
engineering, advertising and promotional expenses. We aim to control these
expenses by working closely with local station management. We also have
incurred and will continue to incur significant depreciation and amortization
expense as a result of completed and future acquisitions of stations.
We typically collect our advertising revenue within 120 days of the date
on which we air the related advertisement. Most accrued expenses, however, are
paid within 45 to 60 days. As a result of this time lag, working capital
requirements have increased as we have grown and are likely to increase in the
future.
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<PAGE>
We have generated net losses primarily as a result of significant charges
for depreciation and amortization relating to the acquisition of radio stations
and interest charges on outstanding debt. We amortize FCC licenses and goodwill
attributable to the acquisition of radio stations over a period ranging from 25
to 40 years. Based upon the large number of acquisitions we expect to
consummate within the next six months, we anticipate that depreciation and
amortization charges will continue to be significant for several years. To the
extent that we complete additional acquisitions, our interest expense and
depreciation and amortization charges are likely to increase. If this occurs,
we would expect to continue to incur net losses.
The performance of a radio broadcasting company, such as ours, is
customarily measured by its ability to generate broadcast cash flow and EBITDA.
Broadcast cash flow consists of operating income (loss) before depreciation and
amortization, corporate general and administrative expenses, and local
marketing agreement fees. "EBITDA" consists of operating income (loss) before
depreciation and amortization expense and local marketing agreement fees.
Broadcast cash flow and EBITDA, as we define them, may not be comparable to
similarly titled measures used by other companies. Although broadcast cash flow
and EBITDA are not measures of performance calculated in accordance with
generally accepted accounting principles, we believe that they are accepted by
the broadcasting industry as generally recognized measures of performance and
are used by analysts who report publicly on the operating performance of radio
broadcasting companies. Nevertheless, you should not consider these measures in
isolation or as a substitute for operating income, net income, net cash
provided by operating activities or any other measure for determining our
operating performance or liquidity that is calculated in accordance with
generally accepted accounting principles.
Our financial results are dependent on a number of factors, including the
general strength of the local and national economies, population growth, the
ability to provide popular programming, local market competition, the relative
efficiency of radio broadcasting compared to other media, signal strength and
government regulation and policies.
Results of Operations
Three months ended March 31, 2000 compared to three months ended March 31, 1999
Net revenues for the three months ended March 31, 2000 were $7.3 million
compared to $6.3 million for the three months ended March 31, 1999, an increase
of 16.2%. This increase was due primarily to the increased focus of our sales
force in growing the sale of commercial time to local and national advertisers.
Operating expenses for the three months ended March 31, 2000 were $5.3
million compared to $4.6 million for the three months ended March 31, 1999, an
increase of 16.4%. The increase was attributable primarily to continuing
investments in our programming and sales personnel at the station level.
As a result of the factors described above, broadcast cash flow was $2.0
million for the three months ended March 31, 2000 compared to $1.7 million for
the three months ended March 31, 1999, an increase of 15.7%.
Corporate general and administrative expenses for the three months ended
March 31, 2000 was $587,000 compared to $500,000 for the three months ended
March 31, 1999, an increase of 17.4%. This increase was attributable primarily
to additional professional fees and investment in additional personnel
necessary to manage our growing radio station portfolio.
As a result of the factors described above, EBITDA was $1.4 million for
the three months ended March 31, 2000 compared to $1.2 million for the three
months ended March 31, 1999, an increase of 15.0%.
Depreciation and amortization expense for the three months ended March
31, 2000 was $822,000 compared to $603,000 for the three months ended March 31,
1999, an increase of 36.3%. This increase reflected the amortization of
goodwill associated with the acquisition of WNJO (FM) and WCHR (AM) recorded in
the quarter ended March 31, 2000.
35
<PAGE>
Local marketing agreement fees for the three months ended March 31, 2000
were $640,000 compared to $725,000 for the three months ended March 31, 1999, a
decrease of 11.7%. The decrease reflected a reduction in the amount of local
marketing agreement fees paid under existing agreements.
As a result of the factors described above, our operating loss for the
three months ended March 31, 2000 was $86,000 compared to $131,000 for the
three months ended March 31, 1999, a decrease of 34.4%.
Other expenses for the three months ended March 31, 2000 was $938,000
compared to $2.4 million for the three months ended March 31, 1999. The change
is attributable primarily to the gain recognized in the sale of tower-related
assets.
As a result of the factors described above, our net loss for the three
months ended March 31, 2000 was $1.0 million compared to a net loss of $2.5
million for the three months ended March 31, 1999.
Year ended December 31, 1999 compared to year ended December 31, 1998
Net revenues for the year ended December 31, 1999 were $31.4 million
compared to $25.0 million for the year ended December 31, 1998, an increase of
25.6%. This increase in revenues was driven primarily by the underlying
economics of the markets we operated in, improved selling efforts and the
overall strong performance of our established stations as well as the
maturation of our developing stations.
Operating expenses for 1999 were $20.8 million compared to $17.2 million
for 1998, an increase of 20.7%. The increase was due to increased investments
in programming talent, increased advertising and promotion expenditures and
sales expenses associated with higher revenues.
As a result of the factors described above, broadcast cash flow was $10.6
million for 1999 compared to $7.8 million for 1998, an increase of 36.5%.
Corporate general and administrative expenses for 1999 totaled $2.3
million compared to $1.8 million for 1998, an increase of 24.9%. The increase
was attributable primarily to the addition of a corporate controller, increased
legal fees as we continually examine new opportunities for growth and
performance based compensation increases.
As a result of the factors described above, EBITDA was $8.3 million for
1999 compared to $5.9 million for 1998, an increase of 40.1%.
Depreciation and amortization expense for 1999 was $2.6 million compared
to $2.4 million for 1998, an increase of 11.5%. This increase reflected the
write-off of deferred financing costs associated with our old credit facility
and amortization of goodwill associated with the acquisitions of WNJO (FM) and
WCHR (AM).
Local marketing agreement fees for 1999 were $2.5 million compared to
$2.3 million in 1998, an increase of 10.8%. The increase was due to the local
marketing agreement initiated in November 1998 for WSBG (FM) and WVPO (AM) in
Stroudsburg, Pennsylvania.
Operating income for 1999 was $3.2 million compared to $1.3 million in
1998, an increase of 142.6%. This increase was primarily attributable to the
strong revenue growth coupled with management's control of expenses.
Other expenses for 1999 was $7.8 million compared to $4.6 million in
1998. This increase was attributable to the gain recognized on the sale of WSBG
(FM) and WVPO (AM) in 1998.
As a result of the factors described above, our net loss for 1999 was
$4.6 million compared to $4.0 million in 1998.
36
<PAGE>
Year ended December 31, 1998 compared to year ended December 31, 1997
Net revenues for the year ended December 31, 1998 were $25.0 million
compared to $19.1 million for the year ended December 31, 1997, an increase of
31.0%. The increase was due to management's continued focus on station by
station growth. 1998 also included a full twelve months of operating results
for WBBO (FM) which went on the air in May 1997. WNJO (FM) and WCHR (AM) were
successfully switched to new formats in mid-1998.
Operating expenses for 1998 were $17.2 million compared to $13.4 million
in 1997, an increase of 28.2%. The increase was primarily attributable to the
commencement of operation of WNJO (FM), WCHR (AM), WBBO (FM) in 1998 as well
as expenses associated with higher revenues.
As a result of the factors described above, broadcast cash flow was $7.8
million in 1998 compared to $5.6 million in 1997, an increase of 37.7%.
Corporate general and administrative expenses were $1.8 million in 1998
compared to $2.0 million in 1997, a decrease of 8.5%. This decrease was
attributable primarily to a reduction in fees paid under a management
consulting agreement which terminated in 1997.
As a result of the factors described above, EBITDA was $5.9 million for
1998 compared to $3.6 million for 1997, an increase of 63.0%.
Depreciation and amortization expense for 1998 was $2.4 million compared
to $2.1 million for 1997, an increase of 10.5%. The increase was attributable
primarily to the full year of depreciation and amortization expense associated
with the radio stations acquired in 1997.
Local marketing agreement fees were $2.3 million in 1998 compared to
$1.7 million in 1997, an increase of 36.3%. New local marketing agreements
were initiated in 1998 for WTSX (FM) and WDLC (AM) in Port Jervis, New York,
and WSBG (FM) and WVPO (AM) in Stroudsburg, Pennsylvania.
As a result of the factors described above, operating income for 1998
was $1.3 million compared to a loss of $158,000 in 1997.
Other expense for 1999 was $4.6 million in 1998 and $6.6 million in
1997. The decrease was attributable to the gain recognized on the sale of WSBG
(FM) and WVPO (AM) in 1998.
As a result of the factors described above, our net loss for 1998 was
$4.0 million compared to $6.7 million in 1997.
Liquidity and Capital Resources
Overview. We have financed our acquisitions from one or a combination of
the following sources:
. our credit facilities;
. borrowings from our equity investors and others;
. additional equity issuance;
. asset sales; and
. internally generated broadcast cash flow.
37
<PAGE>
Our other liquidity needs have been for working capital, debt service,
capital expenditures and other general corporate purposes. In the future, we
expect that our principal liquidity requirements will be for acquisitions of
additional radio stations, working capital, debt service and other general
corporate purposes. We expect to finance future acquisitions through a
combination of bank borrowings and internally generated funds.
We will use the net proceeds from this offering in the following manner:
. $60.0 million plus approximately $2.0 million of accretion to redeem
all of our outstanding senior discount notes incurred to repay
subordinated discount notes held by some of our existing stockholders
and to repay a portion of the borrowings under our old credit
facility;
. $78.0 million to finance a portion of the acquisition of Aurora
Communications;
. $24.0 million to finance the acquisition of the two Allentown,
Pennsylvania radio stations; and
. the remainder to pay transaction costs and provide for general
corporate purposes.
As of March 31, 2000, we held $2.4 million in cash and cash equivalents,
held $2.1 million in marketable securities available for sale, and had $1.0
million available under our old credit facility. Our pending acquisitions have
an aggregate purchase price of $266.3 million with a remaining cash requirement
of $188.5 million. Based on our current debt obligations, we anticipate that
our debt service costs for the twelve months ending March 31, 2001 will be
$12.0 million. Under our new credit facility, we can currently borrow up to
$144.0 million, subject to compliance with financial ratios and covenants. We
believe that the net proceeds from this offering, together with the
availability under our new credit facility and cash on hand should be
sufficient to permit us to meet our financial obligations for at least the next
twelve months.
We had working capital of $7.3 million at December 31, 1999, $12.9
million at December 31, 1998 and $6.0 million at December 31, 1997.
Operating Activities. Our operating activities used $165,083 in 1999
compared to $1.4 million used in 1998. The change relates primarily to improved
working capital management in 1999.
Investing Activities. Our investing activities used $8.4 million in 1999,
primarily for payments due under the purchase agreement for WNJO (FM) and WCHR
(AM).
Financing Activities. Cash provided by financing activities totaled $2.1
million in 1999. In 1999, we drew against our old credit facility to make
payments under existing asset purchase agreements.
As of March 31, 2000, we had an outstanding balance under our old credit
facility of approximately $56.0 million and availability under our old credit
facility of $1.0 million for future acquisitions and other corporate purposes.
Giving pro forma effect to the following transactions as of March 31, 2000, we
would have had an outstanding balance under our new credit facility of
approximately $129.6 million and availability under our new credit facility of
$14.4 million for future acquisitions and other corporate purposes:
. our recapitalization and reorganization;
. the completion of this offering and the application of the net
proceeds as contemplated;
. the completion of our acquisition of Aurora Communications;
. the completion of our acquisition of two radio stations in Allentown,
Pennsylvania;
. the completion of our acquisitions of seven radio stations that we
currently operate under local marketing agreements;
. the completion of our acquisition of Manahawkin Communications
Corporation, the owner of a construction permit to build a new radio
station, WCHR (FM), in the New Jersey market of Monmouth and Ocean
counties; and
. the completion of our acquisition of one radio station in Mount
Pocono, Pennsylvania.
38
<PAGE>
New Credit Facility. Our new credit facility is secured by substantially
all our assets, including our ownership interests in each of our subsidiaries.
Our principal operating subsidiary, Nassau Broadcasting I, LLC, is the borrower
under our new credit facility. However, we have, and each of our other
subsidiaries has, fully and unconditionally guaranteed all of our obligations
under this facility. The terms we use below have the meaning given to them in
our new credit facility.
The new credit facility consists of the following:
. $20.0 million revolving credit facility, approximately $4.6 million
of which we have drawn in connection with our recapitalization and
which we use to provide for general corporate purposes. The revolving
credit facility bears interest at the following annual rates:
(1) during the periods that the loan is an Alternative Base Rate
Loan, the Alternative Base Rate, plus the Applicable Margin, and
(2) during the periods that the loan is a LIBOR Loan, for each
related Interest Period, the LIBO Rate for the loan for that
Interest Period, plus the Applicable Margin.
This loan matures in June, 2006.
. $33.0 million term loan A1, which we will use to finance a portion of
the purchase price of Aurora Communications in the form of repayment
of debt of Aurora Communications. This loan bears interest at the
following annual rates:
(1) during the periods that the loan is an Alternative Base Rate
Loan, the Alternative Base Rate, plus the Applicable Margin, and
(2) during the periods that the loan is a LIBOR Loan, for each
related Interest Period, the LIBO Rate for the loan for that
Interest Period, plus the Applicable Margin.
This loan will amortize on a quarterly basis and matures in June,
2006.
. $26.0 million term loan A2, $5 million of which we have drawn in
connection with our recapitalization and the remainder of which we
will use to finance a portion of the purchase price of stations we
currently operate under local marketing agreements. This loan bears
interest at the following annual rates:
(1) during the periods that the loan is an Alternative Base Rate
Loan, the Alternative Base Rate, plus the Applicable Margin, and
(2) during the periods that the loan is a LIBOR Loan, for each
related Interest Period, the LIBO Rate for the loan for that
Interest Period, plus the Applicable Margin.
This loan will amortize on a quarterly basis and matures in June,
2006.
. $40.0 million term loan B, which we have drawn in connection with our
recapitalization and to fund an equity redemption. This loan bears
interest at the following annual rates:
(1) during the periods that the loan is an Alternative Base Rate
Loan, the Alternative Base Rate, plus the Applicable Margin, and
(2) during the periods that the loan is a LIBOR Loan, for each
related Interest Period, the LIBO Rate for the loan for that
Interest Period, plus the Applicable Margin.
This loan will have minimal amortization over its life and matures in
June, 2007, at which time a balloon payment will be due.
. $25.0 million term loan C, which we will use to finance a portion of
the purchase price of Aurora Communications in the form of repayment
of debt of Aurora Communications. This loan bears interest at the
following annual rates:
(1) during the periods that the loan is an Alternative Base Rate
Loan, the Alternative Base Rate, plus the Applicable Margin, and
39
<PAGE>
(2) during the periods that the loan is a LIBOR Loan, for each
related Interest Period, the LIBO Rate for the loan for that
Interest Period, plus the Applicable Margin.
This loan will have minimal amortization over its life and matures in
June, 2008, at which time a balloon payment will be due.
Our new credit facility prohibits us from paying cash dividends and
restricts our ability to make other distributions with respect to our capital
stock. Our new credit facility also contains other customary restrictive
covenants. Among other things, these covenants limit our ability to:
. incur additional indebtedness, contingent liabilities and liens;
. redeem or repurchase capital stock and redeem, repurchase or prepay
subordinated debt;
. enter into certain investments or joint ventures;
. consolidate, merge or effect asset sales;
. make capital expenditures;
. enter sale and leaseback transactions;
. sell or discount accounts receivable;
. enter into transactions with stockholders and affiliates; or
. change the nature of our business.
We are also required to satisfy financial covenants, which require us to
maintain specified financial ratios and to comply with financial tests, such as
ratios for interest coverage, fixed charge coverage and senior and total debt.
Our new credit facility contains events of default typical for this type
of facility (subject in each case to certain grace periods and materiality
thresholds), including, without limitation, (1) non-payment of amounts due
under the credit facility, (2) material misrepresentations, (3) covenant
defaults, (4) cross-defaults to other indebtedness, (5) judgment defaults, (6)
bankruptcy, and (7) a change of control of the principal operating company,
Nassau Broadcasting I, LLC or its successors.
Senior Discount Notes. On May 4, 2000, we issued and sold units
consisting of senior discount notes and limited partnership units for gross
proceeds of $60.0 million. The limited partnership units were converted into
shares of class A common stock as of the date of this offering. These
senior discount notes will be fully repaid from the proceeds of this offering.
The proceeds from these senior discount notes were used to repay the
subordinated discount notes held by some of our equity holders.
Old Credit Facility. On May 4, 2000, we repaid approximately $58.1
million in then-outstanding borrowings under our old credit facility from
borrowings under our new credit facility and from proceeds of our senior
discount notes.
Subordinated Discount Notes, Preferred Distribution and Equity
Redemption. On May 4, 2000, we repaid all outstanding subordinated discount
notes that we had issued to our existing stockholders in an amount of $42.4
million and made a preferred distribution to Louis F. Mercatanti, Jr. under the
Nassau Broadcasting partnership agreement, in an amount of $2.9 million. In
addition, Nassau Broadcasting, L.P. redeemed $2.5 million of equity interests
held by Mr. Mercatanti, who also has the right to require us to redeem a
further $5.0 million of equity interests at any time provided there is no
existing event of default under our new credit facility and no new event of
default would result.
Pending Acquisitions. We expect that the total cash required to fund our
pending acquisitions is approximately $231.3 million, with a remaining cash
requirement of $188.5 million. The consummation of our pending acquisitions is
subject to conditions, including approval of the FCC. Although we believe the
closing conditions are customary for transactions of this type, these
conditions may not be satisfied. We believe that the FCC ultimately will
approve the proposed acquisitions, but we cannot be certain of this. Therefore,
we do not know when these acquisitions will close, if at all.
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Qualitative and Quantitative Disclosures about Market Risk
Market risk is the risk of loss arising from adverse changes in market
rates and prices such as interest rates, foreign currency exchange rate and
commodity prices. Our primary exposure to market risk is interest rate risk
associated with our new credit facility. Amounts borrowed under the new credit
facility incur interest at the Alternate Base Rate or the LIBO Rate plus the
then Applicable Margin depending on the outstanding principal balance under our
new credit facility. We are required to fix the interest rate of, or enter into
interest rate hedging arrangements for, approximately 50% of the aggregate
principal amount then outstanding under our new credit facility.
Historically, we believe that we have not been exposed to market risk
which has had a material adverse effect on our operations.
Year 2000 Compliance
We have experienced no material problems as a result of the year 2000
issue. We do not anticipate experiencing any latent material problems. Costs to
ensure that our systems are year 2000 compliant have not been, and are not
expected to be, material.
Inflation
To date, our results of operations have not been impacted materially by
inflation.
Recent Pronouncements
In September 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which requires entities to recognize all
derivatives in their financial statements as either assets or liabilities
measured as fair value. SFAS No. 133 also specifies new methods of accounting
for hedging transactions, prescribes the items and transactions that may be
hedged and specifies detailed criteria to be met to qualify for hedge
accounting. SFAS No. 133, as amended by SFAS No. 137, is effective for fiscal
years beginning after June 15, 2000. We are evaluating the impact that this
statement will have on our results of operations and financial position.
In January 2000, the Emerging Issues Task Force reached a consensus on
Issue No. 99-17, "Accounting for Advertising Barter Transactions," to be
effective for transactions entered into after January 20, 2000. The consensus
states that advertising barter transactions should be accounted for at fair
value and that the fair value recognized be disclosed in the financial
statements, if there is verifiable objective evidence provided by sufficient
cash transactions received by the seller of the advertising or similar
advertising. We do not expect EITF No. 99-17 to have a material effect on our
financial statements.
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INDUSTRY OVERVIEW
Radio stations generate the majority of their revenue from the sale of
advertising time to local and national spot advertisers and national network
advertisers. Radio gives advertisers an economy of scale with regard to
targeting demographic groups in specific geographic locations compared to other
forms of media advertising. As a result, radio broadcasting is affordable to
both large and small advertisers, although it serves primarily as a medium for
local advertising. According to the Radio Advertising Bureau's Radio and
Marketing Guide & Fact Book for Advertisers: Fall 1999 to Spring 2000, from
1990 to 1999, local advertising revenue as a percentage of total radio
advertising revenue in the United States has ranged from approximately 77% to
80%. The growth in total radio advertising revenue has been fairly stable in
the past six years, growing between approximately 8% and 15% annually. Total
radio advertising in 1999 reached an estimated $17.7 billion, which represents
almost 15% growth over the prior year.
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 or
news/talk. A station's format and style of presentation enable it to target
particular segments of listeners sharing certain demographic features. By
capturing a specific share of a market's radio listening audience, with
particular concentration in a targeted demographic group, a station is able to
market its broadcasting time to advertisers seeking to reach a defined
audience. Advertisers and stations use data published by audience measuring
services, such as Arbitron, to estimate how many people within particular
geographical markets and demographic groups listen to each station in those
markets. In addition, rates vary depending upon a program's popularity among
the listeners an advertiser is seeking to attract, the number of advertisers
vying for available air time and the availability of alternative advertising
media in the market. Radio advertising rates generally are highest during the
morning and afternoon drive-time hours which are the peak hours for radio
audience listening.
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 that are broadcast during any 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
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 they obtain.
Consumer Reach
Radio is a powerful medium through which to reach consumers. Radio is
able to reach consumers more frequently than television or cable because it can
be listened to outside the home, in cars and in the workplace. According to the
Radio Advertising Bureau's Radio and Marketing Guide & Fact Book for
Advertisers: Fall 1999 to Spring 2000, radio reaches 75% of consumers 12 years
of age and older everyday and with more radio listening occurring outside the
home, radio advertising is confronted with less competition in attracting
consumers than other mediums of advertising. Every week, radio reaches 95% of
all consumers 12 years of age and older. Radio is also the number one medium
close to the point of purchase as it reaches 63% of adults 25 to 54 years old
within one hour of making their largest purchase of the day.
More than 60% of all radio listening is done outside the home, and radio
reaches four out of five adults travelling in vehicles each week. The average
listener spends approximately three hours and 12 minutes every weekday
listening to radio. The highest portion of radio listenership occurs during the
morning, particularly between the time a listener wakes up and the time the
listener reaches work. Each week, this "morning drive time" period reaches more
than 80% of people 12 years of age and older and, as a result, radio
advertising sold during this period achieves premium advertising rates.
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Radio listeners have gradually shifted over the years from AM (amplitude
modulation) to FM (frequency modulation) stations. FM reception is generally
clearer and provides greater tonal range and higher fidelity than AM reception.
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.
The area served by AM stations is determined by a combination of
frequency, transmitter power and antenna orientation. Power, operating
frequency, antenna patterns and day/night operating modes are required to
determine the effective service area of an AM station. The area served by FM
stations is determined by a combination of transmitter power and antenna
height, with stations divided into classes according to their anticipated
service area.
The minimum and maximum facilities requirements for an FM station are
determined by its class. FM class designations depend upon the geographic zone
in which the transmitter of the FM station is located. In general, commercial
FM stations are classified as follows, in order of increasing power and antenna
height: Class A, B1, C3, B, C2, C1 and C. Class C FM stations operate at 100
kilowatts of power with up to 1,968 feet of antenna elevation above average
terrain. They are the most powerful FM stations, providing service to a large
area, typically a substantial portion of a state. Class B FM stations operate
at up to 50 kilowatts of power with up to 500 feet of antenna elevation. These
stations typically serve large metropolitan areas as well as their associated
suburbs. Class A FM stations operate at 6 kilowatts with up to 328 feet of
antenna elevation, and serve smaller cities and towns or suburbs of larger
cities.
License Grant and Renewal
Radio broadcast licenses are granted and renewed for maximum terms of
eight years. Licenses may be renewed through an application to the FCC.
Petitions to deny license renewal applications can be filed by interested
parties, including members of the public.
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BUSINESS
We focus on building local radio station clusters in demographically
attractive suburban areas surrounding major metropolitan markets in the
Northeast. Our primary strategy is to capture leadership positions in the
markets in which we currently operate and, while growing those markets, also
expand to other attractive suburban markets with strong growth opportunities.
We attribute our broadcast cash flow growth on a same station basis of 33% over
the past two years to our ability to identify and define underdeveloped markets
and transform radio stations into competitive local brands.
Operating Strategy
We intend to grow our business, both organically and through
acquisitions, by pursuing the following strategies:
Build station clusters and operate multiple stations within new markets
We operate stations in clusters to provide coverage over a series of
adjacent markets. Clustering enables us to realize operational efficiencies
through a combined sales force and shared support functions for each cluster.
Joint promotions among our stations enable us to create larger marketing
programs than an individual radio station could otherwise economically afford.
Each radio cluster presents advertisers with multiple opportunities to
reach their target audiences and achieve their marketing objectives. Synergies
derived from clustering enable us to present cost efficient solutions to
advertisers. If an advertiser desires airtime on several stations, we provide
it with one point of contact within our organization and request only one order
form.
Improve station programming to increase audience share
We recognize the importance of focusing on the local community to ensure
that our radio stations address the public interest. In many of our markets,
improving the coverage of local stories has filled a void in the community and
created audience loyalty. For example, last year we recognized the growing
desire for sports coverage in Trenton, New Jersey with the introduction of
professional hockey and baseball teams. To respond to this community interest,
we established WTTM (AM) in May 1999 as the first all sports station and the
exclusive radio broadcaster of ESPN in this market. In addition to focusing on
local interests, we also actively participate in community events and
charities.
We invest in our on-air talent and program directors who monitor the
content and advertising on our stations to ensure each station is operating
under its designed format. We continually search for ways to improve our
programming as we evolve with our listeners. Our goal is to retain or improve
station ratings, which we believe is essential to achieve consistent growth. We
attempt to do this by creating distinct, highly visible profiles for our on-air
personalities, particularly those broadcasting during "morning drive-time,"
which is traditionally between 6:00 am and 10:00 am, weekdays. We recently
detected an opportunity to grow the audience for the hot adult contemporary
format during the evening hours, a typically weaker time period. We designed an
original interactive show built around the radio personality, Roberta, that we
believe will captivate a significant number of listeners. Based on the current
success in syndicating this program on several of our stations, we intend to
syndicate Roberta nationally later this year.
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Enhance brand awareness
We believe brand awareness and brand loyalty are essential to achieving a
sizable audience, which attracts advertising revenue. To maintain or improve
audience ratings, we brand and market individual stations. Creating a brand for
a station facilitates the ability of people in the local community to identify
with the station. For example, in 1997, we branded WJLK (FM) in the Monmouth-
Ocean market as "The POINT." The POINT's concept and design is intended to
reflect the lifestyle of its target audience. The station ranks first in its
target demographic audience, women 25-54 years old, among all local and New
York stations in the Monmouth-Ocean market.
Cultivate a broad base of advertisers
We focus on the needs of both local and national advertisers by
developing a sales force trained to proactively service local and national
advertisers in creative ways. We have an ongoing training program which
includes seminars offered by the Radio Advertising Bureau and other industry
groups as well as in-house training organized by management. Our sales force
seeks to design advertising packages which include those stations in a cluster
that best fit an advertiser's needs. We utilize Katz Communications, Inc., or
Katz, a national advertising representation firm, to obtain national
advertising for our stations. We also use Jersey Radio Network, our own
national sales force, to locate additional national advertisers.
Acquisition Strategy
Identification of target stations
We seek to expand our presence by acquiring additional stations in
demographically attractive suburban areas surrounding major metropolitan
markets, primarily in the Northeast. We target radio markets that are
underdeveloped and have lower radio market revenue relative to total retail
sales as compared to the national average and/or where radio has historically
captured only a small portion of total local advertising for all media. We
identify and seek to acquire stations that we believe will enable us to create
leadership positions in ratings and format in our existing markets or new,
complementary markets and provide us with the opportunity to increase revenues
and broadcast cash flow. In executing this strategy, we focus on properties
which:
. provide a regional fit with our overall portfolio;
. provide proximity to larger markets that may lead to increased
economic expansion into our markets;
. are situated in previously unconsolidated markets with fragmented
individual ownership of stations; and
. provide the opportunity to assemble a group of stations that have
competitive signal strength and that are diversified in format to
provide a wide range of target audiences for advertisers.
Integration of acquired stations
Since 1995, we have acquired or signed local marketing agreements to
operate 19 radio stations. We have developed an efficient process to integrate
new stations into our portfolio, culture and operating philosophy. Our
integration process consists of the following key elements:
. improving local presence of stations through top-quality on-air
talent and programming personnel;
. building an experienced sales force through continued recruitment and
on-going training; and
. designing marketing efforts to build brand awareness for each
station.
We intend to transform stations in our portfolio that currently
contribute minimal broadcast cash flow into profitable stations. After
identifying an underperforming station, senior management carefully analyzes
the
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characteristics of the station, including the current programming and the
audience's perception of the station, and uses market studies to determine
market receptivity for change. In designing a plan to revitalize the station,
senior management examines how the station profile fits with our existing
portfolio in terms of station reach, format and audience. We then focus on
hiring and retaining strong on-air talent and programming personnel to create a
dynamic station and garner new listeners.
By implementing our acquisition strategy, we have quickly achieved
success in many of our markets, such as:
WJLK (FM)--Monmouth-Ocean, NJ. After acquiring WJLK (FM) and WQNJ (FM) in
October 1996, we began the process of disconnecting the simulcast of WJLK (FM)
and WQNJ (FM), while at the same time adjusting the format on WJLK (FM) to hot
adult contemporary. In May 1997, we relaunched WQNJ (FM) as WBBO (FM) in a
contemporary hit radio format and have since increased combined net revenues of
these stations from $3.6 million in 1996 to $7.8 million in 1999.
WNNJ (FM)--Sussex, NJ. After acquiring WNNJ (FM) in August 1996, we
determined the listeners targeted by the station's hot adult contemporary
format were more receptive to our two other adult contemporary stations in the
area, WSUS (FM) and WSBG (FM). In 1997, we changed the station's format to
classic hits and increased the signal power to 25,000 watts. WNNJ (FM) now
shares the number one market position with WSUS (FM) in the 25-54 year old
target demographic audience.
WNJO (FM)--Trenton, NJ. When we acquired WNJO (FM) in May 1997, the
station was broadcasting a religious format. Given the high signal power of
50,000 watts, we believed we could move the religious format to an AM station
without losing significant revenue and implement a more popular format on the
FM station. In March 1998, we placed the religious format on WCHR (AM) and
implemented an oldies format on WNJO (FM). With the addition of this signal, we
had two 50,000-watt FM stations in the Trenton market and also a very strong FM
presence in the Philadelphia metropolitan market. After the format change, the
combined net revenues of WNJO (FM) and WCHR (AM) increased by 322% over the
next two years.
Advertising
All of our revenue is derived from advertising. Similar to other radio
stations, we have a sales force that solicits local advertising and we employ
Katz as our national sales representative. Further, we believe that some
national advertisers represent opportunities for additional, directly-generated
revenue. These advertisers are primarily national businesses that do not have a
direct presence in our markets. We created a division called Jersey Radio
Network to target these advertisers. Jersey Radio Network is a sales force that
focuses on conveying to advertisers the importance of utilizing our radio
stations to complement a New York or Philadelphia radio advertising schedule.
Through Jersey Radio Network, we offer a simple process with flexibility and
creativity to adapt to an advertiser's desire to target our affluent suburban
markets. With our expansion throughout the Northeast, we intend to expand this
concept to supplement any major metropolitan market in which we operate.
We believe that through direct advertiser relationships we can better
understand the advertiser's business needs and more effectively design an
advertising campaign to help the advertiser sell its product. As a result, we
pay a higher commission rate to both our local sales staff and Jersey Radio
Network sales staff than our national representative for generating sales. Our
employees work with our advertisers in each of our markets to produce
commercials in our technologically advanced facilities.
Advertising rates charged by a radio station are based primarily on the
station's ability to attract listeners in a given market and on the
attractiveness to advertisers of the station's listener demographics. We
believe that having multiple stations in a market enables us to offer a variety
of rates to advertisers. We believe
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we will be able to increase our rates and fully sell our advertising time as
new and existing advertisers recognize the desirability of our stations'
diverse formats.
Each station broadcasts a predetermined number of advertisements each
hour with the actual number depending upon the format of a particular station.
We determine the number of advertisements broadcast hourly that can maximize
each of our station's available revenue dollars without jeopardizing its
listener levels.
Our revenue mix between local and national advertising varies
significantly by market. Currently, approximately 75% of our advertising is
local and approximately 25% is national. We believe that local revenues are
important as they represent a stable revenue source which is less affected by
economic downturns. However, we also view national advertising as important
because it generally commands a higher dollar rate for each advertising spot
than local advertising.
Station Portfolio
Our stations are clustered in demographically attractive mid-size
suburban areas, particularly those surrounding the New York and Philadelphia
metropolitan areas. This enables us to co-ordinate our sales effort and realize
operating efficiencies in our sales, programming, engineering and accounting
divisions. The following table sets forth information about our stations and
the markets we serve and will serve upon completion of the acquisition of
Aurora Communications, the acquisition of the Allentown, Pennsylvania radio
stations and our other pending acquisitions. The sources for this information
are described under "Summary-- Market and Industry Data and Industry Terms."
<TABLE>
<CAPTION>
1993-1998 1999
1999 1999 Radio Market 1999 Stations Radio Group
Market Radio Market Average Annual Radio Market --------- Rank in
Market Rank Revenue Rank Revenue Growth Revenue Growth FM AM Market Revenue
- ------------------------ ------ ------------ -------------- -------------- ---- ---- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Northern(1)
Westchester, NY(2)...... 1 2 10.8% 16.8% 2 1 N/A
Bridgeport, CT.......... 112 91 8.9% 5.6% 1 1 1
Danbury, CT............. 189 190 5.3% 8.0% 2 2 2
Northwestern
Sussex, NJ.............. 239 250 N/A 16.7% 3 1 1
Newburgh-Middletown,
NY..................... 141 258 0% 9.8% 1 1 5
Wilkes Barre-Scranton,
PA..................... 64 77 6.5% 11.3% 1 2 4
Allentown, PA(3)........ 67 76 7.5% 6.8% 1 1 3
Central
Trenton, NJ............. 138 100 11.5% 14.6% 2 4 1
Shore
Monmouth-Ocean, NJ(4)... 47 83 5.6% 21.3% 4 2 1
---- ----
Total stations........ 17 15
==== ====
</TABLE>
- --------
(1) Consists of the nine radio stations we expect to acquire through our
acquisition of Aurora Communications, LLC.
(2) Falls within the greater New York market.
(3) Consists of two stations we expect to acquire from Clear Channel
Communications, Inc.
(4) Includes the construction permit of WCHR (FM), which we will acquire upon
the completion of our acquisition of Manahawkin Communications Corporation.
The following is a general description of each of our markets and our
radio stations within these markets. Information relating to radio market
revenue rank, radio market revenue and revenue growth of stations is derived
from BIA.
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WESTCHESTER, NEW YORK
1999 Radio Market Revenue Rank: 2
<TABLE>
<CAPTION>
Target Audience Share Audience Rank
Date Demographic in Target in Target
Station Call Letters Acquired Format Audience Demographic(1) Demographic(1)
- ------------------------ -------- ------------------ ----------- -------------- --------------
<S> <C> <C> <C> <C> <C>
WFAS (FM)............... pending Adult contemporary 25-54W 5.8 3
WFAF (FM)............... pending Adult contemporary 25-54W N/A N/A
WFAS (AM)............... pending News/talk/sports 40-64 N/A N/A
</TABLE>
- --------
(1) Westchester County only.
Market Overview
Currently radio stations in Westchester County are listed under the New
York, New York market. Arbitron is in the process of designating Westchester as
a recognized market. Based on 1999 population estimates, it would be the 58th
largest radio market in the United States.
Westchester Stations
Upon receiving final approval from the FCC, we will acquire Aurora
Communications which owns the following three radio stations in Westchester
County.
WFAS (FM), known to its listeners by its branded name "Westchester
Radio," broadcasts on two frequencies--103.9, covering southern Westchester
county and 106.3, covering northern Westchester County which is licensed as
WFAF (FM). WFAS (FM) targets the 25-54 year old demographic audience with an
adult contemporary format and includes local news, Westchester traffic updates,
weather, and other local information. We promote the station throughout the
year by sponsoring numerous charity events and expositions, which we believe
emphasizes our community orientation.
WFAF (FM) began simulcasting WFAS (FM) in an adult contemporary format at
the end of 1999 in an effort to reduce expenses. We believe that the signal is
very viable in the Westchester market and intend to relaunch the station with a
new format by the end of 2001.
WFAS (AM) broadcasts a news/talk/sports format for Westchester County.
Established over 60 years ago, WFAS (AM) was Westchester's first radio station.
We position this station as "News/Talk 1230" with local news, traffic and
weather information, local and national talk shows, block programming and
sports news. In addition, we include daily appearances by local civic, service,
and business leaders and spot news coverage, and we participate in community
events to promote WFAS (AM) as Westchester's favorite local radio station.
BRIDGEPORT, CONNECTICUT
1999 Radio Market Revenue Rank: 91
<TABLE>
<CAPTION>
Target Audience Share Audience Rank
Date Demographic in Target in Target
Station Call Letters Acquired Format Audience Demographic Demographic
- ------------------------ -------- ------------------ ----------- -------------- -------------
<S> <C> <C> <C> <C> <C>
WEBE(FM)................ pending Adult contemporary 25-54W 10.8% 2
WICC(AM)................ pending Full service 35-64 7.5% 2
</TABLE>
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<PAGE>
Market Overview
The Bridgeport radio market ranks 91st in the United States based on 1999
radio market revenue. Radio market revenues in Bridgeport have grown from
approximately $12.8 million in 1993 to approximately $20.7 million in 1999,
representing a compound average annual revenue growth rate of 8.3%. Radio
market revenue grew 5.6% during the year ended December 31, 1999, as compared
to the prior year.
Bridgeport Stations
Upon receiving final approval from the FCC, we will purchase two radio
stations in Bridgeport from Aurora Communications.
WEBE (FM) broadcasts an adult contemporary format that we believe has a
strong listener following in Fairfield County. Founded in 1982, WEBE (FM) is a
Class B FM station, broadcasting at 50,000 watts. As of the Fall 1999 Arbitron
Market Report, WEBE (FM) ranked number two in its target demographic audience
group of women 25-54 years old. WEBE (FM)'s primary competition is WEZN (FM),
which broadcasts an adult contemporary format.
WICC (AM), established in 1926, was Bridgeport's first radio station.
WICC (AM) has ranked number one among listeners 12 years of age and older in
the Bridgeport metropolitan area in six of the last ten Arbitron Market
Reports. The station's full-service format includes news and information, long
term radio personalities, evening talk shows and weekend specialty shows. Our
"Family Breakfast Show" on WICC (AM) ranks number one among listeners 12 years
of age and older in all of Fairfield County.
DANBURY, CONNECTICUT
1999 Radio Market Revenue Rank: 190
<TABLE>
<CAPTION>
Target Audience Share Audience Rank
Date Demographic in Target in Target
Station Call Letters Acquired Format Audience Demographic Demographic
- ------------------------ -------- ------------------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C>
WRKI(FM)................ pending Album oriented rock 25-54 8.8% 2
WAXB(FM)................ pending Oldies 35-64 3.6% 7
WINE(AM)................ pending Adult standards 50+ 0.8% N/A
WPUT(AM)................ pending Adult standards 50+ N/A N/A
</TABLE>
Market Overview
The Danbury market ranks 190th in the United States based on 1999 radio
market revenue. Radio market revenues in Danbury have grown from approximately
$5.8 million in 1993 to approximately $8.1 million in 1999, representing a
compound average annual revenue growth rate of 5.7%. Radio market revenue grew
8.0% during the year ended December 31, 1999, as compared to the prior year.
Danbury Stations
Upon receiving final approval from the FCC, we will acquire Aurora
Communications, which owns four radio stations in Danbury.
WRKI (FM) is known to listeners by its brandname "I-95." Established in
1957, this station has operated under an album oriented rock format since the
1970s. WRKI (FM) is a Class B FM station, broadcasting at 50,000 watts and
covering Fairfield and New Haven Counties, Connecticut, and parts of New York
State. The station currently ranks second in its target demographic audience in
the Danbury market with an 8.8% share. Overall in Fairfield County, WRKI (FM)
has a 10.0% revenue share.
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<PAGE>
WAXB (FM), founded in 1964, currently broadcasts an oldies format and
ranks seventh in its target demographic audience in Danbury with a 3.6%
audience share. We believe that the station is underperforming and intend to
improve its performance by instituting programming changes.
WINE (AM) switched from an unsuccessful satellite country format to
adult standards in the beginning of this year and is presently the only
station broadcasting this format in its market. This format is simulcast on
WPUT (AM) to reach a greater audience. We believe that the success of this
format on similar signals in similar markets has been proven.
WPUT (AM), which was founded in 1958, simulcasts the WINE (AM) adult
standards format.
SUSSEX, NEW JERSEY
1999 Radio Market Revenue Rank: 250
<TABLE>
<CAPTION>
Target Audience Share Audience Rank
Date Demographic in Target in Target
Station Call Letters Acquired Format Audience Demographic Demographic
- ------------------------ -------- ------------------ ----------- -------------- -------------
<S> <C> <C> <C> <C> <C>
WNNJ(FM)................ 8/96 Classic hits 25-54 13.8% 1
WSUS(FM)................ 4/97 Adult contemporary 25-54 13.8% 1
WHCY(FM)................ 3/96 Country 18-49 3.5% 8
WNNJ(AM)................ 8/96 Adult standards 50+ N/A N/A
</TABLE>
Market Overview
The Sussex market ranks 250th in the United States based on 1999 radio
market revenue. Radio market revenues in Sussex have grown from approximately
$2.4 million in 1995 to approximately $4.9 million in 1999, representing a
compound average annual revenue growth rate of 19.5%. Radio market revenue
grew 16.7% during the year ended December 31, 1999, as compared to the prior
year.
Sussex Stations
We own and operate four radio stations, one AM and three FM, in the
Sussex market. We requested Arbitron make Sussex a recognized market in 1997.
The addition of WHCY (FM) has allowed our sales force to market four stations
with different formats and listener bases to advertisers in this market. Of
our four stations, two ranked first in 1999 in their respective target
demographic audiences.
WNNJ (FM) broadcasts a classic hits format. WNNJ (FM)'s signal reaches
all of Northwestern New Jersey, the Poconos in Pennsylvania and Orange County
in New York. After acquiring WNNJ (FM) in August 1996, we changed the
station's format from hot adult contemporary to classic hits and increased the
signal power to 25,000 watts. In 1999, WNNJ (FM) shared the number one market
position with its sister station, WSUS (FM), in the 25-54 year old target
demographic audience, with a market share of 13.8%.
WSUS (FM) began operations in 1972. We acquired the station in 1997 and
reprogrammed its format to adult contemporary with a focus on local news and
issues. With this programming focus, the station now ranks number one in the
market, based on the Fall 1999 Arbitron Market Report for listeners 12 years
of age and older. WSUS (FM) also ranks first in the 25-54 year old target
demographic audience. The station's signal reaches Sussex, Morris and Warren
Counties in New Jersey, along with Orange County in New York and Pike County
in Pennsylvania.
WHCY (FM) broadcasts country music and focuses on events in the country
music world. In addition, WHCY (FM) provides local news, weather and traffic
reports to its listeners. Based on the Fall 1999 Arbitron Market Report, WHCY
(FM) has an overall market share of 3.4% for listeners 12 years of age and
older, an increase of 90.0% since we acquired the station. WHCY (FM) currently
ranks eighth in the market.
50
<PAGE>
WNNJ (AM) programs an adult standards format, targeting listeners 50
years of age and older by featuring musical hits of the past five decades from
big band classics to soft contemporary.
NEWBURGH-MIDDLETOWN, NEW YORK
1999 Radio Market Revenue Rank: 258
<TABLE>
<CAPTION>
Target Audience Share Audience Rank
Date Demographic in Target in Target
Station Call Letters Operated Format Audience Demographic Demographic
- ------------------------ -------- --------------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C>
WTSX(FM)................ 8/98 Oldies 35-64 N/A N/A
WDLC(AM)................ 8/98 Adult standards 50+ N/A N/A
</TABLE>
Market Overview
The Newburgh-Middletown market ranks 258th in the United States based on
1999 radio market revenue. Radio market revenues in Newburgh-Middletown did not
change from 1993 to 1998. However, radio market revenue grew 9.8% during the
year ended December 31, 1999, as compared to the prior year.
Newburgh-Middletown Stations
We currently operate two radio stations pursuant to a local marketing
agreement, in what Arbitron designates as the Newburgh-Middletown market. We do
not subscribe to Arbitron in respect of this market due to signal limitations
of our stations. We entered into a local marketing agreement for the stations
to increase our listener base in the Sussex, Pike, Sullivan and Orange counties
which are not reflected in the Newburgh-Middletown market. Therefore, we
believe the ratings for this market are not meaningful.
WTSX (FM) changed to an oldies format after we began operating the
station in August 1998. As part of our branding strategy to increase listener
recognition, we branded WTSX (FM) as "Fox 96.7." This brand consists of a
carefully designed play list of the most popular songs from the 1960s,
promotions, specialty weekends, local personalities, and an emphasis on local
news and community information.
WDLC (AM) changed to an adult standards format after we began operating
the station and targets listeners of 50 years of age and older. Its format
features musical hits of the past five decades from big classics to soft
contemporary and provides news and information for the local community.
WILKES BARRE-SCRANTON, PENNSYLVANIA
1999 Radio Market Revenue Rank: 77
<TABLE>
<CAPTION>
Target Audience Share Audience Rank
Date Demographic in Target in Target
Station Call Letters Operated Format Audience Demographic(1) Demographic(1)
- ------------------------ -------- ---------------------- ----------- -------------- --------------
<S> <C> <C> <C> <C> <C>
WSBG(FM)................ 3/95 Hot adult contemporary 18-34W 15.5% 1
WVPO(AM)................ 3/95 Adult standards 50+ N/A N/A
WILT(AM)................ 11/99 ESPN sports 25-54M N/A N/A
</TABLE>
- --------
(1) Monroe County only.
Market Overview
Wilkes Barre-Scranton is the 77th largest radio market in the United
States based on 1999 radio market revenue. Radio market revenues in the Wilkes
Barre-Scranton market have grown from approximately $17.4 million in 1993 to
approximately $26.5 million in 1999, representing a compound average annual
revenue growth rate of 7.3%. Radio market revenue grew 11.3% during the year
ended December 31, 1999, as
51
<PAGE>
compared to the prior year. Although our stations are listed in the greater
Wilkes Barre-Scranton market, due to the mountainous terrain, our stations
primarily serve Monroe County, which is a part of the Wilkes Barre-Scranton
market and do not compete in the remainder of the market.
Wilkes Barre-Scranton Stations
We operate WILT (AM) in Mount Pocono and operate WSBG (FM) and WVPO (AM)
under a local marketing agreement with Multicultural Radio Broadcasting, Inc.,
the owner of the stations.
WSBG (FM) is currently ranked as Monroe County's number one radio
station, with a hot adult contemporary format. WSBG (FM) shares group
promotions, imaging and content with its sister station WJLK (FM), "The POINT".
We emphasize the station's commitment to the community and raise brand
awareness through a variety of charity and promotional events.
WVPO (AM) targets potential listeners 50 years of age and older. Its
adult standard format features musical hits of the past five decades from big
band classics to soft contemporary. In 1999, the Associated Press and
Pennsylvania Broadcasters Association recognized WVPO (AM) for its outstanding
news and public service.
WILT (AM), a soon-to-be acquired station which started programming in
March 2000, broadcasts the ESPN sports format for the area.
ALLENTOWN, PENNSYLVANIA
1999 Radio Market Revenue Rank: 76
<TABLE>
<CAPTION>
Target Audience Share Audience Rank
Date Demographic in Target in Target
Station Call Letters Acquired Format Audience Demographic Demographic
- ------------------------ -------- ---------------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C>
WODE(FM)................ pending Oldies 35-64W 14.8% 2
WEEX(AM)................ pending News/talk/sports 25-54 N/A N/A
</TABLE>
Market Overview
Allentown is the 76th largest radio market in the United States based on
1999 radio market revenue. Radio market revenues in the Allentown market have
grown from approximately $17.4 million in 1993 to approximately $26.7 million
in 1998, representing a compound average annual revenue growth rate of 7.4%.
Radio market revenue grew 6.8% during the year ended December 31, 1999, as
compared to the prior year.
Allentown Stations
Upon receiving final approval from the FCC, we will purchase two radio
stations in Allentown for $30.0 million from Clear Channel, further
strengthening our northwestern cluster.
WODE (FM) broadcasts heritage oldies and consistently ranks in the top
five stations in the market for the demographic audience 12 years of age and
older. WODE (FM) utilizes a carefully designed play list of Allentown's most
popular songs from the 1960s, offers promotions, and emphasizes a strong
community commitment by providing local content, traffic and weather. We intend
to improve the programming to further maximize market opportunities.
WEEX (AM) currently programs a news/talk/sports format. We intend to
review the programming on the station and seek to make improvements.
52
<PAGE>
TRENTON, NEW JERSEY
1999 Radio Market Revenue Rank: 100
<TABLE>
<CAPTION>
Station Target Audience Share Audience Rank
Call Date Demographic in Target in Target
Letters Operated Format Audience Demographic Demographic
------- -------- ---------------------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C>
WPST
(FM).. 12/86 Contemporary hit radio 18-34 13.1% 1
WNJO
(FM).. 5/97 Oldies 35-64 9.0% 1
WHWH
(AM).. 12/86 Financial news 25-54 -- N/A
WJHR
(AM)
(1)... 2/99 Financial news 25-54 -- N/A
WTTM
(AM).. 5/99 ESPN sports 18-54 -- N/A
WCHR
(AM).. 5/97 Religion N/A N/A
</TABLE>
- --------
(1) WJHR (AM) is licensed to Flemington, NJ
Market Overview
Trenton is the 100th largest radio market in the United States based on
1999 radio market revenue. Radio market revenues in the Trenton market have
grown from approximately $9.5 million in 1993 to approximately $18.8 million in
1999, representing a compound average annual revenue growth rate of 12.0%.
Radio market revenue grew 14.6% during the year ended December 31, 1999, as
compared to the prior year.
Trenton Stations
We own the radio stations WHWH (AM), WTTM (AM) and WPST (FM) in the
Trenton market. We currently operate three additional radio stations, WCHR
(AM), WNJO (FM) and WJHR (AM), under local marketing agreements. We expect to
close our acquisition of WCHR (AM) and WNJO (FM) upon receiving final approval
from the FCC for the transfer of these licenses. We have paid or escrowed all
of the purchase price for the stations. We expect to file for the transfer of
the license of WJHR (AM) after the consummation of this offering.
WPST (FM) broadcasts a contemporary hit radio format. We believe it is
the market's most popular station. Its Class B FM 50,000-watt signal covers
Central New Jersey and Philadelphia. WPST (FM) is programmed as a mass appeal
pop culture radio station, playing today's hit music, offering promotions,
featuring interesting on-air personalities, and focusing on local issues.
WPST (FM) and its programming team have won numerous industry awards from
Billboard, Gavin, The Friday Morning Quarterback and Bobby Poe. WPST (FM) has
also been named "Best Radio Station in Philadelphia" by Philadelphia magazine.
Based on the Fall 1999 Arbitron Market Report, WPST (FM) had an audience share
of 13.1% for its target demographic audience, the largest in the Trenton
market. Although WPST (FM) targets the 18-34 year old demographic audience, the
station ranks number one in every demographic audience from 12-54 years old.
WNJO (FM) is an oldies radio station. The station programmed a religious
format before we began operating the station in May 1997 and moved the
religious format to WCHR (AM). With the addition of this signal, we have two
Class B 50,000-watt FM stations in the Trenton market and also a strong FM
presence in the Philadelphia metropolitan market. The WNJO (FM) brand consists
of a play list of the most popular songs from the 1960s, promotions, specialty
weekends and local personalities. In 1999, the station had an audience share of
9.0% in the 35-64 year old target demographic audience, the largest in the
Trenton market. Before we began operating the station, it had a 0.5% market
share of this demographic audience.
WHWH (AM), Trenton's financial news station, provides live news covering
Wall Street to Main Street, the Associated Press, Bloomberg News and business
talk 24 hours a day. The station broadcasts its 5,000 watt signal to listeners
in Central New Jersey and Bucks County, Pennsylvania. In January 2000, we
expanded the coverage of its format to include WJHR (AM) in Hunterdon County,
New Jersey.
53
<PAGE>
WJHR (AM) changed its format to financial news in January 2000. Except
for local news and traffic, the station builds off the format of WHWH (AM).
WTTM (AM) is a 24-hour sports and sports talk station. The station was
launched in May 1999 and was strategically designed to coincide with the
market's increased interest in sports, including minor league ice hockey and
baseball, which resulted from the introduction of new sports facilities in the
area. We believed this interest was not being addressed in the market and used
this opportunity to target sports fans. In addition, the station is the
market's exclusive radio broadcaster of ESPN. The station features some of
America's most popular sports personalities, inside information and breaking
news in the world of sports. The station also focuses on local New Jersey
sports teams. WTTM (AM) is the only signal that offers the market total sports
content in the morning.
WCHR (AM) is Trenton's religious and inspirational talk station. The
station provides syndicated programming featuring introspective talk and
inspirational music.
MONMOUTH-OCEAN, NEW JERSEY
1999 Radio Market Revenue Rank: 83
<TABLE>
<CAPTION>
Target Audience Share Audience Rank
Date Demographic in Target in Target
Station Call Letters Operated Format Audience Demographic Demographic
- ------------------------ -------- ---------------------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C>
WBBO (FM)............... 5/96 Contemporary hit radio 18-34W 6.0% 5
WJLK (FM)............... 5/96 Hot adult contemporary 25-54W 7.7% 1
WOBM (FM)............... 7/96 Adult contemporary 35-64W 7.7% 2
WCHR (FM) (1)........... TBD TBD TBD N/A N/A
WADB (AM)............... 5/96 Adult standards/news 55+ 3.9% 9
WOBM (AM)............... 7/96 Adult standards/news 55+ 11.3% 1
</TABLE>
- --------
(1) We are acquiring Manahawkin Communications Corporation, the owner of a
construction permit to build this station.
Market Overview
Monmouth-Ocean is the 83rd largest radio market in the United States
based on 1999 radio market revenue. Radio market revenues in the Monmouth-Ocean
market have grown from approximately $13.5 million in 1993 to approximately
$21.6 million in 1999, representing a compound average annual revenue growth
rate of 8.1%. Radio market revenue grew 21.3% during the year ended December
31, 1999, as compared to the prior year.
Monmouth-Ocean Stations
We own and operate the radio stations WBBO (FM), WJLK (FM) and WADB (AM)
in the Monmouth-Ocean market. Additionally, we currently operate two Monmouth-
Ocean radio stations, WOBM (AM) and WOBM (FM), under a local marketing
agreement with North Shore Broadcasting Corporation and Seashore Broadcasting
Corporation respectively, the owners of the stations. We have entered into an
agreement to purchase these two stations, which is subject to final approval
from the FCC.
WBBO (FM) was acquired with WJLK (FM) and WADB (AM) in November 1996. The
station was originally a simulcast of WJLK (FM). We relaunched the station in
May 1997 with a contemporary hit radio format in the Jersey Shore market. Based
on the Fall 1999 Arbitron Market Report, the station had 6.0% of the Monmouth-
Ocean market, ranking fifth in the 18-34 year old women target demographic
audience.
54
<PAGE>
WJLK (FM) is a hot adult contemporary station. We have operated the
station since May 1996 and have developed a new programming strategy and
brand. We designed "The POINT" as a new style of hot adult contemporary for
the 25-54 year old demographic audience. Based on the Fall 1999 Arbitron
Market Report, The POINT had an audience share of 7.7% in its target
demographic audience of women 25-54 years old, ranking first among all local
and New York stations in the Monmouth-Ocean market.
WOBM (FM) plays adult contemporary music and offers local news. The
station has a strong community commitment. WOBM (FM)'s signal covers the Ocean
County portion of the Monmouth-Ocean market. We repositioned the station to a
"soft rock" concept which we believe has resulted in a more focused product
and stronger brand image. Based on the Fall 1999 Arbitron Market Report, WOBM
(FM) had an audience share of 7.0% in its target demographic audience of women
25-54 years old, ranking second among all local and New York stations in the
Monmouth-Ocean market.
WCHR (FM). Upon receiving final approval from the FCC of our purchase of
Manahawkin Communications Corporation, the owner of the construction permit,
currently constructing the radio station, we will commence operations and
receive a license from the FCC. WCHR (FM) will have the largest signal
covering the Monmouth-Ocean market.
WADB (AM) targets listeners of 50 years of age and older with its adult
standards format, broadcasting musical hits of the past five decades from big
band hits to soft contemporary classics.
WOBM (AM), known as "Wonderful Memories," broadcasts an adult standards
format, targeting listeners 50 years of age and older in Ocean County, New
Jersey. The station also focuses heavily on local information and news. We
believe that this format will continue to be successful in Ocean County, in
which approximately one-third of the population is over 55 years of age.
Competition; Changes in the Broadcasting Industry
Overview. The radio broadcasting industry is highly competitive. The
success of each of our stations depends largely upon its audience ratings and
its share of the overall advertising revenue within its market. Our stations
compete for listeners and advertising revenue directly with other radio
stations within their respective markets. Radio stations compete for listeners
primarily on the basis of program content that appeals to a particular
demographic group. By building a strong listener base consisting of specific
demographic groups in each of our markets, we are able to attract advertisers
seeking to reach those listeners.
The following are some of the factors that are important to a radio
station's competitive position:
. management experience;
. the station's local audience rank in its market;
. transmitter power;
. assigned frequency;
. audience characteristics;
. local program acceptance; and
. the number and characteristics of other radio stations and other
advertising media in the market area.
In addition, we attempt to improve our competitive position with
promotional campaigns aimed at the demographic groups targeted by our stations
and by sales efforts designed to attract advertisers.
55
<PAGE>
Main competitors. Our stations compete for audiences and advertising
revenues within their respective markets directly with other radio stations, as
well as with other media such as newspapers, magazines, network and cable
television, outdoor advertising and direct mail. In addition, the radio
broadcasting industry is subject to competition from new media technologies
that are being developed or introduced such as:
. cable television operators have introduced a service commonly
referred to as "cable radio" which provides cable television
subscribers with several high-quality channels of music, news and
other information;
. direct satellite broadcast television companies are supplying
subscribers with several high quality music channels;
. the Internet offers new and diverse forms of program distribution;
. satellite digital audio radio technology, initially developed for
automotive applications, could result in new high quality satellite
radio services; and
. the introduction of in-band on-channel digital radio and new low-
power FM radio could provide radio services in the same bandwidth
currently occupied by traditional FM and AM radio services.
The FCC has adopted rules for the establishment of low-powered FM
stations that are designed to serve small localized areas. The radio
broadcasting industry historically has grown despite the introduction of new
technologies for the delivery of entertainment and information, such as,
television broadcasting, cable television, audio tapes and compact discs. A
growing population and greater availability of radios, particularly car and
portable radios, have contributed to this growth. We cannot assure you,
however, that this historical growth will continue or that the development or
introduction in the future of any new media technology or low-powered FM
stations will not have an adverse effect on the radio broadcasting industry.
The FCC has adopted licensing and operating rules for satellite delivered
audio and awarded two licenses for this service in April 1997. Satellite
delivered audio may provide a medium for the delivery by satellite or
terrestrial means of multiple new audio programming formats to local and/or
national audiences. Digital technology also may be used in the future by
terrestrial radio broadcast stations either on existing or alternate
broadcasting frequencies, and the FCC has stated that it will consider making
changes to its rules to permit AM and FM radio stations to offer digital sound
following industry analysis of technical standards. In addition, the FCC has
authorized an additional 100 kHz of bandwidth for the AM band and has allotted
frequencies in this new band to certain existing AM station licensees that
applied for migration to the expanded AM band. 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 at the end of a transition period.
We cannot predict what other matters might be considered in the future by
the FCC, nor can we assess in advance what impact, if any, the implementation
of any of these proposals or changes might have on our business.
On-air talent. We employ a number of on-air personalities and generally
enter into employment agreements with these personalities to protect our
interests in those relationships. The loss of some of these personalities could
result in a short-term loss of audience share, but we do not believe that the
loss would have a material adverse effect on our business.
Federal Regulation of Radio Broadcasting
The radio broadcasting industry is subject to extensive and changing
regulation of, among other things, program content, advertising content,
technical operations and business and employment practices. The
56
<PAGE>
ownership, operation and sale of radio stations are subject to the jurisdiction
of the FCC. Among other things, the FCC:
. assigns frequency bands for broadcasting;
. determines the particular frequencies, locations and operating power
of stations;
. issues, renews, revokes and modifies station licenses;
. determines whether to approve changes in ownership or control of
station licenses;
. regulates equipment used by stations; and
. adopts and implements regulations and policies that directly affect
the ownership, operation and employment practices of stations.
The FCC has the power to impose penalties for violations of its rules or
the Communications Act, including the imposition of monetary forfeitures, the
issuance of short-term licenses, the imposition of a condition on the renewal
of a license, nonrenewal of licences and the revocation of operating authority.
The following is a brief summary of some provisions of the Communications
Act and of specific FCC regulations and policies. The summary is not a
comprehensive listing of all of the regulations and policies affecting radio
stations. For further information concerning the nature and extent of federal
regulation of radio stations, you should refer to the Communications Act, FCC
rules and FCC public notices and rulings.
FCC Licenses. Radio stations operate pursuant to renewable broadcasting
licenses that are ordinarily granted by the FCC for maximum terms of eight
years. A station may continue to operate beyond the expiration date of its
license if a timely filed license renewal application is pending. During the
periods when renewal applications are pending, petitions to deny license
renewals can be filed by interested parties, including members of the public.
The FCC is required to hold hearings on a station's renewal application if a
substantial or material question of fact exists as to whether the station has
served the public interest, convenience and necessity. If, as a result of an
evidentiary hearing, the FCC determines that the licensee has failed to meet
certain requirements and that no mitigating factors justify the imposition of a
lesser sanction, then the FCC may deny a license renewal application. Only
after a license renewal application is denied will the FCC accept and consider
competing applications for the vacant frequency. Historically, the FCC has
generally renewed licenses. We have no reason to believe that our licenses will
not be renewed in the ordinary course, although we cannot assure you that any
or all of our licenses will be renewed. The non-renewal of one or more of our
licenses could have a material adverse effect on our business.
The FCC classifies each AM and FM station. An AM station operates on
either a clear channel, regional channel or local channel. A clear channel is
one on which AM stations are assigned to serve wide areas. Clear channel AM
stations are classified as either: Class A stations, which operate on an
unlimited time basis and are designated to render primary and secondary service
over an extended area; Class B stations, which operate on an unlimited time
basis and are designed to render service only over a primary service area; or
Class D stations, which operate either during daytime hours only, during
limited times only or on an unlimited time basis with low night-time power. A
regional channel is one on which Class B and Class D AM stations may operate
and serve primarily a principal center of population and the rural areas
contiguous to it. A local channel is one on which AM stations operate on an
unlimited time basis and serve primarily a community and the immediately
contiguous suburban and rural areas. Class C AM stations operate on a local
channel and are designed to render service only over a primary service area
that may be reduced as a consequence of interference.
The minimum and maximum facilities requirements for an FM station are
determined by its class. FM class designations depend upon the geographic zone
in which the transmitter of the FM station is located. In general, commercial
FM stations are classified as follows, in order of increasing power and antenna
height: Class A, B1, C3, B, C2, C1 and C.
57
<PAGE>
The following table sets forth the metropolitan market served, call
letters, FCC license classification, frequency, power and FCC license
expiration date of each of the stations that we will own and/or operate upon
the completion of all pending acquisitions. Our licenses are held by our
wholly-owned subsidiary. Pursuant to FCC rules and regulations, many AM radio
stations are licensed to operate at a reduced power during the nighttime
broadcasting hours, which results in reducing the radio station's coverage
during the nighttime hours of operation. Both power ratings are shown. For FM
stations, the maximum effective radiated power in the main lobe is given.
<TABLE>
<CAPTION>
Daytime Nighttime Expiration
FCC Power Power Date of
Market Station Class Frequency (in watts) (in watts) FCC License
- ------------------------ -------- ----- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Northern
Westchester, NY......... WFAS (FM) A 103.9 MHz 600 600 June, 2006
WFAF (FM) A 106.3 MHz 1,400 1,400 June, 2006
WFAS (AM) C 1,230.0 kHz 1,000 1,000 June, 2006
Bridgeport, CT.......... WEBE (FM) B 107.9 MHz 50,000 50,000 April, 2006
WICC (AM) B 600.0 kHz 1,000 500 April, 2006
Danbury, CT............. WRKI (FM) B 95.1 MHz 29,500 29,500 April, 2006
WAXB (FM) A 105.5 MHz 900 900 June, 2006
WINE (AM) B 940.0 kHz 680 4 April, 2006
WPUT (AM) B 1,510.0 kHz 1,000 1,000 June, 2006
Northwestern
Sussex, NJ.............. WNNJ (FM) B1 103.7 MHz 2,300 2,300 June, 2006
WSUS (FM) A 102.3 MHz 590 590 June, 2006
WHCY (FM) A 106.3 MHz 430 430 June, 2006
WNNJ (AM) B 1,360.0 kHz 2,000 2,000 June, 2006
Newburgh-Middletown,
NY..................... WTSX (FM) A 96.7 MHz 890 890 June, 2006
WDLC (AM) C 1,490.0 kHz 1,000 1,000 June, 2006
Wilkes Barre-Scranton,
PA..................... WSBG (FM) A 93.5 MHz 550 550 August, 2006
WVPO (AM) B 840.0 kHz 250 0 August, 2006
WILT (AM) B 960.0 kHz 1,000 24 August, 2006
Allentown, PA........... WODE (FM) B 99.9 MHz 50,000 50,000 August, 2006
WEEX (AM) C 1230.0 kHz 1,000 1,000 August, 2006
Central
Trenton, NJ............. WPST (FM) B 97.5 MHz 50,000 50,000 June, 2006
WNJO (FM) B 94.5 MHz 50,000 50,000 June, 2006
WHWH (AM) B 1,350.0 kHz 5,000 5,000 June, 2006
WJHR (AM) B 1,040.0 kHz 4,700 1,000 June, 2006
WTTM (AM) B 1,680.0 kHz 10,000 1,000 (1)
WCHR (AM) B 920.0 kHz 1,400 1,000 June, 2006
Shore
Monmouth-Ocean, NJ...... WBBO (FM) A 98.5 MHz 6,000 6,000 June, 2006
WJLK (FM) A 94.3 MHz 1,300 1,300 June, 2006
WOBM (FM) A 92.7 MHz 1,400 1,400 June, 2006
WCHR (FM) B 105.7 MHz 25,000 25,000 N/A
WADB (AM) B 1,310.0 kHz 2,500 1,000 June, 2006
WOBM (AM) B 1,160.0 kHz 5,000 8,900 June, 2006
</TABLE>
- --------
(1) We are currently operating this station under temporary authority from the
FCC. We are awaiting the issuance of a formal license, which will expire
five years after the date of issuance.
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<PAGE>
Transfer or Assignment of License. The Communications Act prohibits the
assignment of broadcast licenses or the transfer of control of a broadcast
licensee without the prior approval of the FCC. In determining whether to grant
such approval, the FCC considers a number of factors pertaining to the licensee
and proposed licensee, including:
. compliance with the various rules limiting common ownership of media
properties in a given market;
. the character of the licensee and those persons holding attributable
interests in the licensee; and
. history of compliance with the Communications Act's limitations on
alien ownership as well as compliance with other FCC regulations and
policies.
To obtain FCC consent to assign or transfer control of a broadcast
license, appropriate applications must be filed with the FCC. If the
application involves a substantial change in ownership or control, for example,
the transfer or acquisition of more than 50.0% of the voting stock, the
application must be placed on public notice for not less than 30 days during
which time petitions to deny or other objections against the application may be
filed by interested parties, including members of the public. These types of
petitions are filed from time to time with respect to proposed acquisitions. If
the FCC grants an assignment or transfer application, interested parties have
30 days from public notice of the grant to seek reconsideration of that grant.
The FCC usually has an additional ten days to set aside the grant on its own
motion. If the application does not involve a substantial change in ownership
or control, it is a pro forma application, which is not subject to the public
notice and 30-day petition to deny procedure. The pro forma application is
nevertheless subject to informal objections that may be filed against it at any
time until the FCC acts on the application. When ruling on an assignment or
transfer application, the FCC is prohibited from considering whether the public
interest might be served by an assignment or transfer of control of the
broadcast license to any party other than the assignee or transferee specified
in the application.
Multiple Ownership Rules. The Communications Act and FCC rules impose
specific limits on the number of commercial radio stations an entity can own in
a single market. These rules may preclude us from acquiring certain stations we
might otherwise seek to acquire. The rules also effectively prevent us from
selling stations in a market to a buyer that has reached its ownership limit in
the market unless that buyer divests other stations. The local radio ownership
rules are as follows:
. in markets with 45 or more commercial radio stations, ownership is
limited to eight commercial stations, no more than five of which can
be either AM or FM;
. in markets with 30 to 44 commercial radio stations, ownership is
limited to seven commercial stations, no more than four of which can
be either AM or FM;
. in markets with 15 to 29 commercial radio stations, ownership is
limited to six commercial stations, no more than four of which can be
either AM or FM; and
. in markets with 14 or fewer commercial radio stations, ownership is
limited to five commercial stations or no more than 50.0% of the
market's total, whichever is lower, and no more than three of which
can be either AM or FM.
The FCC is also reportedly considering proposing a policy that would give
special review to a proposed transaction if it would enable a single owner to
attain a high degree of revenue concentration in a market. In connection with
this, the FCC, in its public notices, has invited comment on the impact of
concentration of media voices in proposed transactions, and has delayed or
refused its consent in some cases because of revenue concentration.
The FCC recently revised its radio/television cross-ownership rule to
allow for greater common ownership of television and radio stations. The
revised radio/television cross-ownership rule permits a single
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owner to own up to two television stations, consistent with the FCC's rules on
common ownership of television stations, together with one radio station in all
markets. In addition, an owner will be permitted to own additional radio
stations, not to exceed the local ownership limits for the market, as follows:
. in markets where 20 media voices will remain, an owner may own an
additional five radio stations, or, if the owner only has one
television station, an additional six radio stations; and
. in markets where 10 media voices will remain, an owner may own an
additional three radio stations.
A "media voice" includes each independently owned, full-power television
and radio station and each daily newspaper that has a circulation exceeding
5.0% of the households in the market, plus one voice for all cable television
systems operating in the market.
In addition to the limits on the number of radio stations and radio/
television combinations that a single owner may own, the FCC's
broadcast/newspaper cross-ownership rule prohibits the same owner from owning a
broadcast station and a daily newspaper in the same geographic market.
The FCC generally applies its ownership limits to attributable interests
held by an individual, corporation, partnership or other association. In the
case of corporations controlling broadcast licenses, the interests of officers,
directors and those who, directly or indirectly, have the right to vote 5% or
more of the corporation's voting stock are generally attributable. In addition,
certain passive investors are attributable if they hold 20.0% or more of the
corporation's voting stock. If a single individual or entity controls more than
50.0% of a corporation's voting stock, however, the interests of other
stockholders are generally not attributable unless the stockholders are also
officers or directors of the corporation. The FCC treats all partnership
interests as attributable, except for those limited partnership interests that
under FCC policies are considered "insulated" from "material involvement" in
the management or operation of the media related activities of the partnership.
The FCC currently treats limited liability companies like limited partnerships
for purposes of attribution.
The FCC recently adopted a new rule, known as the equity-debt-plus rule,
that causes certain creditors or investors to be attributable owners of a
station, regardless of whether there is a single majority stockholder. Under
this new rule, a major programming supplier or a same-market owner will be an
attributable owner of a station if the supplier or owner holds debt or equity,
or both, in the station that is greater than 33.0% of the value of the
station's total debt plus equity. A major programming supplier includes any
programming supplier that provides more than 15.0% of the station's weekly
programming hours. A same-market owner includes any attributable owner of a
media company, including broadcast stations, cable television and newspapers,
located in the same market as the station, but only if the owner is
attributable under an FCC attribution rule other than the equity-debt-plus
rule. If attribution under the equity-debt-plus rule results in a violation of
the FCC's multiple ownership rules, each affected party must come into
compliance with those rules, by reducing or eliminating the party's interest in
the affected media outlets or obtaining a waiver from the FCC, no later than
August 5, 2000. The attribution rules limit the number of radio stations we may
acquire or own in any market.
Alien Ownership Rules. The Communications Act prohibits the issuance or
holding of broadcast licenses by persons who are not U.S. citizens, whom the
FCC rules refer to as "aliens," including any corporation if more than 20.0% of
its capital stock is owned or voted by aliens. In addition, the FCC may
prohibit any corporation from holding a broadcast license if the corporation is
controlled by any other corporation of which more than 25.0% of the capital
stock is owned of record or voted by aliens, if the FCC finds that the
prohibition is in the public interest. Our certificate of incorporation
prohibits the ownership, voting and transfer of our capital stock in violation
of the FCC restrictions, and prohibits the issuance of capital stock or the
voting rights such capital stock represents to or for the account of aliens or
corporations otherwise subject to domination or control by aliens in excess of
the FCC limits. The certificate of incorporation authorizes our board of
directors to enforce these prohibitions. For example, the certificate of
incorporation provides for the redemption of shares of our capital stock by
action of the board of directors to the extent necessary to comply with these
alien ownership restrictions.
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Local Marketing Agreements. Over the past few years, a number of radio
stations have entered into what have commonly been referred to as local
marketing agreements. While these agreements may take varying forms, under a
typical local marketing agreement, separately owned and licensed radio stations
agree to enter into cooperative arrangements of varying sorts, subject to
compliance with the requirements of antitrust laws and with FCC's rules and
policies. Under these arrangements, separately owned stations could agree to
function cooperatively in programming, advertising sales and similar matters,
subject to the requirement that the licensee of each station maintain
independent control over the programming and operations of its own station. One
typical type of local marketing agreement is a programming agreement between
two separately-owned radio stations serving a common service area, whereby the
licensee of one station provides substantial portions of the broadcast
programming for airing on the other licensee's station, subject to ultimate
editorial and other controls being exercised by the latter licensee, and sells
advertising time during those program segments.
The FCC's rules provide that a radio station that brokers more than 15.0%
of the weekly broadcast time on another station serving the same market will be
considered to have an attributable ownership interest in the brokered station
for purposes of FCC's local radio ownership limits. As a result, in a market
where we own a radio station, we would not be permitted to enter into a local
marketing agreement with another radio station in the same market if we could
not own the brokered station under the multiple ownership rules, unless our
programming on the brokered station constituted 15% or less of the brokered
station's programming time on a weekly basis. FCC rules also prohibit a
broadcast station from duplicating more than 25.0% of its programming on
another station in the same broadcast service, that is AM-AM or FM-FM, through
a local marketing agreement where the brokered and brokering stations which it
owns or programs serve substantially the same area.
Programming and Operations. The Communications Act requires broadcasters
to serve the public interest. The FCC gradually has relaxed or eliminated many
of the more formalized procedures it had developed in the past to promote the
broadcast of certain types of programming responsive to the needs of a
station's community of license. A licensee continues to be required, however,
to present programming that is responsive to community problems, needs and
interests and to maintain records demonstrating this responsiveness. Complaints
from listeners concerning a station's programming often will be considered by
the FCC when it evaluates renewal applications of a licensee, but listener
complaints may be filed at any time. Complaints are required to be maintained
in the station's public file and generally may be considered by the FCC at any
time. Stations also must pay regulatory and application fees and follow various
rules promulgated under the Communications Act. Those rules regulate, among
other things, political advertising, sponsorship identifications, the
advertisement of contests and lotteries, obscene and indecent broadcasts and
technical operations, including limits on human exposure to radio frequency
radiation.
In January 2000, the FCC adopted new rules prohibiting employment
discrimination by broadcast stations on the basis of race, religion, color,
national origin and gender; and requiring broadcasters to implement programs to
promote equal employment opportunities at their stations. The rules generally
require broadcast stations to disseminate information about job openings widely
so that all qualified applicants, including minorities and women, have an
adequate opportunity to compete for the job. Broadcasters may fulfill this
requirement by sending the station's job vacancy information to organizations
that request it, participating in community outreach programs or designing an
alternative recruitment program. Broadcasters with five or more full-time
employees must place in their public files annually a report detailing their
recruitment efforts and must file a statement with the FCC certifying
compliance with the rules every two years. Broadcasters with ten or more full-
time employees must file their annual reports with the FCC midway through their
license term. Broadcasters also must file employment information with the FCC
annually for statistical purposes. These new equal employment opportunity rules
are designed to replace the FCC's prior rules, some of which were ruled
unconstitutional by the U.S. Court of Appeals for the District of Columbia
Circuit.
Proposed and Recent Changes. Congress and the FCC may in the future
consider and adopt new laws, regulations and policies regarding a wide variety
of matters that could affect, directly or indirectly, the
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operation, ownership and profitability of our radio stations, including the
loss of audience share and advertising revenues for our radio stations, and an
inability to acquire additional radio stations or to finance those
acquisitions. These matters may include:
. changes in the FCC's cross-interest, multiple ownership and
attribution policies;
. regulatory fees, spectrum use fees or other fees on FCC licenses;
. foreign ownership of broadcast licenses;
. restatement in revised form of the FCC's equal employment opportunity
rules and revisions to the FCC's rules relating to political
broadcasting;
. technical and frequency allocation matters; and
. proposals to restrict or prohibit the advertising of beer, wine and
other alcoholic beverages on radio.
The FCC currently is considering standards for evaluating, authorizing,
and implementing terrestrial digital audio broadcasting technology, including
in-band on-channel technology for FM radio stations. Digital audio
broadcasting's advantages over traditional analog broadcasting technology
include improved sound quality and the ability to offer a greater variety of
auxiliary services. In-band on-channel technology would permit an FM station to
transmit radio programming in both analog and digital formats, or in digital
only formats, using the bandwidth that the radio station is currently licensed
to use. It is unclear what regulations the FCC will adopt regarding digital
audio broadcasting or in-band on-channel technology and what effect such
regulations would have on our business or the operations of our radio stations.
In January 2000, the FCC voted to adopt rules creating a new low-power FM
radio service. The new low-power stations will operate at a maximum power of
between 10 and 100 watts in the existing FM commercial and noncommercial band.
Low-power stations may be used by governmental and nonprofit organizations to
provide noncommercial educational programming or public safety and
transportation radio services. No existing broadcaster or other media entity,
including us, will be permitted to have an ownership interest or enter into any
program or operating agreement with any low-power FM station. During the first
two years of the new service, applicants must be based in the area that they
propose to serve. Applicants will not be permitted to own more than one station
nationwide during the initial two-year period. After the initial two-year
period, entities will be allowed to own up to five stations nationwide, and
after three years, the limit will be raised to ten stations nationwide. A
single person or entity may not own two low-power stations whose transmitters
are less than seven miles from each other. The authorizations for the new
stations will not be transferable. The FCC has stated that it intends to begin
accepting applications for new stations during the next several months.
At this time, it is difficult to assess the competitive impact of these
new stations. The new low-power stations must comply with certain technical
requirements aimed at protecting existing FM radio stations from interference,
although we cannot be certain of the level of interference that low-power
stations will cause after they begin operating. Moreover, if low-power FM
stations are licensed in the markets in which we operate our stations, the low-
power stations may compete for listeners. The low-power stations may also limit
our ability to obtain new licenses or to modify our existing facilities,
although FCC engineers have conducted interference testing and have concluded
that the new 10-watt power FM stations will not produce unacceptable levels of
interference to existing FM stations, such as those owned by us.
Finally, the FCC has adopted procedures for the auction of broadcast
spectrum in circumstances where two or more parties have filed for new or major
change applications which are mutually exclusive. Such procedures may limit our
efforts to modify or expand the broadcast signals of our stations.
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We cannot predict what other matters might be considered in the future by
the FCC or Congress, nor can we judge in advance what impact, if any, the
implementation of any of these proposals or changes might have on our business.
Federal Antitrust Laws. The agencies responsible for enforcing the
federal antitrust laws, the Federal Trade Commission or the Department of
Justice, may investigate certain acquisitions. We cannot predict the outcome of
any specific FTC or Department of Justice investigation. Any decision by the
FTC or the Department of Justice to challenge a proposed acquisition could
affect our ability to consummate an acquisition or to consummate it on the
terms acceptable to us.
For an acquisition meeting certain size thresholds, the Hart-Scott-Rodino
Act requires the parties to file Notification and Report Forms concerning
antitrust issues with the FTC and the Department of Justice and to observe
specified waiting period requirements before consummating the acquisition. If
the investigating agency raises substantive issues in connection with a
proposed transaction, then the parties frequently engage in lengthy discussions
or negotiations with the investigating agency concerning possible means of
addressing those issues, including restructuring the proposed acquisition or
divesting assets. In addition, the investigating agency could file suit in
federal court to enjoin the acquisition or to require the divestiture of
assets, among other remedies. Acquisitions that are not required to be reported
under the Hart-Scott-Rodino Act may be investigated by the FTC or the
Department of Justice under the antitrust laws before or after consummation. In
addition, private parties may under certain circumstances bring legal actions
to challenge an acquisition under the antitrust laws.
As part of its increased scrutiny of radio station acquisitions, the
Department of Justice has stated publicly that it believes that local marketing
agreements, joint sales agreements and other similar agreements customarily
entered into in connection with radio station transfers could violate the Hart-
Scott-Rodino Act if such agreements take effect prior to the expiration of the
waiting period under the Hart-Scott-Rodino Act. Furthermore, the Department of
Justice has noted that joint sales agreements may raise antitrust concerns
under Section 1 of the Sherman Act and has challenged joint sales agreements in
certain locations. The Department of Justice also has stated publicly that it
has established certain revenue and audience share concentration benchmarks
with respect to radio station acquisitions, above which a transaction may
receive additional antitrust scrutiny. However, to date, the Department of
Justice has also investigated transactions that do not meet or exceed these
benchmarks and has cleared transactions that do exceed these benchmarks.
Employees
On March 31, 2000, we had a staff of 236 full-time employees and 78 part-
time employees. We believe that our relations with our employees are good.
Environmental
As the owner, lessee or operator of various real properties and
facilities, we are subject to various federal, state and local environmental
laws and regulations. Historically, compliance with these laws and regulations
has not had a material adverse effect on our business. There can be no
assurance, however, that compliance with existing or new environmental laws and
regulations will not require us to make significant expenditures of funds.
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Properties And Facilities
The types of facilities required to support each of our radio stations
include offices, studios and transmitter and antenna sites. We typically lease
our studio and office space with lease terms that expire in six months to ten
years. Our principal executive offices are located at 619 Alexander Road,
Princeton, New Jersey 08540. We lease the majority of our main transmitter and
antenna sites. The transmitter and antenna site for each station is generally
located so as to provide maximum market coverage, consistent with the station's
FCC license. After completion of our acquisition of Aurora Communications, we
will own some additional antenna sites and studio and office space.
No single facility is material to us. We believe that our facilities are
generally in good condition and suitable for our operations. However, we
continually look for opportunities to upgrade our facilities and may do so in
the future. Substantially all of our properties and equipment serve as
collateral for our obligations under our new credit facility.
Seasonality
We expect that our operations and revenues will be seasonal in nature,
with generally lower revenue generated in the first quarter of the year and
generally higher revenue generated in the fourth quarter of the year. The
seasonality of our business causes, and is likely to continue to cause, a
significant variation in our quarterly operating results.
Legal Proceedings
From time to time, we are involved in litigation incidental to the
conduct of our business, but we are not currently a party to any lawsuit or
proceeding.
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MANAGEMENT
Directors, executive officers and senior officers
The names of our executive officers, directors and senior officers and
their respective ages and positions are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Louis F. Mercatanti, Jr. ........ 43 President, Chief Executive Officer and
Director
Michael S. Libretti.............. 36 Executive Vice President, Chief Financial
Officer and Director
Joan E. Gerberding............... 50 President of Jersey Radio Network
G. Daniel Henrickson, Jr. ....... 48 Executive Vice President and General
Manager
Peter D. Tonks................... 49 Executive Vice President and Director of
Accounting & Human Resources
Anthony A. Gervasi, Jr. ......... 32 Senior Vice President of Engineering &
Technology
Michelle Stankowski.............. 31 Senior Vice President of Programming
Donald E. Dalesio................ 38 Vice President and General Manager
Reuel H. Musselman, Jr. ......... 50 Vice President and General Manager
Brion B. Applegate............... 46 Director
William B. Collatos.............. 46 Director
Stuart D. Frankel................ 52 Director
</TABLE>
There are no family relationships between any persons identified above.
The following are brief biographies of the persons identified above.
Louis F. Mercatanti, Jr., our founder, is our President and Chief
Executive Officer and a director and had until our reorganization held those
positions at our general partner since its inception in early 1995. Mr.
Mercatanti acquired all of our equity from Nassau Broadcasting Company in
December 1986 and operated the stations prior to the founding of the limited
partnership. In 1995, Mr. Mercatanti co-founded the partnership with Brion B.
Applegate and William B. Collatos of Spectrum Equity Investors, L.P. and Stuart
D. Frankel of Grotech Capital Group. Since the founding of the partnership, Mr.
Mercatanti has devoted substantially all of his time to the management of the
partnership. He has been responsible for formulating our annual operating
budgets and managing all of our financing requirements. Mr. Mercatanti was
actively involved in several other successful entrepreneurial activities prior
to his founding of the partnership.
Michael S. Libretti is our Executive Vice President, Chief Financial
Officer and Director and had until our reorganization held those positions at
our general partner since December 1997. Mr. Libretti joined our general
partner in November 1996 and served as its Senior Vice President of Operations
from then until December 1997. From 1986 to November 1996, Mr. Libretti worked
in various capacities for AT&T Capital Corporation. During his last three years
at AT&T Capital he served as a Director of the Capital Markets Division
responsible for providing financing to the media industry. From 1990 to 1993,
Mr. Libretti was actively involved in providing project financing for the
energy industry, as well as leveraged lease financing to the aircraft industry.
Prior to 1990, Mr. Libretti was involved in a variety of projects in
accounting, systems, acquisition analysis, sales and budgeting. During his
career with AT&T Capital, he was involved in numerous financings with an
aggregate value in excess of $1.0 billion.
Joan E. Gerberding has served as President of our Jersey Radio Network
since March 1997. She had been Executive Vice President of the limited
partnership from 1995 to 1997. Prior to that, she served in various management
capacities with Nassau Broadcasting Company since 1981.
G. Daniel Henrickson, Jr. is our Executive Vice President and General
Manager and had until our reorganization held those positions at our general
partner since March 1995. His duties include the management of our stations in
the Central Region. Prior to being named Executive Vice President of our
general partner, he served in various management capacities with Nassau
Broadcasting Company since 1990.
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Peter D. Tonks is our Executive Vice President and Director of Accounting
& Human Resources and had until our reorganization held those positions at our
general partner since March 1995. From 1980 to March 1995, he served as
President and Chief Executive Officer of Tonks & Company, CPAs.
Anthony A. Gervasi, Jr. is our Senior Vice President of Engineering &
Technology and had until our reorganization held those positions at our general
partner since December 1998. Prior to that, he had been Director of Engineering
from 1995 to 1997 and Vice President of Engineering from 1997 to 1998, of our
general partner. From September 1992 through October 1995, Mr. Gervasi was
Director of Engineering of a radio station at Chancellor Media.
Michelle Stankowski is our Senior Vice President of Programming and
manages our programming division for all our stations. She had until our
reorganization held various positions at our general partner since 1987. Ms.
Stankowski is the Chairperson of the Programming Committee for the National
Association of Broadcasters 2000 Radio Show and the Chairperson of the New
Jersey Broadcasters' Association and Mid- Atlantic States Annual Convention.
Donald E. Dalesio is our Vice President and General Manager and had until
our reorganization held those positions at our general partner since September
1996. Prior to that, Mr. Dalesio had been General Sales Manager of Clear
Channel Communications, Inc. from May 1995 to August 1996. From 1991 through
1995, he was Vice President of Group Operations at H&D Broadcast Group.
Reuel H. Musselman, Jr. is our Vice President and General Manager and had
until our reorganization held those positions at our general partner since
1996. Prior to that, Mr. Musselman had been general manager of Clearview
Broadcasting Company from September 1992 to October 1996.
Brion B. Applegate is a director and had until our reorganization served
as a director of our general partner since 1995. Mr. Applegate has been a
general partner of Spectrum Equity Associates, L.P., the managing general
partner of Spectrum Equity Associates, L.P., since 1993. Mr. Applegate is also
the President and a shareholder and director of Applegate & Collatos, Inc., a
company which provides management services to Spectrum. From 1982 through 1993,
Mr. Applegate was a partner with Burr, Egan & Deleage & Co., a venture capital
firm, in which he supervised the company's investments in numerous broadcasting
companies. Mr. Applegate serves on the boards of directors of Network Access
Solutions, Inc. and Tut Systems, Inc.
William B. Collatos is a director and had until our reorganization served
as a director of our general partner since 1995. Mr. Collatos is currently a
general partner of Spectrum Equity Associates, L.P. Mr. Collatos is also an
officer, director and shareholder of Applegate & Collatos, Inc., a company
which provides management services to Spectrum. Mr. Collatos serves on the
boards of directors of ITXC Corporation and Jazztel, PLC.
Stuart D. Frankel is a director and had until our reorganization served
as a director of our general partner since 1995. Mr. Frankel currently serves
as a Managing Director and the Secretary of Grotech Capital Group IV, LLC, the
general partner of Grotech Partners IV, L.P., supervising certain of Grotech's
venture capital investments. Mr. Frankel has also served as a Managing Director
and the Secretary of Grotech Management Company, the provider of management
services to Grotech. Mr. Frankel serves as a principal for several other
venture capital funds and as the general partner of several real estate
partnerships.
Election of Directors
Directors are elected at our annual meeting of stockholders and hold
office until the next annual meeting of stockholders and until his or her
successor is duly elected and qualified or until his or her resignation or
removal, if earlier.
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Indemnification of Directors
Section 145 of the Delaware General Corporation Law allows us to
indemnify officers, directors and any corporate agents under certain
circumstances for liabilities, including reimbursement for expenses incurred,
arising under the Securities Act. Our certificate of incorporation and our by-
laws provide for indemnification of our directors, officers, employees and
other agents to the extent and under the circumstances permitted by the
Delaware General Corporation Law. We expect to enter into agreements with our
directors and executive officers that require us, among other things, to
indemnify them to the fullest extent permitted by Delaware law against certain
liabilities that may arise because of their status or service as directors and
executive officers. We also intend to purchase directors and officers liability
insurance, which provides coverage against liabilities, including liabilities
under the Securities Act.
Compensation of Directors
Directors who are also employees of our company will receive no
additional compensation for service as a director. We reimburse directors for
their reasonable expenses incurred in connection with attending board or
committee meetings. We expect that each outside director (a director who is not
an employee of our company and who owns, together with his or her affiliates,
less than 1% of our voting power) will automatically be granted stock options
under our stock incentive plan. These grants are described under "Stock Plans--
Stock Incentive Plan."
Committees of the Board of Directors
Prior to or immediately following the consummation of this offering, we
will establish an executive committee consisting of , , and . The
executive committee will have the authority to approve our acquisition and
divestiture of business entities for a price of up to $ million, the
appointment of our senior officers or those of our affiliates and termination
of their employment, the preparation and approval of short-term and long-term
budgets, and other material policy-level decisions.
Prior to or immediately following the consummation of this offering, we
will establish an audit committee of the board of directors which will consist
solely of three or more independent directors. In addition, we will adopt an
audit committee charter. The audit committee will review, act on and report to
the board of directors with respect to various auditing and accounting matters,
including the selection of our auditors, the scope of the annual audits, fees
to be paid to the auditors, the performance of our independent auditors and our
accounting practices.
Prior to or immediately following the consummation of this offering, we
will establish a compensation committee of the board of directors which will
consist of at least two independent directors. The compensation committee will
determine the salaries and incentive compensation of our officers and provide
recommendations for the salaries and incentive compensation of our other
employees and consultants. The compensation committee will also administer our
stock incentive plan.
Compensation Committee Interlocks and Insider Participation
During the year ended December 31, 1999, our general partner had no
compensation committee. The equivalent function for 1999 was performed by the
board of directors of our general partner. Following the completion of the
offering, compensation decisions will be made by a newly established
compensation committee of our board of directors.
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Executive Compensation
The following table sets forth, for the years ended December 31, 1999,
1998 and 1997 the compensation paid to the chief executive officer and the
other four most highly paid executives in 1999, all of whom continued to serve
as executive officers of our general partner and all of whom serve as executive
officers of our corporation.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
------------
Annual
Compensation Shares
----------------- Indirectly All Other
Name and Principal Position Year Salary Bonus Owned (1) Compensation
--------------------------- ---- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Louis F. Mercatanti, Jr. .... 1999 $275,000 $150,000 -- $12,263 (2)
President and Chief 1998 275,000 125,000 -- 25,299
Executive Officer
1997 275,000 188,000 -- 24,197
Michael S. Libretti.......... 1999 140,000 91,515 75,000 8,225 (3)
Executive Vice President and 1998 130,000 61,000 350,000 14,460
Chief Financial Officer 1997 130,000 30,000 175,000 13,113
Joan E. Gerberding........... 1999 150,000 45,000 15,000 3,380 (4)
President, Jersey Radio 1998 150,000 35,000 45,000 5,981
Network
1997 150,000 27,000 215,000 6,006
G. Daniel Henrickson, Jr. ... 1999 150,000 20,500 25,000 7,515 (5)
Executive Vice President and 1998 130,000 35,000 25,000 12,773
General Manager
1997 130,000 26,000 225,000 13,101
Peter D. Tonks............... 1999 135,000 31,000 10,000 5,990 (6)
Executive Vice President and 1998 130,000 6,500 25,000 16,551
Director of
Accounting & Human Resources 1997 127,000 6,000 15,000 16,671
</TABLE>
- --------
(1) As we describe more fully below under the heading "--Indirect Ownership of
Stock," options were granted by one of our stockholders, Nassau
Broadcasting Company. Upon exercise, at $0.15 per share, these employees
will indirectly own some of our shares.
(2) Consists of a $2,083 matching contribution made by Nassau Broadcasting
Partners, L.P. to the Nassau Broadcasting Partners, L.P. 401(k) plan and
$10,180 in respect of term life and disability premiums paid by Nassau
Broadcasting Partners, L.P.
(3) Consists of a $2,272 matching contribution made by Nassau Broadcasting
Partners, L.P. to the Nassau Broadcasting Partners, L.P. 401(k) plan and
$5,953 in respect of term life and disability premiums paid by Nassau
Broadcasting Partners, L.P.
(4) Consists of a $1,940 matching contribution made by Nassau Broadcasting
Partners, L.P. to the Nassau Broadcasting Partners, L.P. 401(k) plan and
$1,440 in respect of term life and disability premiums paid by Nassau
Broadcasting Partners, L.P.
(5) Consists of a $2,172 matching contribution made by Nassau Broadcasting
Partners, L.P. to the Nassau Broadcasting Partners, L.P. 401(k) plan and
$5,343 in respect of term life and disability premiums paid by Nassau
Broadcasting Partners, L.P.
(6) Represents premiums paid by Nassau Broadcasting Partners, L.P. in respect
of term life and disability insurance.
Indirect Ownership of Stock
Some of our employees have been granted options by one of our
stockholders, Nassau Broadcasting Company or NBC, to acquire stock of NBC at an
exercise price of $0.15 per share. NBC granted these options to these employees
as additional compensation for services provided by these employees to Nassau
Broadcasting Partners, L.P. We expect that these employees will exercise all of
their options prior to this offering. Accordingly, by reason of their ownership
of NBC stock, these employees will indirectly own approximately 5.0% of our
company.
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The following table sets forth, with respect to the chief executive
officer of our general partner and the four other most highly compensated
executive officers, information concerning their indirect ownership of our
stock as a result of their ownership of the stock of Nassau Broadcasting
Company.
<TABLE>
<CAPTION>
Percent of
Shares Value of
Shares Indirectly Shares
Indirectly Owned by Indirectly
Name Owned Employees Owned *
---- ---------- ---------- ----------
<S> <C> <C> <C>
Louis F. Mercatanti, Jr........................ -- --
Michael S. Libretti............................ 600,000 0.49%
Joan E. Gerberding............................. 275,000 0.22%
G. Daniel Henrickson, Jr....................... 275,000 0.22%
Peter D. Tonks................................. 87,000 0.07%
</TABLE>
* Based on $ per share, the mid-point of the range.
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Stock and Option Ownership of Executive Officers
Messrs. Mercatanti, Libretti, Henrickson and Tonks and Ms. Gerberding
together own shares of our class A common stock and shares of our class B
common stock. We will grant all of our executive officers and directors
additional options to purchase shares of our class A common stock at the time
of the completion of the offering. In addition, some or all of our executive
officers may purchase shares of our class A common stock in the offering from
the shares reserved for our employees, directors, affiliates, and other
individuals whom we feel have contributed to the success of our company.
69--1
<PAGE>
Employment Agreements
We intend to enter into employment agreements with Louis J. Mercatanti,
Jr., our President and Chief Executive Officer, Michael S. Libretti, our
Executive Vice President and Chief Financial Officer and Peter D. Tonks, our
Executive Vice President and Director of Accounting & Human Resources. The
terms of these agreements have not yet been established.
Stock Incentive Plan
We intend to adopt a stock incentive plan. The purpose of the plan will
be to promote our long-term growth and profitability by providing key people
with incentives to improve stockholder value and to contribute to our growth
and financial success and by enabling us to attract, retain and reward the best
available persons for positions of substantial responsibility. We expect that
the following will generally describe the terms of the plan once adopted.
General. We have reserved for issuance up to % of the number of
shares of our outstanding common stock outstanding from time to time, on a
fully diluted basis, subject to equitable adjustment upon the occurrence of any
stock dividend or other distribution, stock split, merger, consolidation,
combination, share repurchase or exchange or similar corporate transaction or
event. If an award granted under the plan expires or is terminated for any
reason, the shares of common stock underlying the award will again be available
for purposes of the plan. No individual may be granted awards relating to more
than % of the common stock outstanding on a fully diluted basis, in any
12-month period.
Types of Awards. The following awards may be granted under the plan:
. stock options, including incentive and nonqualified stock options;
. restricted stock;
. phantom stock;
. stock bonuses; and/or
. other stock based awards.
Administration. The plan will be administered by our board of directors.
In the alternative, the board of directors may appoint a committee consisting
of not less than two members of the board of directors to administer the plan
on behalf of the board of directors, subject to the terms and conditions as the
board of directors may prescribe, and for this purpose, the body administering
the plan will be referred to as the committee. The committee will be organized
in a manner so as to satisfy the provisions of Rule 16b-3 promulgated under
Section 16 of the Securities Exchange Act of 1934 and Section 162(m) of the
Internal Revenue Code, and the plan will be interpreted in a manner consistent
with the requirements of those rules and regulations.
The committee has full authority, subject to the provisions of the plan,
among other things, to determine the persons to whom awards will be granted, to
determine the type of award to be granted, the number of shares to be made
subject to awards, the exercise price and other terms and conditions of the
awards, and to interpret the plan and prescribe, amend and rescind rules and
regulations relating to the plan. The board of directors or the committee may
delegate to any of our senior management the authority to make grants of awards
to our employees who are not our executive officers or directors.
Eligibility. Awards may be granted under the plan to employees,
directors, including directors who are not employees, and consultants of our
company or any of our affiliates, as selected by the committee.
Terms and Conditions of Options. Options may be either incentive stock
options, as that is defined in Section 422 of the Internal Revenue Code, or
nonqualified stock options. The exercise price of a stock option granted under
the plan is determined by the committee at the time the option is granted, but
the exercise
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<PAGE>
price of an incentive stock option may not be less than the fair market value
per share of common stock on the date of grant. Stock options are exercisable
at the times and upon the conditions that the committee may determine, as
reflected in the applicable option agreement. Generally, the exercise period
will be determined by the committee, but in the case of any incentive stock
option, the exercise period may not exceed ten years from the date of grant.
The option exercise price must be paid in full at the time of exercise,
and is payable by any one of the following methods or a combination thereof:
. in cash or cash equivalents;
. the surrender of previously acquired shares of common stock that have
been held by the participant for at least six months prior to the
date of surrender;
. if so determined by the committee as of the grant date, authorization
for us to withhold a number of shares otherwise payable upon the
exercise of an option; or
. through a broker cashless exercise procedure approved by us.
The committee may, in its sole discretion, authorize us to make or
guarantee loans to a participant to assist the participant in exercising
options.
The committee may provide at the time of grant of an option that the
participant may elect to exercise all or part of the option before it becomes
vested and exercisable. If the participant elects to exercise all or part of a
non-vested option, the participant will be issued shares of restricted stock
which will become vested in accordance with the vesting schedule set forth in
the original option agreement. The stock will be subject to our repurchase
option if the optionee's employment or service terminates prior to its vesting.
Outside Director Options. Outside directors, which are non-employee
directors who own, together with their affiliates, less than 1% of the voting
power of our company will be eligible for automatic grants of non-qualified
options under the plan. Each outside director has been granted an option to
purchase shares of common stock. Following this offering, each outside
director will be granted upon his or her first election or appointment to the
board of directors, an option to purchase shares of common stock. In
addition, immediately following each annual meeting of stockholders after the
initial public offering, each outside director then serving who has been re-
elected or re-appointed at such stockholder meeting may be granted, in the sole
discretion of our board, an option to purchase shares of common stock.
Each option granted under the plan to an outside director will have an exercise
price equal to the fair market value of the common stock on the date of grant
and will become exercisable in three equal parts on the date of grant, the
first anniversary of the date of grant and the second anniversary of the date
of grant, provided that the director is still serving as an outside director as
of the date of vesting of the option. Each option granted to an outside
director will expire on the tenth anniversary of the date of grant of the
option. The other terms of the options granted to outside directors will be
consistent with the terms of options granted to employees.
Restricted Stock. The plan provides for awards of common stock that are
subject to restrictions on transferability and other restrictions imposed by
the committee. Except to the extent restricted under the awarded agreement
relating to the restricted stock, a participant granted restricted stock will
have all of the rights of a stockholder.
Phantom Stock. The plan provides for the award of phantom stock which,
upon vesting, entitles the participant granted the award to receive an amount
in cash equal to the fair market value of the number of shares subject to the
award. Vesting of all or a portion of a phantom stock award may be subject to
various conditions established by the committee.
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<PAGE>
Stock Bonuses; Other Awards. The plan provides that awards of shares of
common stock may be made to employees in the discretion of the committee. In
addition, other awards valued in whole or in part by reference to, or otherwise
based on, common stock may be granted either alone or in addition to other
awards under the plan, in the committee's discretion.
Termination of Employment. Unless otherwise determined by the committee,
the unvested portion of awards granted under the plan will immediately be
cancelled upon termination of a participant's employment or service with us. If
a participant's employment or service terminates other than because of death,
disability or retirement, all options that are exercisable at the time of
termination may be exercised by the participant for no longer than 90 days
after the date of termination. If a participant's employment or service
terminates for cause, all options held by the participant will immediately
terminate. If a participant's employment or service terminates as a result of
death, all options that are exercisable at the time of death may be exercised
by the participant's heirs or distributees for one year. If a participant's
employment or service terminates because of disability or retirement, all
options that are exercisable at the time of termination may be exercised for a
period of one year immediately following termination. In no case may an option
be exercised after it expires in accordance with its terms.
In the event that, within months following a change in control, an
optionee's employment terminated by us without cause or by the optionee for
good reason, the unvested portion of the optionee's options will become fully
vested and exercisable on the date of termination.
Amendment, Termination of Plan. The board of directors may modify or
terminate the plan or any portion of the plan at any time, except that an
amendment that requires stockholder approval in order for the plan to continue
to comply with any law, regulation or stock exchange requirement will not be
effective unless approved by the requisite vote of our stockholders. Amendment
or termination of the plan cannot adversely affect an outstanding awarded
without the awarded holder's consent. No options may be granted under the plan
after the date immediately preceding the tenth anniversary of its adoption
date.
Since the amount of benefits to be received by any plan participant who
is out employee or an employee of any of our affiliates is determined by the
committee, the amount of future benefits to be allocated by any employee or
group of employees under the plan in any particular year is not determinable.
Management Incentive Plan
We intend to adopt a management incentive plan. The purposes of the
management incentive plan will be to reinforce corporate business goals and to
promote the achievement of annual and long-range financial, business and other
objectives by providing for the payment of cash bonuses to our officers and
other key employees. We expect that the following will generally describe the
terms of the plan once adopted. The plan will be administered by the
compensation committee of our board of directors. The compensation committee
will have the authority to determine who will participate in the plan and to
determine the terms and conditions of incentive awards granted under the plan.
The payment of bonuses under the management incentive plan will be based on the
achievement during a performance period determined by the compensation
committee of specific performance goals set by the compensation committee,
which may include any, all or none of the following:
. pre-tax income or after tax income;
. operating profits;
. return on equity, assets, capital or investments;
. earnings or book value per share;
. sales or revenue;
. operating expenses;
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. increases in the market price of common stock;
. implementation or completion or critical projects or processes;
. comparison of actual performance during a performance period against
budget for that period;
. growth of revenue; or
. reduction in expenses.
Minimum bonuses will be based on achievement of 80.0% of the performance
goals, target bonuses will be based on the achievement of 100.0% of the
performance goals and maximum bonuses will be based on achievement of 125.0% of
the performance goals. A bonus will be paid only if the participant is employed
by us or our affiliates on the date the bonus is to be paid. Under the plan, no
payment may be made to one of our executive officers that exceeds 150.0% of the
officer's annual base salary. Any successor of ours will be required to assume
the plan at the time of a change in control, and will be obligated to honor the
terms of the plan during the performance period during which the change in
control occurs.
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RELATED PARTY TRANSACTIONS
Registration Rights Agreements
On May , 2000, we entered into a registration rights agreement with most
of our existing stockholders, in which we granted them registration rights in
respect of % of our currently outstanding common stock. We have also agreed
to enter into a registration rights agreement with the sellers of Aurora
Communications, who will receive our common stock as partial consideration
towards the purchase price, once we complete this acquisition. Under these
registration rights agreements, beginning 180 days after this offering until
, 2006, the holders of the registrable securities will have the right to
demand three registrations. Under each demand registration right, holders
owning at least 17.5% of the outstanding registrable securities can require us
to effect a registration of their shares, and the holders of the other shares
subject these registration rights can also require us to register their shares
at the same time. The holders of these registrable securities will also have
"piggy-back" registration rights. Under these piggy-back registration rights,
if we propose to register any other common stock under the Securities Act, we
will generally have to register the registrable securities whose holders
exercise these piggy-back rights. In addition, once we become eligible to file
registration statements on Form S-3, holders of registrable securities
generally can require us at any time to register their shares on a Form S-3
registration statement so long as no registration is for less than $5.0 million
of registrable securities. All of these registration rights are subject to
limitations and conditions, including, in the case of the piggy-back
registration rights, the right of underwriters of an offering to limit the
number of shares to be included in a registration. We would bear all
registration expenses incurred in connection with these registrations, except
for any underwriting discounts and selling commissions.
In addition, on May 4, 2000, we entered into a registration rights
agreement with holders of the shares of our class A common stock that
were issued upon conversion of the limited partnership units issued with our
senior discount notes. Under this registration rights agreement beginning 180
days after this offering, the holders of these registrable securities have the
right to demand two registrations. Under each of these demand registration
rights, holders owning at least 10.0% of these shares can require us to effect
a registration of their shares, and the holders of the other shares subject
these registration rights can also require us to register their shares at the
same time. The holders of these registrable securities will also have "piggy-
back" registration rights. Under these piggy-back rights, if we propose to
register any other common stock under the Securities Act, we will generally
have to register the registrable securities whose holders exercise these piggy-
back rights. Both the demand and piggy-back registration rights are subject to
limitations and conditions, including, in the case of the piggy-back
registration rights, the right of underwriters of an offering to limit the
number of shares to be included in a registration. We would bear all
registration expenses incurred in connection with these registrations, except
for any underwriting discounts and selling commissions.
Sale of Tower-Related Assets
In February 2000, we completed the sale of our tower-related assets to
affiliated entities controlled by Louis F. Mercatanti, Jr., our President and
Chief Executive Officer, for $10.0 million. These affiliated entities then
immediately transferred the bulk of these assets to Pinnacle Towers Inc., which
has in turn leased required tower space back to us. In addition, some of our
affiliates have leased assets to us. Our lease payments to affiliated entities
controlled by Mr. Mercatanti are expected to be approximately $250,000 this
year.
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Subordinated Discount Notes, Redemption and Preferred Distributions
From 1995 to 1997, we issued 8.0% subordinated discount notes to some of
our existing stockholders. On May 4, 2000, we fully repaid all of these
subordinated discount notes with a portion of the proceeds from the sale of
units consisting of our senior discount notes and limited partnership units, as
follows.
<TABLE>
<CAPTION>
Issuer Amount Repaid
------ -------------
(in millions)
<S> <C>
Spectrum Equity Investors, L.P.................................... $18.1
Spectrum Equity Investors II, L.P. ............................... 9.5
Grotech Partners IV, L.P.......................................... 7.7
Toronto Dominion Capital (U.S.A.), Inc............................ 7.1
-----
Total........................................................... $42.4
=====
</TABLE>
We used an aggregate of $5.4 million of the proceeds from the sale of the
units described above to redeem some equity interests of, and to make a
preferred distribution to, Louis F. Mercatanti Jr., pursuant to the Nassau
Broadcasting partnership agreement.
Loans to Stockholder and Employee
In 1998, and November, 1999, we advanced an aggregate of $100,000, with
an interest rate of 8.0% per annum, due and payable on or prior to November 30,
2001, to Joan E. Gerberding, our President of Jersey Radio Network, to purchase
a residence.
In December, 1999 we loaned an aggregate of $590,000 to Louis F.
Mercatanti, Jr., one of our existing stockholders, to finance a portion of the
purchase price of a communications tower. This loan accrued interest at a rate
of 8.0% per annum and was repaid in full by Mr. Mercatanti in March, 2000.
In March 2000, we loaned $200,000 interest-free to Mr. Mercatanti to
enable him to purchase some real property. Mr. Mercatanti repaid this loan in
full in May, 2000.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of our common stock upon our incorporation and as adjusted to reflect
the sale of the shares of common stock offered hereby by:
. each person who we know owns beneficially more than 5.0% of our
common stock;
. each of our directors, including our chief executive officer;
. our four most highly compensated executive officers, other than our
chief executive officer, who were serving as executive officers of
our general partner at the end of 1999; and
. all of our directors and executive officers as a group.
<TABLE>
<CAPTION>
Common Stock
-----------------------------------------------
Class A Class B Class C
--------------- --------------- --------------- % of Total % of Total
% of % of % of Economic Voting
Number Class Number Class Number Class Interest Power
of Post- of Post- of Post- Post- Post-
Stockholder Shares Offering Shares Offering Shares Offering Offering Offering
----------- ------ -------- ------ -------- ------ -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Spectrum Equity
Investors,
L.P. (1)...............
Spectrum Equity
Investors II,
L.P. (1)...............
Grotech Partners IV,
L.P. (2)...............
Toronto Dominion Capital
(U.S.A.), Inc. (3).....
Louis F. Mercatanti, Jr.
(4)....................
Michael S. Libretti
(4)....................
Joan E. Gerberding (4)..
G. Daniel Henrickson,
Jr. (4)................
Peter D. Tonks (4)......
Brion B. Applegate......
William B. Collatos.....
Stuart D. Frankel.......
All directors and
executive officers as a
group (12 persons).....
</TABLE>
(1) The address of both Spectrum Equity Investors, L.P. and Spectrum Equity
Investors II, L.P. is 333 Middlefield Road, Suite 200, Menlo Park, CA
94025.
(2) The address of Grotech Partners IV, L.P. is 9690 Deerco Road, Timonium, MD
21093.
(3) The address of Toronto Dominion Capital (U.S.A.), Inc. is c/o TD
Securities USA, Inc., 31 West 52nd Street, New York, NY 10019.
(4) The address of Mr. Mercatanti, Mr. Libretti, Ms. Gerberding, Mr.
Henrickson and Mr. Tonks is c/o Nassau Broadcasting Corporation, 619
Alexander Road, Princeton, New Jersey 08540.
The table above does not give effect to the million shares of class
C common stock to be issued to BancAmerica Capital Investors SBIC I, L.P. and
several individuals in connection with the Aurora Communications acquisition.
We will issue these shares on the closing date of that acquisition.
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Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Except as indicated by footnote, and subject
to community property laws where applicable, the persons named in the table
above have sole voting and investment power with respect to all shares of
common stock. The number of shares beneficially owned includes shares of common
stock issuable upon the exercise of options or warrants that are currently
exercisable or exercisable within 60 days of the date of this prospectus.
Percentage of beneficial ownership is based on shares of common stock
outstanding as of the date of this prospectus and shares of common stock
outstanding after completion of this offering.
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DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock and provisions of our
certificate of incorporation and by-laws is only a summary. For a more detailed
description, see our certificate of incorporation and by-laws, copies of which
we have filed as exhibits to our registration statement.
Our capital stock consists of shares of class A common stock, par
value $0.01 per share, shares of class B common stock, par value $0.01 per
share, shares of class C common stock, par value $0.01 per share, and
shares of preferred stock, par value $0.01 per share.
Common Stock
On the closing date of this offering, there will be shares of class A
common stock issued and outstanding, excluding shares to be issued if
underwriters and international managers exercise their over-allotment options,
shares of class B common stock and shares of class C common stock.
Voting rights. Each share of class A common stock will be entitled to one
vote and each share of class B common stock will be entitled to ten votes,
while shares of class C common stock will generally not be entitled to any
votes. Except as otherwise provided by law, and subject to any voting rights
granted to holders of any outstanding shares of preferred stock, the holders of
our outstanding shares of class A common stock and the holders of our
outstanding shares of class B common stock will vote on all matters on which
stockholders are entitled to vote. Except as otherwise provided by law, and
subject to any voting rights granted to holders of any outstanding preferred
stock, amendments to the certificate of incorporation must be approved by a
majority of votes entitled to be cast by all holders of class A common stock
and class B common stock, voting together as a single class. However,
amendments to the certificate of incorporation that would alter or change the
powers, preferences or special rights of the class A common stock, class B
common stock or class C common stock so as to affect them adversely also must
be approved by a majority of the votes entitled to be cast by the holders of
the shares affected by the amendment, voting as a separate class. Any amendment
to our certificate of incorporation to increase or decrease the authorized
shares of any class requires the approval of the holders of a majority of the
common stock, voting together as a single class.
Dividends. Holders of class A common stock, class B common stock and
class C common stock will share equally on a per share basis, based on the
number of shares of common stock held, in any dividend declared by the board of
directors, subject to any preferential rights of any outstanding preferred
stock. Dividends consisting of shares of class A common stock, class B common
stock and class C common stock may be paid only as follows: (1) shares of class
A common stock may be paid only to holders of shares of class A common stock,
shares of class B common stock may be paid only to holders of class B common
stock and shares of class C common stock may be paid only to holders of shares
of class C common stock; and (2) shares will be paid proportionally with
respect to each outstanding share of class A common stock, class B common stock
and class C common stock. We may not subdivide or combine shares of either
class of common stock without at the same time proportionally subdividing or
combining shares of the other class.
Conversion of class A common stock. Class A common stock is convertible
into shares of class C common stock at any time on a one-for-one basis.
Conversion of class B common stock. Class B common stock is convertible
into shares of class A common stock or class C common stock at any time on a
one-for-one basis. In addition, upon a transfer to anyone other than a
permitted class B transferee, shares of class B common stock automatically
convert into shares of class A common stock on a one-for-one basis.
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Conversion of class C common stock. Class C common stock is convertible
into shares of class A or class B common stock at the option of the holder, at
any time on a one-for-one basis, so long as the holder would not have an
attributable interest in radio stations pursuant to the FCC's multiple
ownership rules as a result of such conversion.
Other rights. In the event of any merger or consolidation with or into
another company in connection with which shares of common stock are converted
into or exchangeable for shares of stock, other securities or property
(including cash), all holders of common stock, regardless of class, will be
entitled to receive the same kind and amount of shares of stock and other
securities and property, including cash.
On liquidation, dissolution or winding up, after payment in full of the
amounts required to be paid to holders of preferred stock, if any, all holders
of common stock, regardless of class, are entitled to share ratably in any
assets available for distribution to holders of shares of common stock.
No shares of any class of common stock are subject to redemption or have
preemptive rights to purchase additional shares of common stock.
Upon consummation of the offering, all the outstanding shares of our
class A common stock will be legally issued, fully paid and nonassessable.
Preferred Stock
The board of directors will be authorized, without stockholder approval,
to issue from time to time up to million shares of preferred stock in one
or more series and to fix or alter the designations, preferences, rights and
any qualifications, limitations or restrictions of the shares of each series.
The specific matters that our board may determine include the following:
. the designation of each series;
. the number of shares of each series;
. the rate of any dividends;
. whether any dividends will be cumulative or noncumulative;
. the terms of any redemption;
. the amount payable in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of our company;
. rights and terms of any conversion or exchange;
. restrictions on the issuance of shares of the same series or any
other series; and
. any voting rights.
Upon the closing of the offering, there will be no shares of preferred
stock outstanding. We have no present plans to issue any shares of preferred
stock. See "--Anti-takeover Effects of Provisions of Delaware law and Our
Certificate of Incorporation and By-Laws" for more information.
Options
As of the date of this prospectus, options to purchase a total of
shares of class A common stock were outstanding, of which are subject to
lockup agreements entered into with the underwriters.
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<PAGE>
The total of shares of class A common stock that may be subject to the
granting of options under our stock incentive plan will be equal to shares
of common stock. We refer you to "Management--Executive Compensation--Stock
Incentive Plan" and "Shares Eligible for Future Sale."
Limitation on Liability of Directors
Our certificate of incorporation provides that our directors will not be
personally liable to us or our stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability imposed by law, as in effect
from time to time:
. for any breach of the director's duty of loyalty to us or our
stockholders;
. for any act or omission not in good faith or which involved
intentional misconduct or a knowing violation of law;
. for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General
Corporation Law; or
. for any transaction from which the director derived an improper
personal benefit.
The inclusion of this provision in our certificate of incorporation may
have the effect of reducing the likelihood of derivative litigation against or
directors and may discourage or deter stockholders or us from bringing a
lawsuit against our directors for breach of their duty of care, even though
such an action, if successful, might otherwise have benefitted us and our
stockholders.
Foreign Ownership
Our certificate of incorporation restricts the ownership, voting and
transfer of our capital stock, including the class A common stock, in
accordance with the Communications Act and the rules of the FCC, which prohibit
the issuance of more than 25% of our outstanding capital stock, or more than
25% of the voting rights such stock represents, to or for the account of
aliens, as defined by the FCC, or corporations otherwise subject to domination
or control by aliens. Our certificate of incorporation prohibits any transfer
of our capital stock that would cause a violation of this prohibition. The
certificate of incorporation authorizes the board of directors to take action
to enforce these prohibitions, including restricting the transfer of shares of
capital stock to aliens and placing a legend restricting foreign ownership on
the certificates representing the class A common stock. In addition, the
certificate of incorporation provides for the redemption of shares of our
capital stock by action of the board of directors to the extent necessary to
comply with alien ownership restrictions.
Anti-takeover Effects of Provisions of Delaware Law and Our Certificate of
Incorporation and By-Laws
Some of the provisions of our certificate of incorporation and by-laws
and Section 203 of the Delaware General Corporation Law could have the
following effects, among others:
. delaying, deferring or preventing a change in control;
. delaying, deferring or preventing the removal of our existing
management;
. deterring potential acquirors from making an offer to our
stockholders; and
. limiting our stockholders' opportunity to realize premiums over
prevailing market prices of our class A common stock in connection
with offers by potential acquirors.
This could be the case, notwithstanding that a majority of our stockholders
might benefit from such a change in control or offer. The following is a
summary of these provisions.
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A classified board of directors. We have a classified board of directors,
which means that our board is divided into three classes with three-year terms
with only one class elected at each annual meeting of stockholders. As a
result, a holder of a majority of our common stock will need two annual
meetings of stockholders to gain control of the board.
Directors, and not stockholders, fix the size of our board of
directors. Our certificate of incorporation and by-laws provide that the number
of directors shall be fixed from time to time exclusively pursuant to a
resolution adopted by a majority of our board of directors, but in no event
shall it consist of less than one nor more than six members.
Board vacancies to be filled by remaining directors, and not
stockholders. Our certificate of incorporation and by-laws provide that any
vacancies on our board of directors will be filled by the affirmative vote of
the majority of the remaining directors, even if less than a quorum, or by a
sole remaining director. In any event, no vacancy shall be filled by our
stockholders.
Advance notice for stockholder proposals. Our by-laws contain provisions
requiring that advance notice be delivered to us of any business to be brought
by a stockholder before an annual meeting and providing for procedures to be
followed by stockholders in nominating persons for election to our board of
directors. Generally, such advance notice provisions require that the
stockholder must give written notice to us not less than 120 calendar days
before the date our proxy statement was released to stockholders in connection
with our previous year's annual meeting. Our by-laws provide that the notice
must set forth specific information regarding the stockholder and each director
nominee by the stockholder or other business proposed by the stockholder.
Section 203 of the Delaware General Corporation Law. Nassau is a Delaware
corporation and subject to Section 203 of the Delaware General Corporation Law.
Generally, Section 203 prohibits a publicly held Delaware company from engaging
in a "business combination" with an "interested stockholder" for a period of
three years after the time such stockholder became an interested stockholder
unless, as described below, specified conditions are satisfied. Thus, it may
make acquisition of control of our company more difficult. The prohibitions in
Section 203 of the Delaware General Corporation Law do not apply if:
. prior to the time the stockholder became an interested stockholder,
the board of directors of the corporation approved either the
business combination or the transaction which resulted in the
stockholder becoming an interested stockholder;
. upon consummation of the transaction, which resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85.0% of the voting stock of the
corporation outstanding at the time the transaction commenced; and
. at or subsequent to the time the stockholder became an interested
stockholder, the business combination is approved by the board of
directors and authorized by the affirmative vote of at least 66 2/3%
of the outstanding voting stock that is not owned by the interested
stockholder.
Under Section 203 of the Delaware General Corporation Law, a "business
combination" includes:
. any merger or consolidation of the corporation with the interested
stockholder;
. any sale, lease, exchange or other disposition, except
proportionately as a stockholder of such corporation, to or with the
interested stockholder of assets of the corporation having an
aggregate market value equal to 10.0% or more of either the aggregate
market value of all the assets of the corporation or the aggregate
market value of all the outstanding stock of the corporation;
. transactions resulting in the issuance or transfer by the corporation
of stock of the corporation to the interested stockholder;
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. transactions involving the corporation, which have the effect of
increasing the proportionate share of the corporation's stock of any
class or series that is owned by the interested stockholder; and
. transactions in which the interested stockholder receives financial
benefits provided by the corporation.
Under Section 203 of the Delaware General Corporation Law, an "interested
stockholder" generally is:
. any person that owns 15.0% or more of the outstanding voting stock of
the corporation;
. any person that is an affiliate or associate of the corporation and
was the owner of 15% or more of the outstanding voting stock of the
corporation at any time within the three-year period immediately
prior to the date on which it is sought to be determined whether or
not such person is an interested stockholder; or
. the affiliates or associates of either of the above-stated categories
person.
Under some circumstances, Section 203 of the Delaware General Corporation
Law makes it more difficult for an "interested stockholder" to effect various
business combinations with us for a three-year period, although our
stockholders may elect to exclude us from the restrictions imposed thereunder.
Registration Rights
All of our current stockholders have, or will have, registration rights
for their securities. Registration of these securities under the Securities Act
would result in those shares becoming freely tradeable by persons not
affiliated with us. For a more complete explanation of these registration
rights, you should read "Related Party Transactions--Registration Rights
Agreement" and "Shares Eligible for Future Sale--Registration Rights."
Transfer Agent and Registrar
The transfer agent and registrar for our class A common stock is American
Stock Transfer & Trust Company.
Nasdaq Stock Market Listing
We expect the shares to be approved for quotation on the Nasdaq National
Market, subject to notice of issuance, under the symbol "NBCR."
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the offering, there has been no public market for our common
stock. Although we can make no prediction as to the effect, if any, that sales
of shares of common stock by our existing stockholders would have on the market
price of our class A common stock prevailing from time to time, sales of
substantial amounts of common stock or the availability of the shares for sale
could adversely affect prevailing market prices.
Upon completion of the offering, we will have outstanding shares of
class A common stock, shares of class B common stock and shares of
class C common stock. If the underwriters exercise their over-allotment options
in full, we will have a total of shares of class A common stock
outstanding, shares of class B common stock outstanding and shares of
class C common stock outstanding. All of the shares of class A common stock to
be sold in the offering will be freely tradable without restrictions or further
registration under the Securities Act, except that shares purchased by our
"affiliates" as defined in Rule 144 under the Securities Act will be subject to
the resale limitations of Rule 144. The shares of class A common stock, class B
common stock and class C common stock owned by our existing stockholders are
"restricted securities" within the meaning of Rule 144 and may not be sold in
the absence of registration under the Securities Act other than pursuant to
Rule 144 under the Securities Act or another exemption from registration under
the Securities Act.
Shares of our class A common stock, class B common stock and class C
common stock outstanding prior to this offering and any shares of common stock
acquired by any of our affiliates will be subject to the resale limitations of
Rule 144 of the Securities Act. Rule 144 defines an affiliate as a person that
directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, the issuer.
In general, beginning 90 days after the date of this prospectus, a
stockholder who has beneficially owned shares of our common stock for at least
one year may, within any three-month period, sell up to the greater of:
. 1.0% of the total number of shares of class A common stock then
outstanding; or
. the average weekly trading volume of the shares of class A common
stock during the four calendar weeks preceding the stockholder's
required filing of notice of sale.
Rule 144 requires stockholders to aggregate their sales with other
stockholders with which it is affiliated for purposes of complying with this
volume limitation. A stockholder who has owned shares of our common stock for
at least two years, and who has not been our affiliate for at least three
months, may sell shares of our common stock free from the volume limitation and
notice requirements of Rule 144.
The shares of class A common stock authorized for issuance pursuant to
options that may be granted under the stock incentive plan may be either
authorized but unissued shares or treasury shares obtained by us through market
or private purchases. See "Management--Executive Compensation--Stock Incentive
Plan." We intend to register under the Securities Act the shares of common
stock issuable upon the exercise of options granted pursuant to the stock
incentive plan.
We and our executive officers and directors and most of our existing
stockholders have agreed, with limited exceptions, not to sell or transfer any
common stock for 180 days after the date of this prospectus without first
obtaining the written consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Salomon Smith Barney Inc. Specifically, we and these other
individuals have agreed not to directly or indirectly
. offer, pledge, sell or contract to sell any common stock, other than
common stock issued by us in connection with our purchase of Aurora
Communications;
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. sell any option or contract to purchase any common stock;
. purchase any option or contract to sell any common stock;
. grant any option, right or warrant for the sale of any common stock,
other than pursuant to our stock incentive plan;
. lend or otherwise dispose of or transfer any common stock;
. request or demand that we file a registration statement related to
any common stock; or
. enter into any swap or other agreement that transfers, in whole or in
part, the economic consequence of ownership of any common stock
whether any such swap or transaction is to be settled by delivery of
shares or other securities, in cash or otherwise.
This lockup provision applies to common stock and to securities
convertible into or exchangeable or exercisable for or repayable with common
stock. It also applies to common stock owned now or acquired later by the
person executing the agreement or for which the person executing the agreement
later acquires the power of disposition.
As a result of contractual restrictions, notwithstanding possible earlier
eligibility for sale under the provisions of Rule 144 promulgated under the
Securities Act, which are summarized above, shares subject to lockup agreements
will not be saleable until the agreements expire.
Registration Rights
We have granted registration rights to most of our stockholders pursuant
to the registration rights agreement described in "Related Party Transactions--
Registration Rights Agreement."
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MATERIAL UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-U.S. HOLDERS OF OUR CLASS A COMMON STOCK
The following is a general summary of the material United States federal
income and estate tax consequences of the purchase, ownership, and sale or
other taxable disposition of our class A common stock by any person or entity
(a "non-U.S. Holder") other than:
. a citizen or individual resident of the United States;
. a partnership, corporation or other entity created or organized in or
under the laws of the United States or of any political subdivision
thereof;
. a trust, if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or
more United States persons have the authority to control all
substantial decisions of the trust or the trust has a valid election
in effect under applicable U.S. Treasury regulations to be treated as
a United States person; and
. an estate, the income of which is includible in gross income for
United States federal income tax purposes regardless of its source.
This summary does not address all tax considerations that may be relevant
to non-U.S. Holders in light of their particular circumstances or to certain
non-U.S. Holders that may be subject to special treatment under United States
federal income or estate tax laws. This summary is based upon the Internal
Revenue Code of 1986, as amended, existing, temporary and proposed Treasury
regulations promulgated thereunder, and administrative and judicial decision
thereof, all as in effect on the date of this prospectus and all of which are
subject to change, possibly with retroactive effect. In addition, this summary
does not address the effect of any state, local or foreign tax laws. Each
prospective purchaser of class A common stock should consult its tax advisor
with respect to the tax consequences of purchasing, owning and disposing of the
class A common stock.
Dividends
Dividends paid to a non-U.S. Holder of class A common stock generally
will be subject to a withholding of United States federal income tax at a 30
percent rate or such lower rate as may be specified by an applicable income tax
treaty unless:
. the dividend is effectively connected with the conduct of a trade or
business of the non-U.S. Holder within the United States; or
. if an income tax treaty applies, it is attributable to a United
States permanent establishment of the non-U.S. Holder,
in which case the dividend will be taxed at ordinary United States federal
income tax rates. If the non-U.S. Holder is a corporation, such effectively
connected income may also be subject to an additional "branch profits tax"
equal to 30.0% of its effectively connected earnings and profits for the
taxable year, as adjusted for certain items, unless an applicable income tax
treaty provides otherwise. A non-U.S. Holder generally is required to satisfy
certain certification requirements in order to claim treaty benefits or
otherwise claim a reduction of, or exemption from, the withholding described
above.
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<PAGE>
Sale or Other Disposition of Common Stock
A non-U.S. Holder generally will not be subject to United States federal
income tax in respect of any gain recognized on the sale or other taxable
disposition of class A common stock unless one of the following applies:
. the gain is effectively connected with the conduct of a trade or
business of the non-U.S. Holder within the United States; and, if an
income treaty applies, is attributable to a U.S. permanent
establishment of the non-U.S. Holder. Unless an applicable income tax
treaty provides otherwise, the non-U.S. Holder will be taxed on its
net effectively connected gain derived from the sale under the
regular graduated United States federal income tax rates. If the non-
U.S. Holder is a foreign corporation, it may be subject to an
additional branch profits tax equal to 30.0% of its effectively
connected earnings and profits for the taxable year, as adjusted for
certain items, unless an applicable income tax treaty provides
otherwise;
. in the case of a non-U.S. Holder who is an individual and holds the
class A common stock as a capital asset, the holder is present in the
United States for 183 or more days in the taxable year of the sale or
other taxable disposition and certain other tests are met; in this
case, the non-U.S. Holder will be subject to a flat 30.0% tax on the
gain derived from the sale, which may be offset by certain United
States capital losses;
. the non-U.S. Holder is subject to tax pursuant to the provisions of
United States federal income tax law applicable to certain United
States expatriates; or
. we are or have been a "United States real property holding
corporation" at any time during the five-year period ending on the
date of disposition (or, if shorter, the non-U.S. Holder's holding
period), unless both (i) the non-U.S. Holder held, actually or
constructively, no more than 5.0% of our outstanding class A common
stock and (ii) our stock is "regularly traded on an established
securities market," for purpose of these rules. We believe that we
will not constitute a United States real property holding corporation
immediately after the offering and we do not expect to become a
United States real property holding corporation.
Estate Tax
Class A common stock owned or treated as owned by an individual non-U.S.
Holder at the time of death will be includible in the individual's gross estate
for United States federal estate tax purposes, unless an applicable estate
treaty provides otherwise, and may be subject to United States federal estate
tax.
Backup Withholding
Under the backup withholding rules, dividends payable to a non-U.S.
holder and the proceeds from any disposition of class A common stock by a non-
U.S. holder may be subject to backup withholding at the rate of 31.0% unless
the non-U.S. holder (i) is a corporation or comes within certain other exempt
categories and demonstrates that fact when required or (ii) provides a current
taxpayer identification number, certifies as to no loss of exemption from
backup withholding, and otherwise complies with applicable requirements of the
backup withholding rules.
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<PAGE>
UNDERWRITING
We intend to offer the shares in the U.S. and Canada through the U.S.
underwriters and elsewhere through the international managers. Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Salomon Smith Barney Inc. and Banc of
America Securities LLC are acting as U.S. representatives of the U.S.
underwriters named below. Subject to the terms and conditions described in a
U.S. purchase agreement among us and the U.S. underwriters, and concurrently
with the sale of shares to the international managers, we have agreed
to sell to the U.S. underwriters, and the U.S. underwriters severally have
agreed to purchase from us, the number of shares listed opposite their names
below.
<TABLE>
<CAPTION>
Number
U.S. Underwriter of Shares
---------------- ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................................
Salomon Smith Barney Inc. .......................................
Banc of America Securities LLC ..................................
----
Total.......................................................
====
</TABLE>
We have also entered into an international purchase agreement with the
international managers, for whom Merrill Lynch International and Salomon
Brothers International Limited are acting as lead managers, for sale of the
shares outside the U.S. and Canada. Subject to the terms and conditions in the
international purchase agreement, and concurrently with the sale of
shares to the U.S. underwriters pursuant to the U.S. purchase agreement,
we have agreed to sell to the international managers, and the international
managers severally have agreed to purchase shares from us. The
initial public offering price per share and the total underwriting discount per
share are identical under the U.S. purchase agreement and the international
purchase agreement.
The U.S. underwriters and the international managers have agreed to
purchase all of the shares sold under the U.S. and international purchase
agreements if any of these shares are purchased. If an underwriter defaults,
the U.S. and international purchase agreements provide that the purchase
commitments of the nondefaulting underwriters may be increased or the purchase
agreements may be terminated. The closings for the sale of shares to be
purchased by the U.S. underwriters and the international managers are
conditioned on one another.
We have agreed to indemnify the U.S. underwriters and the international
managers against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the U.S. underwriters and
international managers may be required to make in respect of those liabilities.
The underwriters are offering the shares, subject to prior sale, when, as
and if issued to and accepted by them, subject to approval of legal matters by
their counsel, including the validity of the shares, and other conditions
contained in the purchase agreements, such as the receipt by the underwriters
of officer's certificates and legal opinions. The underwriters reserve the
right to withdraw, cancel or modify offers to the public and to reject orders
in whole or in part.
Commissions and Discounts
The U.S. representatives have advised us that the U.S. underwriters
propose initially to offer the shares to the public at the initial public
offering price on the cover page of this prospectus and to dealers at that
price less a concession not in excess of $ per share. The U.S. underwriters
may allow, and the dealers may reallow, a discount not in excess of $ per
share to other dealers. After the initial public offering, the public offering
price, concession and discount may be changed.
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<PAGE>
The following table shows the public offering price, underwriting
discount and proceeds before expenses to Nassau. In addition, the table
includes certain other items considered by the NASD to be underwriting
compensation for purposes of the NASD's Conduct Rules. The information assumes
either no exercise or full exercise by the U.S. underwriters and the
international managers of their over-allotment options.
<TABLE>
<CAPTION>
Per Share Without Option With Option
--------- -------------- -----------
<S> <C> <C> <C>
Public offering price.................. $ $ $
Underwriting discount.................. $ $ $
Proceeds, before expenses, to Nassau... $ $ $
Other items............................ $ $ $
</TABLE>
Merrill Lynch Capital Corporation, an affiliate of Merrill Lynch, Pierce,
Fenner & Smith Incorporated, owns shares of our class A common stock
which were received upon conversion of limited partnership units acquired in
connection with our recapitalization. The compensation in the table above in
the line titled "other items" was computed based on the difference between the
$ offering price and $ , the price deemed to be paid for the shares of
class A common stock held by Merrill Lynch Capital Corporation.
The expenses of the offering, not including the underwriting discount,
are estimated at $ and are payable by us, as set forth in the following
table.
<TABLE>
<S> <C>
SEC registration fee...................................................... $
NASD filing fee...........................................................
Nasdaq National Market listing fee........................................
Printing and engraving expenses...........................................
Legal fees and expenses...................................................
Accounting fees and expenses..............................................
Blue sky fees and expenses (including legal fees).........................
Transfer agent and registrar fees and expenses............................
Premiums for director and officer insurance...............................
Miscellaneous.............................................................
----
Total................................................................... $
====
</TABLE>
Over-allotment Options
We have granted an option to the U.S. underwriters to purchase up to
additional shares at the public offering price less the underwriting
discount. The U.S. underwriters may exercise this option for 30 days from the
date of this prospectus solely to cover any over-allotments. If the U.S.
underwriters exercise this option, each will be obligated, subject to
conditions contained in the purchase agreements, to purchase a number of
additional shares proportionate to that U.S. underwriter's initial amount
reflected in the above table.
We have also granted an option to the international managers, exercisable
for 30 days from the date of this prospectus, to purchase up to
additional shares to cover any over-allotments on terms similar to those
granted to the U.S. underwriters.
Intersyndicate Agreement
The U.S. underwriters and the international managers have entered into an
intersyndicate agreement that provides for the coordination of their
activities. Under the intersyndicate agreement, the U.S. underwriters and the
international managers may sell shares to each other for purposes of resale at
the initial public offering price, less an amount not greater than the selling
concession. Under the intersyndicate agreement, the U.S. underwriters and any
dealer to whom they sell shares will not offer to sell or sell shares to
persons who are non-U.S. or non-Canadian persons or to persons they believe
intend to resell to persons who are non-U.S. or
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<PAGE>
non-Canadian persons, except in the case of transactions under the
intersyndicate agreement. Similarly, the international managers and any dealer
to whom they sell shares will not offer to sell or sell shares to U.S. persons
or Canadian persons or to persons they believe intend to resell to U.S. or
Canadian persons, except in the case of transactions under the intersyndicate
agreement.
Reserved Shares
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to shares offered by this prospectus for sale to
some of our directors, officers, employees and business associates. If these
persons purchase reserved shares, this will reduce the number of shares
available for sale to the general public. Any reserved shares that are not
orally confirmed for purchase within one day of the pricing of this offering
will be offered by the underwriters to the general public on the same terms as
the other shares offered by this prospectus.
Purchasers of shares pursuant to the reserved share program generally
will not be subject to lock-up agreements in respect of the shares so purchased
unless required by the Conduct Rules of the NASD. The NASD's Conduct Rules will
require that some purchasers of shares who are affiliated or associated with
NASD members or who hold senior positions at financial institutions or members
of their immediate families be subject to three-month lock up agreements.
No Sales of Similar Securities
We and our executive officers and directors and most of our existing
stockholders have agreed, with limited exceptions, not to sell or transfer any
common stock for 180 days after the date of this prospectus without first
obtaining the written consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Salomon Smith Barney Inc. Specifically, we and these other
individuals have agreed not to directly or indirectly
. offer, pledge, sell or contract to sell any common stock, other than
common stock issued by us in connection with our purchase of Aurora
Communications;
. sell any option or contract to purchase any common stock;
. purchase any option or contract to sell any common stock;
. grant any option, right or warrant for the sale of any common stock,
other than pursuant to our stock incentive plan;
. lend or otherwise dispose of or transfer any common stock;
. request or demand that we file a registration statement related to
any common stock; or
. enter into any swap or other agreement that transfers, in whole or in
part, the economic consequence of ownership of any common stock
whether any such swap or transaction is to be settled by delivery of
shares or other securities, in cash or otherwise.
This lockup provision applies to common stock and to securities
convertible into or exchangeable or exercisable for or repayable with common
stock. It also applies to common stock owned now or acquired later by the
person executing the agreement or for which the person executing the agreement
later acquires the power of disposition.
87--1
<PAGE>
Quotation on the Nasdaq National Market
We expect the shares to be approved for quotation on the Nasdaq National
Market, subject to notice of issuance, under the symbol "NBCR."
Before this offering, there has been no public market for our class A
common stock. The initial public offering price will be determined through
negotiations among us and the U.S. representatives and lead managers. In
addition to prevailing market conditions, the primary factors to be considered
in determining the initial public offering price are
. the valuation multiples of publicly traded companies that the U.S.
representatives and the lead managers believe to be comparable to us;
. our financial information;
. the history of, and the prospects for, our company and the industry
in which we compete;
. an assessment of our management, its past and present operations, and
the prospects for, and timing of, our future revenues;
. the present state of our development;
. the general condition of the securities market at the time of this
offering; and
. the above factors in relation to market values and various valuation
measures of other companies engaged in activities similar to ours.
An active trading market for the shares may not develop. It is also
possible that after the offering the shares will not trade in the public market
at or above the initial public offering price.
The underwriters do not expect to sell more than 5% of the shares in the
aggregate to accounts over which they exercise discretionary authority.
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<PAGE>
Price Stabilization, Short Positions and Penalty Bids
Until the distribution of the shares is completed, SEC rules may limit
underwriters and selling group members from bidding for and purchasing our
class A common stock. However, the U.S. representatives may engage in
transactions that stabilize the price of the class A common stock, such as bids
or purchases to peg, fix or maintain that price.
If the underwriters create a short position in the class A common stock
in connection with the offering, i.e., if they sell more shares than are listed
on the cover of this prospectus, the U.S. representatives may reduce that short
position by purchasing shares in the open market. The U.S. representatives may
also elect to reduce any short position by exercising all or part of the over-
allotment options described above. Purchases of the class A common stock to
stabilize its price or to reduce a short position may cause the price of the
class A common stock to be higher than it might be in the absence of such
purchases.
The U.S. representatives may also impose a penalty bid on underwriters
and selling group members. This means that if the U.S. representatives purchase
shares in the open market to reduce the underwriters' short position or to
stabilize the price of such shares, they may reclaim the amount of the selling
concession from the underwriters and selling group members who sold those
shares. The imposition of a penalty bid may also affect the price of the shares
in that it discourages resales of those shares.
Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the class A common stock. In addition,
neither we nor any of the underwriters makes any representation that the U.S.
representatives or the lead managers will engage in these transactions or that
these transactions, once commenced, will not be discontinued without notice.
These transactions may be effected on the Nasdaq National Market, in the over-
the-counter market or otherwise.
Other Relationships
Merrill Lynch, Pierce, Fenner & Smith Incorporated has acted as our
financial advisor in connection with our pending acquisition of Aurora
Communications and our reorganization. In addition, Merrill Lynch has acted as
sole placement agent with respect to our units consisting of senior discount
notes and limited partnership units, and as sole lead arranger, book running
manager and syndication agent with respect to our new credit facility. Merrill
Lynch has received customary fees and commissions for these transactions.
Merrill Lynch Capital Corporation, an affiliate of Merrill Lynch, owns $20.0
million aggregate principal amount of our senior discount notes and shares
of our class A common stock. Merrill Lynch Capital Corporation is also a lender
under our new credit facility. We expect to issue shares of class C
common stock to BancAmerica Capital Investors SBIC I, L.P., an affiliate of
Banc of America Securities LLC, in connection with the Aurora Communications
acquisition. Merrill Lynch Capital Corporation has agreed that it will not,
with limited exceptions, sell, transfer, assign, pledge or hypothecate any
shares of class A common stock for one year after the date of this prospectus.
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LEGAL MATTERS
The validity of the class A common stock offered in this prospectus and
certain other legal matters will be passed upon for us by Skadden, Arps, Slate,
Meagher & Flom LLP, New York, New York. Certain legal matters will be passed
upon for the underwriters by Shearman & Sterling, New York, New York.
EXPERTS
Our historical financial statements at December 31, 1998 and 1999, and
for each of the three years in the period ended December 31, 1999 appearing in
this prospectus and registration statement were audited by Grant Thornton LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
in this prospectus, and are included in reliance upon such report given on
their authority as experts in accounting and auditing.
The consolidated financial statements of Aurora Communications, LLC at
December 31, 1999, and for the period January 20, 1999 (commencement of
operations) to December 31, 1999 appearing in this prospectus have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report
thereon appearing elsewhere in this prospectus, and are included in reliance
upon such report given on their authority as experts in accounting and
auditing.
This historical financial statements of WEBE and WICC Radio Stations
(divisions of ML Media Partners, L.P.) at December 31, 1997 and 1998 and for
each of the three years in the period ended December 31, 1998 appearing in this
prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in its reports appearing herein and elsewhere in this prospectus, and
are included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The historical financial statements of (i) Capstar Trust, at December 31,
1998 and at October 26, 1999 and for the period May 29, 1998 to October 26,
1999; (ii) Westchester Radio, LLC at December 31, 1998 and October 26, 1999 and
for the period April 2, 1998 to October 26, 1999; (iii) Commodore Media of
Westchester, Inc. at December 31, 1996 and 1997 and at April 1, 1998 and for
the period from January 1, 1996 to April 1, 1998, and (iv) WRKI, WAXB, WPVT,
WZZN and WINE (operating divisions of Commodore Media of Norwalk, Inc.) at
December 31, 1996 and 1997 and at May 29, 1998 and for the period from January
1, 1996 to May 29, 1998, appearing in this prospectus were audited by Weeks
Holderbaum Huber & DeGraw, LLP, independent auditors, as set forth in their
report thereon appearing elsewhere in this prospectus, and are included in
reliance upon such report given on their authority as experts in accounting and
auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed a registration statement on Form S-1 with the SEC covering
our class A common stock. For further information about us and the class A
common stock, you should refer to our registration statement and its exhibits.
This prospectus summarizes material provisions of contracts and other documents
to which we refer you. Since the prospectus may not contain all the information
that you may find important, you should review the full text of these
documents. We have included copies of these documents as exhibits to our
registration statement.
After the offering, we will be subject to the reporting requirements of
the Securities Exchange Act of 1934. We will fulfill these requirements by
filing periodic reports, proxy statements and other information with the SEC.
We intend to furnish our stockholders with annual reports containing
consolidated financial statements certified by an independent accounting firm.
Our SEC filings will be available over the internet at the SEC's website at
http://www.sec.gov. You may also read, without charge, or copy, at prescribed
rates, any document we filed at the SEC's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at 1-800-
SEC-0330 for more information about the public reference rooms and their copy
charges. You may also inspect our SEC reports and other information at Nasdaq's
website at http://www.nasdaq.com.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Nassau Broadcasting Partners, L.P.--Audited Financial Statements
Report of Independent Certified Public Accountants................... F-4
Balance Sheets as of December 31, 1999 and 1998...................... F-5
Statements of Operations and Comprehensive Loss for the years ended
December 31, 1999, 1998 and 1997.................................... F-6
Statement of Partners' Capital (Deficit) for the years ended December
31, 1999, 1998 and 1997............................................. F-7
Statements of Cash Flows for the years ended December 31, 1999, 1998
and 1997............................................................ F-8
Notes to Financial Statements........................................ F-9
Nassau Broadcasting Partners, L.P.--Unaudited Interim Financial
Statements
Balance Sheets as of March 31, 2000 and 1999......................... F-21_1
Statements of Operations for the three months ended March 31, 2000
and 1999............................................................ F-21_2
Statements of Cash Flows for the three months ended March 31, 2000
and 1999............................................................ F-21_3
Notes to Financial Statements........................................ F-21_4
Aurora Communications, LLC (A Limited Liability Company)--Audited
Consolidated Financial Statements
Report of Independent Auditors....................................... F-24
Consolidated Balance Sheet as of December 31, 1999................... F-25
Consolidated Statement of Operations for the period January 20, 1999
(commencement of operations) to December 31, 1999................... F-26
Consolidated Statement of Members' Capital for the period January 20,
1999 (commencement of operations) to December 31, 1999.............. F-27
Consolidated Statement of Cash Flows for the period January 20, 1999
(commencement of operations) to December 31, 1999................... F-28
Notes to Consolidated Financial Statements........................... F-29
WEBE and WICC Radio Stations (Divisions of MLMedia Partners, L.P.)--
Audited Combined Financial Statements
Independent Auditors' Report......................................... F-38
Balance Sheets as of December 31, 1998 and 1997...................... F-39
Statements of Operations and Accumulated Earnings (Deficit) for the
years ended December 31, 1998, 1997 and 1996........................ F-40
Statements of Cash Flows for the years ended December 31, 1998, 1997
and 1996............................................................ F-41
Notes to Combined Financial Statements............................... F-42
Capstar Trust (A Trust)--Audited Financial Statements
Independent Auditors' Report......................................... F-46
Balance Sheet as of October 26, 1999................................. F-47
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Statement of Operations and Beneficiaries' Equity for the period of
January 1, 1999
to October 26, 1999............................................... F-47--1
Statement of Cash Flows for the period of January 1, 1999 to
October 26, 1999.................................................. F-47--2
Notes to Financial Statements...................................... F-47--3
Capstar Trust (A Trust)--Audited Financial Statements
Independent Auditors' Report....................................... F-47--7
Balance Sheet as of December 31, 1998.............................. F-47--8
Statement of Operations and Beneficiaries' Equity for the period
from May 29, 1998
(date of inception) to December 31, 1998.......................... F-47--9
Statement of Cash Flows for the period from May 29, 1998 (date of
inception) to December 31, 1998................................... F-47--10
Notes to Financial Statements...................................... F-47--11
Westchester Radio, LLC--Audited Financial Statements
Independent Auditors' Report....................................... F-48
Balance Sheet as of October 26, 1999............................... F-49
Statement of Operations and Members' Deficiency for the period
January 1, 1999 to
October 26, 1999.................................................. F-50
Statement of Cash Flows for the period January 1, 1999 to October
26, 1999.......................................................... F-51
Notes to Financial Statements...................................... F-52
Westchester Radio, LLC--Audited Financial Statements
Independent Auditors' Report....................................... F-61
Balance Sheet as of December 31, 1998.............................. F-62
Statement of Operations and Members' Deficiency for the period
April 2, 1998
(date of inception) to December 31, 1998.......................... F-63
Statement of Cash Flows for the period April 2, 1998 (date of in-
ception) to December 31, 1998..................................... F-64
Notes to Financial Statements...................................... F-65
Commodore Media of Westchester, Inc.--Audited Financial Statements
Independent Auditors' Report....................................... F-74
Balance Sheet as of April 1, 1998.................................. F-75
Statement of Operations and Retained Earnings for the period of
January 1, 1998 to April 1, 1998.................................. F-76
Statement of Cash Flows for the period of January 1, 1998 to April
1, 1998........................................................... F-77
Notes to Financial Statements...................................... F-78
Commodore Media of Westchester, Inc.--Audited Financial Statements
Independent Auditors' Report....................................... F-84
Balance Sheet as of December 31, 1997.............................. F-85
Statement of Operations and Retained Earnings for the year ended
December 31, 1997................................................. F-86
</TABLE>
F-1--1
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Statement of Cash Flows for the year ended December 31, 1997......... F-87
Notes to Financial Statements........................................ F-88
Commodore Media of Westchester, Inc.--Audited Financial Statements
Independent Auditors' Report......................................... F-94
Balance Sheet as of December 31, 1996................................ F-95
Statement of Operations and Accumulated Deficit for the year ended
December 31, 1996................................................... F-96
Statement of Cash Flows for the year ended December 31, 1996......... F-97
Notes to Financial Statements........................................ F-98
WRKI/WAXB/WPVT/WINE (Operating Divisions of Commodore Media of Norwalk,
Inc.)--Audited Combined Financial Statements
Independent Auditors' Report......................................... F-124
Combined Balance Sheet as of May 29, 1998............................ F-125
Combined Statement of Operations and Division Equity for the period
of January 1, 1998 to May 29, 1998.................................. F-126
Combined Statement of Cash Flows for the period of January 1, 1998 to
May 29, 1998........................................................ F-127
Notes to Financial Statements........................................ F-128
WRKI/WAXB/WPVT/WINE (Operating Divisions of Commodore Media of Norwalk,
Inc.)--Audited Combined Financial Statements
Independent Auditors' Report......................................... F-134
Combined Balance Sheet as of December 31, 1997....................... F-135
Combined Statement of Operations and Division Equity for the year
ended December 31, 1997............................................. F-136
Combined Statement of Cash Flows for the year ended December 31,
1997................................................................ F-137
Notes to Financial Statements........................................ F-138
WRKI/WAXB/WPVT/WZZN/WINE (Operating Divisions of Commodore Media of
Norwalk, Inc.)--Audited Combined Financial Statements
Independent Auditors' Report......................................... F-144
Combined Balance Sheet as of December 31, 1996....................... F-145
Combined Statement of Operations and Division Equity for the year
ended December 31, 1996............................................. F-146
Combined Statement of Cash Flows for the year ended December 31,
1996................................................................ F-147
Notes to Financial Statements........................................ F-148
</TABLE>
F-1--2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners of
Nassau Broadcasting Partners, L.P.
We have audited the accompanying balance sheets of Nassau Broadcasting
Partners, L.P. as of December 31, 1999 and 1998 and the related statements of
operations and comprehensive loss, partners' capital (deficit) and cash flows
for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 financial statements referred to above present
fairly, in all material respects, the financial position of Nassau Broadcasting
Partners, L.P. as of December 31, 1999 and 1998, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
Grant Thornton LLP
Edison, New Jersey
March 1, 2000
F-4
<PAGE>
NASSAU BROADCASTING PARTNERS, L.P.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
--------------------------
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents........................ $ 587,362 $ 7,050,051
Marketable securities............................ 2,201,080 1,779,788
Due from broker.................................. -- 762,710
Accounts receivable (net of allowance for
doubtful accounts of $316,000 and $331,000 in
1999 and 1998, respectively).................... 6,645,514 5,257,065
Prepaid expenses and other current assets........ 223,664 206,308
Note receivable--officer......................... 590,000 90,000
------------ ------------
Total current assets........................... 10,247,620 15,145,922
PROPERTY AND EQUIPMENT, NET........................ 11,792,237 11,316,879
OTHER ASSETS
Certificates of deposit--restricted.............. 77,586 39,913
Deferred costs................................... 805,436 1,230,923
Cost in excess of net assets acquired............ 26,504,288 27,253,280
Deposits......................................... 25,100,484 15,599,133
Note receivable--officer......................... 100,000 36,000
Other assets..................................... 140,129 72,331
------------ ------------
$ 74,767,780 $ 70,694,381
============ ============
LIABILITIES AND PARTNERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses............ $ 1,683,042 $ 1,082,145
Loan payable--broker............................. 805,270 769,846
Mortgages payable--current....................... 127,340 115,824
Capitalized lease obligations--current........... 354,057 320,709
------------ ------------
Total current liabilities...................... 2,969,709 2,288,524
SENIOR DEBT........................................ 47,938,871 43,994,812
SUBORDINATED NOTES PAYABLE......................... 39,099,013 35,091,620
MORTGAGES PAYABLE, LONG-TERM....................... 2,099,363 2,226,703
CAPITALIZED LEASE OBLIGATIONS, LONG-TERM........... 826,376 1,058,754
DEFERRED INCOME.................................... 282,000 --
DEFERRED GAIN...................................... 1,062,000 1,629,000
COMMITMENTS AND CONTINGENCIES
PARTNERS' DEFICIT.................................. (19,509,552) (15,595,032)
------------ ------------
$ 74,767,780 $ 70,694,381
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
NASSAU BROADCASTING PARTNERS, L.P.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------
1999 1998 1997
------------ ----------- -----------
<S> <C> <C> <C>
Gross revenues......................... $ 34,295,261 $27,349,044 $20,891,079
Less agency and outside commissions.... 2,893,603 2,352,913 1,811,723
------------ ----------- -----------
Net revenues....................... 31,401,658 24,996,131 19,079,356
------------ ----------- -----------
Operating expenses, excluding
depreciation, amortization, corporate
general and administrative expenses,
and local marketing agreement fees.... 20,793,685 17,226,676 13,437,147
Depreciation and amortization expense.. 2,634,479 2,363,711 2,138,981
Corporate general and administrative
expenses.............................. 2,280,157 1,825,305 1,995,151
Local marketing agreement fees......... 2,516,718 2,271,176 1,665,990
------------ ----------- -----------
28,225,039 23,686,868 19,237,269
------------ ----------- -----------
Operating income (loss)............ 3,176,619 1,309,263 (157,913)
------------ ----------- -----------
Other income (expenses)
Interest and dividend income......... 26,634 65,336 210,709
Realized gains on marketable
securities.......................... 2,536,577 926,531 319,269
Gain on sale of radio stations....... 567,000 3,176,496 --
Interest expense..................... (10,946,358) (8,781,184) (6,367,215)
Special management fee............... -- -- (744,140)
------------ ----------- -----------
(7,816,147) (4,612,821) (6,581,377)
------------ ----------- -----------
Loss before extraordinary item..... (4,639,528) (3,303,558) (6,739,290)
Extraordinary loss on early retirement
of debt............................... -- (676,514) --
------------ ----------- -----------
NET LOSS........................... (4,639,528) (3,980,072) (6,739,290)
------------ ----------- -----------
Unrealized gain on marketable
securities
Unrealized holding gains arising
during the year..................... 1,213,318 488,310 --
Less reclassification adjustment for
gains included in net income........ (488,310) -- --
------------ ----------- -----------
Other comprehensive income............. 725,008 488,310 --
------------ ----------- -----------
Comprehensive loss................. $ (3,914,520) $(3,491,762) $(6,739,290)
============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
NASSAU BROADCASTING PARTNERS, L.P.
STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
Years ended December 31, 1997, 1998 and 1999
<TABLE>
<CAPTION>
Accumulated
other Total
Accumulated comprehensive partners'
deficit income deficit
------------ ------------- ------------
<S> <C> <C> <C>
Balances, January 1, 1997........... $ (7,792,845) -- $ (7,792,845)
Net loss............................ (6,739,290) -- (6,739,290)
Increase attributable to
subordinated debt option........... 5,500,000 -- 5,500,000
------------ ---------- ------------
Balances, December 31, 1997......... (9,032,135) -- (9,032,135)
Net loss............................ (3,980,072) -- (3,980,072)
Unrealized gain on marketable
securities......................... -- $ 488,310 488,310
Distributions....................... (3,071,135) -- (3,071,135)
------------ ---------- ------------
Balances, December 31, 1998......... (16,083,342) 488,310 (15,595,032)
Net loss............................ (4,639,528) -- (4,639,528)
Unrealized gain on marketable
securities, net of reclassification
adjustment......................... -- 725,008 725,008
------------ ---------- ------------
Balances, December 31, 1999......... $(20,722,870) $1,213,318 $(19,509,552)
============ ========== ============
</TABLE>
The accompanying notes are an integral part of this statement.
F-7
<PAGE>
NASSAU BROADCASTING PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------
1999 1998 1997
----------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss............................. $(4,639,528) $ (3,980,072) $ (6,739,290)
Adjustments to reconcile net loss to
net cash used in operating
activities..........................
Extraordinary loss on early
retirement of debt................. -- 676,514 --
Depreciation........................ 1,192,000 1,090,478 660,554
Amortization of deferred costs...... 560,487 495,073 755,578
Amortization of subordinated debt
discount........................... 901,896 1,100,004 642,000
Amortization of costs in excess of
net assets acquired................ 881,992 778,160 722,849
Subordinated debt interest.......... 3,105,497 3,422,028 2,821,432
Deferred senior debt interest....... 1,459,059 494,812 --
Gain on sale of radio stations...... (567,000) (3,176,496) --
Gain on sale of marketable
securities......................... (2,536,577) (926,531) (319,269)
Changes in operating assets and
liabilities
Accounts receivable................. (1,388,449) (1,192,491) (940,486)
Prepaid expenses and other current
assets............................. (17,356) (92,545) (42,406)
Prepaid management fee.............. -- -- 50,000
Accounts payable and accrued
expenses........................... 600,896 (96,459) (1,004,000)
Deferred income..................... 282,000 -- --
----------- ------------ ------------
Net cash used in operating
activities....................... (165,083) (1,407,525) (3,393,038)
----------- ------------ ------------
Cash flows from investing activities
Purchase of certificates of
deposit--restricted, net........... (37,673) (1,913) (38,000)
Purchases of property and
equipment.......................... (1,667,364) (911,579) (3,204,608)
Acquisition of radio stations....... -- -- (5,052,220)
Sale of radio stations, net of
selling costs...................... -- 6,778,716 --
Deposits for stations to be acquired
and other costs.................... (9,634,351) (4,292,721) (8,769,153)
Sale (purchase) of marketable
securities, net.................... 3,603,008 2,088,789 (1,270,083)
Repayment of prepaid management
fee................................ -- 400,000 --
Loans to president and officer...... (564,000) (126,000) --
Increase in other assets............ (67,798) (33,499) (207,141)
----------- ------------ ------------
Net cash (used in) provided by
investing activities............. (8,368,178) 3,901,793 (18,541,205)
----------- ------------ ------------
Cash flows from financing activities
Proceeds from senior debt........... 2,485,000 43,500,000 --
Payment of senior debt.............. -- (25,000,000) --
(Payments on) proceeds from
subordinated debt.................. -- (9,890,597) 17,500,000
Payments of other debt.............. (358,852) (384,499) (377,738)
Proceeds from other debt............ 79,424 -- 50,000
Increase in deferred costs.......... (135,000) (1,307,265) --
Distribution to Partners............ -- (3,071,135) --
----------- ------------ ------------
Net cash provided by financing
activities....................... 2,070,572 3,846,504 17,172,262
----------- ------------ ------------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS............. (6,462,689) 6,340,772 (4,761,981)
Cash and cash equivalents at
beginning of year................... 7,050,051 709,279 5,471,260
----------- ------------ ------------
Cash and cash equivalents at end of
year................................ $ 587,362 $ 7,050,051 $ 709,279
=========== ============ ============
Supplemental disclosures of cash flow
information:
Cash paid during the year for
Interest........................... $ 4,952,226 $ 3,916,497 $ 2,621,972
=========== ============ ============
</TABLE>
Supplemental information on noncash investing and financing activities:
(1) Capital lease obligations of $1,016,594 and $50,000 were incurred during
the years ended December 31, 1998 and 1997, respectively. The Company
entered into leases for new broadcast equipment.
(2) Mortgage obligations of $2,575,000 were incurred in 1998.
The accompanying notes are an integral part of these statements.
F-8
<PAGE>
NASSAU BROADCASTING PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
NOTE A--SUMMARY OF ACCOUNTING POLICIES
1. Business
Nassau Broadcasting Partners, L.P. (the "Company") is principally engaged
in the management and operation of radio broadcast stations in suburban markets
located between the New York and Philadelphia metropolitan areas. As of
December 31, 1999, the Company owns and/or operates nineteen radio stations.
Following are descriptions of the partners in the Company and certain
affiliates:
Nassau Broadcasting Company, Inc. ("NBC")--Limited partner which,
on a fully diluted basis, holds a 79% equity interest in the
Company. NBC is wholly owned by Nassau Broadcast Holdings, Inc.
("NBH"), in which the Company's President and Chief Executive
Officer of the Company, has a 90% interest. The remaining 10% of
NBH is owned by an affiliate related to the President and Chief
Executive Officer of the Company.
Nassau Holdings, Inc. ("NHI")--Limited partner, which, on a fully
diluted basis, holds a 20% equity interest in the Company. NHI is
wholly owned by the President and Chief Executive Officer of the
Company.
Nassau Broadcasting Partners, Inc. ("NBPI")--General partner
which, on a fully diluted basis, holds a 1% equity interest and
100% of the voting rights in the Company. The President and Chief
Executive Officer of the Company has a 52.4% equity interest and
33.4% voting interest in NBPI.
2. Revenue Recognition
Revenues for commercial broadcasting advertisements are recognized when
the commercial is broadcast.
3. Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided on
a straight-line basis over the estimated useful lives of the related assets.
Leasehold improvements are amortized over the shorter of the lease term or
estimated useful lives of the assets. Depreciation for tax purposes is based
upon the original cost basis of all assets using accelerated methods.
4. Marketable Securities
The Company has evaluated its investment policies consistent with
Statement of Financial Accounting Standards No. 115 ("SFAS No. 115"),
"Accounting for Certain Investments in Debt and Equity Securities," and
determined that its investment securities, all of which are equity securities,
are to be classified as available-for-sale. Available-for-sale securities are
carried at fair value, with the unrealized gains and losses reported as a
component of partners' capital. The cost of securities sold is based on the
specific identification method.
5. Cost in Excess of Net Assets Acquired
The excess of cost over fair value of the net tangible assets acquired
consists of FCC licenses and goodwill, which are being amortized by the
straight-line method over twenty-five to forty years. Accumulated amortization
is $2,468,000 and $1,719,000 at December 31, 1999 and 1998, respectively.
F-9
<PAGE>
NASSAU BROADCASTING PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
6. Deferred Costs
Deferred costs consist of legal and financing fees incurred in connection
with the issuance of the senior and subordinated notes and are being amortized
over the terms of the respective debt instruments.
7. Income Taxes
The Partnership does not pay income taxes on income; rather, the partners
are taxed on their share of partnership income. Accordingly, the Partnership
does not make any provisions in its accounts for income taxes.
8. Partners Distribution
On August 28, 1998, the Company entered into a senior loan agreement from
which a portion of the proceeds was used to repay subordinated notes held by
the Company and for distributions to the Company's Partners.
9. Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. These funds are
insured by the Federal Deposit Insurance Corporation up to an aggregate maximum
of $100,000 per institution. At various times throughout the year, the Company
maintains cash balances at banks in excess of $100,000.
10. Local Marketing Agreements
The Company enters into local marketing agreements ("LMAs") with respect
to certain radio stations it intends to acquire. The Company operates the
stations under the LMA whereby the Company agrees to purchase from the
broadcast station licensee certain broadcast time and provide programming to
and sell advertising on the stations during the purchased time. Fees incurred
pursuant to various local marketing are recognized as station operating
expenses in the period the services received occur. The Company's financial
statements include broadcasting revenues and station operating expenses of
stations marketed under LMAs. The broadcast station licensee retains
responsibility for ultimate control of the station in accordance with FCC
policies. When applicable, the LMA terminates upon the closing of the
acquisition of the station. The Company operated up to nine stations under such
agreements in 1999 and eight stations under such agreements in 1998 and 1997.
11. Impairment of Long Lived Assets and Identifiable Intangibles
The Company reviews long-lived assets, identifiable intangibles and
goodwill and will reserve for impairment whenever events or changes in
circumstances indicate the carrying amount of assets may not be fully
recoverable.
12. Barter Transactions
Revenue from barter transactions (advertising provided in exchange for
goods and services) is recognized as income when commercials are broadcast, and
merchandise or services received are charged to expense when received or used.
Barter valuation is based upon management's estimates of fair value of goods or
services received. Barter revenue was approximately $1,353,000, $1,184,000 and
$1,075,000 for the years
F-10
<PAGE>
NASSAU BROADCASTING PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
ended December 31, 1999, 1998 and 1997, respectively. Available barter credits
as of December 31, 1999 and 1998 are not material to the Company's financial
statements.
13. Concentrations of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash
investments, marketable securities and accounts receivable. Concentrations of
credit risk with respect to accounts receivable are limited due to the large
number of customers comprising the Company's customer base.
14. 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.
15. Special Management Fee
The special management fee incurred in 1997, as approved by the Board of
Directors and in accordance with the management consulting agreement with NBH,
was in recognition of the successful completion of an acquisition plan
initiated in 1995.
16. Comprehensive (Income) Loss
Comprehensive income (loss) encompasses net income (loss) and other
comprehensive income (loss). The only item of other comprehensive income
presently applicable to the Company is the unrealized gain on the fair value of
marketable securities available for sale. Where applicable, reclassification
adjustments are made for realized gains or losses on such marketable securities
that were included in comprehensive income in prior years.
17. Advertising Expenses
Costs associated with advertising are expensed as incurred and amounted
to approximately $1.4 million, $1.0 million, and $700,000 for the years ended
December 31, 1999, 1998 and 1997, respectively.
18. Certificates of Deposit--Restricted
The Company purchased a $75,000 certificate of deposit in April 1999
which secures a standby letter of credit (see Note F-3). The certificate of
deposit bears interest at a rate of 4.93% and matures April 2001. The balance
at December 31, 1999, including accrued interest, is $77,586.
In December 1997, the Company purchased a $38,000 certificate of deposit
which secured a standby letter of credit. The letter of credit expired in March
1999, at which time the certificate of deposit was redeemed for approximately
$40,000.
19. Deferred Income
In 1999, the Company received $350,000 pursuant to an agreement with an
advertising representation firm. This amount was recorded as deferred income
and is being recognized as a reduction of agency fees over thirty-six months.
The amount recognized in 1999 was $68,000.
F-11
<PAGE>
NASSAU BROADCASTING PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
20. Reclassification
Certain prior period amounts have been reclassified to conform to the
current period presentation.
21. Significant New Accounting Pronouncements
In September 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133 ("SFAS No. 133"),
"Accounting for Derivative Instruments and Hedging Activities," which requires
entities to recognize all derivatives in their financial statements as either
assets or liabilities measured as fair value. SFAS No. 133 also specifies new
methods of accounting for hedging transactions, prescribes the items and
transactions that may be hedged and specifies detailed criteria to be met to
qualify for hedge accounting. SFAS No. 133, as amended by SFAS No. 137, is
effective for fiscal years beginning after June 15, 2000. The Company is
evaluating the impact that this statement will have on its results of
operations, financial position and related disclosures.
In January 2000, the Emerging Issues Task Force ("EITF") reached a
consensus on Issue No. 99-17, "Accounting for Advertising Barter
Transactions," to be effective for transactions entered into after January 20,
2000. The consensus states that advertising barter transactions should be
accounted for at fair value and that the fair value recognized be disclosed in
the financial statements, if there is verifiable objective evidence provided
by sufficient cash transactions received by the seller of the advertising or
similar advertising. EITF No. 99-17 is not expected to have a material effect
on the Company's financial statements.
22. Use of Estimates
In preparing the Company's financial statements in conformity with
accounting principles generally accepted in the United States, management is
required 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, as well as the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
NOTE B--PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31, 1999
and 1998:
<TABLE>
<CAPTION>
Depreciable life 1999 1998
----------------------- ----------- -----------
<S> <C> <C> <C>
Broadcast equipment........... 7 years $ 8,805,832 $ 7,868,697
Land and improvements......... 3,566,737 3,500,145
Buildings and improvements.... 10-31.5 years 1,803,423 1,397,643
Office equipment.............. 7 years 670,692 641,519
Computers..................... 5 years 528,094 463,163
Vehicles...................... 3 years 246,545 183,598
Lesser of term of
Leasehold improvements........ lease or life of assets 1,193,448 1,100,958
----------- -----------
16,814,771 15,155,723
Less accumulated
depreciation................. 5,022,534 3,838,844
----------- -----------
$11,792,237 $11,316,879
=========== ===========
</TABLE>
F-12
<PAGE>
NASSAU BROADCASTING PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
NOTE C--SENIOR DEBT
Senior debt represents notes payable to a financial institution in the
amounts of $43.5 and $2.485 million. The loans bear interest at 11% current
plus 3.25% deferred interest and are collateralized by all of the assets of the
Company. In addition, the partners, all of which are corporations, have pledged
their corporate stock as a guarantee. All principal and deferred interest are
due in full August 28, 2001.
The Company has $47 million available pursuant to these agreements, of
which $45.985 million has been borrowed.
Senior debt payable at December 31, 1999 and 1998 consists of the
following:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Original proceeds.................................... $43,500,000 $43,500,000
Additional proceeds.................................. 2,485,000 --
Deferred interest.................................... 1,953,871 494,812
----------- -----------
$47,938,871 $43,994,812
=========== ===========
</TABLE>
The term notes require that the Company achieve certain minimum annual
net revenues and broadcasting cash flows. The agreements also limit capital
expenditures, operating leases, corporate overhead expenses, and certain
acquisitions or loans. The Company obtained a waiver, dated February 22, 2000,
for the capital expenditure and corporate overhead limitations with which the
Company was not in compliance at December 31, 1999. The next compliance date
for these covenants is December 31, 2000.
NOTE D--SUBORDINATED DEBT
Subordinated debt represents 8% subordinated notes payable to an investor
group, due and payable in full, including all accrued interest, on March 27,
2002.
The subordinated debt holders have an option to purchase a majority
partnership interest. This option can be exercised at any time prior to the
expiration of the option on June 30, 2010. Subordinated debt discount in the
amount of $5,500,000 has been allocated to the value of the option based on the
relative fair values of the underlying debt and the option and is being
accreted over the term of the debt. In 1998, a portion of the subordinated debt
was repaid thereby giving rise to an extraordinary loss in writing off a pro
rata share of the subordinated debt discount.
F-13
<PAGE>
NASSAU BROADCASTING PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The components of subordinated debt as of December 31, are as follows:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Balance at beginning of year, including accrued
interest........................................... $38,173,102 $44,641,675
Accrued interest.................................... 3,105,497 3,422,024
----------- -----------
41,278,599 48,063,699
Repayment........................................... -- (9,890,597)
----------- -----------
Subordinated debt................................... 41,278,599 38,173,102
----------- -----------
Subordinated debt discount
Original amount................................... 5,500,000 5,500,000
Amortization through end of year.................. (3,320,414) (1,742,004)
Write-off attributable to repayment............... -- (676,514)
----------- -----------
2,179,586 3,081,482
----------- -----------
Subordinated debt, net of discount.................. $39,099,013 $35,091,620
=========== ===========
</TABLE>
NOTE E--MORTGAGES PAYABLE
Mortgages payable at December 31, 1999 and 1998 are summarized below:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Mortgage payable to a financial institution at 300 basis
points per annum in excess of weekly average yield on
US Treasury securities, fixed for five years,
collateralized by real property, guaranteed by the
President of the Company, and due June 1, 2013.
Principal and interest are payable monthly............. $1,035,702 $1,078,430
Mortgage payable to seller bearing interest at 10%,
collateralized by real property and due February 1,
2008. Principal and interest are payable monthly....... 876,801 944,006
Mortgage payable to sellers bearing interest at 10%,
collateralized by real property and due January 23,
2003. Principal and interest are payable monthly. The
mortgage was paid in full in February 2000............. 314,200 320,091
---------- ----------
2,226,703 2,342,527
Less current maturities................................. 127,340 115,824
---------- ----------
Mortgages payable--long-term portion.................... $2,099,363 $2,226,703
========== ==========
</TABLE>
Maturities of mortgages payable as of December 31, 1999 are as follows:
<TABLE>
<S> <C>
2000.............................................................. $ 127,340
2001.............................................................. 139,842
2002.............................................................. 153,611
2003.............................................................. 168,744
2004.............................................................. 160,905
Thereafter........................................................ 1,476,261
----------
Total........................................................... $2,226,703
==========
</TABLE>
F-14
<PAGE>
NASSAU BROADCASTING PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
NOTE F--COMMITMENTS
1. Leases
The Company leases office, studio and tower space under noncancellable
operating leases expiring through 2018. The Company has an option to renew its
corporate office lease for four consecutive five-year periods commencing July
1, 2001. Rent expense for the years ended December 31, 1999, 1998 and 1997 was
approximately $610,000, $450,000 and $220,000, respectively. Future minimum
lease commitments are as follows:
<TABLE>
<S> <C>
2000............................................................. $1,021,000
2001............................................................. 986,000
2002............................................................. 783,000
2003............................................................. 770,000
2004............................................................. 766,000
Thereafter....................................................... 4,145,000
----------
Total minimum lease commitments................................ $8,471,000
==========
</TABLE>
The Company leases certain broadcast equipment under capitalized lease
agreements. The cost of leased equipment included in property and equipment was
approximately $1,697,000 and $1,675,000 at December 31, 1999 and 1998,
respectively, and the accumulated amortization was approximately $530,000 and
$330,000 at December 31, 1999 and 1998, respectively. Future minimum lease
payments for assets under capital leases at December 31, 1999 are as follows:
<TABLE>
<S> <C>
2000.............................................................. $ 380,444
2001.............................................................. 302,112
2002.............................................................. 12,405
2003.............................................................. 364,788
2004.............................................................. --
Thereafter........................................................ 467,689
---------
Total minimum lease payments.................................... 1,527,438
Less amount representing interest................................. 347,005
---------
Present value of net minimum lease payments....................... 1,180,433
Less current maturities........................................... 354,057
---------
Long-term obligation.............................................. $ 826,376
=========
</TABLE>
NHI and NBC have guaranteed a lease obligation of approximately $500,000.
2. Stock Option Plan
The Board of Directors of NBC has approved a stock option plan for
employees of the Company to secure options in NBC. The plan is effective upon
the issuance of final FCC approval for the transfer of the licenses of WNJO
(FM) and WCHR (AM) to the Company. These options have the effect of diluting
the equity holdings in NBC of the Company's President and Chief Executive
Officer. As of December 31, 1999, there were 1.2 million options contingently
issued to officers of the Company at an exercise price of $0.15 per share.
F-15
<PAGE>
NASSAU BROADCASTING PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
3. Letter of Credit
The Company has a $75,000 standby letter of credit, which relates to a
payment obligation to a vendor. The standby letter of credit is secured by a
certificate of deposit. (Note A-18.)
4. Employment Agreements
The Company has entered into employment agreements with its President and
Chief Executive Officer and its Executive Vice President of Operations and
Finance. The minimum compensation to be paid in 2000 pursuant to these
agreements is $425,000. In addition, pursuant to the employment agreements,
these employees are eligible for bonuses based on results of operations. The
agreements expire on December 31, 2000.
NOTE G--ACQUISITIONS
WOBM (FM) and WOBM (AM)
On July 1, 1996, the Company entered into an agreement to purchase all of
the issued and outstanding capital stock of Seashore Broadcasting Inc. and
Northshore Broadcasting Inc. ("Seashore") for $16 million. Seashore owns and
operates WOBM (FM) and WOBM (AM) located in the Toms River area in New Jersey.
The Company paid a $2 million deposit and final closing is scheduled for July
1, 2000, pending FCC approval.
In a related transaction, the Company entered into an LMA effective July
1, 1996 with Seashore pursuant to which the Company programs all of the
broadcast time of the stations and sells all of the commercial time during its
programming. Also, the Company retains certain revenues of the licensee and has
agreed to make monthly LMA payments of $83,333, increasing in annual increments
to maximum monthly payments of $108,333, through the later of June 30, 2000 or
the closing, and reimburse certain operating expenses incurred during the term
of the agreement. The agreement expires on closing.
WSUS (FM)
On May 30, 1997, the Company acquired substantially all of the net
operating assets of WSUS Communications, Inc., which operated one radio
station, WSUS (FM), located in Franklin, New Jersey, for a purchase price of
approximately $5 million.
The above acquisition has been accounted for by the purchase method of
accounting. The purchase price has been allocated to the assets acquired,
principally intangible assets, and the liabilities assumed based on their
estimated fair values at the date of acquisition. The excess of the purchase
price over the estimated fair value of the net assets acquired has been
recorded as costs in excess of net assets acquired. The operating results of
this acquisition are included in the Company's results of operations from the
date of acquisition. Pro forma results of operations have not been included as
the amounts are not material to the Company's financial statements.
WNJO (FM) and WCHR (AM)
On June 1, 1997, the Company entered into an agreement, as amended, with
Great Scott Broadcasting ("Great Scott") to purchase substantially all of the
assets of WNJO (FM) and WCHR (AM), located in the
F-16
<PAGE>
NASSAU BROADCASTING PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Trenton, New Jersey area, for a purchase price of $20,000,000. At December 31,
1999, the entire purchase price had been paid and is reflected as deposits on
the balance sheet.
The FCC has not yet approved the transaction. If the FCC fails to approve
the transaction and the Company is unsuccessful in appealing that decision, the
stations would be remarketed for a period of three years. Depending upon the
ultimate sales price to a third-party purchaser, the Company may or may not be
made whole in recovering its deposits.
Concurrently, the Company entered into an LMA with Great Scott pursuant
to which the Company has the right to program all of the broadcast time of the
stations and sell all of the commercial time during its programming beginning
June 1, 1997. The Company pays $75,000 per month pursuant to this agreement.
Effective February 8, 1999, the $75,000 per month payment was applied to the
final payment due under the Asset Purchase Agreement. These payments are
included in deposits on the accompanying balance sheet.
Upon a reduction of the payments pursuant to the LMA agreement in
September 1999, the Company continues to recognize revenues and expenses in
accordance with the terms of the LMA, and has commenced amortizing the deposits
on these stations over a period of 25 years. The amount amortized in 1999 was
approximately $130,000.
WTSX (FM) and WDLC (AM)
On August 7, 1998, the Company entered into an option agreement to
acquire the assets of Port Jervis Broadcasting Co., Inc. ("Port Jervis"), which
operates WTSX (FM) and WDLC (AM), licensed to broadcast in Port Jervis, New
York, for a purchase price of approximately $2,700,000. The option agreement
calls for an option payment of $550,000 plus monthly option payments of $12,500
and extends for a period of 36 months. Concurrently, the Company entered into
an LMA with Port Jervis for the operation of the stations requiring monthly
payments ranging from $10,000 at the outset to $25,000 commencing August 1,
2000.
WILT (AM)
In 1998, NBH submitted a Chapter 11 Plan of Reorganization for Tiab
Communications Corporation which owns the FCC license for WILT (AM) in Mt.
Pocono, Pennsylvania. An agreement between NBH and the Company provides that in
exchange for the funding of the bankruptcy plan and associated legal costs, the
Company has received an option to purchase TIAB or the FCC license from NBH for
a nominal amount. On February 12, 1999, the Plan of Reorganization was
confirmed and funded by the Company in the amount of $110,000. At December 31,
1999, WILT (AM) was not yet on the air and all amounts disbursed to date are
reflected as deposits on the accompanying balance sheet.
WJHR (AM)
On January 21, 1999, the Company entered into an agreement to purchase
all of the assets of WJHR-AM in Flemington, New Jersey for $2,500,000. Final
closing is scheduled for November 18, 2001. Concurrent with this transaction,
the Company entered into an LMA for the operation of the radio station until
November 18, 2001. The agreement calls for quarterly payments of $50,000 for
the term of the agreement. The Company has already irrevocably deposited
$130,000 toward the purchase of this station, which is included in deposits on
the accompanying balance sheet.
F-17
<PAGE>
NASSAU BROADCASTING PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
WCHR (FM)
On August 18, 1999, the Company exercised its option to purchase for
$4,675,000 the stock of a corporation which owns the permit to construct an FM
radio station in Ocean County, New Jersey. The Company has paid approximately
$2 million of the purchase price as of the date of this report. Such amounts
have been included in deposits on the accompanying balance sheet. The closing
on this acquisition is pending FCC approval.
NOTE H--OTHER LOCAL MARKETING AGREEMENTS
On November 12, 1998, the Company sold all of the assets associated with
WSBG (FM) and WVPO (AM) in Stroudsburg, Pennsylvania for approximately $6.8
million. Concurrent with that transaction, the Company entered into an LMA for
its operation of the stations for a period of 36 months. The agreement requires
the Company to make quarterly payments in the amount of $175,000, which are
recorded as operating expenses of the radio stations. The Company has accounted
for these transactions as a sale-leaseback arrangement whereby $1,700,000 of
the gain on sale of the radio stations is being deferred and credited to gain
on sale of radio stations over the thirty-six months of that agreement. The
deferred gain recognized in 1999 and 1998 was $567,000 and $71,000,
respectively.
NOTE I--MARKETABLE SECURITIES
The following is a summary of marketable securities at December 31:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Equity securities:
Fair value........................................... $2,201,080 $1,779,788
Cost................................................. 987,762 1,291,478
---------- ----------
Unrealized gain.................................... $1,213,318 $ 488,310
========== ==========
</TABLE>
At December 31, 1999 and 1998, the Company had loans from its broker
totaling $805,270 and $769,846, respectively. At December 31, 1999 and 1998,
the interest rate on the loans was 8.5% and 7.75%, respectively. The loans are
secured by the Company's marketable securities in the Company's investment
account.
NOTE J--SEGMENT INFORMATION
The Company manages and operates radio stations in the New York and
Philadelphia metropolitan areas. The Company considers its business to consist
of one reportable operating segment, based on radio stations operated, sharing
similar economic characteristics in the nature of the advertising sold, method
of broadcasting and listener base. All the Company's revenue is earned within
the Northeastern United States.
NOTE K--RELATED PARTY TRANSACTIONS
Certain investors in NBPI have purchased from the principal shareholder
in the majority partner, NBC ("Grantor"), an option to purchase a majority
partnership interest. The option is exercisable at any time at an exercise
price of $500,000 and expires June 10, 2010. The investors have the right to
require the Grantor to repurchase the unexercised option units upon the sale,
transfer, assignment or other disposition of all or
F-18
<PAGE>
NASSAU BROADCASTING PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
substantially all of the Company's assets. The repurchase price of the
unexercised option units varies based on terms specified in the partnership
agreement.
In 1997, a special management fee of $744,140 was paid to NBH, as
approved by the Company's partners.
On January 23, 1998, NBH purchased twenty-five percent of the stock of a
corporation which owns an AM radio station license. In the same transaction,
NBH also acquired the real estate and broadcasting towers of the AM station and
an FM station. On February 1, 1998, NBH assigned, at cost, all rights and title
under the aforementioned transaction to the Company.
In 1996, the Company advanced $450,000 to NBH as a prepayment of a then
existing consulting agreement. $50,000 of the prepayment was expensed in 1997,
with the remaining $400,000 being repaid to the Company in 1998 upon
termination of the consulting agreement.
In 1998, the Company acquired a parcel of real property for approximately
$1 million that was owned by a partnership in which the president of the
Company was a partner.
At December 31, 1999 and 1998, the President and Chief Executive Officer
of the Company was indebted to the Company in the amount of $590,000 and
$90,000, respectively. These amounts bear interest at the rate of 8% and were
repaid in full, with interest, in February 2000 and March 1999, respectively.
At December 31, 1999 and 1998, the Company had notes receivable from an
officer totaling $100,000 and $36,000, respectively, which bear interest at 8%
per annum. Principal and interest are due in full on November 30, 2001.
NOTE L--EMPLOYEE BENEFIT PLAN
The Company maintains a defined contribution plan covering all employees
who have one year of service and are age twenty-one or older. Under the
provisions of the plan, the Company matches 25% of the first 8% of the
participant's compensation contributed as elective deferrals. The Company's
contribution in 1999, 1998 and 1997 amounted to $100,706, $76,497 and $87,350,
respectively.
NOTE M--ACCOUNTS PAYABLE AND ACCRUED EXPENSE
Accounts payable and accrued expenses consist of the following at
December 31,
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Accounts payable...................................... $ 767,519 $ 644,020
Accrued commissions................................... 281,875 268,891
Accrued interest...................................... 435,580 --
Other accrued expenses................................ 198,068 169,234
---------- ----------
$1,683,042 $1,082,145
========== ==========
</TABLE>
F-19
<PAGE>
NASSAU BROADCASTING PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
NOTE N--FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments," requires that the Company disclose
estimated fair values for its financial instruments. The following summary
presents a description of the methodologies and assumptions used to determine
such amounts:
Limitations
Fair value estimates are made at a specific point in time and are based
on relevant market information and information about the financial
instruments; they are subjective in nature and involve uncertainties and
matters of judgment, and, therefore, cannot be determined with precision.
These estimates do not reflect any premium or discounts that could result from
offering for sale at one time the Company's entire holdings of a particular
instrument. Changes in assumptions could significantly affect these estimates.
Since the fair value is estimated as of December 31, 1999 and 1998, the
amounts that will actually be realized or paid at settlement or maturity of
the instruments could be significantly different.
Cash Equivalents and Certificates of Deposit
The carrying amount is assumed to be the fair value because of the
liquidity of the instruments.
Marketable Securities
The carrying amount represents fair value based on quoted market price.
Accounts Receivable and Notes Receivable
The carrying amount is assumed to be the fair value because of the
short-term maturity of the portfolio. The carrying amount of the noncurrent
note receivable is assumed to be the fair value because the note receivable
earns interest at prevailing rates.
Long-term Obligations
The fair values of the Company's notes payable, mortgages payable,
senior debt and other long-term obligations approximate the terms in the
marketplace at which they could be replaced in the aggregate. Therefore, the
fair value approximates the carrying value of these financial instruments in
the aggregate.
NOTE O--SUBSEQUENT EVENTS
On February 24, 2000, the Company sold its tower related broadcasting
assets and real property to affiliated entities controlled by the Company's
President and Chief Executive Officer for $10.0 million. These affiliated
entities then immediately sold the bulk of these assets to a third party, who
has leased tower space back to the Company.
On February 29, 2000, the Company entered into an asset purchase
agreement with Clear Channel Communications Inc. ("Clear Channel") to purchase
two Allentown, Pennsylvania stations for total
F-20
<PAGE>
NASSAU BROADCASTING PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
consideration of $30 million payable in cash. In March 2000, the Company has
irrevocably deposited $6 million toward the purchase of these stations.
Unaudited
On March 24, 2000, the Company entered into a purchase and exchange
agreement with the owners of Aurora Communications, LLC ("Aurora") to purchase
all of their stock, and thereby acquire the nine stations owned by Aurora for
total consideration of $185 million, consisting of $35 million in common stock
of the Company, $85 million in cash and $65 million in assumption of debt. The
cash amount is subject to a working capital adjustment. In March 2000, the
Company irrevocably deposited $7 million toward the purchase of Aurora.
On March 1, 2000, the Company entered into an additional $10 million term
loan agreement with its Senior Lender. The proceeds from this loan were used
for deposits on the Aurora and Clear Channel acquisitions.
The Company's equity investors have committed financing for the Aurora
and Clearview Channel acquisitions.
The Company intends to conduct an initial public offering ("IPO") for a
yet to be determined number of shares of Class A common stock. Prior to the
IPO, the Company plans to issue $60 million aggregate principal of senior
discount notes due 2010. The Company has also entered into a commitment letter
with a lender for the arrangement of senior credit facilities in an amount of
up to $144 million. There is no assurance that these transactions will occur,
or that they will occur under the terms and amounts noted above.
Prior to the consummation of the IPO, the Company intends to convert to a
corporation, which will result in the Company being subject to Federal, state
and local corporate income taxes.
In connection with the transactions discussed above, the President and
Chief Executive Officer of the Company is eligible to receive $7.5 million for
a redemption of a partial equity interest as well as receiving approximately $3
million as a distribution in accordance with the terms of the Company's
partnership agreement.
Certain marketable equity securities held by the Company as of December
31, 1999 declined by approximately $800,000 as of April 25, 2000. Management of
the Company believes this decline is to be temporary.
F-21
<PAGE>
Nassau Broadcasting Partners, L.P.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December
2000 31, 1999
----------- -----------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.......................... $ 2,396,819 $ 587,362
Marketable securities.............................. 2,099,734 2,201,080
Accounts receivable (net of allowance for doubtful
accounts of $353,000 and $316,000 in 2000 and
1999, respectively)............................... 5,456,265 6,645,514
Prepaid expenses and other current assets.......... 450,848 223,664
Due from officer................................... 201,306 590,000
----------- -----------
Total current assets............................. 10,604,972 10,247,620
PROPERTY AND EQUIPMENT, NET.......................... 5,672,422 11,792,237
OTHER ASSETS
Certificates of deposit-restricted -- 77,586
Deferred costs..................................... 1,039,596 805,436
Cost in excess of net assets acquired.............. 26,317,040 26,504,288
Deposits........................................... 38,902,228 25,100,484
Note receivable-officer............................ 100,000 100,000
Other assets....................................... 50,250 140,129
----------- -----------
$82,686,508 $74,767,780
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses.............. $ 1,705,265 $ 1,683,041
Loan payable-broker................................ -- 805,270
Mortgages payable-current.......................... -- 127,341
Capitalized lease obligations-current.............. 471,665 354,057
----------- -----------
Total current liabilities........................ 2,176,930 2,969,709
SENIOR DEBT.......................................... 56,138,603 47,938,871
SUBORDINATED NOTES PAYABLE........................... 40,159,232 39,099,013
MORTGAGES PAYABLE, LONG-TERM......................... 2,099,363
CAPITALIZED LEASE OBLIGATIONS, LONG-TERM............. 642,484 826,376
DEFERRED INCOME...................................... 252,834 282,000
DEFERRED GAIN........................................ 4,805,250 1,062,000
COMMITMENTS AND CONTINGENCIES
PARTNERS' DEFICIT.................................... (21,488,825) (19,509,552)
----------- -----------
$82,686,508 $74,767,780
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-21--1
<PAGE>
Nassau Broadcasting Partners, L.P.
STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
Three months ended
March 31,
------------------------
2000 1999
----------- -----------
(unaudited)
<S> <C> <C>
Gross revenues....................................... $ 7,893,311 $ 6,810,687
Less agency and outside commissions.................. 611,533 543,884
----------- -----------
Net revenues..................................... 7,281,778 6,266,803
----------- -----------
Operating expenses, excluding depreciation,
amortization, corporate general and administrative
expenses, and local marketing agreement fees........ 5,318,209 4,569,762
Depreciation and amortization expense................ 822,093 602,832
Corporate general and administrative expenses........ 587,050 500,435
Local marketing agreement fees....................... 639,571 725,261
----------- -----------
7,366,923 6,398,290
----------- -----------
Operating loss................................... (85,145) (131,487)
----------- -----------
Other income (expense)
Interest and dividend income....................... 11,099 --
Realized gains on marketable securities............ 441,457 153,665
Gain on sale of radio stations and tower assets.... 1,632,536 141,750
Interest expense................................... (3,024,268) (2,718,400)
----------- -----------
(939,176) (2,422,985)
----------- -----------
NET LOSS......................................... (1,024,321) (2,554,472)
----------- -----------
Unrealized gain on marketable securities
Unrealized holding gains (losses) arising during
the period........................................ (513,495) (335,332)
Less reclassification adjustment for gains included
in net income..................................... (441,457) (153,665)
----------- -----------
Other comprehensive loss............................. (954,952) (488,997)
----------- -----------
Comprehensive loss............................... $(1,979,273) $(3,043,469)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-21--2
<PAGE>
NASSAU BROADCASTING PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended
March 31,
------------------------
2000 1999
----------- -----------
(unaudited)
<S> <C> <C>
Cash flows from operating activities
Net loss........................................... $(1,024,321) $(2,554,472)
Adjustments to reconcile net loss to net cash
provided by operating activities
Depreciation and amortization..................... 320,725 301,464
Amortization of deferred costs.................... 114,120 114,120
Amortization of subordinated debt discount........ 225,474 275,001
Amortization of costs in excess of net assets
acquired......................................... 387,248 187,248
Subordinated debt interest........................ 834,745 772,648
Deferred senior debt interest..................... 377,779 353,438
Gain on sale of radio stations and tower assets... (1,632,536) (141,750)
Gain on sale of securities........................ (441,457) (153,665)
Changes in operating assets and liabilities.......
Accounts receivable.............................. 1,189,249 714,025
Prepaid expenses and other current assets........ (227,184) (196,767)
Accounts payable and accrued expenses............ 22,224 433,041
Deferred income.................................. (29,166) --
----------- -----------
Net cash provided by operating activities....... 116,900 104,331
----------- -----------
Cash flows from investing activities
Purchases of property and equipment................ (234,614) (178,260)
Sale of tower assets............................... 9,890,000 --
Deposits for radio stations to be acquired and
other costs....................................... (14,123,021) (4,596,260)
Sale (purchase) of marketable securities, net...... (407,663) (2,130,123)
Payments received on due from officer, net......... 388,694 --
(Increase) decrease in other assets................ (89,969) 12,863
----------- -----------
Net cash used in investing activities........... (4,576,573) (6,891,780)
----------- -----------
Cash flows from financing activities
Proceeds from senior debt, net..................... 7,821,955 --
Proceeds (principal payments) of other debt........ (1,204,815) 585,704
Increase in deferred costs......................... (348,280) (50,000)
----------- -----------
Net cash provided by (used in) financing
activities..................................... 6,268,860 535,704
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
EQUIVALENTS.................................... 1,809,187 (6,251,745)
Cash and equivalents at beginning of period.......... 587,632 7,050,051
----------- -----------
Cash and equivalents at end of period................ $ 2,396,819 $ 798,306
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-21--3
<PAGE>
Nassau Broadcasting Partners, L.P.
NOTES TO FINANCIAL STATEMENTS
March 31, 2000 and 1999
NOTE A--GENERAL
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly Nassau
Broadcasting Partners, L.P.'s (the "Company") financial position at March 31,
2000 and the results of operations and cash flows for the three months ended
March 31, 2000 and 1999.
Certain financial information which is normally included in financial
statements prepared in accordance with generally accepted accounting
principles, but which is not required for interim reporting purposes, has been
condensed or omitted. The accompanying financial statements need to be read in
conjunction with the financial statements and notes thereto included elsewhere
in this prospectus.
Any adjustments that have been made to the financial statements are of a
normal recurring nature.
Significant New Accounting Pronouncements
In September 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133 ("SFAS No. 133"),
"Accounting for Derivative Instruments and Hedging Activities," which requires
entities to recognize all derivatives in their financial statements as either
assets or liabilities measured as fair value. SFAS No. 133 also specifies new
methods of accounting for hedging transactions, prescribes the items and
transactions that may be hedged and specifies detailed criteria to be met to
qualify for hedge accounting. SFAS No. 133, as amended by SFAS No. 137, is
effective for fiscal years beginning after June 15, 2000. The Company is
evaluating the impact that this statement will have on its results of
operations, financial position and related disclosures.
In January 2000, the Emerging Issues Task Force ("EITF") reached a
consensus on Issue No. 99-17, "Accounting for Advertising Barter
Transactions," to be effective for transactions entered into after January 20,
2000. The consensus states that advertising barter transactions should be
accounted for at fair value and that the fair value recognized be disclosed in
the financial statements, if there is verifiable objective evidence provided
by sufficient cash transactions received by the seller of the advertising or
similar advertising. Adoption of EITF No. 99-17 did not have a material effect
on the Company's financial statements.
F-21--4
<PAGE>
Nassau Broadcasting Partners, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
March 31, 2000 and 1999
NOTE B--RELATED PARTY TRANSACTIONS
On February 24, 2000, the Company sold its tower-related broadcasting
assets and real property, net of liabilities to Nassau Tower Holdings, LLC
("NTH"), an entity controlled by the Company's President and Chief Executive
Officer for $10 million. These affiliated entities then immediately sold the
bulk of these assets to a third party.
In connection with the above transaction, the Company entered leases for
tower space with NTH for certain assets the Company sold to NTH. In addition,
the Company is also leasing tower space from the third party who purchased the
assets from NTH. The Company paid approximately $20,000 rent to NTH for the
three months ended March 31, 2000.
The initial terms of the leases are for ten years with options to renew
for four consecutive five-year periods. For the portion of the assets not
leased back, the Company has recorded a gain of $1,475,870. In addition, a
portion of the assets have been accounted for as sales leaseback arrangements
and accordingly, the gain, approximately which amounted to $1.8 million, has
been deferred and will be amortized over the lease terms. The remainder of the
realized gain which amounted to approximately $2.1 million, will be recognized
when the Company fulfills its obligations. The gain recognized on the sales
lease back assets was $15,000 for the three months ended March 31, 2000.
During the first quarter of 2000, the Company advanced its President and
Chief Executive Officer approximately $200,000. This advance, which was
noninterest-bearing, was repaid in full in May 2000.
NOTE C--ACQUISITIONS AND DISPOSITION
On February 29, 2000, the Company entered into an asset purchase
agreement with Clear Channel Communications Inc. ("Clear Channel") to purchase
two Allentown, Pennsylvania, stations for total consideration of $30 million
payable in cash. In March 2000, the Company deposited $6 million toward the
purchase of these stations.
On March 24, 2000, the Company entered into a purchase and exchange
agreement with the owners of Aurora Communications, LLC ("Aurora") to purchase
all of their stock, and thereby acquire the nine stations owned by Aurora for
total consideration of $185 million, consisting of $35 million in common stock
of the Company, $85 million in cash and $65 million in assumption of debt. The
cash amount is subject to a working capital adjustment. In March 2000, the
Company deposited $7 million toward the purchase of Aurora.
F-21--5
<PAGE>
Nassau Broadcasting Partners, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
March 31, 2000 and 1999
NOTE D--SENIOR AND OTHER DEBT
Senior Debt
On March 1, 2000, the Company entered into an additional $10 million
term loan agreement with its Senior Lender. The proceeds from this loan were
used for deposits on the Aurora and Clear Channel acquisitions.
The loan bears interest at the rate of 11% current plus 3.25% deferred
interest. All principal and deferred interest are due in full on August 28,
2001.
In connection with the loan, the Company paid approximately $348,000 in
financing costs, which were deferred and are being amortized over the term of
the loan.
Mortgage Payable
In connection with the Tower sale, NTH assumed certain mortgage
obligations of the Company.
NOTE E--SUBSEQUENT EVENTS
Senior Credit Facility
In May 2000, the Company entered into a senior credit facility for
approximately $144 million.
The credit facility consists of the following:
$33.0 million A1 term loan, which will finance a portion of the purchase
price of Aurora Communications in the form of repayment of debt of Aurora
Communications. This loan will amortize on a quarterly basis and matures on
June, 2006.
$26.0 million A2 term loan, $5 million of which will be used to repay
part of current senior credit facilities and the remainder of which will
finance part of the purchase price of stations we currently operate under
local marketing agreements. This loan will amortize on a quarterly basis and
matures on June, 2006.
F-21--6
<PAGE>
Nassau Broadcasting Partners, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
March 31, 2000 and 1999
NOTE E (continued)
$40.0 million B term loan, which will be used to repay borrowings under
the current senior credit facility and fund an equity redemption. This loan
will have minimal amortization over its life and matures on June, 2007, at
which time a balloon payment will be due.
$25.0 million C term loan, which will pay part of the purchase price of
Aurora Communications in the form of repayment of debt of Aurora
Communications. This loan will have minimal amortization over its life and
matures on June, 2008, at which time a balloon payment will be due.
$20.0 million revolving credit facility, of which the Company has drawn
$4.6 million to date, which matures on June, 2006.
All of the above loans bear interest at an alternative base rate or
LIBOR, as more fully described in the Senior Credit Facility Agreement.
The credit facility contains events of default typical for these types of
facilities (subject in each case to certain grace periods and materiality
thresholds), including, without limitation, (i) nonpayment of amounts under the
credit facility, (ii) material misrepresentations, (iii) covenant defaults,
(iv) cross-defaults to their indebtedness, (v) judgment defaults, (vi)
bankruptcy and (vii) a change of control.
Senior Discount Notes
In 2000, the Company issued $60.0 million aggregate principal amount of
13% senior discount notes due 2010, along with warrants to purchase equity
interests to several institutions.
In May 2000, the Company repaid $58.0 million in then-outstanding
borrowings under its current senior secured credit facility from borrowings
under the new credit facility and from proceeds of the senior discount notes.
Subordinated Notes, Preferred Distribution and Redemption of Equity Interest
In May 2000, the Company repaid all outstanding subordinated notes
payable, which amounted to $42.4 million, and made a preferred distribution to
the President and Chief Executive Officer of the Company under the partnership
agreement, in an amount of $2.9 million. In addition, the Company's President
and Chief Executive Officer is eligible to receive $7.5 million for a
redemption of a partial equity interest, of which he has received $2.5 million.
F-21--7
<PAGE>
Nassau Broadcasting Partners, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
March 31, 2000 and 1999
NOTE E (continued)
The Company intends to conduct an initial public offering ("IPO") for a
yet to be determined number of shares of Class A common stock. There is no
assurance that this transaction will occur.
Prior to the consummation of the IPO, the Company intends to convert to a
corporation, which will result in the Company being subject to Federal, state
and local corporate income taxes.
F-21--8
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Members
Aurora Communications, LLC
We have audited the accompanying consolidated balance sheet of Aurora
Communications, LLC as of December 31, 1999, and the related consolidated
statements of operations, members' capital and cash flows for the period
January 20, 1999 (commencement of operations) to December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Aurora Communications, LLC at December 31, 1999 and the consolidated results
of its operations and its cash flows for the period January 20, 1999
(commencement of operations) to December 31, 1999, in conformity with
accounting principles generally accepted in the United States.
ERNST AND YOUNG, LLP
New York, New York
February 25, 2000
F-24
<PAGE>
AURORA COMMUNICATIONS, LLC
(A Limited Liability Company)
CONSOLIDATED BALANCE SHEET
December 31, 1999
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................... $ 1,096,594
Accounts receivable, less allowance for doubtful accounts of
$43,789...................................................... 3,694,071
Prepaid expenses and other current assets..................... 164,477
------------
Total current assets........................................ 4,955,142
Property and equipment, at cost, less accumulated depreciation
of $157,829.................................................... 5,713,402
FCC licenses and goodwill, net of accumulated amortization of
$666,779....................................................... 92,012,735
Deferred financing costs, net of accumulated amortization of
$119,772....................................................... 2,179,283
------------
Total assets................................................ $104,860,562
============
LIABILITIES AND MEMBERS' CAPITAL
Current liabilities:
Accounts payable and accrued expenses......................... $ 1,105,550
Accrued wages and sales commissions........................... 277,897
Accrued interest payable...................................... 807,359
------------
Total current liabilities................................... 2,190,806
Long-term debt.................................................. 64,256,250
Other noncurrent liabilities.................................... 383,005
Commitments and contingencies................................... --
Members' capital:
Members interests............................................. 38,605,270
Accumulated deficit........................................... (574,769)
------------
Total members' capital...................................... 38,030,501
------------
Total liabilities and members' capital...................... $104,860,562
============
</TABLE>
See accompanying notes.
F-25
<PAGE>
AURORA COMMUNICATIONS, LLC
(A Limited Liability Company)
CONSOLIDATED STATEMENT OF OPERATIONS
For the period January 20, 1999 (commencement of operations) to December 31,
1999
<TABLE>
<S> <C>
Net revenues....................................................... $6,204,731
Operating expenses:
Selling.......................................................... 1,111,258
Programming and promotion........................................ 1,198,369
Technical........................................................ 113,594
General and administrative....................................... 682,963
Depreciation and amortization.................................... 824,608
Corporate expenses............................................... 743,766
----------
Total operating expenses....................................... 4,674,558
----------
Operating income................................................... 1,530,173
Interest income.................................................... 32,345
Interest expense................................................... 2,137,287
----------
Net loss........................................................... $ (574,769)
==========
</TABLE>
See accompanying notes.
F-26
<PAGE>
AURORA COMMUNICATIONS, LLC
(A Limited Liability Company)
CONSOLIDATED STATEMENT OF MEMBERS' CAPITAL
<TABLE>
<CAPTION>
Total
Preferred Units Common Units Additional
--------------------- --------------- Paid-in Accumulated
Units Value Units Value Capital Deficit Total
--------- ----------- --------- ----- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 20,
1999................... -- $ -- -- $ -- $ -- $ -- $ --
Issued in connection
with May 3, 1999
capitalization......... 52,500 525,000 2,743,678 -- -- -- 525,000
Issued in connection
with August 31, 1999
capitalization......... 3,807,500 38,075,000 1,898,572 -- -- -- 38,075,000
Other issuance.......... -- -- -- -- 5,270 5,270
Net loss................ -- -- -- -- -- (574,769) (574,769)
--------- ----------- --------- ----- ------ --------- -----------
Balance at December 31,
1999................... 3,860,000 $38,600,000 4,642,250 $ -- $5,270 $(574,769) $38,030,501
========= =========== ========= ===== ====== ========= ===========
</TABLE>
See accompanying notes.
F-27
<PAGE>
AURORA COMMUNICATIONS, LLC
(A Limited Liability Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
For the period January 20, 1999 (commencement of operations) to December 31,
1999
<TABLE>
<S> <C>
Cash flows from operating activities
Net loss......................................................... $ (574,769)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization.................................. 824,608
Non-cash interest expense...................................... 502,777
Non-cash compensation expense.................................. 5,270
Changes in current assets and current liabilities:
Increase in accounts receivable.............................. (3,694,071)
Increase in prepaid expenses and other current assets........ (164,477)
Increase in accounts payable and accrued expenses............ 1,105,550
Increase in accrued wages and sales commissions.............. 277,897
Increase in accrued interest payable......................... 807,359
-----------
Total adjustments............................................ (335,087)
-----------
Net cash used in operating activities............................ (909,856)
-----------
Cash flows from investing activities
Payments for business acquisitions............................... (98,343,310)
Capital expenditures............................................. (207,435)
-----------
Net cash used in investing activities............................ (98,550,745)
-----------
Cash flows from financing activities
Proceeds from issuance of long-term debt, net.................... 64,256,250
Proceeds from issuance of membership interests................... 38,600,000
Debt issuance costs.............................................. (2,299,055)
-----------
Net cash provided by financing activities........................ 100,557,195
-----------
Net increase in cash and cash equivalents........................ 1,096,594
Cash and cash equivalents at beginning of period................. --
-----------
Cash and cash equivalents at end of period....................... $ 1,096,594
===========
</TABLE>
See accompanying notes.
F-28
<PAGE>
AURORA COMMUNICATIONS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
1. Nature of Business and Organization
Aurora Communications, LLC (the "Company") is a limited liability company
formed in January 1999 and is engaged in the acquisition and operation of radio
stations throughout the United States. The Company is a subsidiary of Aurora
Management, Inc., its majority owner and managing member. Pursuant to its
limited liability company agreement, the Company shall continue until the
earlier of its dissolution by its members or December 31, 2049.
2. Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements include the accounts
of the Company and its subsidiaries. All material intercompany items and
transactions have been eliminated.
Depreciation
Property and equipment are recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the assets, as follows:
<TABLE>
<S> <C>
Buildings......................................................... 39 years
Furniture and fixtures............................................ 5-7 years
Broadcasting equipment............................................ 3-15 years
Transportation equipment.......................................... 5 years
</TABLE>
Expenditures for maintenance and repairs are charged to operations as
incurred.
Intangible Assets
Deferred financing costs of $2.2 million are amortized over the term of
the related debt on a straight-line basis, which approximates the interest
method. FCC licenses and goodwill, in the amount of $92.0 million, represent
the excess of acquisition cost over the amounts assigned to other assets
acquired in the Company's acquisitions, and is amortized on a straight-line
basis over a 40-year period.
It is the Company's policy to account for FCC licenses, goodwill and all
other intangible assets at the lower of amortized cost or estimated realizable
value. As part of an ongoing review of the valuation and amortization of
intangible assets of the Company and its subsidiaries, management assesses the
carrying value of the intangible assets if facts and circumstances suggest that
there may be impairment. If this review indicates that the intangibles will not
be recoverable as determined by a non-discounted cash flow analysis of the
operating assets over the remaining amortization period, the carrying value of
the intangible assets would be reduced to estimated realizable value.
Barter Transactions
Revenue from barter transactions (advertising provided in exchange for
goods and services) is recognized when advertisements are broadcast, and
merchandise or services received are charged to expense (or
F-29
<PAGE>
AURORA COMMUNICATIONS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
capitalized as appropriate) when received or used. Barter revenue and expense
reflected in the consolidated statement of operations for the period ended
December 31, 1999 was $490,791 and $412,269, respectively.
Revenue
The primary source of revenue is the sale of advertising to local,
regional and national customers. Revenue is presented net of advertising
commissions of $719,134, and is recognized when advertisements are broadcast.
Cash Equivalents
Cash equivalents consist of short-term, highly liquid investments which
are readily convertible into cash and have an original maturity of three months
or less when purchased.
Advertising and promotion
Expenditures for advertising and promotion are charged to expense as
incurred and totaled $430,000 in 1999.
Income Taxes
No provision for federal, state or local income taxes or credits has been
reflected in the accompanying financial statements because such obligations or
credits are liabilities or benefits of the members.
Risks and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company 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 revenue and expenses during the reported
period. Actual results may differ from those estimates.
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of trade receivables. The
Company's revenue is derived primarily from local broadcast advertisers who are
impacted by the local economy. The Company routinely assesses the credit
worthiness of its customers and generally does not require collateral or other
security to support customer receivables.
3. Acquisitions
At December 31, 1999, the Company owned and operated five FM and four AM
radio stations.
On August 31, 1999, the Company acquired substantially all the assets of
radio stations WEBE-FM/WICC-AM, Bridgeport, Connecticut for $66.0 million plus
transaction costs.
On October 27, 1999, the Company acquired substantially all the assets of
radio stations WFAS-AM/WFAS-FM/WFAF-FM (formerly WZZN-FM), Westchester County,
New York for $20.25 million plus transaction costs.
F-30
<PAGE>
AURORA COMMUNICATIONS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
On October 27, 1999, the Company acquired substantially all the assets of
radio stations WRKI-FM/WINE-AM, Danbury, Connecticut and WAXB-FM/WPUT-AM,
Patterson, New York for $11.25 million plus transaction costs.
All of the acquisitions have been accounted for using the purchase method
of accounting. Accordingly, the purchase price of each acquisition has been
allocated to the assets based upon their respective estimated fair values at
the date of acquisition. The results of operations of the properties acquired
are included in the Company's consolidated results of operations from the
respective dates of acquisition. The aggregate purchase prices have been
allocated to the assets acquired and liabilities assumed as follows:
<TABLE>
<S> <C>
Current assets.................................................. $ 63,507
Property and equipment.......................................... 5,663,796
FCC licenses and goodwill....................................... 92,679,514
-----------
98,406,817
-----------
Current liabilities........................................... (237,921)
-----------
$98,168,896
===========
</TABLE>
4. Pro Forma Financial Information (Unaudited)
<TABLE>
<S> <C>
Year ended December 31, 1999
Net revenues.................................................. $ 21,495,573
Net loss...................................................... $ (2,055,385)
</TABLE>
The unaudited pro forma information for the year ended December 31, 1999
assumes that the acquisitions described in Note 3, had occurred on January 1,
1999. The pro forma information is not necessarily indicative either of the
results of operations that would have occurred had these transactions been made
at the beginning of the period, or of future results of operations.
5. Long-Term Debt
A summary of long-term debt as of December 31, 1999 is as follows:
<TABLE>
<S> <C>
Term loan at the LIBOR rate plus 3.5%; interest payable
monthly; quarterly commitment reductions from March 31, 2000
through December 31, 2005 (A)(C)............................. $20,000,000
Revolving loan at the LIBOR rate plus 3.5%; interest payable
monthly; matures November 30, 2005 (A)(C).................... 30,756,250
Subordinated debentures; cash interest payable quarterly at
8%; payment-in-kind interest compounds quarterly at 9%;
principal due in September 2006 (B)(C)....................... 13,500,000
-----------
64,256,250
Less current portion.......................................... --
-----------
$64,256,250
===========
</TABLE>
(A) On August 31, 1999, Aurora Holding, LLC ("Holding"), a wholly-owned
subsidiary of the Company entered into credit facilities totaling $75.0 million
with Heller Financial, Inc. and Union Bank of California, N.A., as agents (the
"Senior Loans"). The Senior Loans consist of a $20.0 million term loan and a
$55.0 million revolving loan. The initial borrowings under the Senior Loans
were used to partially fund the
F-31
<PAGE>
AURORA COMMUNICATIONS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Company's acquisitions, pay transaction costs and provide working capital. The
Senior Loans contain covenants which require, among other things, that Holding
and its subsidiaries maintain certain financial levels, principally with
respect to EBITDA (earnings before interest, income tax, depreciation and
amortization) and leverage ratios, and limit the amount of capital
expenditures. The Senior Loans also restrict the payment of cash dividends. The
Senior Loans are collateralized by pledges of the tangible and intangible
assets of Holding and its subsidiaries, as well as the membership interests of
Holding and its subsidiaries. At December 31, 1999, the Company has additional
availability under the revolving credit facility of $24.2 million, of which
$5.4 million may currently be borrowed. No amounts due under the term loan are
classified as current liabilities on the consolidated balance sheet at December
31, 1999 because the availability under the revolving facility is sufficient to
pay amounts scheduled to be repaid in 2000 under the term loan. The Company
pays an annual commitment fee of 0.5% of the unused commitment.
(B) On September 10, 1999, Holding entered into a subordinated loan
agreement with Allied Capital Corporation and Allied Investment Corporation
which provides for subordinated debentures totaling $13.5 million. Proceeds
from the debentures were used to partially fund the Company's acquisitions and
to pay transaction costs. The subordinated debentures mature in September 2006
and bear interest at 17%. From the date of issuance through the first
anniversary, interest is paid quarterly in cash at a rate of 8% per year. From
the first anniversary to the second anniversary, interest is paid quarterly in
cash at a rate of 9% per year. From the second anniversary through maturity,
interest is paid quarterly in cash at a rate of 10% per year. Deferred interest
accrues and compounds quarterly equal to the difference between 17% and the
cash pay rate and is payable at the maturity date. The subordinated loan
agreement contains covenants which require, among other things, that Holding
and its subsidiaries maintain certain financial levels, principally with
respect to EBITDA (earnings before interest, income tax, depreciation and
amortization) and leverage ratios, and limit the amount of capital
expenditures. The subordinated loan agreement also restricts the payment of
cash dividends. Payment of amounts owed under the debentures is guaranteed by
the Company and Holdings' subsidiaries.
(C) In the event of a default under the Senior Loans or the subordinated
debentures prior to June 29, 2000, upon notice by a lender, the members of the
Company shall be required to make additional capital contributions of an amount
up to 75% of the trailing twelve month broadcast cash flow of the Company's
radio stations measured at the date of acquisition. The proceeds from such
contributions shall be used to repay a portion of the Senior Loans' principal.
The obligation to make such additional capital contributions shall terminate
when certain conditions are met, principally with respect to completing
additional radio station acquisitions that provide greater geographic
diversity.
At December 31, 1999, exclusive of the Revolving loan, the aggregate
amounts of long-term debt due scheduled during the next five years are as
follows:
<TABLE>
<CAPTION>
Year: Amount
----- -----------
<S> <C>
2000............................................................. $ 2,000,000
2001............................................................. 2,500,000
2002............................................................. 3,000,000
2003............................................................. 3,500,000
2004............................................................. 4,000,000
Thereafter....................................................... 18,500,000
</TABLE>
Cash paid for interest during 1999 was approximately $827,000. The fair
value of the debt approximates net book value.
F-32
<PAGE>
AURORA COMMUNICATIONS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. Property and Equipment
Property and equipment at December 31, 1999 consists of the following:
<TABLE>
<S> <C>
Land............................................................. $1,107,644
Buildings........................................................ 1,238,520
Equipment........................................................ 3,525,067
----------
5,871,231
Less accumulated depreciation.................................... (157,829)
----------
$5,713,402
==========
</TABLE>
At December 31, 1999, all property and equipment is pledged as collateral
for the debt disclosed in Note 5.
7. Commitments
The Company leases office and broadcast tower space, vehicles and office
equipment. Rental expense amounted to approximately $159,000 for the period
from commencement of operations through December 31, 1999.
The minimum aggregate annual rentals under non-cancelable operating
leases are payable as follows:
<TABLE>
<CAPTION>
Year: Amount
----- ----------
<S> <C>
2000.............................................................. $ 576,000
2001.............................................................. 261,000
2002.............................................................. 231,000
2003.............................................................. 184,000
2004.............................................................. 147,000
Thereafter........................................................ 219,000
----------
$1,618,000
==========
</TABLE>
8. Related Party Transactions
The Company pays Aurora Management, Inc., its managing member, a
management and monitoring fee at the annual rate of $150,000 per year.
Under the long-term debt agreements described in Note 5, the Company
borrowed funds from certain members of the Company or their affiliates.
Interest on the outstanding principal amounts and certain other fees are paid
to such members or their affiliates.
On October 27, 1999, the Company acquired substantially all the assets of
radio stations WFAS-AM/WFAS-FM/WFAF-FM (formerly WZZN-FM), Westchester County,
New York from Westchester Radio, LLC (see Note 3). At the time of the
acquisition, Frank G. Washington, a member of the Company, was a member of
Westchester Radio, LLC.
F-33
<PAGE>
AURORA COMMUNICATIONS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9. Members' Capital
The classes of the Company's membership interests consist of Preferred
Units and Common Units (which are further designated as Invested Common Units,
Callable Common Units and Promoted Common Units).
Preferred equity interests
The Company may issue Preferred Units, no par value, which are non-
convertible. During 1999, the Company had issued 3,860,000 preferred units for
an aggregate $38.6 million. The holders of Preferred Units are entitled to a
preferred return at the annual rate of 10%, compounded quarterly, cumulative to
the extent not distributed. Undistributed preferred dividends as of December
31, 1999 were approximately, $1,293,000.
Common equity interests
The Company may issue Common Units, no par value, which represent a
common profits percentage. Each holder of Preferred Units received an equal
number of Invested Common Units. At December 31, 1999, issued and outstanding
Invested Common Units, Callable Common Units, Promoted Common Units and Total
Common Units were 3,860,000; 255,238; 527,012; and 4,642,250, respectively.
Allocation of profits and losses/liquidation preference
After giving effect to tax distributions, if any, paid to the members,
the Company's net income is allocated to the members' capital accounts in the
following priority: (i) to the Preferred Unit holders until the aggregate net
income allocated equals the aggregate net losses previously allocated to the
Preferred Unit holders; (ii) to the Preferred Unit holders in an amount equal
to the cumulative preferred return; and (iii) to the members in accordance with
their respective common profits percentages.
Net losses of the Company, after giving effect to tax distributions, if
any, paid to the members, are allocated to the members' capital accounts in the
following priority: (i) to the members until the aggregate net losses allocated
to the members' Common Units equals the aggregate net income previously
allocated to the members with respect to their Common Units; (ii) to the
members in proportion to their respective adjusted common capital account
balances until the adjusted common account balances of all members have been
reduced to zero; (iii) to the Preferred Unit holders until the aggregate net
losses allocated to the Preferred Unit holders equals the excess, if any, of
the sum of aggregate net income allocated to the Preferred Units over the
amount of aggregate tax distributions and preferred return distributions made
to the Preferred Unit holders; and (iv) to the Preferred Unit holders in
proportion to their respective adjusted capital account balances until the
adjusted capital account balances of all Preferred Unit holders have been
reduced to zero.
Upon a liquidation of the Company, after all the Company's liabilities
have been paid, remaining proceeds shall be distributed as follows: (i) to the
Preferred Unit holders in an amount equal to the lesser of such Preferred Unit
holder's adjusted preferred capital contribution, and such Preferred Unit
holders positive capital account balance; (ii) to the Common Unit holders in
proportion to their positive capital account balances.
Optional equity contributions
On or prior to April 3, 2000, a member of the Company and director of
Aurora Management, Inc., may at his option make additional capital
contributions with an aggregate value of up to $900,000. During the first
quarter of 2000, the capital contribution was made by the member.
F-34
<PAGE>
AURORA COMMUNICATIONS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
On or prior to May 3, 2004, the Company's President, Chief Executive
Officer and member, may make additional capital contributions at his option
with an aggregate value of up to approximately $1,652,000.
10. Impact of Year 2000 (Unaudited)
In late 1999, the Company completed its remediation and testing of
systems. As a result of its planning and implementation efforts, the Company
experienced no significant disruptions in mission critical information
technology and non-information technology systems and believes those systems
successfully responded to the Year 2000 date change. Costs incurred by the
Company in connection with remediating its systems were immaterial. The Company
is not aware of any material problems resulting from Year 2000 issues, either
with the programming of its radio stations, its internal systems, or the
products and services of third parties. The Company will continue to monitor
its mission critical computer applications and those of its significant
suppliers and vendors throughout the year 2000 to ensure that any latent Year
2000 matters that may arise are addressed promptly.
11. Subsequent Event (Unaudited)
On March 24, 2000, the Company's members entered into an agreement to
sell all the ownership interests in the Company to Nassau Broadcasting
Partners, L.P. for approximately $185.0 million less long-term debt, consisting
of approximately $150.0 million plus an ownership interest in Nassau
Broadcasting Partners, L.P. The transaction is subject to various regulatory
approvals.
F-35
<PAGE>
INDEPENDENT AUDITORS' REPORT
WEBE and WICC Radio Stations
(Divisions of ML Media Partners, L.P.)
We have audited the accompanying combined balance sheets of WEBE and WICC
Radio Stations (Divisions of ML Media Partners, L.P.) (collectively, the
"Combined Group") as of December 31, 1998 and 1997, and the related combined
statements of operations and accumulated earnings (deficit), and cash flows for
each of the three years in the period ended December 31, 1998. These financial
statements are the responsibility of the Combined Group's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such combined financial statements present fairly, in all
material respects, the financial position of WEBE and WICC Radio Stations
(Divisions of ML Media Partners, L.P.) at December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998 in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
New York, New York
August 27, 1999
F-38
<PAGE>
WEBE AND WICC RADIO STATIONS
(Divisions of ML Media Partners, L.P.)
COMBINED BALANCE SHEETS
December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................ $ 3,920,462 $ 555,002
Accounts receivable--trade, less allowance for
doubtful accounts of $115,841 in 1998 and $78,572 in
1997................................................ 2,203,635 1,902,249
Prepaid barter expense............................... 49,776 84,342
Other current assets................................. 28,209 21,329
----------- -----------
Total current assets............................... 6,202,082 2,562,922
----------- -----------
PROPERTY:
Building............................................. 76,368 76,368
Towers and antennas.................................. 751,881 750,096
Broadcasting equipment............................... 1,250,000 1,314,502
Furniture, fixtures and office equipment............. 388,981 385,457
Leasehold improvements............................... 155,232 155,232
Vehicles............................................. -- 20,790
----------- -----------
Total.............................................. 2,622,462 2,702,445
Less accumulated depreciation and amortization....... 2,521,037 2,597,617
----------- -----------
PROPERTY--Net.......................................... 101,425 104,828
----------- -----------
OTHER ASSETS:
Goodwill............................................. 14,777,376 14,777,376
Other intangible assets.............................. 761,624 761,624
----------- -----------
Total.............................................. 15,539,000 15,539,000
Less accumulated amortization........................ 4,356,407 3,972,745
----------- -----------
OTHER ASSETS--Net...................................... 11,182,593 11,566,255
----------- -----------
TOTAL ASSETS........................................... $17,486,100 $14,234,005
=========== ===========
LIABILITIES AND DIVISIONAL EQUITY
CURRENT LIABILITIES:
Accounts payable..................................... $ 31,278 $ 15,982
Deferred barter revenue.............................. 94,175 147,207
Accrued liabilities--other........................... 327,920 450,736
Payable to affiliates................................ 1,688,693 2,874,228
----------- -----------
Total current liabilities.......................... 2,142,066 3,488,153
----------- -----------
COMMITMENTS (Note 4)
DIVISIONAL EQUITY:
Division capital..................................... 4,500,000 4,500,000
Payable to affiliates................................ 5,244,248 4,869,581
Accumulated earnings................................. 5,599,786 1,376,271
----------- -----------
Total.............................................. 15,344,034 10,745,852
----------- -----------
TOTAL LIABILITIES AND DIVISIONAL EQUITY................ $17,486,100 $14,234,005
=========== ===========
</TABLE>
See notes to combined financial statements.
F-39
<PAGE>
WEBE AND WICC RADIO STATIONS
(Divisions of ML Media Partners, L.P.)
COMBINED STATEMENTS OF OPERATIONS AND ACCUMULATED EARNINGS (DEFICIT)
Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
REVENUE:
Local................................ $ 9,496,654 $ 9,063,957 $ 7,467,180
National............................. 2,777,925 2,194,956 1,753,774
Trades............................... 445,752 614,201 572,519
Other................................ 571,863 426,240 443,473
----------- ----------- -----------
Total.............................. 13,292,194 12,299,354 10,236,946
Less commissions of agencies......... 1,632,323 1,478,419 1,223,346
----------- ----------- -----------
NET REVENUE............................ 11,659,871 10,820,935 9,013,600
----------- ----------- -----------
OPERATING EXPENSES BEFORE DEPRECIATION
AND AMORTIZATION:
Direct............................... 602,410 590,407 494,376
Technical............................ 240,970 231,854 247,733
Programming.......................... 990,498 994,339 816,721
News................................. 259,388 248,508 273,873
Selling.............................. 2,052,515 1,994,603 1,701,447
Promotion............................ 610,757 717,685 455,956
General and administrative........... 1,334,684 1,401,451 1,337,873
Corporate administrative............. 271,218 298,284 327,868
Management fee....................... 450,488 1,068,552 650,965
----------- ----------- -----------
Total.............................. 6,812,928 7,545,683 6,306,812
----------- ----------- -----------
OPERATING INCOME BEFORE DEPRECIATION
AND AMORTIZATION...................... 4,846,943 3,275,252 2,706,788
DEPRECIATION AND AMORTIZATION.......... (410,373) (538,887) (561,945)
----------- ----------- -----------
OPERATING INCOME....................... 4,436,570 2,736,365 2,144,843
INTEREST EXPENSE....................... (213,055) (204,363) (458,369)
----------- ----------- -----------
NET INCOME............................. 4,233,515 2,532,002 1,686,474
ACCUMULATED EARNINGS (DEFICIT),
BEGINNING OF YEAR..................... 1,376,271 (1,155,731) (2,842,205)
----------- ----------- -----------
ACCUMULATED EARNINGS (DEFICIT), END OF
YEAR.................................. $ 5,599,786 $ 1,376,271 $(1,155,731)
=========== =========== ===========
</TABLE>
See notes to combined financial statements.
F-40
<PAGE>
WEBE AND WICC RADIO STATIONS
(Divisions of ML Media Partners, L.P.)
COMBINED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................... $4,223,515 $2,532,002 $1,686,474
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation........................... 26,711 95,760 118,104
Amortization........................... 383,662 443,127 443,841
Bad debt expense....................... 56,026 45,336 64,633
Changes in operating assets (increase)
decrease:
Accounts receivable.................. (357,412) (248,784) (269,555)
Prepaid barter expense............... 34,566 43,014 (126,011)
Other current assets................. (6,880) 18,937 (9,605)
Changes in operating liabilities
increase (decrease):
Accounts payable and other accrued
liabilities......................... (107,519) (116,776) (40,514)
Deferred barter revenue.............. (53,032) 22,766 124,258
---------- ---------- ----------
Net cash provided by operating
activities........................ 4,199,637 2,835,382 1,991,625
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES--
Capital expenditures..................... (23,309) (29,663) (16,419)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES--
Net decrease in payable to parent and
affiliates.............................. (810,868) (3,135,510) (1,332,044)
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................... 3,365,460 (329,791) 643,162
CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR...................................... 555,002 884,793 241,631
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR..... $3,920,462 $ 555,002 $ 884,793
========== ========== ==========
</TABLE>
See notes to combined financial statements.
F-41
<PAGE>
WEBE AND WICC RADIO STATIONS
(Divisions of ML Media Partners, L.P.)
NOTES TO COMBINED FINANCIAL STATEMENTS
Years Ended December 31, 1988, 1997 and 1996
1. ORGANIZATION, OWNERSHIP AND OPERATIONS
WEBE and WICC radio stations (collectively, the "Combined Group") are
divisions of ML Media Partners, L.P. ("ML"). Both of the radio stations are
located in Fairfield County, Connecticut. Based upon regular assessments of the
Combined Group's operations performed by key management, the Combined Group has
determined that is reportable segment is commercial radio broadcasting. The
economic characteristics, services, production process, customer type and
distribution methods for the Combined Group's two radio statements are
substantially similar and have therefore been aggregated as one reportable
segment.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Combination--The accompanying combined financial statements
include the accounts of the Combined Group. All significant intercompany
balances and transactions have been eliminated in combination.
Property--Property is stated at cost less accumulated depreciation and
amortization. Leasehold improvements are amortized over their estimated useful
lives or the length of the lease, whichever is shorter. Depreciation is
computed using the straight-line method over the estimated useful lives of the
assets as follows:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Buildings............................................................ 20-30
Towers and antennas.................................................. 7-20
Broadcasting equipment............................................... 7-8
Furniture, fixtures, and office equipment............................ 3-7
Vehicles............................................................. 5
</TABLE>
Asset Impairment--The individual entities within the Combined Group
assess the impairment of their respective long-lived assets on a regular basis
or immediately upon the occurrence of a significant event in the marketplace or
an event that directly impacts such assets. The methodology varies depending on
the type of asset but typically consists of comparing the net book value of the
asset to either: (1) the undiscounted expected future cash flows generated by
the asset, and/or (2) the current market values obtained from industry sources.
If the net book value of a particular asset is materially higher than the
estimated net realizable value, and the asset is considered to be permanently
impaired, the radio stations will write down the net book value of the asset
accordingly. The Combined Group relies on industry sources and its experience
in the particular marketplace to determine whether an asset impairment is other
than temporary. As of December 31, 1998, based on the opinion of management, no
such impairments had occurred.
Intangible Assets--Intangible assets consist of advertiser lists,
favorable market area, favorable program format, permits, agreements,
contracts, goodwill and organizational costs which are stated at cost, less
accumulated amortization, as determined by management for WICC and by
independent appraisals for WEBE. These intangible assets are being amortized
over the shorter of their respective expiration dates for 40 years.
Revenue Recognition--Local and national advertising revenues are recorded
when the corresponding commercials spots are aired.
F-42
<PAGE>
WEBE AND WICC RADIO STATIONS
(Divisions of ML Media Partners, L.P.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1998, 1997 and 1996
Barter Transactions--As is customary in the broadcasting industry, the
Combined Group engages in the bartering of commercial air time for various
goods and services. The goods and services are capitalized or expensed as
appropriate, when received or utilized. Revenues are recognized when the
commercial spots are aired. At December 31, 1998 and 1997, the Combined Group
had deferred barter revenue (net of prepaid barter expense) of $44,399 and
$62,865, respectively. During 1998, 1997 and 1996 the Combined Group had
expenses of $424,287, $676,288 and $597,548, respectively, and revenues of
$445,752, $614,201 and $572,519, respectively, in connection with barter
transactions.
Cash Equivalents--Cash equivalents represent liquid investments with an
original maturity of 90 days or less.
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.
3. ALLOCATED BORROWINGS
On July 19, 1989, ML and Wincom Broadcasting Corporation and its wholly-
owned subsidiary Win Communications, Inc. (collectively, "Wincom" which is
wholly-owned by ML) entered into an amended and restated credit, security and
pledge agreement (the "Wincom-WEBE-WICC Loan") with Chemical Bank (currently
doing business as Chase Manhattan Bank and subsequently referred to herein as
"Chase") which was used to replace and repay other debt agreements and finance
the acquisition of WICC. The Combined Group has been allocated a portion of the
Wincom-WEBE-WICC Loan based on each station's percentage of broadcast cashflow
to the total broadcast cash flow of Wincom Communications and WEBE and WICC.
The Combined Group's allocated portion of the related obligations was
$1,688,693 and $2,874,228 at December 31, 1998 and 1997, respectively and is
included in payable to affiliates--current on the combined balance sheets.
The Wincom-WEBE-WICC Loan was structured as a revolving credit line that
provided for borrowings of up to $35,000,000 through December 31, 1990. The
Wincom-WEBE-WICC Loan converted to a term loan on December 31, 1990. Principal
payments were scheduled to commence on March 31, 1991 and to continue quarterly
through June 30, 1997. ML, if no event of default had occurred, had options to
elect to pay interest on the Wincom-WEBE-WICC Loan based upon the bank's
reference rate or London Interbank Offered Rates, plus applicable margins. As a
result of defaults under the Wincom-WEBE-WICC Loan, the lender has restricted
interest rate options to reference rate only.
The Wincom-WEBE-WICC Loan required that the Wincom-WEBE-WICC group
maintain minimum covenant levels of certain ratios such as debt to operating
profit and debt service coverage, and restrict such items as: cash
disbursements; the payment of management fees; distributions or dividends;
additional indebtedness; or asset sales by or at Wincom, WEBE or WICC. The
Wincom-WEBE-WICC Loan also included other standard and usual loan covenants.
Borrowings under the Wincom-WEBE-WICC Loan were nonrecourse to ML and are
collateralized with substantially all of the assets of the Wincom-WEBE-WICC
Group.
F-43
<PAGE>
WEBE AND WICC RADIO STATIONS
(Divisions of ML Media Partners, L.P.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1998, 1997 and 1996
On July 30, 1993, ML and Chase executed a Second Amendment to the Wincom-
WEBE-WICC Loan (the "Restructuring Agreement"), effective January 1, 1993,
which cured all previously outstanding defaults pursuant to the Wincom-WEBE-
WICC Loan. In addition, as part of the restructuring process, ML agreed to sell
substantially all of the assets of Indianapolis Stations owned by Wincom, WRZX-
FM and WCKN-AM. Such sale was consummated on October 1, 1993.
The Restructuring Agreement provided for the outstanding principal and
interest due Chase as of December 31, 1992 (approximately $24.7 million and
$2.0 million, respectively) to be divided into three notes as follows: a Series
A Term Loan in the amount of $13 million; a Series B Term Loan in the amount of
approximately $11.7 million; and a Series C Term Loan in the amount of
approximately $2.0 million.
As a result of the payment of the Series B Term Loan from the net
proceeds of the sale of the Indianapolis Stations exceeding $6 million
(described above), the full principal amount of the Series C Term Loan was
forgiven by Chase on October 1, 1993 pursuant to the terms of the Restructuring
Agreement.
The Series A Term Loan was paid in full as of December 31, 1998. On
January 28, 1999, the remaining principal and interest of the Series B term
loan was paid in full. The Combined Group's allocated portion of this loan is
included in payable to affiliates - current on the combined balances sheets.
4. OPERATING LEASES
The Combined Group leases broadcast facilities and certain other
equipment under operating lease agreements. Several of the leases contain
renewal options and require payment for real estate taxes and other operating
costs. Minimum future rental commitments at December 31, 1998 under all
noncancelable operating leases in excess of one year, are as follows:
<TABLE>
<CAPTION>
Year Amount
---- --------
<S> <C>
1999.............................................................. $205,656
========
</TABLE>
Total rent expense for the years ended December 31, 1998, 1997 and 1996
was $210,906, $256,902 and $355,232, respectively.
5. INCOME TAXES
As operating divisions of ML, WEBE, and WICC are included in the tax
returns of ML. ML is not subject to income taxes because all income and
expenses are allocated to the individual partners of ML for inclusion in their
respective tax returns. Accordingly, no income tax provision is recorded for
WEBE and WICC in the accompanying combined statements of operations.
6. RELATED PARTY TRANSACTIONS
The payable to affiliates represents the amount payable by the Combined
Group, principally to ML. ML does not assess interest to the Combined Group on
its outstanding intercompany balances.
F-44
<PAGE>
WEBE AND WICC RADIO STATIONS
(Divisions of ML Media Partners, L.P.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1998, 1997 and 1996
The Combined Group is charged management fees by ML. These fees amounted
to $450,488, $1,068,552 and $650,965 in 1998, 1997 and 1996, respectively. The
Combined Group also incurred corporate administrative fees to RP Radio LLC.,
(which took over management of the radio station in 1996). Amounts incurred in
1998, 1997 and 1996 were $271,218, $298,284 and $327,868, respectively.
The activity in the payable to affiliates account for the years ended
December 31, 1998, 1997, and 1996 is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Balance, beginning of year............... $4,869,581 $3,579,610 $3,044,486
Transfers from ML and affiliates--net.... 374,667 1,289,971 535,124
---------- ---------- ----------
Balance, end of year..................... $5,244,248 $4,869,581 $3,579,610
========== ========== ==========
</TABLE>
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, Disclosures about Fair Value of Financial Instruments,
requires companies to report the fair value of certain on- and off-balance-
sheet assets and liabilities which are defined as financial instruments.
Assets, including cash and cash equivalents and accounts receivable, and
liabilities, such as accounts payable and amounts payable to parent and
affiliates, are carried at amounts which approximate fair value.
8. SUBSEQUENT EVENT
On April 22, 1999, ML Media Partners L.P. entered into an asset purchase
agreement to sell the assets of WEBE and WICC for $66 million. The effective
closing date for this transaction is August 31, 1999.
F-45
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustee
Capstar Trust
We have audited the accompanying balance sheet of Capstar Trust (a trust)
as of October 26, 1999, and the related statements of operations and
beneficiaries' equity and cash flows for the period of January 1, 1999 to
October 26, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Capstar Trust as of
October 26, 1999, and the results of its operations and its cash flows for the
period of January 1, 1999 to October 26, 1999 in conformity with generally
accepted accounting principles.
Weeks Holderbaum Huber & DeGraw LLP
January 21, 2000
F-46
<PAGE>
CAPSTAR TRUST
BALANCE SHEET
October 26, 1999
<TABLE>
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents....................................... $ 567,697
Accounts receivable, less allowance for doubtful accounts of
$71,838........................................................ 585,355
Other current assets............................................ 31,350
------------
Total Current Assets.......................................... 1,184,402
Property, Plant and Equipment--Net................................ 1,943,749
Intangible Assets--Net............................................ 7,464,336
Security Deposits................................................. 2,005
------------
Total assets...................................................... $ 10,594,492
============
LIABILITY AND BENEFICIARIES' EQUITY
Current Liability:
Accounts payable and accrued expenses........................... $ 247,834
Beneficiaries' Equity........................................... 10,346,658
------------
Total liabilities and beneficiaries' equity................... $ 10,594,492
============
</TABLE>
The Notes to Financial Statements are an Integral Part of this Statement
F-47
<PAGE>
CAPSTAR TRUST
STATEMENT OF OPERATIONS AND BENEFICIARIES' EQUITY
For the period of January 1, 1999 to October 26, 1999
<TABLE>
<S> <C>
Revenues:
Broadcast revenue................................................ $ 3,578,756
Less: agency commissions......................................... (249,121)
-----------
Net Broadcast Revenue.......................................... 3,329,635
Other Non-broadcast Revenue...................................... 7,734
-----------
Total Revenue.................................................. 3,337,369
Expenses:
Programming and technical........................................ 638,370
Sales and advertising............................................ 1,096,967
Administrative................................................... 640,153
-----------
Total Expenses................................................. 2,375,490
-----------
Income from Operations............................................. 961,879
Other (Income) Expenses:
Depreciation..................................................... 144,592
Amortization..................................................... 172,174
Other expenses................................................... 47,693
Interest income.................................................. (13,731)
-----------
Total Other (Income) Expenses.................................. 350,728
-----------
Net Income......................................................... 611,151
Beneficiaries' Equity at Beginning of Period....................... 10,485,507
Distributions to Beneficiary....................................... (750,000)
-----------
Beneficiaries' Equity at End of Period............................. $10,346,658
===========
</TABLE>
The Notes to Financial Statements are an Integral Part of this Statement
F-47--1
<PAGE>
CAPSTAR TRUST
STATEMENT OF CASH FLOWS
For the period of January 1, 1999 to October 26, 1999
<TABLE>
<S> <C>
Cash Flows From Operating Activities:
Net income....................................................... $ 611,151
Adjustments to Reconcile Net income to Net Cash Provided by
Operating Activities:
Depreciation and amortization.................................... 316,766
Bad debt (recovery).............................................. (41,519)
Increase in accounts receivable.................................. (74,106)
Decrease in other current asset.................................. 6,553
Increase in accounts payable..................................... 158,874
---------
Total Adjustments.............................................. 366,568
---------
Net cash provided by operating activities.......................... 977,719
Cash Flows From Investing Activities:
Purchase of property and equipment............................... (159,953)
Cash Flows from Financing Activities:
Distributions to beneficiary..................................... (750,000)
---------
Net Increase in Cash and Cash Equivalents.......................... 67,766
Cash and Cash Equivalents at Beginning of Period................... 499,931
---------
Cash and Cash Equivalents at End of Period......................... $ 567,697
=========
</TABLE>
The Notes to Financial Statements are an Integral Part of this Statement
F-47--2
<PAGE>
CAPSTAR TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Business
Capstar Trust (the Company) operates several radio stations in the
Danbury, Connecticut area. The Company commenced operations on May 29, 1999
upon the contribution of the assets by the grantor. The Company derives its
revenue primarily from the sale of radio advertising.
Contribution of Assets
On May 29, 1999, Capstar Broadcasting Corporation (the Grantor)
contributed all of the rights, title, interest and obligations in all of the
assets, properties, contracts, leases and agreements of four radio stations
known by the call letters WRKI, WAXB, WPUT and WINE to the Trust.
Revenue Recognition
Broadcasting operations derive revenue primarily from the sale of
program time and commercial announcements to local, regional and national
advertisers. Revenue is recognized when the program and commercial
announcements are broadcast.
Advertising Costs
The Company incurs various marketing and promotional costs to add and
maintain listenership. These are expensed as incurred.
Use of Estimates
The process of preparing financial statements in conformity with
generally accepted accounting principles requires the use of estimates and
assumptions regarding certain types of assets, liabilities, revenues and
expenses. Such estimates primarily relate to unsettled transactions and events
as of the date of the financial statements. Accordingly, upon settlement,
actual results may differ from those estimates.
Concentration of Credit Risk
The Company maintains balances in a money market fund. Such balances are
not FDIC insured.
The Company periodically maintains cash balances in excess of the FDIC
insurance limit in its financial institution.
The radio broadcasting industry is subject to federal regulation by the
Federal Communications Commission. These governmental regulations and policies
could change over time and there can be no assurance that such changes would
not have a material impact upon the Company.
The Company's revenue and accounts receivable primarily relates to
advertising of products and services within the radio stations' broadcast
areas. The Company performs ongoing credit evaluations of its customers'
financial condition and, generally requires no collateral from its customers.
Credit losses have been within management's expectations and adequate
allowances for any uncollectible accounts receivable are maintained.
F-47--3
<PAGE>
CAPSTAR TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
Property and Equipment
The cost of property and equipment is depreciated over the estimated
useful lives of the related assets. Leasehold improvements are depreciated over
the lesser of the term of the related lease or the estimated useful lives of
the assets. Depreciation is computed on the straight-line method for financial
reporting purposes and double declining balance method for income tax purposes.
Maintenance and repairs are charged to operations when incurred.
Betterments and renewals are capitalized. When property and equipment are sold
or otherwise disposed of, the asset account and related accumulated
depreciation account are relieved, and any gain or loss is included in
operations.
The useful lives of property and equipment for purposes of computing
depreciation are:
<TABLE>
<S> <C>
Office equipment.............................................. 3-7 years
Studio equipment.............................................. 7-10 years
Leasehold improvements........................................ 10-20 years
Buildings and broadcast tower................................. 20 years
</TABLE>
Income Taxes
The Company is treated as a grantor trust for tax purposes. Accordingly,
the items of income, loss and credit are taxed directly to the beneficiary.
Cash Flows
For purposes of the statement of cash flows, cash equivalents include
time deposits, certificates of deposits, and all highly liquid debt instruments
with original maturities of three months or less.
There were no cash payments for interest and income taxes.
Barter Transactions
The Company barters unsold advertising time for products and services.
Such transactions are recorded at the estimated fair value of the products or
services received. Barter revenue is recorded when commercials are broadcast,
and related expenses are recorded when the bartered product or service is used.
The fair value of barter and trade-out transactions is included in
broadcasting revenue and broadcasting expense. Barter transactions charged to
operations were as follows:
<TABLE>
<S> <C>
Trade sales....................................................... $ 484,938
Trade expense..................................................... (526,372)
---------
Net Trade Out................................................... $ (41,434)
=========
</TABLE>
F-47--4
<PAGE>
CAPSTAR TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
NOTE 2--PROPERTY, PLANT AND EQUIPMENT
Property and equipment consisted of the following at October 26, 1999:
<TABLE>
<S> <C>
Land, building and improvements.................................. $ 999,636
Vehicles......................................................... 3,290
Studio and transmission equipment................................ 1,206,141
Office equipment and fixtures.................................... 193,599
----------
Total.......................................................... 2,402,666
Less: accumulated depreciation (458,917)
----------
Net Property and Equipment....................................... $1,943,749
==========
</TABLE>
Depreciation expense changed to operations amounted to $144,592 for the
period.
NOTE 3--INTANGIBLE ASSETS
Intangible assets consisted of the following at October 26, 1999:
<TABLE>
<CAPTION>
Amortization
Period
------------
<S> <C> <C>
FCC license......................................... 40 years $8,003,448
Goodwill............................................ 40 years 32,000
Favorable lease..................................... 9 years 56,108
-------- ----------
Total............................................... 8,091,556
Less: accumulated amortization...................... (627,220)
-------- ----------
Net Intangible Assets............................... $7,464,336
======== ==========
</TABLE>
Amortization expense changed to operations amounted to $172,174 for the
period.
The Company periodically evaluates intangible assets for potential
impairment by analyzing the operating results, future cash flows on an
undiscounted basis, trends and prospects of the Company's stations, as well as
by comparing them to their competitors. The Company also takes into
consideration recent acquisition patterns within the broadcast industry, the
impact of recently enacted or potential FCC rules and regulations and any other
events or circumstances which might indicate potential impact. At this time, in
the opinion of management, no impairment has occurred.
NOTE 4--COMMITMENTS
Operating Leases
The Company leases office equipment under an operating lease expiring in
2003.
The Company also leases various tower facilities under operating leases
which do not currently have a definitive expiration date.
F-47--5
<PAGE>
CAPSTAR TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Company also contracts for a variety of services and equipment
through short term agreements and leases under cash or barter arrangements.
These agreements and leases are renewed or replaced at the end of their term at
the discretion of management.
Minimum future rentals under noncancelable operating leases having
remaining terms in excess of one year for each of the next five years and in
the aggregate are as follows:
<TABLE>
<S> <C>
Year ended October 26,
2000............................................................ $ 233,765
2001............................................................ 144,928
2002............................................................ 141,832
2003............................................................ 150,066
2004............................................................ 50,793
---------
Total Minimum Lease Payments.................................. $ 721,384
=========
</TABLE>
NOTE 6--PENSION PLAN
The Company has a 401(k) Profit Sharing Plan covering all full time
employees meeting eligibility requirements. The Company matches fifty percent
of the employees contributions up to six percent of compensation. For the
period ended October 26, 1999, the Company contributed $14,148.
NOTE 7--SUBSEQUENT SALE OF CAPSTAR TRUST
On October 27, 1999, the assets, excluding cash, and equivalents, and
accounts receivable, of the Capstar Trust were purchased by Aurora
Communications, LLC. The gross proceeds from the sale were $11,273,787.
F-47--6
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustee
Capstar Trust
We have audited the accompanying balance sheet of Capstar Trust (a trust)
as of December 31, 1998, and the related statements of operations and
beneficiaries' equity and cash flows for the period May 29, 1998 (date of
inception) to December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Capstar Trust as of
December 31, 1998, and the results of its operations and its cash flows for the
period of May 29, 1998 (date of inception) to December 31, 1998 in conformity
with generally accepted accounting principles.
Weeks Holderbaum Huber & DeGraw LLP
February 11, 1999
(except for Note 7, as to
which the date is October
27, 1999)
F-47--7
<PAGE>
CAPSTAR TRUST
BALANCE SHEET
December 31, 1998
<TABLE>
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................................ $ 499,931
Accounts receivable, less allowance for doubtful accounts of
$113,357........................................................ 469,730
Other current assets............................................. 37,903
-----------
Total Current Assets........................................... 1,007,564
Property, Plant and Equipment--Net................................. 1,927,705
Intangible Assets--Net............................................. 7,637,193
Security Deposits.................................................. 2,005
-----------
TOTAL ASSETS..................................................... $10,574,467
===========
LIABILITY AND BENEFICIARIES' EQUITY
Current Liability:
Accounts payable and accrued expenses............................ 88,960
Beneficiaries' Equity............................................ 10,485,507
-----------
TOTAL LIABILITIES AND BENEFICIARIES' EQUITY.................... $10,574,467
===========
</TABLE>
The Notes to Financial Statements are an Integral Part of this Statement
F-47--8
<PAGE>
CAPSTAR TRUST
STATEMENT OF OPERATIONS AND BENEFICIARIES' EQUITY
For the period of May 29, 1998 (date of inception) to December 31, 1998
<TABLE>
<S> <C>
Revenues:
Broadcast revenue................................................ $ 2,329,270
Less: agency commissions......................................... (155,879)
-----------
Net Broadcast Revenue.......................................... 2,173,391
Other Non-broadcast Revenue...................................... 6,016
Total Revenue.................................................. 2,179,407
Expenses:
Programming and technical........................................ 398,393
Sales and advertising............................................ 807,306
Administrative................................................... 420,998
-----------
Total Expenses................................................. 1,626,697
-----------
Income from Operations............................................. 552,710
Other (Income) Expenses:
Corporate Expense................................................ 33,112
Depreciation..................................................... 87,606
Amortization..................................................... 121,236
Interest income.................................................. (8,348)
-----------
Total Other (Income) Expenses.................................. 233,606
-----------
Net Income......................................................... 319,104
Beneficiaries' Equity at Beginning of Period....................... --
Contributed Capital................................................ 10,416,403
Distributions to Beneficiary....................................... (250,000)
-----------
Beneficiaries' Equity at End of Period............................. $10,485,507
===========
</TABLE>
The Notes to Financial Statements are an Integral Part of this Statement
F-47--9
<PAGE>
CAPSTAR TRUST
STATEMENT OF CASH FLOWS
For the period May 29, 1998 (date of inception) to December 31, 1998
<TABLE>
<S> <C>
Cash Flows From Operating Activities:
Net income....................................................... $ 319,104
Adjustments to Reconcile Net income to Net Cash Provided by
Operating Activities:
Depreciation and amortization.................................. 208,842
Bad debt provision (recovery).................................. 20,009
Decrease in accounts receivable................................ 173,358
Increase in other current assets............................... (22,785)
Payment of security deposits................................... (380)
Increase in accounts payable................................... 88,960
-----------
Total Adjustments............................................ 468,004
-----------
NET CASH PROVIDED BY OPERATING ACTIVITIES.................... 787,108
Cash Flows From Investing Activities:
Organization costs............................................. (3,442)
Purchase of property and equipment............................. (34,535)
-----------
NET CASH USED BY INVESTING ACTIVITIES........................ (37,977)
Cash Flows from Financing Activities:
Payment of distribution to beneficiary......................... (250,000)
-----------
Net Increase in Cash and Cash Equivalents...................... 499,131
Cash and Cash Equivalents at Beginning of Period............... 800
-----------
Cash and Cash Equivalents at End of Period..................... $ 499,931
===========
Summary of Noncash Financing Activities:
Contribution of assets by grantor.............................. $10,416,403
===========
</TABLE>
The Notes to Financial Statements are an Integral Part of this Statement
F-47--10
<PAGE>
CAPSTAR TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Business
Capstar Trust (the Company) operates several radio stations in the
Danbury, Connecticut area. The Company commenced operations on May 29, 1998
upon the contribution of the assets by the grantor. The Company derives its
revenue primarily from the sale of radio advertising.
Contribution of Assets
On May 29, 1998, Capstar Broadcasting Corporation (the Grantor)
contributed all of the rights, title, interest and obligations in all of the
assets, properties, contracts, leases and agreements of four radio stations
known by the call letters WRKI, WAXB, WPUT and WINE to the Trust.
Revenue Recognition
Broadcasting operations derive revenue primarily from the sale of
program time and commercial announcements to local, regional and national
advertisers. Revenue is recognized when the program and commercial
announcements are broadcast.
Advertising Costs
The Company incurs various marketing and promotional costs to add and
maintain listenership. These are expensed as incurred.
Use of Estimates
The process of preparing financial statements in conformity with
generally accepted accounting principles requires the use of estimates and
assumptions regarding certain types of assets, liabilities, revenues and
expenses. Such estimates primarily relate to unsettled transactions and events
as of the date of the financial statements. Accordingly, upon settlement,
actual results may differ from those estimates.
Concentration of Credit Risk
The Company maintains balances in a money market fund. Such balances are
not FDIC insured.
The Company periodically maintains cash balances in excess of the FDIC
insurance limit in its financial institution.
The radio broadcasting industry is subject to federal regulation by the
Federal Communications Commission. These governmental regulations and policies
could change over time and there can be no assurance that such changes would
not have a material impact upon the Company.
The Company's revenue and accounts receivable primarily relates to
advertising of products and services within the radio stations' broadcast
areas. The Company performs ongoing credit evaluations of its customers'
financial condition and, generally requires no collateral from its customers.
Credit losses have been within management's expectations and adequate
allowances for any uncollectible accounts receivable are maintained.
F-47--11
<PAGE>
CAPSTAR TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
Property and Equipment
The cost of property and equipment is depreciated over the estimated
useful lives of the related assets. Leasehold improvements are depreciated over
the lesser of the term of the related lease or the estimated useful lives of
the assets. Depreciation is computed on the straight-line method for financial
reporting purposes and double declining balance method for income tax purposes.
Maintenance and repairs are charged to operations when incurred.
Betterments and renewals are capitalized. When property and equipment are sold
or otherwise disposed of, the asset account and related accumulated
depreciation account are relieved, and any gain or loss is included in
operations.
The useful lives of property and equipment for purposes of computing
depreciation are:
<TABLE>
<S> <C>
Office equipment................................................. 3-7 years
Studio equipment................................................. 7-10 years
Leasehold improvements........................................... 10-20 years
Buildings and broadcast tower.................................... 20 years
</TABLE>
Income Taxes
The Company is treated as a grantor trust for tax purposes. Accordingly,
the items of income, loss and credit are taxed directly to the beneficiary.
Cash Flows
For purposes of the statement of cash flows, cash equivalents include
time deposits, certificates of deposits, and all highly liquid debt instruments
with original maturities of three months or less.
Cash paid for interest and income taxes are as follows:
<TABLE>
<S> <C>
Interest............................................................... $ --
Income taxes........................................................... --
</TABLE>
Barter Transactions
The Company barters unsold advertising time for products and services.
Such transactions are recorded at the estimated fair value of the products or
services received. Barter revenue is recorded when commercials are broadcast,
and related expenses are recorded when the bartered product or service is used.
The fair value of barter and trade-out transactions is included in
broadcasting revenue and broadcasting expense. Barter transactions charged to
operations were as follows:
<TABLE>
<S> <C>
Trade sales....................................................... $ 359,909
Trade expense..................................................... (423,317)
---------
Net Trade Out................................................... $ (63,408)
=========
</TABLE>
F-47--12
<PAGE>
CAPSTAR TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
NOTE 2--PROPERTY, PLANT AND EQUIPMENT
Property and equipment consisted of the following at December 31, 1998:
<TABLE>
<S> <C>
Land, building and improvements.................................. $ 992,917
Vehicles......................................................... 3,290
Studio and transmission equipment................................ 1,124,535
Office equipment and fixtures.................................... 121,971
----------
Total.......................................................... 2,242,713
Less: accumulated depreciation................................... (315,008)
----------
Net Property and Equipment....................................... $1,927,705
==========
</TABLE>
Depreciation charged to operations amounted to $87,606.
NOTE 3--INTANGIBLE ASSETS
Intangible assets consisted of the following at December 31, 1998:
<TABLE>
<S> <C>
FCC license...................................................... $8,003,448
Goodwill......................................................... 32,000
Favorable lease.................................................. 56,108
Organization costs............................................... 3,442
----------
Total.......................................................... 8,094,998
Less: accumulated amortization................................... (457,805)
----------
$7,637,193
==========
</TABLE>
Amortization charged to operations amount to $121,236.
The Company periodically evaluates intangible assets for potential
impairment by analyzing the operating results, future cash flows on an
undiscounted basis, trends and prospects of the Company's stations, as well as
by comparing them to their competitors. The Company also takes into
consideration recent acquisition patterns within the broadcast industry, the
impact of recently enacted or potential FCC rules and regulations and any other
events or circumstances which might indicate potential impact. At this time, in
the opinion of management, no impairment has occurred.
Note 4--Commitments
Operating Leases
The Company leases office equipment under an operating lease expiring in
2003.
The Company also leases various tower facilities under operating leases
which do not currently have a definitive expiration date.
F-47--13
<PAGE>
CAPSTAR TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Company also contracts for a variety of services and equipment
through short term agreements and leases under cash or barter arrangements.
These agreements and leases are renewed or replaced at the end of their term at
the discretion of management.
Note 3--Intangible Assets
Intangible assets consisted of the following at December 31, 1998:
<TABLE>
<S> <C>
FCC license...................................................... $8,003,448
Goodwill......................................................... 32,000
Favorable lease.................................................. 56,108
Organization costs............................................... 3,442
----------
Total.......................................................... 8,094,998
Less: accumulated amortization................................... (457,805)
----------
Net Intangible Assets............................................ $7,637,193
==========
</TABLE>
Amortization charged to operations amounted to $121,236.
The Company periodically evaluates intangible assets for potential
impairment by analyzing the operating results, future cash flows on an
undiscounted basis, trends and prospects of the Company's stations, as well as
by comparing them to their competitors. The Company also takes into
consideration recent acquisition patterns within the broadcast industry, the
impact of recently enacted or potential FCC rules and regulations and any other
events or circumstances which might indicate potential impact. At this time, in
the opinion of management, no impairment has occurred.
Note 4--Commitments
Operating Leases
The Company leases office equipment under an operating lease expiring in
2003.
The Company also leases various tower facilities under an operating lease
which do not currently have a definitive expiration date.
The Company also contracts for a variety of services and equipment
through short term agreements and leases under cash or barter arrangements.
These agreements and leases are renewed or replaced at the end of their term at
the discretion of management.
F-47--14
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Members
Westchester Radio, LLC
We have audited the accompanying balance sheet of Westchester Radio, LLC
(a limited liability company) as of October 26, 1999, and the related
statements of operations and members' deficiency and cash flows for the period
of January 1, 1999 to October 26, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Westchester Radio,
LLC as of October 26, 1999, and the results of its operations and its cash
flows for the period of January 1, 1999 to October 26, 1999 in conformity with
generally accepted accounting principles.
Weeks Holderbaum Huber & DeGraw LLP
January 4, 2000
F-48
<PAGE>
WESTCHESTER RADIO, LLC
BALANCE SHEET
October 26, 1999
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...................................... $ 256,496
Accounts receivable, less allowance for doubtful accounts of
$55,000....................................................... 836,822
Other current assets........................................... 20,428
------------
Total current assets......................................... 1,113,746
PROPERTY, PLANT AND EQUIPMENT--NET............................... 2,440,304
Intangible assets--net......................................... 18,178,136
Security deposits.............................................. 7,732
------------
Total assets................................................. $ 21,739,918
============
LIABILITY AND MEMBERS' DEFICIENCY
CURRENT LIABILITIES:
Current maturities of long-term debt........................... $ 1,963,873
Accounts payable and accrued expenses.......................... 406,761
------------
Total current liabilities.................................... 2,370,634
LONG-TERM DEBT................................................... 38,167,660
MEMBERS' DEFICIENCY.............................................. (18,798,376)
------------
TOTAL LIABILITIES AND MEMBERS' DEFICIENCY.................... $ 21,739,918
============
</TABLE>
The Notes to Financial Statements are an Integral Part of this Statement
F-49
<PAGE>
WESTCHESTER RADIO, LLC
STATEMENT OF OPERATIONS AND MEMBERS' DEFICIENCY
For the Period of January 1, 1999 to October 26, 1999
<TABLE>
<S> <C>
Revenues:
Broadcast revenue.............................................. $ 4,228,178
Less: agency commissions....................................... (396,621)
------------
Net broadcast revenue........................................ 3,831,557
Other non broadcast revenue...................................... 120,071
------------
Total revenue................................................ 3,951,628
Expenses:
Programming and technical...................................... 623,392
Sales and advertising.......................................... 1,133,766
Administrative................................................. 899,211
------------
Total expenses............................................... 2,656,369
------------
Income from operations........................................... 1,295,259
Other (income) expenses:
Partnership administration..................................... 204,584
Depreciation................................................... 124,838
Amortization................................................... 783,090
Loss on impairment of intangible assets........................ 13,250,000
Interest expense............................................... 3,376,846
Interest income................................................ (6,851)
------------
Total other (income) expenses................................ 17,732,507
------------
NET LOSS..................................................... (16,437,248)
Members' deficiency at beginning of period....................... (2,361,128)
------------
Members' deficiency at end of period............................. $(18,798,376)
============
</TABLE>
The Notes to Financial Statements are an Integral Part of this Statement
F-50
<PAGE>
WESTCHESTER RADIO, LLC
STATEMENT OF CASH FLOWS
For the Period of January 1, 1999 to October 26, 1999
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss........................................................ $(16,437,248)
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation and amortization................................. 907,928
Loss on impairment of intangible assets....................... 13,250,000
Noncash interest accrued on long-term obligations............. 1,740,921
Decrease in accounts receivable............................... 135,340
Decrease in other current assets.............................. 25,590
Increase in accounts payable.................................. 97,699
Recovery of security deposits................................. 695
------------
Total adjustments........................................... 16,158,173
------------
Net cash used by operating activities....................... (279,075)
Cash flows from investing activities:
Purchase of property and equipment............................ (81,496)
Cash flows from financing activities:
Proceeds from member loans.................................... 1,359,548
Repayment of bank loans....................................... (937,500)
Principle payments on installment obligation.................. (2,952)
------------
Net cash provided by financing activities................... 419,096
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 58,525
Cash and cash equivalents at beginning of period................ 197,971
------------
Cash and cash equivalents at end of period...................... $ 256,496
============
</TABLE>
The Notes to Financial Statements are an Integral Part of this Statement
F-51
<PAGE>
WESTCHESTER RADIO, LLC
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Business
Westchester Radio, LLC (the Company) operates several radio stations in
Westchester County, New York. The Company commenced operations on April 2, 1999
with the contribution of the assets of WFAS-FM, WFAS-AM and WZZN-FM from
Commodore Media of Westchester, Inc. The Company derives its revenue primarily
from the sale of radio advertising.
Acquisition of Assets
On April 2, 1999, the Company acquired the net assets and FCC license of
WFAS-FM, WFAS-AM and WZZN-FM (the Stations) from Commodore Media of
Westchester, Inc. in a business combination accounted for as a purchase. The
total cost of the acquisition was $35,500,000, which exceeded the fair value of
the net assets of the stations by $32,332,961, which has been allocated to the
stations FCC license and goodwill. The excess is being amortized on the
straight line method over forty years. (See note 3 and 9)
Revenue Recognition
Broadcasting operations derive revenue primarily from the sale of program
time and commercial announcements to local, regional and national advertisers.
Revenue is recognized when the program and commercial announcements are
broadcast.
Advertising Costs
The Company incurs various marketing and promotional costs to add and
maintain listenership. These costs are expensed as incurred.
Use of Estimates
The process of preparing financial statements in conformity with
generally accepted accounting principles requires the use of estimates and
assumptions regarding certain types of assets, liabilities, revenues and
expenses. Such estimates primarily relate to unsettled transactions and events
as of the date of the financial statements. Accordingly, upon settlement,
actual results may differ from those estimates.
Concentration of Credit Risk
In the ordinary course of business, the Company maintains cash balances
in a money market fund. Such balances are not FDIC insured.
The Company periodically maintains cash balances with financial
institutions in excess of the $100,000 FDIC insurance limit.
The Company's business activity is with customers located within the
immediate geographic area. Blocks of advertising time are generally sold on
credit on standard business terms.
The Company's revenue and accounts receivable primarily relates to
advertising of products and services within the radio stations' broadcast
areas. The Company performs ongoing credit evaluations of its
F-52
<PAGE>
WESTCHESTER RADIO, LLC
NOTES TO FINANCIAL STATEMENTS--(Continued)
customers' financial condition and generally requires no collateral from its
customers. Credit losses have been within management's expectations and
adequate allowances for any uncollectible accounts receivables are maintained.
The radio broadcasting industry is subject to federal regulation by the
Federal Communications Commission. These governmental regulations and policies
could change over time and there can be no assurance that such changes would
not have a material impact upon the Company.
Property and Equipment
The cost of property and equipment is depreciated over the estimated
useful lives of the related assets. Leasehold improvements are depreciated over
the lesser of the term of the related lease or the estimated useful lives of
the assets. Depreciation is computed on the straight line method for financial
reporting purposes and double declining balance method for income tax purposes.
Maintenance and repairs are charged to operations when incurred.
Betterments and renewals are capitalized. When property and equipment are sold
or otherwise disposed of, the asset account and related accumulated
depreciation account are relieved, and any gain or loss is included in
operations.
The useful lives of property and equipment for purposes of computing
depreciation are:
<TABLE>
<S> <C>
Office equipment................................................. 5-7 years
Studio equipment................................................. 7 years
Building, leasehold improvements and tower....................... 10-40 years
</TABLE>
Debt Acquisition Costs
Legal and banking fees and other expenses associated with acquisition of
the bank financing are being amortized using the interest method over the term
of the underlying note. Amortization expense charged to operations for the
period was $109,487.
Income Taxes
The Company, a limited liability company, has elected to be treated as a
partnership for income tax purposes. Accordingly, the items of income, loss and
credit are taxed directly to the members.
Cash Flows
For purposes of the statement of cash flows, cash equivalents include
time deposits, certificates of deposits, and all highly liquid debt instruments
with original maturities of three months or less.
Cash paid for interest and income taxes are as follows:
<TABLE>
<S> <C>
Interest.......................................................... $1,458,846
Income taxes...................................................... --
</TABLE>
F-53
<PAGE>
WESTCHESTER RADIO, LLC
NOTES TO FINANCIAL STATEMENTS--(Continued)
Barter Transactions
The Company barters unsold advertising time for products and services.
Such transactions are recorded at the estimated fair value of the products or
services received. Barter revenue is recorded when commercials are broadcast
and related expenses are recorded when the bartered product or service is used.
The fair value of barter and trade-out transactions is included in
broadcasting revenue and broadcasting expense. Barter transactions charged to
operations were as follows for the period of January 1, 1999 to October 26,
1999:
<TABLE>
<S> <C>
Trade sales...................................................... $ 753,875
Trade expense.................................................... (809,810)
---------
Net Trade Out Transactions....................................... $ (55,935)
=========
</TABLE>
NOTE 2--PROPERTY, PLANT AND EQUIPMENT
Property and equipment consisted of the following at October 26, 1999:
<TABLE>
<S> <C>
Land............................................................. $ 573,900
Buildings and leasehold improvements............................. 975,469
Studio and transmission equipment................................ 827,714
Music library.................................................... 3,500
Office equipment and fixtures.................................... 235,120
Property held under capital lease................................ 21,215
----------
Total.......................................................... 2,636,918
Less: accumulated depreciation................................... (196,614)
----------
Net Property and Equipment....................................... $2,440,304
==========
</TABLE>
Depreciation charged to operations amounted to $124,838 for the period.
Property and equipment are pledged as collateral for bank loans (See Note
4).
NOTE 3--INTANGIBLE ASSETS
Intangible assets consisted of the following at October 26, 1999:
<TABLE>
<S> <C>
FCC license..................................................... $16,832,961
Goodwill........................................................ 2,250,000
Debt acquisition costs.......................................... 580,500
-----------
Total......................................................... 19,663,461
Less: accumulated amortization.................................. (1,485,325)
-----------
Net Intangible Assets........................................... $18,178,136
===========
</TABLE>
Amortization charged to operations amounted to $783,090 for the period.
F-54
<PAGE>
WESTCHESTER RADIO, LLC
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Company periodically evaluates intangible assets for potential
impairment by analyzing the operating results, future cash flows on an
undiscounted basis, trends and prospects of the Company's stations, as well as
by comparing them to their competitors. The Company also takes into
consideration recent acquisition patterns within the broadcast industry, the
impact of recently enacted or potential FCC rules and regulations and any other
events or circumstances which might indicate potential impact.
During the period, certain intangible assets (Goodwill) that was acquired
in 1998 were deemed to be impaired. This impairment arouse due to the
subsequent sale of the stations assets, which is more fully described in note
9. As a result, Goodwill has been written down by $13,250,000. The write off of
Goodwill is included in the Financial Statement as Loss on Impairment.
NOTE 4--LONG-TERM DEBT
Long-term debt consists of the following at October 26, 1999:
<TABLE>
<S> <C>
Line of credit--bank
Interest payable quarterly in arrears at 10%, matures April
2004, Secured by all assets of the company and guaranteed by
the parent corporation of a member; maximum available credit
$1,000,000..................................................... $ 397,500
Term obligation--bank
Interest at 10% payable quarterly in arrears, quarterly payments
of principal which are currently $312,500. Matures April 2004,
secured by all assets of the company and guaranteed by the
parent corporation of a member................................. 23,125,000
Loan payable
This obligation is the result of the payments by the guarantor
of the bank obligations above of interest and principle on
behalf of the Company. This obligation has no stated interest
and no maturity date (see note 7).............................. 3,290,241
Note payable--This note has a face value in the amount of
$56,884,769 due April 2008. Interest accrues on this obligation
at 18% per annum through April 2008. (See Note 7)................ 13,302,279
Capital Lease Obligation.......................................... 16,513
-----------
Total Long-term Debt.......................................... 40,131,533
Less: Current Portion......................................... (1,963,873)
-----------
Long-term Debt................................................ $38,167,660
===========
</TABLE>
The following are the maturities of long-term debt for each of the next
five years:
<TABLE>
<S> <C>
Year Ending October 26,
2000............................................................ $ 1,960,000
2001............................................................ 1,875,000
2002............................................................ 2,187,500
2003............................................................ 9,375,000
2004............................................................ 8,125,000
-----------
$23,522,500
===========
</TABLE>
At October 26, 1999, the Company had $602,500 of unused lines of credit
with a bank to be drawn upon as needed.
F-55
<PAGE>
WESTCHESTER RADIO, LLC
NOTES TO FINANCIAL STATEMENTS--(Continued)
On October 27, 1999 the bank obligations were repaid from the proceeds of
the sale (Note 9) and payments by a member under their guarantee obligation.
The bank loan agreements contain various covenants pertaining to the
maintenance of various record keeping, reporting and ratio requirements.
Specifically, at October 26, 1999, the Company was in default of the
covenants related to the maintenance of its leverage ratio, interest coverage
ratio, and net broadcast earnings.
Under the terms of the agreement, the bank may call the loan if the
Company is in violation of any restrictive covenant. However, the obligations
have subsequently been fully repaid.
Capital Lease
The Company is the lessee of office equipment under capital leases
expiring in various years through 2003. The assets and liabilities under
capital leases are recorded at the lower of the present value of the minimum
lease payments or the fair value of the asset. The assets are depreciated over
the lower of their related lease terms or their estimated productive lives.
Depreciation of assets under capital leases is included in depreciation expense
for the period.
Depreciation on assets under capital leases charged to expense for the
period was $4,690.
Following is a summary of property held under capital leases:
<TABLE>
<S> <C>
Phone System...................................................... $21,215
Less: Accumulated depreciation.................................... (6,205)
-------
Net............................................................... $15,010
=======
</TABLE>
Minimum future lease payments under capital leases as of October 26, 1999
for each of the next five years and in the aggregate are:
<TABLE>
<S> <C>
Year Ended October 26, 1999:
2000............................................................ $ 5,352
2001............................................................ 5,352
2002............................................................ 5,352
2003............................................................ 3,122
-------
Total minimum lease payments.................................. 19,178
Less: Amount representing interest................................ (2,665)
-------
Present value of net minimum lease payments....................... $16,513
=======
</TABLE>
Interest rates on this capitalized lease is 14.35% and is imputed based
on the lower of company's incremental borrowing rate at the inception of the
lease or the lessor's implicit rate of return.
F-56
<PAGE>
WESTCHESTER RADIO, LLC
NOTES TO FINANCIAL STATEMENTS--(Continued)
NOTE 5--COMMITMENTS
Guarantee of Indebtedness
The Company has guaranteed the 13 1/4% senior subordinated notes dated
April 2, 1995 which have a principal value of $76,808,000 of Capstar Radio
Broadcasting Partners, Inc., the parent corporation of the Company's nonvoting
member.
Employment Contract
The Company has entered into an employment contract with its managing
member through April 2000 that provides for a minimum annual salary. At
October 26, 1999, the total commitment was $150,000 per annum.
Operating Leases
The Company leases various tower facilities under operating leases which
have various expiration dates.
The Company also contracts for a variety of services and equipment
through short term agreements and leases under cash or barter arrangements.
These agreements and leases are renewed or replaced at the end of their term
at the discretion of management.
Minimum future rentals under noncancelable operating leases having
remaining terms in excess of one year for each of the next five years and in
the aggregate are as follows:
<TABLE>
<S> <C>
Year ended October 26,
2000............................................................ $ 7,500
2001............................................................ 7,500
2002............................................................ 7,500
2003............................................................ 7,500
2004............................................................ 7,500
-------
Total Minimum Lease Payments.................................. $37,500
=======
</TABLE>
NOTE 6--PENSION PLAN
The Company has a 401(k) Profit Sharing Plan covering all full time
employees meeting eligibility requirements. The Company matches fifty percent
of the employees contributions up to six percent of compensation. For the
period ended October 26, 1999, the Company contributed $15,052.
NOTE 7--RELATED PARTIES
As part of the acquisition of the stations, the Company borrowed from the
parent corporation of one of its members, moneys to complete the acquisition.
The note has a face value of $56,884,769 and is due in April 2008. The note
has been discounted to its present value at the rate of 18% and was,
accordingly, assigned a value of $10,150,000 and is subordinate to the bank
obligations.
The Company, subsequent to the contribution of the net assets of
Commodore Media of Westchester Inc., refinanced those assets and distributed
$35,000,000 of the proceeds to its member.
F-57
<PAGE>
WESTCHESTER RADIO, LLC
NOTES TO FINANCIAL STATEMENTS--(Continued)
The note including accumulated interest is convertible at the option of
the holder at any time, into a maximum of 13,000 member interests in the
company based on a prescribed formula (See Note 8).
The Company, as a result of its inability to cover principal and interest
payments on its bank lines as they came due, relied on the guarantee of a
member to meet the obligations. At October 26, 1999, the member had advanced a
total of $3,290,241 to the Company to meet its obligations.
NOTE 8--MEMBERS' EQUITY
The members of the Company have liability for the debts, obligations and
liabilities of the Company up to the amount of capital contributed to the
Company.
The Company is authorized to issue up to 14,000 limited liability company
interests which may be designated as voting interests or nonvoting interests
upon issuance. Subject to obtaining necessary consent, outstanding nonvoting
interests are convertible, at any time, upon the election of the holder into a
like number of voting interests.
At October 26, 1999, the Company had a total of 1,000 interests
outstanding, of which 700 were voting interests.
NOTE 9--SUBSEQUENT SALE OF THE COMPANY
On October 27, 1999, the tangible assets, FCC license and goodwill of the
company were purchased by Aurora of Westchester L.L.C. The total selling price
was $20,250,000.
F-58
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Members
Westchester Radio, LLC
We have audited the accompanying balance sheet of Westchester Radio, LLC
(a limited liability company) as of December 31, 1998, and the related
statements of operations and members' deficiency and cash flows for the period
April 2, 1998 (date of inception) to December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Westchester Radio,
LLC as of December 31, 1998, and the results of its operations and its cash
flows for the period of April 2, 1998 (date of inception) to December 31, 1998
in conformity with generally accepted accounting principles.
Weeks Holderbaum Huber & DeGraw LLP
February 19, 1999
(except for Note 9, as to which the date is October 27, 1999)
F-61
<PAGE>
WESTCHESTER RADIO, LLC
BALANCE SHEET
December 31, 1998
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....................................... $ 197,971
Accounts receivable, less allowance for doubtful accounts of
$111,673....................................................... 972,162
Other current assets............................................ 46,018
-----------
Total current assets.......................................... 1,216,151
PROPERTY, PLANT AND EQUIPMENT--NET................................ 2,483,646
Intangible assets--net............................................ 32,211,227
Security deposits................................................. 8,427
-----------
Total assets.................................................. $35,919,451
===========
LIABILITY AND MEMBERS' DEFICIENCY
CURRENT LIABILITIES:
Current maturities of long-term debt............................ $ 1,253,479
Accounts payable and accrued expenses........................... 309,062
-----------
Total current liabilities..................................... 1,562,541
LONG-TERM DEBT.................................................... 36,718,038
MEMBERS' DEFICIENCY............................................... (2,361,128)
-----------
Total liabilities and members' deficiency..................... $35,919,451
===========
</TABLE>
The notes to financial statements are an integral part of this statement.
F-62
<PAGE>
WESTCHESTER RADIO, LLC
STATEMENT OF OPERATIONS AND MEMBERS' DEFICIENCY
For the Period of April 2, 1998 (date of inception) to December 31, 1998
<TABLE>
<S> <C>
Revenues:
Broadcast revenue............................................... $ 4,036,192
Less: agency commissions........................................ (385,014)
-----------
Net broadcast revenue......................................... 3,651,178
-----------
Other non broadcast revenue....................................... 118,873
-----------
Total revenue................................................. 3,770,051
-----------
Expenses:
Programming and technical....................................... 605,440
Sales and advertising........................................... 1,009,839
Administrative.................................................. 777,257
-----------
Total expenses................................................ 2,392,536
-----------
Income from operations............................................ 1,377,515
Other (income) expenses:
Reorganization/start up cost.................................... 67,246
Depreciation.................................................... 71,776
Amortization.................................................... 702,234
Interest expense................................................ 3,248,178
Interest income................................................. (791)
-----------
Total other (income) expenses................................. 4,088,643
-----------
NET LOSS...................................................... (2,711,128)
Members' equity at beginning of period............................ --
Contributed capital............................................... 350,000
-----------
Members' deficiency at end of period.............................. $(2,361,128)
===========
</TABLE>
The notes to financial statements are an integral part of this statement.
F-63
<PAGE>
WESTCHESTER RADIO, LLC
STATEMENT OF CASH FLOWS
For the Period April 2, 1998 (date of inception) to December 31, 1998
<TABLE>
<S> <C>
Cash Flows From Operating Activities:
Net Loss....................................................... $(2,711,128)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.................................. 774,010
Bad debt provision (recovery).................................. (19,173)
Noncash interest accrued on long-term obligations.............. 1,411,358
Increase in accounts receivable................................ (135,834)
Increase in other current assets............................... (22,935)
Increase in accounts payable................................... 116,236
-----------
Total adjustments............................................ 2,123,662
-----------
Net cash used by operating activities........................ (587,466)
Cash flows from investing activities:
Acquisition of stations........................................ (35,500,000)
Purchase of property and equipment............................. (23,417)
-----------
Net cash used by investing activities........................ (35,523,417)
-----------
Cash flows from financing activities:
Proceeds from bank loans....................................... 25,580,000
Proceeds from member loans..................................... 12,080,778
Proceeds from capital contributions............................ 350,000
Repayment of bank loans........................................ (1,120,500)
Principle payments on installment obligation................... (1,624)
Payment of debt acquisition costs.............................. (580,000)
-----------
Net cash provided by financing activities.................... 36,308,654
-----------
NET INCREASE IN CASH AND CASH EQUIVALENTS.................... 197,771
Cash and cash equivalents at beginning of period................. 200
-----------
Cash and cash equivalents at end of period....................... $ 197,971
===========
Noncash financing activities:
Financing under capital lease.................................. $ 21,215
===========
</TABLE>
The notes to financial statements are an integral part of this statement.
F-64
<PAGE>
WESTCHESTER RADIO, LLC
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Business
Westchester Radio, LLC (the Company) operates several radio stations in
Westchester county, New York. The Company commenced operations on April 2, 1998
with the contribution of the assets of WFAS-FM, WFAS-AM and WZZN-FM from
Commodore Media of Westchester, Inc. The Company derives its revenue primarily
from the sale of radio advertising.
Contribution of Assets
On April 2, 1998, the Company acquired the net assets and FCC license of
WFAS-FM, WFAS-AM and WZZN-FM (the Stations) from Commodore Media of
Westchester, Inc. in a business combination accounted for as a purchase. The
results of operations of the acquired stations are included in the accompanying
financial statements since the date of acquisition. The total cost of the
acquisition was $35,500,000, which exceeded the fair value of the net assets of
the stations by $32,332,961, which has been allocated to the stations FCC
license and goodwill. The excess is being amortized on the straight line method
over forty years.
Revenue Recognition
Broadcasting operations derive revenue primarily from the sale of program
time and commercial announcements to local, regional and national advertisers.
Revenue is recognized when the program and commercial announcements are
broadcast.
Advertising Costs
The Company incurs various marketing and promotional costs to add and
maintain listenership. These are expensed as incurred.
Use of Estimates
The process of preparing financial statements in conformity with
generally accepted accounting principles requires the use of estimates and
assumptions regarding certain types of assets, liabilities, revenues and
expenses. Such estimates primarily relate to unsettled transactions and events
as of the date of the financial statements. Accordingly, upon settlement,
actual results may differ from those estimates.
Concentration of Credit Risk
In the ordinary course of business, the Company maintains cash balances
in a money market fund. Such balances are not FDIC insured.
The Company periodically maintains cash balances with financial
institutions in excess of the $100,000 FDIC insurance limit.
The Company's business activity is with customers located within the
immediate geographic area. Blocks of advertising time are generally sold on
credit on standard business terms.
F-65
<PAGE>
WESTCHESTER RADIO, LLC
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Company's revenue and accounts receivable primarily relates to
advertising of products and services within the radio stations' broadcast
areas. The Company performs ongoing credit evaluations of its customers'
financial condition and generally requires no collateral from its customers.
Credit losses have been within management's expectations and adequate
allowances for any uncollectible accounts receivables are maintained.
The radio broadcasting industry is subject to federal regulation by the
Federal Communications Commission. These governmental regulations and policies
could change over time and there can be no assurance that such changes would
not have a material impact upon the Company.
Property and Equipment
The cost of property and equipment is depreciated over the estimated
useful lives of the related assets. Leasehold improvements are depreciated over
the lesser of the term of the related lease or the estimated useful lives of
the assets. Depreciation is computed on the straight line method for financial
reporting purposes and double declining balance method for income tax purposes.
Maintenance and repairs are charged to operations when incurred.
Betterments and renewals are capitalized. When property and equipment are sold
or otherwise disposed of, the asset account and related accumulated
depreciation account are relieved, and any gain or loss is included in
operations.
The useful lives of property and equipment for purposes of computing
depreciation are:
<TABLE>
<S> <C>
Office equipment................................................. 5-7 years
Studio equipment................................................. 7 years
Building, leasehold improvements and tower....................... 10-40 years
</TABLE>
Debt Acquisition Costs
Legal and banking fees and other expenses associated with acquisition of
the bank financing are being amortized using the interest method over the term
of the underlying note. Amortization expense charged to operations in 1998 was
$95,991.
Income Taxes
The Company, a limited liability company, has elected to be treated as a
partnership for income tax purposes. Accordingly, the items of income, loss and
credit are taxed directly to the members.
Cash Flows
For purposes of the statement of cash flows, cash equivalents include
time deposits, certificates of deposits, and all highly liquid debt instruments
with original maturities of three months or less.
Cash paid for interest and income taxes are as follows:
<TABLE>
<S> <C>
Interest.......................................................... $1,836,820
Income taxes...................................................... --
</TABLE>
F-66
<PAGE>
WESTCHESTER RADIO, LLC
NOTES TO FINANCIAL STATEMENTS--(Continued)
Barter Transactions
The Company barters unsold advertising time for products and services.
Such transactions are recorded at the estimated fair value of the products or
services received. Barter revenue is recorded when commercials are broadcast
and related expenses are recorded when the bartered product or service is used.
The fair value of barter and trade-out transactions is included in
broadcasting revenue and broadcasting expense. Barter transactions charged to
operations were as follows for the period of April 2, 1998 to December 31,
1998:
<TABLE>
<S> <C>
Trade sales...................................................... $ 650,240
Trade expense.................................................... (712,658)
---------
Net trade out transactions..................................... $ (62,418)
=========
</TABLE>
NOTE 2--PROPERTY, PLANT AND EQUIPMENT
Property and equipment consisted of the following at December 31, 1998:
<TABLE>
<S> <C>
Land............................................................. $ 573,900
Buildings and leasehold improvements............................. 954,623
Studio and transmission equipment................................ 802,518
Music library.................................................... 3,500
Office equipment and fixtures.................................... 199,666
Property held under capital lease................................ 21,215
----------
Total.......................................................... 2,555,422
Less: accumulated depreciation................................... (71,776)
----------
Net property and equipment....................................... $2,483,646
==========
</TABLE>
Depreciation charged to operations amounted to $71,776 for the period
April 2, 1998 to December 31, 1998.
Property and equipment are pledged as collateral for bank loans (See Note
4).
NOTE 3--INTANGIBLE ASSETS
Intangible assets consisted of the following at December 31, 1998:
<TABLE>
<S> <C>
FCC license..................................................... $16,832,961
Goodwill........................................................ 15,500,000
Debt acquisition costs.......................................... 580,500
-----------
Total......................................................... 32,913,461
Less: accumulated amortization.................................. (702,234)
-----------
Net intangible assets........................................... $32,211,227
===========
</TABLE>
Amortization charged to operations amounted to $702,234 for the period
April 2, 1998 to December 31, 1998.
F-67
<PAGE>
WESTCHESTER RADIO, LLC
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Company periodically evaluates intangible assets for potential
impairment by analyzing the operating results, future cash flows on an
undiscounted basis, trends and prospects of the Company's stations, as well as
by comparing them to their competitors. The Company also takes into
consideration recent acquisition patterns within the broadcast industry, the
impact of recently enacted or potential FCC rules and regulations and any other
events or circumstances which might indicate potential impact. At this time, in
the opinion of management, no impairment has occurred.
NOTE 4--LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1998:
<TABLE>
<S> <C>
Line of credit--bank
Interest payable quarterly in arrears at 8.0625%, matures April
2004, Secured by all assets of the company and guaranteed by
the parent corporation of a member; maximum available credit
$1,000,000..................................................... $ 397,500
Term obligation--bank
Interest at 8.0625% payable quarterly in arrears, quarterly
payments of principal which are currently $312,500. Matures
April 2004, secured by all assets of the company and guaranteed
by the parent corporation of a member.......................... 24,062,500
Loan payable
This obligation is the result of the payments by the guarantor
of the bank obligations above of interest and principle on
behalf of the Company. This obligation has no stated interest
and no maturity date (see note 7).............................. 1,930,693
Note payable--This note has a face value in the amount of
$56,884,769 due April 2008. Interest accrues on this obligation
at 18% per annum through April 2008. (See Note 7)................ 11,561,358
-----------
Total long-term debt.......................................... 37,952,051
Less: Current Portion......................................... (1,250,000)
-----------
Long-term Debt................................................ $36,702,051
===========
</TABLE>
The following are the maturities of long-term debt for each of the next
five years:
<TABLE>
<S> <C>
Year Ending December 31,
1999........................................................... $ 1,250,000
2000........................................................... 1,718,750
2001........................................................... 1,875,000
2002........................................................... 2,343,750
2003........................................................... 12,812,125
-----------
$19,999,625
===========
</TABLE>
At December 31, 1998, the Company had $602,500 of unused lines of credit
with a bank to be drawn upon as needed.
The bank loan agreements contain various covenants pertaining to the
maintenance of various record keeping, reporting and ratio requirements.
F-68
<PAGE>
WESTCHESTER RADIO, LLC
NOTES TO FINANCIAL STATEMENTS--(Continued)
Specifically, at December 31, 1998, the Company was in default of the
covenants related to the maintenance of its leverage ratio, interest coverage
ratio, and net broadcast earnings.
Under the terms of the agreement, the bank may call the loan if the
Company is in violation of any restrictive covenant. As of February 19, 1999,
the bank had not waived the requirement.
Capital Lease
The Company is the lessee of office equipment under capital leases
expiring in various years through 2003. The assets and liabilities under
capital leases are recorded at the lower of the present value of the minimum
lease payments or the fair value of the asset. The assets are depreciated over
the lower of their related lease terms or their estimated productive lives.
Depreciation of assets under capital leases is included in depreciation expense
for 1998.
Depreciation on assets under capital leases charged to expense in 1998
was $1,515.
Following is a summary of property held under capital leases:
<TABLE>
<S> <C>
Phone System........................................................ $21,215
Less: Accumulated depreciation...................................... (1,515)
-------
Net................................................................. $19,700
=======
</TABLE>
Minimum future lease payments under capital leases as of December 31,
1998 for each of the next five years and in the aggregate are:
<TABLE>
<S> <C>
Year Ended December 31:
1999.............................................................. $ 5,352
2000.............................................................. 5,352
2001.............................................................. 5,352
2002.............................................................. 5,352
2003.............................................................. 2,230
-------
Total minimum lease payments.................................... 23,638
Less: Amount representing interest.................................. (4,257)
-------
Present value of net minimum lease payments......................... $19,381
=======
</TABLE>
Interest rates on this capitalized lease is 14.35% and is imputed based
on the lower of company's incremental borrowing rate at the inception of the
lease or the lessor's implicit rate of return.
NOTE 5--COMMITMENTS
Guarantee of Indebtedness
The Company has guaranteed the 13 1/4% senior subordinated notes dated
April 2, 1995 which have a principal value of $76,808,000 of Capstar Radio
Broadcasting Partners, Inc., the parent corporation of the Company's nonvoting
member.
F-69
<PAGE>
WESTCHESTER RADIO, LLC
NOTES TO FINANCIAL STATEMENTS--(Continued)
Employment Contract
The Company has entered into an employment contract with its managing
member through April 2000 that provides for a minimum annual salary. At
December 31, 1998, the total commitment was $150,000 per annum.
Operating Leases
The Company leases various tower facilities under operating leases which
does not currently have various expiration dates.
The Company also contracts for a variety of services and equipment
through short term agreements and leases under cash or barter arrangements.
These agreements and leases are renewed or replaced at the end of their term at
the discretion of management.
Minimum future rentals under noncancelable operating leases having
remaining terms in excess of one year for each of the next five years and in
the aggregate are as follows:
<TABLE>
<S> <C>
Year ended December 31,
1999.............................................................. $16,182
2000.............................................................. 7,500
2001.............................................................. 7,500
2002.............................................................. 7,500
2003.............................................................. 7,500
-------
Total minimum lease payments.................................... $46,182
=======
</TABLE>
NOTE 6--PENSION PLAN
The Company has a 401(k) Profit Sharing Plan covering all full time
employees meeting eligibility requirements. The Company matches fifty percent
of the employees contributions up to six percent of compensation. For the
period ended December 31, 1998, the Company contributed $7,674.
NOTE 7--RELATED PARTIES
As part of the acquisition of the stations, the Company borrowed from the
parent corporation of one of its members, moneys to complete the acquisition.
The note has a face value of $56,884,769 and is due in April 2008. The note has
been discounted to its present value at the rate of 18% and was, accordingly,
assigned a value of $10,150,000 and is subordinate to the bank obligations.
The Company subsequent to the contribution of the net assets of Commodore
Media of Westchester Inc. refinanced those assets and distributed $35,000,000
of the proceeds to its member.
The note including accumulated interest is convertible at the option of
the holder at any time, into a maximum of 13,000 member interests in the
company based on a prescribed formula (See Note 8).
The Company, as a result of its inability to cover principal and interest
payments on its bank lines as they came due, relied on the guarantee of a
member to meet the obligations. At December 31, 1998, the member had advanced
$1,930,693 to the Company to meet its obligations.
F-70
<PAGE>
WESTCHESTER RADIO, LLC
NOTES TO FINANCIAL STATEMENTS--(Continued)
NOTE 8--MEMBERS' EQUITY
The members of the Company have liability for the debts, obligations and
liabilities of the Company up to the amount of capital contributed to the
Company.
The Company is authorized to issue up to 14,000 limited liability company
interests which may be designated as voting interests or nonvoting interests
upon issuance. Subject to obtaining necessary consent, outstanding nonvoting
interests are convertible, at any time, upon the election of the holder into a
like number of voting interests.
At December 31, 1998, the Company had a total of 1,000 interests
outstanding, of which 700 were voting interests.
NOTE 7--SUBSEQUENT SALE OF THE COMPANY
On October 27, 1999, the tangible assets, FCC license and goodwill of the
company were purchased by Aurora of Westchester L.L.C. The total cost of the
acquisition was $22,250,000.
F-71
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders
Commodore Media of Westchester, Inc.
We have audited the accompanying balance sheet of Commodore Media of
Westchester, Inc. as of April 1, 1998 and the related statements of operations
and retained earnings and cash flows for the period of January 1, 1998 to April
1, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Commodore Media of
Westchester, Inc. as of April 1, 1998, and the results of its operations and
its cash flows for the period of January 1, 1998 to April 1, 1998 in conformity
with generally accepted accounting principles.
Weeks Holderbaum Huber & DeGraw, LLP
July 29, 1999
F-74
<PAGE>
COMMODORE MEDIA OF WESTCHESTER, INC.
BALANCE SHEET
April 1, 1998
<TABLE>
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................................ $ 9,681
Accounts receivable, less allowance for doubtful accounts of
$130,846........................................................ 817,154
Other current assets............................................. 17,306
-----------
Total Current Assets........................................... 844,141
Property, Plant and Equipment--Net................................. 1,683,789
Intangible Assets--Net............................................. 31,979,119
Security Deposits.................................................. 8,427
-----------
Total Assets................................................... $34,515,476
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liability:
Accounts payable and accrued expenses............................ $ 179,554
Due to Parent Corporation and Affiliates......................... 9,029,851
Stockholders Equity:
Common stock, 100 shares authorized, issued, and outstanding..... 100
Additional paid-in-capital....................................... 23,596,134
Retained earnings................................................ 1,709,837
-----------
Total Stockholders Equity...................................... 25,306,071
-----------
Total Liabilities and Stockholders' Equity..................... $34,515,476
===========
</TABLE>
Notes to Financial Statements are an Integral Part of this Statement
F-75
<PAGE>
COMMODORE MEDIA OF WESTCHESTER, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
For the period of January 1, 1998 to April 1, 1998
<TABLE>
<S> <C>
Revenues:
Broadcast revenue................................................ $ 1,163,673
Less: agency commissions......................................... (101,200)
-----------
Net Broadcast Revenue.......................................... 1,062,473
Other non-broadcast revenue...................................... 44,684
-----------
Total Revenue.................................................. 1,107,157
Expenses:
Programming and technical........................................ 193,364
Sales and advertising............................................ 283,875
Administrative................................................... 285,088
-----------
Total Expenses................................................. 762,327
-----------
Income from Operations............................................. 344,830
Other Expenses:
Depreciation..................................................... 30,000
Amortization..................................................... 208,489
-----------
Total Other Expenses........................................... 238,489
-----------
Net Income......................................................... 106,341
Retained Earnings at Beginning of Period........................... 1,603,496
-----------
Retained Earnings at End of Period................................. $ 1,709,837
===========
</TABLE>
The Notes to Financial Statements are an Integral Part of this Statement
F-76
<PAGE>
COMMODORE MEDIA OF WESTCHESTER, INC.
STATEMENT OF CASH FLOWS
For the period of January 1, 1998 to April 1, 1998
<TABLE>
<S> <C>
Cash Flows from Operating Activities:
Net Income....................................................... $ 106,341
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:
Depreciation and amortization.................................... 238,489
Bad debt provision (recovery).................................... (34,184)
Decrease in accounts receivable.................................. 437,821
Decrease in other current assets................................. 48,894
Decrease in security deposits.................................... 480
Decrease in accounts payable..................................... (201,611)
---------
Total Adjustments.............................................. 489,889
---------
Net cash provided by operating activities...................... 596,230
Cash Flows From Investing Activities:
Purchase of property and equipment............................... (44,502)
Cash Flows from Financing Activities:
Net repayment of advances to parent corporation and affiliates... (625,614)
---------
Net Decrease in Cash and Cash Equivalents........................ (73,886)
Cash and Cash Equivalents at Beginning of Period................. 83,567
---------
Cash and Cash Equivalents at End of Period....................... $ 9,681
=========
</TABLE>
The Notes to Financial Statements are an Integral Part of this Statement
F-77
<PAGE>
COMMODORE MEDIA OF WESTCHESTER, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1--Significant Accounting Policies
Organization and Nature of Business
Commodore Media of Westchester, Inc. (the Company) operates several radio
stations in Westchester county, New York. The signals licensed by the Federal
Communications Commission (FCC) include WFAS-FM, WFAS-AM and WZZN-FM (the
Stations). The Company derives its revenue primarily from the sale of radio
advertising. Commodore Media of Westchester, Inc. is a wholly owned subsidiary
of Capstar Broadcasting Corporation.
Sale of Stations
On April 2, 1998, the Company contributed all of its net assets and its
related licenses to Westchester Radio, LLC. in exchange for a 100% membership
interest. The company's membership interest was comprised of 700 voting and 300
nonvoting shares.
Westchester Radio, LLC. subsequently refinanced the assets of the station
and made a distribution back to the company in the amount of $35,000,000.
The company subsequently sold its voting interests and retained its 30%
nonvoting interest of the Limited Liability Company.
The business combination has been accounted for as a purchase. This
financial statement contains the results of operations and the financial
position of the company immediately before the contribution of assets to
Westchester Radio, LLC.
Revenue Recognition
Broadcasting operations derive revenue primarily from the sale of program
time and commercial announcements to local, regional and national advertisers.
Revenue is recognized when the program and commercial announcements are
broadcast.
Advertising Costs
The Company incurs various marketing and promotional costs to add and
maintain listenership. These are expensed as incurred.
Use of Estimates
The process of preparing financial statements in conformity with
generally accepted accounting principles requires the use of estimates and
assumptions regarding certain types of assets, liabilities, revenues and
expenses. Such estimates primarily relate to unsettled transactions and events
as of the date of the financial statements. Accordingly, upon settlement,
actual results may differ from those estimates.
Concentration of Credit Risk
The Company's business activity is with customers located within the
immediate geographic area. Blocks of advertising time are generally sold on
credit on standard business terms.
F-78
<PAGE>
COMMODORE MEDIA OF WESTCHESTER,INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Company's revenue and accounts receivable primarily relates to
advertising of products and services within the radio stations' broadcast
areas. The Company performs ongoing credit evaluations of its customers'
financial condition and, generally requires no collateral from its customers.
Credit losses have been within management's expectations and adequate
allowances for any uncollectible accounts receivables are maintained.
The radio broadcasting industry is subject to federal regulation by the
Federal Communications Commission. These governmental regulations and policies
could change over time and there can be no assurance that such changes would
not have a material impact upon the Company.
Property and Equipment
The cost of property and equipment is depreciated over the estimated
useful lives of the related assets. Leasehold improvements are depreciated over
the lesser of the term of the related lease or the estimated useful lives of
the assets. Depreciation is computed on the straight line method for financial
reporting purposes and double declining balance for income tax purposes.
Maintenance and repairs are charged to operations when incurred.
Betterments and renewals are capitalized. When property and equipment are sold
or otherwise disposed of, the asset account and related accumulated
depreciation account are relieved, and any gain or loss is included in
operations.
The useful lives of property and equipment for purposes of computing
depreciation are:
<TABLE>
<S> <C>
Office equipment................................................. 5-7 years
Studio equipment................................................. 7 years
Building, leasehold improvements and tower....................... 10-40 years
</TABLE>
Income Taxes
The Company files a consolidated income tax return with its corporate
parent.
Cash Flows
For purposes of the statement of cash flows, cash equivalents include
time deposits, certificates of deposits, and all highly liquid debt instruments
with original maturities of three months or less.
There was no cash paid for interest and income taxes.
Barter Transactions
The Company barters unsold advertising time for products and services.
Such transactions are recorded at the estimated fair value of the products or
services received. Barter revenue is recorded when commercials are broadcast
and related expenses are recorded when the bartered product or service is used.
F-79
<PAGE>
COMMODORE MEDIA OF WESTCHESTER, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The fair value of barter and trade-out transactions is included in
broadcasting revenue and broadcasting expense. Barter transactions charged to
operations were as follows:
<TABLE>
<S> <C>
Trade sales...................................................... $ 245,893
Trade expense.................................................... (163,592)
---------
Net Trade Transactions......................................... $ 82,301
=========
</TABLE>
Note 2--Property, Plant and Equipment
Property and equipment consisted of the following at April 1, 1998:
<TABLE>
<S> <C>
Land............................................................. $ 420,000
Buildings and leasehold improvements............................. 685,762
Studio and transmission equipment................................ 565,797
Music library.................................................... 2,556
Office equipment and fixtures.................................... 151,396
----------
Total.......................................................... 1,825,511
Less: accumulated depreciation................................... (141,722)
----------
Net Property and Equipment....................................... $1,683,789
==========
</TABLE>
Depreciation charged to operations amounted to $30,000.
Property and equipment are pledged as collateral for various obligations
of the company's corporate parent. (See Note 4).
Note 3--Intangible Assets
Intangible assets consisted of the following at April 1, 1998:
<TABLE>
<S> <C>
FCC license..................................................... $33,157,140
Goodwill........................................................ 32,000
-----------
Total......................................................... 33,189,140
Less: accumulated amortization.................................. (1,210,021)
-----------
Net Intangible Assets........................................... $31,979,119
===========
</TABLE>
Amortization charged to operations amounted to $208,489.
The Company periodically evaluates intangible assets for potential
impairment by analyzing the operating results, future cash flows on an
undiscounted basis, trends and prospects of the Company's stations, as well as
by comparing them to their competitors. The Company also takes into
consideration recent acquisition patterns within the broadcast industry, the
impact of recently enacted or potential FCC rules and regulations and any other
events or circumstances which might indicate potential impact. At this time, in
the opinion of management, no impairment has occurred.
F-80
<PAGE>
COMMODORE MEDIA OF WESTCHESTER, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 4--Related Parties
The company receives advances from and pays advances to its parent
corporation and other related affiliated companies. In addition the Parent
Corporation allocates expenses, based on revenue, to the company, which are
related to corporate overhead and other costs related to the management and
operation of the stations.
The company has pledged substantially all of its assets as a cross
guarantor on a variety of corporate obligations.
Note 5--Commitments
Operating Leases
The Company leases various tower facilities under operating leases, which
do not currently have expiration dates.
The Company also contracts for a variety of services and equipment
through short-term agreements and leases under cash or barter arrangements.
These agreements and leases are renewed or replaced at the end of their term at
the discretion of management.
Minimum future rentals under noncancelable operating leases having
remaining terms in excess of one year for each of the next five years and in
the aggregate are as follows:
<TABLE>
<S> <C>
Year ended April 1,
1999............................................................. $ 16,182
2000............................................................. 7,500
2001............................................................. 7,500
2002............................................................. 7,500
2003............................................................. 7,500
--------
Total Minimum Lease Payments................................... $ 46,182
========
</TABLE>
Note 6--Pension Plan
The Company has a 401(k) Profit Sharing Plan covering all full time
employees meeting eligibility requirements. The Company matches fifty percent
of the employee's contributions up to six percent of compensation. For the
period ended April 1, 1998, the Company contributed $8,760.
F-81
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders:
Commodore Media of Westchester, Inc.
We have audited the accompanying balance sheet of Commodore Media of
Westchester, Inc. as of December 31, 1997, and the related statements of
operations, retained earnings and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Commodore Media of
Westchester, Inc. as of December 31, 1997, and the results of its operations
and its cash flows for the year then ended in conformity with generally
accepted accounting principles.
Weeks Holderbaum Huber & DeGraw LLP
July 29, 1999
F-84
<PAGE>
COMMODORE MEDIA OF WESTCHESTER, INC.
BALANCE SHEET
December 31, 1997
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....................................... $ 83,567
Accounts receivable, less allowance for doubtful accounts of
$165,030....................................................... 1,220,791
Other current assets............................................ 66,200
------------
Total Current Assets.......................................... 1,370,558
PROPERTY, PLANT AND EQUIPMENT--NET................................ 1,669,287
Intangible Assets--Net............................................ 32,187,608
Security Deposits................................................. 8,907
------------
Total Assets.................................................. $ 35,236,360
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITY:
Accounts payable and accrued expenses........................... $ 381,165
Due to Parent Corporation and Affiliates.......................... 9,655,465
Stockholders' Equity:
Common stock, 100 shares authorized, issued, and outstanding.... 100
Additional paid-in-capital...................................... 23,596,134
Retained earnings............................................... 1,603,496
------------
Total Stockholders' Equity.................................... 25,199,730
------------
Total Liabilities and Stockholders' Equity.................... $ 35,236,360
============
</TABLE>
The Notes to Financial Statements are an Integral Part of this Statement
F-85
<PAGE>
COMMODORE MEDIA OF WESTCHESTER, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
For the year ended December 31, 1997
<TABLE>
<S> <C>
Revenues:
Broadcast
revenue........ $ 6,142,742
Less: agency
commissions.... (596,167)
-----------
Net Broadcast
Revenue...... 5,546,575
Other non-
broadcast
revenue........ 156,398
-----------
Total
Revenue...... 5,702,973
Expenses:
Programming and
technical...... 1,000,691
Sales and
advertising.... 830,649
Administrative.. 1,258,264
-----------
Total
Expenses..... 3,089,604
-----------
Income from
Operations....... 2,613,369
Other Expenses:
Depreciation.... 103,640
Amortization.... 829,729
-----------
Total Other
Expenses..... 933,369
-----------
Net Income........ 1,680,000
Accumulated
Deficit at
beginning of
year, as
previously
reported......... (96,656)
Contribution of
net assets of
station WZZN by
parent company... 20,152
-----------
Accumulated
Deficit at
beginning of
year, as
restated......... (76,504)
-----------
Retained Earnings
at End of Year... $ 1,603,496
===========
</TABLE>
The Notes to Financial Statements are an Integral Part of this Statement
F-86
<PAGE>
COMMODORE MEDIA OF WESTCHESTER, INC.
STATEMENT OF CASH FLOWS
For the year ended December 31, 1997
<TABLE>
<S> <C>
Cash Flows from Operating Activities:
Net Income....................................................... $ 1,680,000
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:
Depreciation and amortization.................................. 933,369
Bad debt provision (recovery).................................. (11,980)
Increase in accounts receivable................................ (240,722)
Increase in other current assets............................... (66,200)
Increase in security deposits.................................. (793)
Increase in accounts payable................................... 56,683
-----------
Total Adjustments............................................ 670,357
-----------
Net cash provided by operating activities.................... 2,350,357
Cash Flows from Investing Activities:
Purchase of property and equipment............................. (76,948)
Cash Flows from Financing Activities:
Net repayment of advances from parent corporation and
affiliates.................................................... (2,228,542)
-----------
Net Increase in Cash and Cash Equivalents........................ 44,867
Cash and Cash Equivalents at Beginning of Period................. 38,700
-----------
Cash and Cash Equivalents at End of Period....................... $ 83,567
===========
</TABLE>
The Notes to Financial Statements are an Integral Part of this Statement
F-87
<PAGE>
COMMODORE MEDIA OF WESTCHESTER, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Business
Commodore Media of Westchester, Inc. (the Company) operates several radio
stations in Westchester county, New York. The signals licensed by the Federal
Communications Commission (FCC) include WFAS-FM, WFAS-AM and WZZN-FM (the
Stations). The Company derives its revenue primarily from the sale of radio
advertising. The company is a wholly owned subsidiary of Capstar Broadcasting.
Purchase and Sale of Stations
On January 1, 1997 the net assets of WZZN-FM were transferred to the
company by its parent corporation.
In April 1998, the Company was sold to Westchester Radio LLC., who
acquired the net assets and FCC license of the Stations from Commodore Media of
Westchester, Inc. in a business combination accounted for as a purchase.
Revenue Recognition
Broadcasting operations derive revenue primarily from the sale of program
time and commercial announcements to local, regional and national advertisers.
Revenue is recognized when the program and commercial announcements are
broadcast.
Advertising Costs
The Company incurs various marketing and promotional costs to add and
maintain listenership. These are expensed as incurred.
Use of Estimates
The process of preparing financial statements in conformity with
generally accepted accounting principles requires the use of estimates and
assumptions regarding certain types of assets, liabilities, revenues and
expenses. Such estimates primarily relate to unsettled transactions and events
as of the date of the financial statements. Accordingly, upon settlement,
actual results may differ from those estimates.
Concentration of Credit Risk
The Company's business activity is with customers located within the
immediate geographic area. Blocks of advertising time are generally sold on
credit on standard business terms.
The Company's revenue and accounts receivable primarily relates to
advertising of products and services within the radio stations' broadcast
areas. The Company performs ongoing credit evaluations of its customers'
financial condition and, generally requires no collateral from its customers.
Credit losses have been within management's expectations and adequate
allowances for any uncollectible accounts receivables are maintained.
F-88
<PAGE>
COMMODORE MEDIA OF WESTCHESTER, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The radio broadcasting industry is subject to federal regulation by the
Federal Communications Commission. These governmental regulations and policies
could change over time and there can be no assurance that such changes would
not have a material impact upon the Company.
Property and Equipment
The cost of property and equipment is depreciated over the estimated
useful lives of the related assets. Leasehold improvements are depreciated over
the lesser of the term of the related lease or the estimated useful lives of
the assets. Depreciation is computed on straight line method for financial
reporting purposes and double declining balance method for income tax purposes.
Maintenance and repairs are charged to operations when incurred.
Betterments and renewals are capitalized. When property and equipment are sold
or otherwise disposed of, the asset account and related accumulated
depreciation account are relieved, and any gain or loss is included in
operations.
The useful lives of property and equipment for purposes of computing
depreciation are:
<TABLE>
<S> <C>
Office equipment............................................... 5-7 years
Studio equipment............................................... 7 years
Building, leasehold improvements and tower..................... 10-40 years
</TABLE>
Income Taxes
The Company files a consolidated income tax return with its corporate
parent.
Cash Flows
For purposes of the statement of cash flows, cash equivalents include
time deposits, certificates of deposits, and all highly liquid debt instruments
with original maturities of three months or less.
There was no cash paid for interest and income taxes.
Barter Transactions
The Company barters unsold advertising time for products and services.
Such transactions are recorded at the estimated fair value of the products or
services received. Barter revenue is recorded when commercials are broadcast
and related expenses are recorded when the bartered product or service is used.
The fair value of barter and trade-out transactions is included in
broadcasting revenue and broadcasting expense. Barter transactions charged to
operations were as follows:
<TABLE>
<S> <C>
Trade sales..................................................... $ 792,021
Trade expense................................................... (725,383)
---------
Net Trade Revenue............................................. $ 66,638
=========
</TABLE>
F-89
<PAGE>
COMMODORE MEDIA OF WESTCHESTER, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
NOTE 2--PROPERTY, PLANT AND EQUIPMENT
Property and equipment consisted of the following at December 31, 1997:
<TABLE>
<S> <C>
Land............................................................. $ 420,000
Buildings and leasehold improvements............................. 669,900
Studio and transmission equipment................................ 565,797
Music library.................................................... 2,556
Office equipment and fixtures.................................... 122,755
----------
Total.......................................................... 1,781,008
Less: accumulated depreciation................................... (111,721)
----------
Net Property and Equipment....................................... $1,669,287
==========
</TABLE>
Depreciation charged to operations amounted to $103,640.
Property and equipment are pledged as collateral for various obligations
of the company's corporate parent. (See Note 4).
NOTE 3--INTANGIBLE ASSETS
Intangible assets consisted of the following at December 31, 1997:
<TABLE>
<S> <C>
FCC license..................................................... $33,157,140
Goodwill........................................................ 32,000
-----------
Total......................................................... 33,189,140
Less: accumulated amortization.................................. (1,001,532)
-----------
Net Intangible Assets........................................... $32,187,608
===========
</TABLE>
Amortization charged to operations amounted to $829,729.
The Company periodically evaluates intangible assets for potential
impairment by analyzing the operating results, future cash flows on an
undiscounted basis, trends and prospects of the Company's stations, as well as
by comparing them to their competitors. The Company also takes into
consideration recent acquisition patterns within the broadcast industry, the
impact of recently enacted or potential FCC rules and regulations and any other
events or circumstances which might indicate potential impact. At this time, in
the opinion of management, no impairment has occurred.
NOTE 4--RELATED PARTIES
The company receives advances from and pays advances to its parent
corporation and other related affiliated companies. In addition the Parent
Corporation allocates expenses, based on revenue, to the company, which are
related to corporate overhead and other costs related to the management and
operation of the stations.
The company has pledged substantially all of its assets as a cross
guarantor on a variety of corporate obligations.
F-90
<PAGE>
COMMODORE MEDIA OF WESTCHESTER,INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
NOTE 5--COMMITMENTS
Operating Leases
The Company leases various tower facilities under operating leases, which
do not currently have expiration dates.
The Company also contracts for a variety of services and equipment
through short-term agreements and leases under cash or barter arrangements.
These agreements and leases are renewed or replaced at the end of their term at
the discretion of management.
Minimum future rentals under noncancelable operating leases having
remaining terms in excess of one year for each of the next five years and in
the aggregate are as follows:
<TABLE>
<S> <C>
Year ended December 31,
1998............................................................... $16,152
1999............................................................... 16,182
2000............................................................... 7,500
2001............................................................... 7,500
2002............................................................... 7,500
-------
Total Minimum Lease Payments..................................... $54,834
=======
</TABLE>
NOTE 6--PENSION PLAN
The Company has a 401(k) Profit Sharing Plan covering all full time
employees meeting eligibility requirements. The Company matches fifty percent
of the employee's contributions up to six percent of compensation.
F-91
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders
Commodore Media of Westchester, Inc.
We have audited the accompanying balance sheet of Commodore Media of
Westchester, Inc. as of December 31, 1996, and the related statements of
operations and accumulated deficit and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Commodore Media of
Westchester, Inc. as of December 31, 1996, and the results of its operations
and its cash flows for the year then ended in conformity with generally
accepted accounting principles.
Weeks Holderbaum Huber & DeGraw LLP
July 29, 1999
F-94
<PAGE>
COMMODORE MEDIA OF WESTCHESTER, INC.
BALANCE SHEET
December 31, 1996
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash............................................................ $ 38,700
Accounts receivable, less allowance for doubtful accounts of
$153,050....................................................... 968,089
-----------
Total current assets.......................................... 1,006,789
PROPERTY, PLANT AND EQUIPMENT--NET................................ 1,695,979
INTANGIBLE ASSETS--NET............................................ 33,017,337
SECURITY DEPOSITS................................................. 8,114
-----------
Total assets.................................................. $35,728,219
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITY:
Accounts payable and accrued expenses........................... $ 324,482
DUE TO PARENT CORPORATION AND AFFILIATES.......................... 11,904,159
STOCKHOLDERS' EQUITY:
Common stock, 100 shares authorized, issued, and outstanding.... 100
Additional paid in capital...................................... 23,596,134
Accumulated deficit............................................. (96,656)
-----------
Total stockholders' equity.................................... 23,499,578
-----------
Total liabilities and stockholders' equity.................... $35,728,219
===========
</TABLE>
The Notes to Financial Statements are an Integral Part of this Statement
F-95
<PAGE>
COMMODORE MEDIA OF WESTCHESTER, INC.
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
For the year ended December 31, 1996
<TABLE>
<S> <C>
REVENUES:
Broadcast revenue................................................ $4,684,186
Less: agency commissions......................................... (413,135)
----------
Net broadcast revenue.......................................... 4,271,051
Other non-broadcast revenue...................................... 132,530
----------
Total revenue.................................................. 4,403,581
EXPENSES:
Programming and technical........................................ 730,283
Sales and advertising............................................ 1,214,288
Administrative................................................... 749,771
----------
Total expenses................................................. 2,694,342
----------
INCOME FROM OPERATIONS............................................. 1,709,239
OTHER EXPENSES:
Corporate management and overhead allocation..................... 1,146,542
Depreciation..................................................... 103,085
Amortization..................................................... 266,502
Interest expense................................................. 921,757
----------
Total other expenses........................................... 2,437,886
----------
NET LOSS........................................................... (728,647)
RETAINED EARNINGS AT BEGINNING OF YEAR............................. 631,991
----------
ACCUMULATED DEFICIT AT END OF YEAR................................. $ (96,656)
==========
</TABLE>
The Notes to Financial Statements are an Integral Part of this Statement
F-96
<PAGE>
COMMODORE MEDIA OF WESTCHESTER, INC.
STATEMENT OF CASH FLOWS
For the year ended December 31, 1996
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss......................................................... $(728,647)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED BY OPERATING
ACTIVITIES:
Depreciation and amortization.................................... 369,586
Bad debt provision (recovery).................................... (29,850)
Decrease in accounts receivable.................................. 90,290
Decrease in other current assets................................. 21,948
Increase in accounts payable..................................... 60,419
---------
Total adjustments.............................................. 512,393
---------
Net cash used by operating activities.......................... (216,254)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment............................... (139,917)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net advances from parent corporation and affiliates.............. 366,402
---------
NET INCREASE IN CASH AND CASH EQUIVALENTS.......................... 10,231
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD................... 28,469
---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD......................... $ 38,700
=========
</TABLE>
The Notes to Financial Statements are an Integral Part of this Statement
F-97
<PAGE>
COMMODORE MEDIA OF WESTCHESTER, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Business
Commodore Media of Westchester, Inc. (the Company) operates several radio
stations in Westchester County, New York. The signals licensed by the Federal
Communications Commission (FCC) included in this presentation, operate by the
call letters of WFAS-FM and WFAS-AM. The Company derives its revenue primarily
from the sale of radio advertising.
Sale of Stations
In October 1996 the stations were purchased by Capstar Broadcasting in a
business combination which was accounted for as a purchase. The result of the
transaction is that the company is a wholly owned subsidiary of Capstar
Broadcasting.
The results of operations of the acquired stations are included in the
accompanying financial statements for the entire period. The total cost of the
acquisition, exceeded the fair value of the net assets of the stations by
approximately $33,200,000 which has been allocated to the stations FCC license
and goodwill. The excess in being amortized on the straight-line method over
forty years.
On April 2, 1998, the Company was sold to Westchester Radio LLC. who
acquired the net assets and FCC license of WFAS-FM, WFAS-AM and WZZN-FM (the
Stations) from Commodore Media of Westchester, Inc. in a business combination
accounted for as a purchase.
Revenue Recognition
Broadcasting operations derive revenue primarily from the sale of program
time and commercial announcements to local, regional and national advertisers.
Revenue is recognized when the program and commercial announcements are
broadcast.
Advertising Costs
The Company incurs various marketing and promotional costs to add and
maintain listenership. These are expensed as incurred.
Use of Estimates
The process of preparing financial statements in conformity with
generally accepted accounting principles requires the use of estimates and
assumptions regarding certain types of assets, liabilities, revenues and
expenses. Such estimates primarily relate to unsettled transactions and events
as of the date of the financial statements. Accordingly, upon settlement,
actual results may differ from those estimates.
Concentration of Credit Risk
The Company's business activity is with customers located within the
immediate geographic area. Blocks of advertising time are generally sold on
credit on standard business terms.
F-98
<PAGE>
COMMODORE MEDIA OF WESTCHESTER,INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Company's revenue and accounts receivable primarily relates to
advertising of products and services within the radio stations' broadcast
areas. The Company performs ongoing credit evaluations of its customers'
financial condition and, generally requires no collateral from its customers.
Credit losses have been within management's expectations and adequate
allowances for any uncollectible accounts receivables are maintained.
The radio broadcasting industry is subject to federal regulation by the
Federal Communications Commission. These governmental regulations and policies
could change over time and there can be no assurance that such changes would
not have a material impact upon the Company.
Property and Equipment
The cost of property and equipment is depreciated over the estimated
useful lives of the related assets. Leasehold improvements are depreciated over
the lesser of the term of the related lease or the estimated useful lives of
the assets. Depreciation is computed on straight line method for financial
reporting purposes and double declining balance method for income tax purposes.
Maintenance and repairs are charged to operations when incurred.
Betterments and renewals are capitalized. When property and equipment are sold
or otherwise disposed of, the asset account and related accumulated
depreciation account are relieved, and any gain or loss is included in
operations.
The useful lives of property and equipment for purposes of computing
depreciation are:
<TABLE>
<S> <C>
Office equipment................................................. 5-7 years
Studio equipment................................................. 7 years
Building, leasehold improvements and tower....................... 10-40 years
</TABLE>
Income Taxes
The Company files its income tax return on a consolidated basis with its
parent company.
Cash Flows
For purposes of the statement of cash flows, cash equivalents include
time deposits, certificates of deposits, and all highly liquid debt instruments
with original maturities of three months or less.
Cash paid for interest and income taxes are as follows:
<TABLE>
<S> <C>
Interest........................................................... $ 921,757
Income taxes....................................................... --
</TABLE>
Barter Transactions
The Company barters unsold advertising time for products and services.
Such transactions are recorded at the estimated fair value of the products or
services received. Barter revenue is recorded when commercials are broadcast
and related expenses are recorded when the bartered product or service is used.
F-99
<PAGE>
COMMODORE MEDIA OF WESTCHESTER,INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The fair value of barter and trade-out transactions is included in
broadcasting revenue and broadcasting expense. Barter transactions charged to
operations were as follows:
<TABLE>
<S> <C>
Trade sales....................................................... $ 671,622
Trade expense..................................................... (566,740)
---------
Net Trade Revenue Transactions.................................. $ 104,882
=========
</TABLE>
NOTE 2--PROPERTY, PLANT AND EQUIPMENT
Property and equipment consisted of the following at December 31, 1996:
<TABLE>
<S> <C>
Land............................................................. $ 420,000
Buildings and leasehold improvements............................. 639,766
Studio and transmission equipment................................ 536,162
Music library.................................................... 2,556
Office equipment and fixtures.................................... 118,862
----------
Total.......................................................... 1,717,346
Less: accumulated depreciation................................... (21,367)
----------
Net Property and Equipment....................................... $1,695,979
==========
</TABLE>
Depreciation charged to operations amounted to $103,085.
Property and equipment are pledged as collateral for various obligation
of the company's corporate parent. (See Note 4).
NOTE 3--INTANGIBLE ASSETS
Intangible assets consisted of the following at December 31, 1996:
<TABLE>
<S> <C>
FCC license..................................................... $33,157,140
Goodwill........................................................ 32,000
-----------
Total......................................................... 33,189,140
Less: accumulated amortization.................................. (171,803)
-----------
Net Intangible Assets........................................... $33,017,337
===========
</TABLE>
Amortization charged to operations amounted to $266,502.
The Company periodically evaluates intangible assets for potential
impairment by analyzing the operating results, future cash flows on an
undiscounted basis, trends and prospects of the Company's stations, as well as
by comparing them to their competitors. The Company also takes into
consideration recent acquisition patterns within the broadcast industry, the
impact of recently enacted or potential FCC rules and regulations and any other
events or circumstances which might indicate potential impact. At this time, in
the opinion of management, no impairment has occurred.
F-100
<PAGE>
COMMODORE MEDIA OF WESTCHESTER,INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
NOTE 4--RELATED PARTIES
The company receives advances from and pays advances to its parent
corporation and other related affiliated companies. In addition the parent
corporation allocates expenses, based on revenue, to the company, which are
related to corporate overhead and other costs related to the management and
operation of the stations. During 1996 these allocations amounted to
approximately $834,000.
The company has pledged substantially all of its assets as a cross
guarantor on a variety of corporate obligations.
NOTE 5--COMMITMENTS
Operating Leases
The Company leases various tower facilities under operating leases, which
do not currently have expiration dates.
The Company also contracts for a variety of services and equipment
through short-term agreements and leases under cash or barter arrangements.
These agreements and leases are renewed or replaced at the end of their term at
the discretion of management.
Minimum future rentals under noncancelable operating leases having
remaining terms in excess of one year for each of the next five years and in
the aggregate are as follows:
<TABLE>
<S> <C>
Year ended December 31,
1997.............................................................. $11,710
1998.............................................................. 16,152
1999.............................................................. 16,182
2000.............................................................. 7,500
2001.............................................................. 7,500
-------
Total Minimum Lease Payments...................................... $59,044
=======
</TABLE>
NOTE 6--PENSION PLAN
The Company has a 401(k) Profit Sharing Plan covering all full time
employees meeting eligibility requirements. The Company matches fifty percent
of the employee's contributions up to six percent of compensation.
F-101
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Division Manager of WRKI, WAXB, WPUT, WINE
We have audited the accompanying combined balance sheet of WRKI, WAXB,
WPUT, and WINE (Operating Divisions of Commodore Media of Norwalk, Inc.) (the
Divisions) as of May 29, 1998, and the related combined statements of
operations and division equity and cash flows for the period of January 1, 1998
to May 29, 1998. These financial statements are the responsibility of the
Divisions' management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the combined financial position of WRKI,
WAXB, WPUT, and WINE as of May 29, 1998, and the results of their combined
operations and their combined cash flows for the period of January 1, 1998 to
May 29, 1998 in conformity with generally accepted accounting principles.
Weeks Holderbaum Huber & DeGraw, LLP
August 11, 1999
(except for Note 7, as to
which the date is October
27, 1999)
F-124
<PAGE>
WRKI/WAXB/WPUT/WINE
(Operating Divisions of Commodore Media of Norwalk, Inc.)
COMBINED BALANCE SHEET
May 29, 1998
<TABLE>
<S> <C>
ASSETS
Current Assets:
Cash............................................................. $ 800
Accounts receivable, less allowance for doubtful accounts of
$129,800........................................................ 663,099
-----------
Total Current Assets........................................... 663,899
Property, Plant and Equipment, net................................. 1,980,776
Intangible Assets, net............................................. 7,754,987
Other Assets....................................................... 16,743
-----------
Total Assets..................................................... $10,416,405
===========
LIABILITIES AND DIVISION EQUITY
Accounts payable and accrued expenses.............................. $ 129,385
Division Equity.................................................... 10,287,020
-----------
Total Liabilities and Division Equity.......................... $10,416,405
===========
</TABLE>
The Notes to Financial Statements are an Integral Part of this Statement
F-125
<PAGE>
WRKI/WAXB/WPUT/WINE
(Operating Divisions of Commodore Media of Norwalk, Inc.)
COMBINED STATEMENT OF OPERATIONS AND DIVISION EQUITY
For the period of January 1, 1998 to May 29, 1998
<TABLE>
<S> <C>
Revenues:
Broadcast revenue................................................ $ 1,466,199
Less: agency commissions......................................... (102,647)
-----------
Net Broadcast Revenue.......................................... 1,363,552
Other non-broadcast revenue...................................... 11,894
-----------
Total Revenue.................................................. 1,375,446
Expenses:
Programming and technical........................................ 172,226
Sales and advertising............................................ 573,055
Administrative................................................... 322,743
-----------
Total Expenses................................................. 1,068,024
-----------
Income from Operations............................................. 307,422
Other Expenses:
Depreciation..................................................... 60,515
Amortization..................................................... 86,300
-----------
Total Other Expenses........................................... 146,815
-----------
Net Income..................................................... 160,607
Division Equity at Beginning of Period............................. 10,346,902
Net Advances to Parent & Affiliates................................ (220,489)
-----------
Division Equity at End of Period................................... $10,287,020
===========
</TABLE>
The Notes to Financial Statements are an Integral Part of this Statement
F-126
<PAGE>
WRKI/WAXB/WPUT/WINE
(Operating Divisions of Commodore Media of Norwalk, Inc.)
COMBINED STATEMENT OF CASH FLOWS
For the period of January 1, 1998 to May 29, 1998
<TABLE>
<S> <C>
Cash Flows from Operating Activities:
Net Income........................................................ $160,607
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:
Depreciation and amortization..................................... 146,473
Bad debt provision................................................ (102,102)
Decrease in accounts receivable................................... 32,689
Decrease in other current assets.................................. 25,653
Decrease in accounts payable...................................... (40,785)
--------
Total Adjustments................................................. 61,928
--------
Net Cash Provided by Operating Activities....................... 222,535
Cash Flows from Investing Activities:
Purchase of property and equipment................................ (2,046)
Cash Flows from Financing Activities:
Net repayment of advances from parent corporation................. (220,489)
--------
Net Decrease in Cash and Cash Equivalents......................... --
Cash and Cash Equivalents at Beginning of Period.................. 800
--------
Cash and Cash Equivalents at End of Period........................ $ 800
========
</TABLE>
The Notes to Financial Statements are an Integral Part of this Statement
F-127
<PAGE>
WRKI/WAXB/WPUT/WINE
(Operating Divisions of Commodore Media of Norwalk, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Business
Commodore Media of Norwalk, Inc. (the Company) operates several radio
stations in Connecticut and New York. The signals licensed by the FCC included
in this presentation operate under the call letters of WRKI, WAXB, WPUT, and
WINE (the Divisions). The Divisions derive their revenue primarily from the
sale of radio advertising. Commodore Media of Norwalk, Inc. is a wholly owned
subsidiary of Capstar Broadcasting.
Contributions of Station Assets to Grantor Trust
On May 29, 1998, Capstar Broadcasting Corporation contributed all of the
rights, title, interest and obligations in all of the assets, properties,
contracts, leases and agreements of the Divisions to the Capstar Trust. The
company is the sole beneficiary of the trust.
Revenue Recognition
Broadcasting operations derive revenue primarily from the sale of program
time and commercial announcements to local, regional and national advertisers.
Revenue is recognized when the program and commercial announcements are
broadcast.
Advertising Costs
The Divisions incur various marketing and promotional costs to add and
maintain listenership. These costs are expensed as incurred.
Use of Estimates
The process of preparing financial statements in conformity with
generally accepted accounting principles requires the use of estimates and
assumptions regarding certain types of assets, liabilities, revenues and
expenses. Such estimates primarily relate to unsettled transactions and events
as of the date of the financial statements. Accordingly, upon settlement,
actual results may differ from those estimates.
Concentration of Credit Risk
The Divisions' business activity is with customers located within the
immediate geographic area. Blocks of advertising time are generally sold on
credit on standard business terms.
The Divisions' revenue and accounts receivable primarily relate to
advertising of products and services within the radio stations' broadcast
areas. The Divisions' perform ongoing credit evaluations of its customers'
financial condition and, generally requires no collateral from its customers.
Credit losses have been within management's expectations and adequate
allowances for any uncollectible accounts receivables are maintained.
The radio broadcasting industry is subject to federal regulation by the
Federal Communications Commission. These governmental regulations and policies
could change over time and there can be no assurance that such changes would
not have a material impact upon the Divisions.
F-128
<PAGE>
WRKI/WAXB/WPUT/WINE
(Operating Divisions of Commodore Media of Norwalk, Inc.)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Property and Equipment
The cost of property and equipment is depreciated over the estimated
useful lives of the related assets. Leasehold improvements are depreciated over
the lesser of the term of the related lease or the estimated useful lives of
the assets. Depreciation is computed on the straight line method for financial
reporting purposes and the double-declining balance method for income tax
purposes.
Maintenance and repairs are charged to operations when incurred.
Betterments and renewals are capitalized. When property and equipment are sold
or otherwise disposed of, the asset account and related accumulated
depreciation account are relieved, and any gain or loss is included in
operations.
The useful lives of property and equipment for purposes of computing
depreciation are:
<TABLE>
<S> <C>
Office equipment................................................. 5-7 years
Studio equipment................................................. 7 years
Building, leasehold improvements and tower....................... 10-40 years
</TABLE>
Income Taxes
The Divisions' file their income tax return on a consolidated basis with
their parent company.
Cash Flows
For purposes of the statement of cash flows, cash equivalents include
time deposits, certificates of deposits, and all highly liquid debt instruments
with original maturities of three months or less. The Divisions incurred no
interest expense or income taxes in the reporting period.
Barter Transactions
The Divisions barter unsold advertising time for products and services.
Such transactions are recorded at the estimated fair value of the products or
services received. Barter revenue is recorded when commercials are broadcast
and related expenses are recorded when the bartered product or service is used.
The fair value of barter and trade-out transactions is included in
broadcasting revenue and broadcasting expense. Barter transactions charged to
operations were as follows for the period of January 1, 1998 to January 29,
1998:
<TABLE>
<S> <C>
Trade sales...................................................... $ 256,669
Trade expense.................................................... (258,173)
---------
Net trade expense transactions................................. $ (1,504)
=========
</TABLE>
F-129
<PAGE>
WRKI/WAXB/WPUT/WINE
(Operating Divisions of Commodore Media of Norwalk, Inc.)
NOTES TO FINANCIAL STATEMENTS--(Continued)
NOTE 2--PROPERTY, PLANT AND EQUIPMENT
Property and equipment consisted of the following at May 29, 1998:
<TABLE>
<S> <C>
Land............................................................. $ 339,214
Buildings and leasehold improvements............................. 644,746
Studio and transmission equipment................................ 1,117,583
Music library.................................................... 2,283
Office equipment and fixtures.................................... 101,998
----------
Total.......................................................... 2,205,824
Less: accumulated depreciation................................... (225,048)
----------
Net Property and Equipment....................................... $1,980,776
==========
</TABLE>
Property and equipment are pledged as collateral for various obligation
of the divisions' corporate parent. (See Note 4).
NOTE 3--INTANGIBLE ASSETS
Intangible assets consisted of the following at May 29, 1998:
<TABLE>
<S> <C>
FCC license...................................................... $8,003,448
Transmitter Site Lease........................................... 56,108
Goodwill......................................................... 32,000
----------
Total.......................................................... 8,091,556
Less: accumulated amortization................................... (336,569)
----------
Net Intangible Assets............................................ $7,754,987
==========
</TABLE>
The Divisions periodically evaluate intangible assets for potential
impairment by analyzing the operating results, future cash flows on an
undiscounted basis, trends and prospects of the Divisions, as well as by
comparing them to their competitors. The Divisions also take into consideration
recent acquisition patterns within the broadcast industry, the impact of
recently enacted or potential FCC rules and regulations and any other events or
circumstances which might indicate potential impact. At this time, in the
opinion of management, no impairment has occurred.
NOTE 4--RELATED PARTIES
The Divisions receive advances from and pays advances to its parent
corporation and other related affiliated companies. In addition, the parent
corporation allocates expenses to the divisions based on revenue, which are
related to corporate overhead and other costs related to the management and
operation of the stations.
The net assets of the station have been pledged on guarantees of various
obligations of the corporate parent.
F-130
<PAGE>
WRKI/WAXB/WPUT/WINE
(Operating Divisions of Commodore Media of Norwalk, Inc.)
NOTES TO FINANCIAL STATEMENTS--(Continued)
NOTE 5--COMMITMENTS
Operating Leases
The Divisions lease various tower facilities under operating leases,
which do not currently have expiration dates.
The Divisions also contract for a variety of services and equipment
through short-term agreements and leases under cash or barter arrangements.
These agreements and leases are renewed or replaced at the end of their term at
the discretion of management.
Total rent expense for the period of January 1, 1998 to May 29, 1998 was
approximately $16,000. Minimum future rentals under noncancelable operating
leases having remaining terms in excess of one year for each of the next five
years and in the aggregate are as follows:
<TABLE>
<S> <C>
Year ended December 31,
1999............................................................. $ 40,427
2000............................................................. 41,017
2001............................................................. 42,029
2002............................................................. 43,094
2003............................................................. 43,605
--------
Total Minimum Lease Payments................................... $210,172
========
</TABLE>
NOTE 6--PENSION PLAN
The Divisions have a 401(k) Profit Sharing Plan covering all full time
employees meeting eligibility requirements. The Company matches fifty percent
of the employee's contributions up to six percent of compensation.
NOTE 7--SUBSEQUENT SALE OF CAPSTAR TRUST
On October 27, 1999, the tangible assets, FCC license and goodwill of
Capstar Trust were purchased by Aurora of Danbury, L.L.C. The total cost of the
acquisition was $11,250,000.
F-131
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Division Manager of WRKI, WAXB, WPUT, WINE
We have audited the accompanying combined balance sheet of WRKI, WAXB,
WPUT, and WINE (Operating Divisions of Commodore Media of Norwalk, Inc.) as of
December 31, 1997, and the related combined statements of operations and
division equity and cash flows for the year then ended. These financial
statements are the responsibility of the Divisions' management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the combined financial position of WRKI,
WAXB, WPUT, and WINE as of December 31, 1997, and the results of their combined
operations and their combined cash flows for the year then ended in conformity
with generally accepted accounting principles.
Weeks Holderbaum Huber & DeGraw LLP
August 11, 1999
(except for Note 7, as to
which the date is October
27, 1999)
F-134
<PAGE>
WRKI/WAXB/WPUT/WINE
(Operating Divisions of Commodore Media of Norwalk, Inc.)
COMBINED BALANCE SHEET
December 31, 1997
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash............................................................. $ 800
Accounts receivable, less allowance for doubtful accounts of
$231,902........................................................ 593,685
-----------
Total current assets........................................... 594,485
PROPERTY, PLANT AND EQUIPMENT, NET................................. 2,038,905
INTANGIBLE ASSETS, NET............................................. 7,841,285
OTHER ASSETS....................................................... 42,397
-----------
Total assets................................................... $10,517,072
===========
LIABILITIES AND DIVISION EQUITY
ACCOUNTS PAYABLE AND ACCRUED EXPENSES.............................. $ 170,170
DIVISION EQUITY.................................................... 10,346,902
-----------
Total liabilities and division equity.......................... $10,517,072
===========
</TABLE>
The Notes to Financial Statements are an Integral Part of this Statement
F-135
<PAGE>
WRKI/WAXB/WPUT/WINE
(Operating Divisions of Commodore Media of Norwalk, Inc.)
COMBINED STATEMENT OF OPERATIONS AND DIVISION EQUITY
For the year ended December 31, 1997
<TABLE>
<S> <C>
Revenues:
Broadcast revenue................................................ $ 3,975,767
Less: agency commissions......................................... (275,662)
-----------
Net broadcast revenue.......................................... 3,700,105
Other non-broadcast revenue...................................... 15,754
-----------
Total revenue.................................................. 3,715,859
Expenses:
Programming and technical........................................ 833,852
Sales and advertising............................................ 1,161,616
Administrative................................................... 1,069,475
-----------
Total expenses................................................. 3,064,943
-----------
Income from operations............................................. 650,916
Other expenses:
Depreciation..................................................... 137,724
Amortization..................................................... 207,120
-----------
Total other expenses........................................... 344,844
-----------
Net income......................................................... 306,072
Division equity at beginning of year............................... 10,891,563
Net advances to parent and affiliates.............................. (850,733)
-----------
Division equity at end of year..................................... $10,346,902
===========
</TABLE>
The Notes to Financial Statements are an Integral Part of this Statement
F-136
<PAGE>
WRKI/WAXB/WPUT/WINE
(Operating Divisions of Commodore Media of Norwalk, Inc.)
COMBINED STATEMENT OF CASH FLOWS
For the year ended December 31, 1997
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income......................................................... $ 306,072
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.................................... 344,745
Bad debt provision............................................... 11,384
Decrease in accounts receivable.................................. 190,802
Increase in other current assets................................. (11,778)
Decrease in accounts payable..................................... (19,796)
---------
Total adjustments.............................................. 515,357
---------
Net cash provided by operating activities...................... 821,429
Cash flows from investing activities:
Purchase of property and equipment............................... (97,118)
Cash flows from financing activities:
Net repayment of advances to parent and affiliates............... (850,733)
---------
NET DECREASE IN CASH AND CASH EQUIVALENTS...................... (126,422)
Cash and cash equivalents at beginning of period................... 127,222
---------
Cash and cash equivalents at end of period......................... $ 800
=========
</TABLE>
The Notes to Financial Statements are an Integral Part of this Statement
F-137
<PAGE>
WRKI/WAXB/WPUT/WINE
(Operating Divisions of Commodore Media of Norwalk, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Business
Commodore Media of Norwalk, Inc. (the Company) operates several radio
stations in Connecticut and New York. The signals licensed by the FCC included
in this presentation operate under the call letters of WRKI, WAXB, WPUT, and
WINE (the Divisions). The Divisions derive their revenue primarily from the
sale of radio advertising. Commodore Media of Norwalk, Inc. is a wholly owned
subsidiary of Capstar Broadcasting.
Transfer of Signals and Assets to Grantor Trust
On January 1, 1997, the net assets of WZZN were transferred by the parent
corporation to Commodore Media of Westchester, Inc.
On May 29, 1998, Capstar Broadcasting Corporation contributed all of the
rights, title, interest and obligations in all of the assets, properties,
contracts, leases and agreements of the Divisions to the Capstar Trust. The
company is the sole beneficiary of the trust.
Revenue Recognition
Broadcasting operations derive revenue primarily from the sale of program
time and commercial announcements to local, regional and national advertisers.
Revenue is recognized when the program and commercial announcements are
broadcast.
Advertising Costs
The Divisions incur various marketing and promotional costs to add and
maintain listenership. These costs are expensed as incurred.
Use of Estimates
The process of preparing financial statements in conformity with
generally accepted accounting principles requires the use of estimates and
assumptions regarding certain types of assets, liabilities, revenues and
expenses. Such estimates primarily relate to unsettled transactions and events
as of the date of the financial statements. Accordingly, upon settlement,
actual results may differ from those estimates.
Concentration of Credit Risk
The Divisions' business activity is with customers located within the
immediate geographic area. Blocks of advertising time are generally sold on
credit on standard business terms.
The Divisions' revenue and accounts receivable primarily relates to
advertising of products and services within the radio stations' broadcast
areas. The Divisions perform ongoing credit evaluations of its customers'
financial condition and, generally requires no collateral from its customers.
Credit losses have been within management's expectations and adequate
allowances for any uncollectible accounts receivables are maintained.
F-138
<PAGE>
WRKI/WAXB/WPUT/WINE
(Operating Divisions of Commodore Media of Norwalk, Inc.)
NOTES TO FINANCIAL STATEMENTS--(Continued)
The radio broadcasting industry is subject to federal regulation by the
Federal Communications Commission. These governmental regulations and policies
could change over time and there can be no assurance that such changes would
not have a material impact upon the Divisions.
Property and Equipment
The cost of property and equipment is depreciated over the estimated
useful lives of the related assets. Leasehold improvements are depreciated over
the lesser of the term of the related lease or the estimated useful lives of
the assets. Depreciation is computed on the straight line method for financial
reporting purposes and the double declining balance method for income tax
purposes.
Maintenance and repairs are charged to operations when incurred.
Betterments and renewals are capitalized. When property and equipment are sold
or otherwise disposed of, the asset account and related accumulated
depreciation account are relieved, and any gain or loss is included in
operations.
The useful lives of property and equipment for purposes of computing
depreciation are:
<TABLE>
<S> <C>
Office equipment................................................. 5-7 years
Studio equipment................................................. 7 years
Building, leasehold improvements and tower....................... 10-40 years
</TABLE>
Income Taxes
The Divisions file their income tax return on a consolidated basis with
their parent company.
Cash Flows
For purposes of the statement of cash flows, cash equivalents include
time deposits, certificates of deposits, and all highly liquid debt instruments
with original maturities of three months or less. The Divisions incurred no
interest expense or income taxes in the reported period.
Barter Transactions
The Divisions barter unsold advertising time for products and services.
Such transactions are recorded at the estimated fair value of the products or
services received. Barter revenue is recorded when commercials are broadcast
and related expenses are recorded when the bartered product or service is used.
The fair value of barter and trade-out transactions is included in
broadcasting revenue and broadcasting expense. Barter transactions charged to
operations for the year ended December 31, 1997 were as follows:
<TABLE>
<S> <C>
Trade sales....................................................... $ 514,208
Trade expense..................................................... (482,143)
---------
Net Trade Revenue Transactions.................................. $ 32,065
=========
</TABLE>
F-139
<PAGE>
WRKI/WAXB/WPUT/WINE
(Operating Divisions of Commodore Media of Norwalk, Inc.)
NOTES TO FINANCIAL STATEMENTS--(Continued)
NOTE 2--PROPERTY, PLANT AND EQUIPMENT
Property and equipment consisted of the following at December 31, 1997:
<TABLE>
<S> <C>
Land............................................................. $ 339,214
Buildings and leasehold improvements............................. 644,746
Studio and transmission equipment................................ 1,115,975
Music library.................................................... 2,283
Office equipment and fixtures.................................... 101,560
----------
Total.......................................................... 2,203,778
Less: accumulated depreciation................................... (164,873)
----------
Net Property and Equipment....................................... $2,038,905
==========
</TABLE>
Property and equipment are pledged as collateral for various obligation
of the divisions' corporate parent. (See Note 4).
NOTE 3--INTANGIBLE ASSETS
Intangible assets consisted of the following at December 31, 1997:
<TABLE>
<S> <C>
FCC license...................................................... $8,003,448
Transmitter site lease........................................... 56,108
Goodwill......................................................... 32,000
----------
Total.......................................................... 8,091,556
Less: accumulated amortization................................... (250,271)
----------
Net Intangible Assets............................................ $7,841,285
==========
</TABLE>
The Divisions periodically evaluate intangible assets for potential
impairment by analyzing the operating results, future cash flows on an
undiscounted basis, trends and prospects of the Divisions, as well as by
comparing them to their competitors. The Divisions also take into consideration
recent acquisition patterns within the broadcast industry, the impact of
recently enacted or potential FCC rules and regulations and any other events or
circumstances which might indicate potential impact. At this time, in the
opinion of management, no impairment has occurred.
NOTE 4--RELATED PARTIES
The divisions receive advances from and pays advances to its parent
corporation and other related affiliated companies. In addition the parent
corporation allocates expenses to the divisions based on revenue, which are
related to corporate overhead and other costs related to the management and
operation of the stations.
The net assets of the Station have been pledged on guarantees of various
obligations of the corporate parent.
F-140
<PAGE>
WRKI/WAXB/WPUT/WINE
(Operating Divisions of Commodore Media of Norwalk, Inc.)
NOTES TO FINANCIAL STATEMENTS--(Continued)
NOTE 5--COMMITMENTS
Operating Leases
The Divisions lease various tower facilities under operating leases,
which do not currently have expiration dates.
Total rent expense for 1997 was approximately $35,500. The Divisions also
contract for a variety of services and equipment through short-term agreements
and leases under cash or barter arrangements. These agreements and leases are
renewed or replaced at the end of their term at the discretion of management.
Minimum future rentals under noncancelable operating leases having
remaining terms in excess of one year for each of the next five years and in
the aggregate are as follows:
<TABLE>
<S> <C>
Year ended December 31,
1998............................................................. $ 37,625
1999............................................................. 40,427
2000............................................................. 41,017
2001............................................................. 42,029
2002............................................................. 43,094
--------
Total Minimum Lease Payments................................... $204,192
========
</TABLE>
NOTE 6--PENSION PLAN
The Divisions have a 401(k) Profit Sharing Plan covering all full time
employees meeting eligibility requirements. The Company matches fifty percent
of the employee's contributions up to six percent of compensation.
NOTE 7--SUBSEQUENT SALE OF CAPSTAR TRUST
On October 27, 1999, the tangible assets, FCC license and goodwill of
Capstar Trust were purchased by Aurora of Danbury, L.L.C. The total cost of the
acquisition was $11,250,000.
F-141
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Division Manager of
WRKI, WAXB, WPUT, WZZN, WINE
We have audited the accompanying combined balance sheet of WRKI, WAXB,
WPUT, WZZN and WINE (Operating Divisions of Commodore Media of Norwalk, Inc.)
(the Divisions) as of December 31, 1996, and the related combined statements of
operations and division equity and cash flows for the year then ended. These
financial statements are the responsibility of the Divisions' management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the combined financial position of WRKI,
WAXB, WPUT, WZZN, and WINE as of December 31, 1996, and the results of their
combined operations and their combined cash flows for the year then ended in
conformity with generally accepted accounting principles.
Weeks Holderbaum Huber & DeGraw LLP
August 11, 1999
(except for Note 7, as to
which the date is October
27, 1999)
F-144
<PAGE>
WRKI/WAXB/WPUT/WZZN/WINE
(Operating Divisions of Commodore Media of Norwalk, Inc.)
COMBINED BALANCE SHEET
December 31, 1996
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash............................................................. $ 127,222
Accounts receivable, less allowance for doubtful accounts of
$220,518........................................................ 795,871
-----------
Total current assets........................................... 923,093
PROPERTY, PLANT AND EQUIPMENT, NET................................. 2,079,411
INTANGIBLE ASSETS, NET............................................. 8,048,406
OTHER ASSETS....................................................... 30,619
-----------
Total assets................................................... $11,081,529
===========
LIABILITIES AND DIVISION EQUITY
Accounts payable and accrued expenses.............................. $ 189,966
Division equity.................................................... 10,891,563
-----------
Total liabilities and division equity.......................... $11,081,529
===========
</TABLE>
The Notes to Financial Statements are an Integral Part of this Statement
F-145
<PAGE>
WRKI/WAXB/WPUT/WZZN/WINE
(Operating Divisions of Commodore Media of Norwalk, Inc.)
COMBINED STATEMENT OF OPERATIONS AND DIVISION EQUITY
For the year ended December 31, 1996
<TABLE>
<S> <C>
Revenues:
Broadcast revenue................................................ $ 4,151,424
Less: agency commissions......................................... (304,903)
-----------
Net broadcast revenue.......................................... 3,846,521
Other non-broadcast revenue...................................... 41,410
-----------
Total revenue.................................................. 3,887,931
Expenses:
Programming and technical........................................ 925,407
Sales and advertising............................................ 1,436,296
Administrative................................................... 1,098,778
-----------
Total expenses................................................. 3,460,481
-----------
Income from operations............................................. 427,450
Other expenses:
Depreciation..................................................... 137,724
Amortization..................................................... 207,120
-----------
Total other expenses........................................... 344,844
-----------
Net income......................................................... 82,606
Division equity at beginning of year............................... 10,808,957
-----------
Division equity at end of year..................................... $10,891,563
===========
</TABLE>
The Notes to Financial Statements are an Integral Part of this Statement
F-146
<PAGE>
WRKI/WAXB/WPUT/WZZN/WINE
(Operating Divisions of Commodore Media of Norwalk, Inc.)
COMBINED STATEMENT OF CASH FLOWS
For the year ended December 31, 1996
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income......................................................... $ 82,606
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.................................... 344,844
Bad debt provision............................................... 162,696
Increase in accounts receivable.................................. (489,817)
Increase in other current assets................................. (29,081)
Increase in accounts payable..................................... 138,875
---------
Total adjustments.............................................. 127,517
---------
Net cash provided by operating activities...................... 210,123
Cash flows from investing activities:
Purchase of property and equipment............................... (10,879)
Cash flows from financing activities:
Net repayment of advances from equity holder..................... (231,407)
---------
Net decrease in cash and cash equivalents.......................... (32,163)
Cash and cash equivalents at beginning of period................... 159,385
---------
Cash and cash equivalents at end of period......................... $ 127,222
=========
</TABLE>
The Notes to Financial Statements are an Integral Part of this Statement
F-147
<PAGE>
WRKI/WAXB/WPUT/WZZN/WINE
(Operating Divisions of Commodore Media of Norwalk, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Business
Commodore Media of Norwalk, Inc. (the Company) operates several radio
stations in Connecticut and New York. The signals licensed by the FCC included
in this presentation operate under the call letters of WRKI, WAXB, WPUT, WZZN,
and WINE (the Divisions). The Divisions derive their revenue primarily from the
sale of radio advertising.
Sale of Stations
In October 1996, Commodore Media of Norwalk, Inc. was purchased by
Capstar Broadcasting in a business combination which was accounted for as a
purchase. Pursuant to this transaction the Company became a wholly owned
subsidiary of Capstar Broadcasting.
During 1997, the net assets of WZZN were transferred by the parent
corporation to Commodore Media of Westchester, Inc., an entity affiliated by
common ownership.
The results of operations of the acquired Divisions are included in the
accompanying financial statements for the entire year. The total cost of the
acquisition, exceeded the fair value of the net assets of the stations by
approximately $8,100,000, which has been allocated to the stations FCC license
and goodwill. The excess is being amortized on the straight-line method over
forty years.
On May 29, 1998, Capstar Broadcasting contributed all of the rights,
title, interest and obligations in all of the assets, properties, contrasts,
leases and agreements of the Divisions to Capstar Trust.
Revenue Recognition
Broadcasting operations derive revenue primarily from the sale of program
time and commercial announcements to local, regional and national advertisers.
Revenue is recognized when the program and commercial announcements are
broadcast.
Advertising Costs
The Divisions incur various marketing and promotional costs to add and
maintain listenership. These costs are expensed as incurred.
Use of Estimates
The process of preparing financial statements in conformity with
generally accepted accounting principles requires the use of estimates and
assumptions regarding certain types of assets, liabilities, revenues and
expenses. Such estimates primarily relate to unsettled transactions and events
as of the date of the financial statements. Accordingly, upon settlement,
actual results may differ from those estimates.
F-148
<PAGE>
WRKI/WAXB/WPUT/WZZN/WINE
(Operating Divisions of Commodore Media of Norwalk, Inc.)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Concentration of Credit Risk
The Divisions' business activity is with customers located within the
immediate geographic area. Blocks of advertising time are generally sold on
credit on standard business terms.
The Divisions' revenue and accounts receivable primarily relate to
advertising of products and services within the radio stations' broadcast
areas. The Divisions perform ongoing credit evaluations of their customers'
financial condition and, generally requires no collateral from its customers.
Credit losses have been within management's expectations and adequate
allowances for any uncollectible accounts receivables are maintained.
The radio broadcasting industry is subject to federal regulation by the
Federal Communications Commission. These governmental regulations and policies
could change over time and there can be no assurance that such changes would
not have a material impact upon the Divisions.
Property and Equipment
The cost of property and equipment is depreciated over the estimated
useful lives of the related assets. Leasehold improvements are depreciated over
the lesser of the term of the related lease or the estimated useful lives of
the assets. Depreciation is computed on the straight line method for financial
reporting purposes and the double-declining balance method for income tax
purposes.
Maintenance and repairs are charged to operations when incurred.
Betterments and renewals are capitalized. When property and equipment are sold
or otherwise disposed of, the asset account and related accumulated
depreciation account are relieved, and any gain or loss is included in
operations.
The useful lives of property and equipment for purposes of computing
depreciation are:
<TABLE>
<S> <C>
Office equipment and fixtures.................................... 5-7 years
Studio equipment................................................. 7 years
Building, leasehold improvements and tower....................... 10-40 years
</TABLE>
Income Taxes
The Divisions file their income tax return on a consolidated basis with
their parent company.
Cash Flows
For purposes of the statement of cash flows, cash equivalents include
time deposits, certificates of deposits, and all highly liquid debt instruments
with original maturities of three months or less. The Divisions incurred no
interest or income taxes in the reporting period.
Barter Transactions
The Divisions barter unsold advertising time for products and services.
Such transactions are recorded at the estimated fair value of the products or
services received. Barter revenue is recorded when commercials are broadcast
and related expenses are recorded when the bartered product or service is used.
F-149
<PAGE>
WRKI/WAXB/WPUT/WZZN/WINE
(Operating Divisions of Commodore Media of Norwalk, Inc.)
NOTES TO FINANCIAL STATEMENTS--(Continued)
The fair value of barter and trade-out transactions is included in
broadcasting revenue and broadcasting expense. Barter transactions charged to
operations for the period ended December 31, 1996 were as follows:
<TABLE>
<S> <C>
Trade sales....................................................... $ 484,265
Trade expense..................................................... (413,279)
---------
Net trade revenue transactions.................................. $ 70,986
=========
</TABLE>
NOTE 2--PROPERTY, PLANT AND EQUIPMENT
Property and equipment consisted of the following at December 31, 1996:
<TABLE>
<S> <C>
Land............................................................. $ 339,214
Buildings and leasehold improvements............................. 642,306
Studio and transmission equipment................................ 1,026,649
Music library.................................................... 2,217
Office equipment and fixtures.................................... 96,274
----------
Total.......................................................... 2,106,660
Less: accumulated depreciation................................... (27,249)
----------
Net property and equipment....................................... $2,079,411
==========
</TABLE>
Property and equipment are pledged as collateral for various obligation
of the divisions' corporate parent. (See Note 4).
NOTE 3--INTANGIBLE ASSETS
Intangible assets consisted of the following at December 31, 1996:
<TABLE>
<S> <C>
FCC license...................................................... $8,003,448
Goodwill......................................................... 32,000
Transmitter site lease........................................... 56,108
----------
Total.......................................................... 8,091,556
Less: accumulated amortization................................... (43,150)
----------
Net intangible assets............................................ $8,048,406
==========
</TABLE>
The Divisions periodically evaluate intangible assets for potential
impairment by analyzing the operating results, future cash flows on an
undiscounted basis, trends and prospects of the Divisions stations, as well as
by comparing them to their competitors. The Divisions also take into
consideration recent acquisition patterns within the broadcast industry, the
impact of recently enacted or potential FCC rules and regulations and any other
events or circumstances which might indicate potential impact. At this time, in
the opinion of management, no impairment has occurred.
F-150
<PAGE>
WRKI/WAXB/WPUT/WZZN/WINE
(Operating Divisions of Commodore Media of Norwalk, Inc.)
NOTES TO FINANCIAL STATEMENTS--(Continued)
NOTE 4--RELATED PARTIES
The Divisions receive advances from and pay advances to their parent
corporation and other related affiliated companies. In addition the parent
corporation allocates expenses to the divisions based on revenue, which are
related to corporate overhead and other costs related to the management and
operation of the stations.
The net assets of the stations have been pledged as guarantees of various
obligations of the corporate parent.
NOTE 5--COMMITMENTS
Operating Leases
The Divisions lease various tower facilities under operating leases,
which do not currently have expiration dates.
Total Rent expense for 1996 was approximately $30,000. The Divisions also
contracts for a variety of services and equipment through short-term agreements
and leases under cash or barter arrangements. These agreements and leases are
renewed or replaced at the end of their term at the discretion of management.
Minimum future rentals under noncancelable operating leases having
remaining terms in excess of one year for each of the next five years and in
the aggregate are as follows:
<TABLE>
<S> <C>
Year ended December 31,
1997............................................................. $ 35,453
1998............................................................. 37,625
1999............................................................. 40,427
2000............................................................. 41,017
2001............................................................. 42,029
--------
Total minimum lease payments................................... $196,551
========
</TABLE>
NOTE 6--PENSION PLAN
The Divisions have a 401(k) Profit Sharing Plan covering all full time
employees meeting eligibility requirements. The Divisions matches fifty percent
of the employee's contributions up to six percent of compensation.
NOTE 7--SUBSEQUENT SALE OF CAPSTAR TRUST
On October 27, 1999, the tangible assets, FCC license and goodwill of
Capstar Trust were purchased by Aurora of Danbury, L.L.C. The total cost of the
acquisition was $11,250,000.
F-151
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Through and including , 2000 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealers' obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
Shares
Nassau Broadcasting Corporation
Class A Common Stock
-----------------
PROSPECTUS
-----------------
Merrill Lynch & Co.
Salomon Smith Barney
Banc of America Securities LLC
, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Alternative Page for International Prospectus
Subject to Completion
Preliminary Prospectus dated May 9, 2000
P R O S P E C T U S
Shares
Nassau Broadcasting Corporation
Class A Common Stock
-----------
This is Nassau's initial public offering. Nassau is selling all of the
shares. The international managers are offering shares outside the U.S.
and Canada and the U.S. underwriters are offering shares in the U.S. and
Canada.
We expect the public offering price to be between $ and $ per share.
Currently, no public market exists for the shares. After pricing of the
offering, we expect that the shares will be quoted on the Nasdaq National
Market under the symbol "NBCR."
Investing in the class A common stock involves risks that are described in
the "Risk Factors" section beginning on page 13 of this prospectus.
-----------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public offering price............................. $ $
Underwriting discount............................. $ $
Proceeds, before expenses, to Nassau.............. $ $
</TABLE>
The international managers may also purchase up to an additional
shares from Nassau at the public offering price, less the underwriting
discount, within 30 days from the date of this prospectus to cover over-
allotments. The U.S. underwriters may similarly purchase up to an additional
shares from Nassau.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
The shares of class A common stock will be ready for delivery on or about
, 2000.
-----------
Merrill Lynch International Schroder Salomon Smith Barney
-----------
The date of this prospectus is , 2000.
A-1
<PAGE>
Alternative Page for International Prospectus
UNDERWRITING
We intend to offer the shares outside the U.S. and Canada through the
international managers and in the U.S. and Canada through the U.S.
underwriters. Merrill Lynch International and Salomon Brothers International
Limited are acting as lead managers for the international managers named below.
Subject to the terms and conditions described in an international purchase
agreement among us and the international managers, and concurrently with the
sale of shares to the U.S. underwriters, we have agreed to sell to the
international managers, and the international managers severally have agreed to
purchase from us, the number of shares listed opposite their names below.
<TABLE>
<CAPTION>
Number
International Manager of Shares
--------------------- ---------
<S> <C>
Merrill Lynch International.....................................
Salomon Brothers International Limited..........................
----
Total......................................................
====
</TABLE>
We have also entered into a U.S. purchase agreement with the U.S.
underwriters, for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Salomon Smith Barney Inc. and Banc of America Securities LLC are acting as U.S.
representatives, for sale of the shares in the U.S. and Canada. Subject to the
terms and conditions in the U.S. purchase agreement, and concurrently with the
sale of shares to the international managers pursuant to the international
purchase agreement, we have agreed to sell to the U.S. underwriters, and the
U.S. underwriters severally have agreed to purchase shares from us. The
initial public offering price per share and the total underwriting discount per
share are identical under the international purchase agreement and the U.S.
purchase agreement.
The international managers and the U.S. underwriters have agreed to
purchase all of the shares sold under the international and U.S. purchase
agreements if any of these shares are purchased. If an underwriter defaults,
the international and U.S. purchase agreements provide that the purchase
commitments of the nondefaulting underwriters may be increased or the purchase
agreements may be terminated. The closings for the sale of shares to be
purchased by the international managers and the U.S. underwriters are
conditioned on one another.
We have agreed to indemnify the international managers and the U.S.
underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the international managers and
U.S. underwriters may be required to make in respect of those liabilities.
The underwriters are offering the shares, subject to prior sale, when, as
and if issued to and accepted by them, subject to approval of legal matters by
their counsel, including the validity of the shares, and other conditions
contained in the purchase agreements, such as the receipt by the underwriters
of officer's certificates and legal opinions. The underwriters reserve the
right to withdraw, cancel or modify offers to the public and to reject orders
in whole or in part.
Schroders is a trademark of Schroders Holdings plc and is used under
license by Salomon Smith Barney.
Commissions and Discounts
The lead managers have advised us that the international managers propose
initially to offer the shares to the public at the initial public offering
price on the cover page of this prospectus and to dealers at that price less a
concession not in excess of $ per share. The international managers may
allow, and the dealers may reallow, a discount not in excess of $ per share
to other dealers. After the initial public offering, the public offering price,
concession and discount may be changed.
A-2
<PAGE>
Alternative Page for International Prospectus
The following table shows the public offering price, underwriting
discount and proceeds before expenses to Nassau. In addition, the table
includes certain other items considered by the NASD to be underwriting
compensation for purposes of the NASD's Conduct Rules. The information assumes
either no exercise or full exercise by the international managers and the U.S.
underwriters of their over-allotment options.
<TABLE>
<CAPTION>
Per Share Without Option With Option
--------- -------------- -----------
<S> <C> <C> <C>
Public offering price.................. $ $ $
Underwriting discount.................. $ $ $
Proceeds, before expenses, to Nassau... $ $ $
Other items............................
</TABLE>
Merrill Lynch Capital Corporation, an affiliate of Merrill Lynch, Pierce,
Fenner & Smith Incorporated, owns shares of our class A common stock which
were received upon conversion of limited partnership units acquired in
connection with our recapitalization. The compensation in the table above in
the line titled "other items" was computed based on the difference between the
$ offering price and $ , the price deemed to be paid for the shares of
class A common stock held by Merrill Lynch Capital Corporation.
The expenses of the offering, not including the underwriting discount,
are estimated at $ and are payable by us, as set forth in the following
table.
<TABLE>
<S> <C>
SEC registration fee...................................................... $
NASD filing fee...........................................................
Nasdaq National Market listing fee........................................
Printing and engraving expenses...........................................
Legal fees and expenses...................................................
Accounting fees and expenses..............................................
Blue sky fees and expenses (including legal fees).........................
Transfer agent and registrar fees and expenses............................
Premiums for director and officer insurance...............................
Miscellaneous.............................................................
----
Total................................................................... $
====
</TABLE>
Over-allotment Option
We have granted an option to the international managers to purchase up to
additional shares at the public offering price less the underwriting
discount. The international managers may exercise this option for 30 days from
the date of this prospectus solely to cover any over-allotments. If the
international managers exercise this option, each will be obligated, subject to
conditions contained in the purchase agreements, to purchase a number of
additional shares proportionate to that international manager's initial amount
reflected in the above table.
We have also granted an option to the U.S. underwriters, exercisable for
30 days from the date of this prospectus, to purchase up to additional
shares to cover any over-allotments on terms similar to those granted to the
international managers.
Intersyndicate Agreement
The international managers and the U.S. underwriters have entered into an
intersyndicate agreement that provides for the coordination of their
activities. Under the intersyndicate agreement, the international managers and
the U.S. underwriters may sell shares to each other for purposes of resale at
the initial public
A-3
<PAGE>
Alternative Page for International Prospectus
offering price, less an amount not greater than the selling concession. Under
the intersyndicate agreement, the international managers and any dealer to whom
they sell shares will not offer to sell or sell shares to persons who are U.S.
or Canadian persons or to persons they believe intend to resell to persons who
are U.S. or Canadian persons, except in the case of transactions under the
intersyndicate agreement. Similarly, the U.S. underwriters and any dealer to
whom they sell shares will not offer to sell or sell shares to non-U.S. persons
or non-Canadian persons or to persons they believe intend to resell to non-U.S.
or non-Canadian persons, except in the case of transactions under the
intersyndicate agreement.
Reserved Shares
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to shares offered by this prospectus for sale to
some of our directors, officers, employees and business associates. If these
persons purchase reserved shares, this will reduce the number of shares
available for sale to the general public. Any reserved shares that are not
orally confirmed for purchase within one day of the pricing of this offering
will be offered by the underwriters to the general public on the same terms as
the other shares offered by this prospectus.
Purchasers of shares pursuant to the reserved share program generally
will not be subject to lock-up agreements in respect of the shares so purchased
unless required by the Conduct Rules of the NASD. The NASD's Conduct Rules will
require that some purchasers of shares who are affiliated or associated with
NASD members or who hold senior positions at financial institutions or members
of their immediate families be subject to three-month lock-up agreements.
No Sales of Similar Securities
We and our executive officers and directors and most of our existing
stockholders have agreed, with limited exceptions, not to sell or transfer any
common stock for 180 days after the date of this prospectus without first
obtaining the written consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Salomon Smith Barney Inc. Specifically, we and these other
individuals have agreed not to directly or indirectly
. offer, pledge, sell or contract to sell any common stock, other than
common stock issued by us in connection with our purchase of Aurora
Communications;
. sell any option or contract to purchase any common stock;
. purchase any option or contract to sell any common stock;
. grant any option, right or warrant for the sale of any common stock,
other than pursuant to our stock incentive plan;
. lend or otherwise dispose of or transfer any common stock;
. request or demand that we file a registration statement related to
any common stock; or
. enter into any swap or other agreement that transfers, in whole or in
part, the economic consequence of ownership of any common stock
whether any such swap or transaction is to be settled by delivery of
shares or other securities, in cash or otherwise.
This lockup provision applies to common stock and to securities
convertible into or exchangeable or exercisable for or repayable with common
stock. It also applies to common stock owned now or acquired later by the
person executing the agreement or for which the person executing the agreement
later acquires the power of disposition.
Quotation on the Nasdaq National Market
We expect the shares to be approved for quotation on the Nasdaq National
Market, subject to notice of issuance, under the symbol "NBCR."
A-4
<PAGE>
Alternative Page for International Prospectus
Before this offering, there has been no public market for our class A
common stock. The initial public offering price will be determined through
negotiations among us and the U.S. representatives and lead managers. In
addition to prevailing market conditions, the primary factors to be considered
in determining the initial public offering price are
. the valuation multiples of publicly traded companies that the U.S.
representatives and the lead managers believe to be comparable to us;
. our financial information;
. the history of, and the prospects for, our company and the industry
in which we compete;
. an assessment of our management, its past and present operations, and
the prospects for, and timing of, our future revenues;
. the present state of our development;
. the general condition of the securities market at the time of this
offering; and
. the above factors in relation to market values and various valuation
measures of other companies engaged in activities similar to ours.
An active trading market for the shares may not develop. It is also
possible that after the offering the shares will not trade in the public market
at or above the initial public offering price.
UK Selling Restrictions
Each international manager has agreed that
. it has not offered or sold and will not offer or sell any shares of
shares of our class A common stock to persons in the United Kingdom,
except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise
in circumstances which do not constitute an offer to the public in
the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995;
. it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in
relation to the class A common stock in, from or otherwise involving
the United Kingdom; and
. it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the
issuance of class A common stock to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 as amended by the
Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1997 or is a person to whom such document may otherwise
lawfully be issued or passed on.
No Public Offering Outside the United States
No action has been or will be taken in any jurisdiction (except in the
United States) that would permit a public offering of the shares of class A
common stock, or the possession, circulation or distribution of this prospectus
or any other material relating to us or shares of our class A common stock in
any jurisdiction where action for that purpose is required. Accordingly, the
shares of our class A common stock may not be offered or sold, directly or
indirectly, and neither this prospectus nor any other offering material or
advertisements in connection with the shares of our class A common stock may be
distributed or published, in or from any country or jurisdiction except in
compliance with any applicable rules and regulations of that country or
jurisdiction.
A-5
<PAGE>
Alternative Page for International Prospectus
You may be required to pay stamp taxes and other charges in accordance
with the laws and practices of the country of purchase in addition to the
offering price on the cover of this prospectus.
Price Stabilization, Short Positions and Penalty Bids
Until the distribution of the shares is completed, SEC rules may limit
underwriters and selling group members from bidding for and purchasing our
class A common stock. However, the U.S. representatives may engage in
transactions that stabilize the price of the class A common stock, such as bids
or purchases to peg, fix or maintain that price.
If the underwriters create a short position in the class A common stock
in connection with the offering, i.e., if they sell more shares than are listed
on the cover of this prospectus, the U.S. representatives may reduce that short
position by purchasing shares in the open market. The U.S. representatives may
also elect to reduce any short position by exercising all or part of the over-
allotment options described above. Purchases of the class A common stock to
stabilize its price or to reduce a short position may cause the price of the
class A common stock to be higher than it might be in the absence of such
purchases.
The U.S. representatives may also impose a penalty bid on underwriters
and selling group members. This means that if the U.S. representatives purchase
shares in the open market to reduce the underwriters' short position or to
stabilize the price of such shares, they may reclaim the amount of the selling
concession from the underwriters and selling group members who sold those
shares. The imposition of a penalty bid may also affect the price of the shares
in that it discourages resales of those shares.
Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the class A common stock. In addition,
neither we nor any of the underwriters makes any representation that the U.S.
representatives or the lead managers will engage in these transactions or that
these transactions, once commenced, will not be discontinued without notice.
These transactions may be effected on the Nasdaq National Market, in the over-
the-counter market or otherwise.
Other Relationships
Merrill Lynch, Pierce, Fenner & Smith Incorporated has acted as our
financial advisor in connection with our pending acquisition of Aurora
Communications and our reorganization. In addition, Merrill Lynch has acted as
sole placement agent with respect to our units consisting of 13% senior
discount notes due 2010 and limited partnership units, and as sole lead
arranger, book running manager and syndication agent with respect to our new
credit facility. Merrill Lynch has received customary fees and commissions for
these transactions. Merrill Lynch Capital Corporation, an affiliate of Merrill
Lynch, owns $20.0 million aggregate principal amount of our senior discount
notes and shares of our class A common stock. Merrill Lynch Capital
Corporation is also a lender under our new credit facility. We expect to issue
shares of class C common stock to BancAmerica Capital Investors SBIC I,
L.P., an affiliate of Banc of America Securities LLC, in connection with the
Aurora Communications acquisition. Merrill Lynch Capital Corporation has agreed
that it will not, with limited exceptions, sell, transfer, assign, pledge or
hypothecate any shares of class A common stock for one year after the date of
this prospectus.
A-6
<PAGE>
Alternative Page for International Prospectus
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Through and including , 2000 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealers' obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
---------------
PROSPECTUS
---------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares
Nassau Broadcasting Corporation
Class A Common Stock
Merrill Lynch International
Schroder Salomon Smith Barney
, 2000
A-7
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
Set forth below is a table of the registration fee for the Securities and
Exchange Commission, the filing fee for the National Association of Securities
Dealers, Inc., the listing fee for the Nasdaq National Market and estimates of
all other expenses to be incurred in connection with the issuance and
distribution of the securities described in this registration statement, other
than underwriting discounts and commissions:
<TABLE>
<S> <C>
SEC registration fee................................................. $
NASD filing fee......................................................
Nasdaq National Market listing fee...................................
Printing and engraving expenses......................................
Legal fees and expenses..............................................
Accounting fees and expenses.........................................
Blue sky fees and expenses...........................................
Transfer agent and registrar fees and expenses.......................
Premiums for director and officer insurance..........................
Miscellaneous expenses...............................................
----
Total.............................................................. $
====
</TABLE>
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law allows for the
indemnification of officers, directors and any corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities, including reimbursement for expenses incurred arising under the
Securities Act. Our certificate of incorporation and our by-laws provide for
indemnification of our directors, officers, employees and other agents to the
extent and under the circumstances permitted by the Delaware General
Corporation Law. We also expect to enter into agreements with our directors and
executive officers that require, among other things, that we indemnify them
against certain liabilities that may arise by reason of their status or service
as directors and executive officers to the fullest extent permitted by Delaware
law. We expect to purchase directors and officers liability insurance, which
provides coverage against certain liabilities, including liabilities under the
Securities Act.
Item 15. Recent Sales of Unregistered Securities
Within the past three years, we have issued and sold securities to
accredited investors or qualified institutional buyers on the dates and for the
consideration set forth below in transactions exempt from registration under
the Securities Act of 1933, as amended.
1. From 1995 to 1997, we issued 8.0% subordinated discount notes
to our existing stockholders, all of whom are accredited investors. On
May 4, 2000, we repaid all of these subordinated discount notes for
aggregate consideration of $42.4 million.
2. On May 4, 2000, we issued and sold units consisting of senior
discount notes and limited partnership units to qualified institutional
buyers for gross proceeds of $60.0 million.
3. Immediately prior to this offering, we effected a
reorganization in which all the equity interests in Nassau Broadcasting
Partners, L.P., were exchanged for shares of our common stock. See the
section "Reorganization" in the prospectus.
4. As part of our expected acquisition of Aurora Communications,
LLC, the holders of equity interests in Aurora Communications will
receive $35.0 million of our class C common stock.
II-1
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1.1** Form of U.S. purchase agreement.
1.2** Form of international purchase agreement.
2.1 Purchase and Exchange Agreement dated March 24, 2000 relating to the
acquisition of Aurora Communications, LLC.
2.2** Amendment No. 1 to the Purchase and Exchange Agreement dated May 4,
2000.
2.3 Asset Purchase Agreement dated February 29, 2000 among Nassau
Broadcasting Partners, L.P. and Clear Channel Communications, Inc. and
Clear Channel Broadcasting Licenses, Inc.
2.4** Stock Purchase Agreement dated July 1, 1996 between Nassau
Broadcasting Partners, L.P. and Joseph E. Buckelew, Jean M. Kvistad,
Steven V. Lane, Edward Levy and Roy G. Simmons.
2.5 Asset Purchase Agreement dated January 21, 1999 between Nassau
Broadcasting Partners, L.P. and Multicultural Radio Broadcasting, Inc.
2.6** Asset Purchase Agreement dated August 30, 1996 between Nassau
Broadcasting Partners, L.P. and Great Scott Broadcasting Ltd.
2.7 Asset Purchase Agreement dated August 7, 1998 between Nassau
Broadcasting Partners, L.P. and Port Jarvis Broadcasting Co., Inc.
2.8** Stock Purchase Agreement dated June , 1999 among Nassau Broadcasting
Partners L.P., Jersey Devil Broadcasting Co., Southern Ocean
Broadcasting, Inc., Great American Communications Co. and Manahawkin
Communications Corporation.
3.1** Certificate of incorporation of the registrant.
3.2** By-laws of the registrant.
4.1** Specimen certificate for shares of class A common stock.
4.2** Specimen certificate for shares of class B common stock.
4.3** Specimen certificate for shares of class C common stock.
4.4** Units Purchase Agreement, dated May 4, 2000 relating to $60,000,000
senior discount notes.
4.5** Form of senior discount note (see Exhibit 4.4).
4.6** Credit agreement, dated May 4, 2000 among Nassau Broadcasting
Partners, L.P., Merrill Lynch Capital Corporation and the other
lenders.
5.1** Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to the legality
of the securities being offered.
10.1** Time Brokerage Agreement dated July 1, 1996 among North Shore
Broadcasting Corporation and Seashore Broadcasting Corporation and
Nassau Broadcasting Partners, L.P.
10.2 Time Brokerage Agreement dated January 21, 1999 between Multicultural
Radio Broadcasting, Inc. and Nassau Broadcasting Partners, L.P.
10.3** Time Brokerage Agreement dated November 12, 1998 between Multicultural
Radio Broadcasting, Inc. and Nassau Broadcasting Partners, L.P.
10.4** Local Marketing Agreement dated June 1, 1997 between Great Scott
Broadcasting, Ltd. and Nassau Broadcasting Partners, L.P.
10.5** Time Brokerage Agreement dated August 1, 1998 between Port Jarvis
Broadcasting Co., Inc. and Nassau Broadcasting Partners, L.P.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.6** Time Brokerage Agreement dated February 12, 1997 among Manahawkin
Communications Corporation, Jersey Devil Broadcasting, Inc., Southern
Ocean Broadcasting, Inc., Great American Communications Co. and Nassau
Broadcasting Partners, L.P.
10.7** Loan Agreement among Nassau Broadcasting Partners, L.P. and Amresco
Commercial Finance, Inc. and Lenders dated August 28, 1998.
10.8** Stock Incentive Plan
10.9** Employment agreement with Louis F. Mercatanti, Jr., dated , 2000.
10.10** Employment agreement with Michael S. Libretti, dated , 2000.
10.11** Employment agreement with Peter D. Tonks, dated , 2000.
10.12** Registration Rights Agreement dated May , 2000 among Nassau
Broadcasting Partners, L.P., Spectrum Equity Investors, L.P., Spectrum
Equity Investors II, L.P., Grotech Partners IV, L.P., Toronto Dominion
(U.S.A.), Inc, Nassau Holdings, Inc., Noel P. Rahn and Nassau
Broadcasting Company
10.13** Common Stock Registration Rights dated May 4, 2000 among Nasssau
Broadcasting Partners, L.P., Merrill Lynch Capital Corporation, Bank
of Montreal, The Bank of Nova Scotia, OZ Master Fund, Ltd. and Caisse
de Depot et Placement du Quebec.
10.14** Form of Registration Rights Agreement to be entered into among Nassau
Broadcasting Corporation and some of the selling holders of equity
interests of Aurora Communications, LLC.
10.15** Agreement dated January 31, 1999 by and between Nassau Broadcasting,
Inc. and Nassau Broadcasting Partners, L.P.
11.1** Statement regarding computation of per share earnings.
12.1** Statement regarding computation of ratios.
21.1 Subsidiaries of the registrant.
23.1* Consent of Grant Thornton LLP.
23.2* Consent of Ernst & Young LLP.
23.3* Consent of Deloitte & Touche LLP.
23.4* Consent of Weeks Holderbaum Huber & Degraw, LLP
23.5** Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
Exhibit 5.1).
24* Power of attorney (included on the signature pages to this
registration statement).
</TABLE>
- --------
* Filed herewith.
** To be filed by amendment.
(b) Financial Statement Schedules:
II-2--1
<PAGE>
Report of Independent Certified Public Accountants on Schedule
The Partners of
Nassau Broadcasting Partners, L.P.
In connection with our audit of the financial statements of Nassau Broadcasting
Partners, L.P. referred to in our report dated March 1, 2000, which is included
in the Prospectus constituting Part I of this Registration Statement, we also
audited Schedule II for each of the three years in the period ended December
31, 1999. In our opinion, this schedule presents fairly, in all material
respects, the information required to be set forth therein.
Grant Thornton LLP
Edison, NJ
March 1, 2000
Nassau Broadcasting Partners, L.P.
Schedule II--Valuation and Qualifying Accounts
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Balance at Charged
beginning to Costs Deductions Balance End
Description of Period and Expenses (A) of Period
----------- ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
1999
Allowance for
doubtful accounts $331,000 $904,000 $(919,000) $316,000
======== ======== ========= ========
1998
Allowance for
doubtful accounts $135,000 $470,000 $(274,000) $331,000
======== ======== ========= ========
1997
Allowance for
doubtful accounts $169,000 $508,000 $(542,000) $135,000
======== ======== ========= ========
</TABLE>
(A) Represents write-offs
II-3
<PAGE>
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.
The Registrant undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of the registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3--1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Princeton,
State of New Jersey, on May 9, 2000.
Nassau Broadcasting Corporation
/s/ Michael S. Libretti
By: _________________________________
Name: Michael S. Libretti
Title: Director
POWER OF ATTORNEY
Each of the undersigned officers and directors of Nassau, a Delaware
corporation, hereby constitutes and appoints Michael S. Libretti and Timothy R.
Smith and each of them, severally, as his attorney-in-fact and agent, with full
power of substitution and resubstitution, in his name and on his behalf, to
sign in any and all capacities this registration statement and any and all
amendments (including post-effective amendments) and exhibits to this
registration statement, any subsequent registration statement for the same
offering which may be filed under Rule 462(b) under the Securities Act of 1933,
as amended, and any and all amendments (including post-effective amendments)
and exhibits thereto, and any and all applications and other documents relating
thereto, with the Securities and Exchange Commission, with full power and
authority to perform and do any and all acts and things whatsoever which any
such attorney or substitute may deem necessary or advisable to be performed or
done in connection with any or all of the above-described matters, as fully as
each of the undersigned could do if personally present and acting, hereby
ratifying and approving all acts of any such attorney or substitute.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities indicated on May 9, 2000.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Louis F. Mercatanti, Jr. President, Chief Executive May 9, 2000
______________________________________ Officer, Director and
Louis F. Mercatanti, Jr. Principal Executive
Officer
/s/ Michael S. Libretti Executive Vice President May 9, 2000
______________________________________ and Chief Financial
Michael S. Libretti Officer
/s/ Peter D. Tonks Director of Accounting & May 9, 2000
______________________________________ Human Resources and
Peter D. Tonks Principal Accounting
Officer
/s/ Brion B. Applegate Director May 9, 2000
______________________________________
</TABLE> Brion B. Applegate
II-4
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ William B. Collatos Director May 9, 2000
______________________________________
William B. Collatos
/s/ Stuart D. Frankel Director May 9, 2000
______________________________________
Stuart D. Frankel
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1.1** Form of U.S. purchase agreement.
1.2** Form of international purchase agreement.
2.1 Purchase and Exchange Agreement dated March 24, 2000 relating to the
acquisition of Aurora Communications, LLC.
2.2** Amendment No. 1 to the Purchase and Exchange Agreement dated May 4,
2000.
2.3 Asset Purchase Agreement dated February 29, 2000 among Nassau
Broadcasting Partners, L.P. and Clear Channel Communications, Inc. and
Clear Channel Broadcasting Licenses, Inc.
2.4** Stock Purchase Agreement dated July 1, 1996 between Nassau
Broadcasting Partners, L.P. and Joseph E. Buckelew, Jean M. Kvistad,
Steven V. Lane, Edward Levy and Roy G. Simmons.
2.5 Asset Purchase Agreement dated January 21, 1999 between Nassau
Broadcasting Partners, L.P. and Multicultural Radio Broadcasting, Inc.
2.6** Asset Purchase Agreement dated August 30, 1996 between Nassau
Broadcasting Partners, L.P. and Great Scott Broadcasting Ltd.
2.7 Asset Purchase Agreement dated August 7, 1998 between Nassau
Broadcasting Partners, L.P. and Port Jarvis Broadcasting Co., Inc.
2.8** Stock Purchase Agreement dated June , 1999 among Nassau Broadcasting
Partners L.P., Jersey Devil Broadcasting Co., Southern Ocean
Broadcasting, Inc., Great American Communications Co. and Manahawkin
Communications Corp.
3.1** Certificate of incorporation of the registrant.
3.2** By-laws of the registrant.
4.1** Specimen certificate for shares of class A common stock.
4.2** Specimen certificate for shares of class B common stock.
4.3** Specimen certificate for shares of class C common stock.
4.4** Units Purchase Agreement, dated May 4, 2000 relating to $60,000,000
senior discount notes
4.5** Form of senior discount note (see Exhibit 4.4)
4.6** Credit agreement, dated May 4, 2000 among Nassau Broadcasting
Partners, L.P., Merrill Lynch Capital Corporation and the other
lenders.
5.1** Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to the legality
of the securities being offered.
10.1** Time Brokerage Agreement dated July 1, 1996 among North Shore
Broadcasting Corporation and Seashore Broadcasting Corporation and
Nassau Broadcasting Partners, L.P.
10.2 Time Brokerage Agreement dated January 21, 1999 between Multicultural
Radio Broadcasting, Inc. and Nassau Broadcasting Partners, L.P.
10.3** Time Brokerage Agreement dated November 12, 1998 between Multicultural
Radio Broadcasting, Inc. and Nassau Broadcasting Partners, L.P.
10.4** Local Marketing Agreement dated June 1, 1997 between Great Scott
Broadcasting, Ltd. and Nassau Broadcasting Partners, L.P.
10.5** Time Brokerage Agreement dated August 1, 1998 between Port Jarvis
Broadcasting Co., Inc. and Nassau Broadcasting Partners, L.P.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.6** Time Brokerage Agreement dated February 12, 1997 among Manahawkin
Communications Corporation, Jersey Devil Broadcasting, Inc., Southern
Ocean Broadcasting, Inc., Great American Communications Co. and Nassau
Broadcasting Partners, L.P.
10.7** Loan Agreement among Nassau Broadcasting Partners, L.P. and Amresco
Commercial Finance, Inc. and Lenders dated August 28, 1998.
10.8** Stock Incentive Plan
10.9** Employment agreement with Louis F. Mercatanti, Jr., dated , 2000.
10.10** Employment agreement with Michael S. Libretti, dated , 2000.
10.11** Employment agreement with Peter D. Tonks, dated , 2000.
10.12** Registration Rights Agreement dated May , 2000 among Nassau
Broadcasting Partners, L.P., Spectrum Equity Investors, L.P., Spectrum
Equity Investors II, L.P., Grotech Partners IV, L.P., Toronto Dominion
(U.S.A.), Inc, Nassau Holdings, Inc., Noel P. Rahn and Nassau
Broadcasting Company
10.13** Common Stock Registration Rights dated May 4, 2000 among Nasssau
Broadcasting Partners, L.P., Merrill Lynch Capital Corporation, Bank
of Montreal, The Bank of Nova Scotia, OZ Master Fund, Ltd. and Caisse
de Depot et Placement du Quebec.
10.14** Form of Registration Rights Agreement to be entered into among Nassau
Broadcasting Corporation and some of the selling stockholders in
Aurora Communications, LLC.
10.15** Agreement dated January 31, 1999 by and between Nassau Broadcasting,
Inc. and Nassau Broadcasting Partners, L.P.
11.1** Statement regarding computation of per share earnings.
12.1** Statement regarding computation of ratios.
21.1 Subsidiaries of the registrant.
23.1* Consent of Grant Thornton LLP.
23.2* Consent of Ernst & Young LLP.
23.3* Consent of Deloitte & Touche LLP.
23.4* Consent of Weeks Holderbaum Huber & Degraw, LLP
23.5** Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
Exhibit 5.1).
24* Power of attorney (included on the signature pages to this
registration statement).
</TABLE>
- --------
* Filed herewith.
** To be filed by amendment.
(b) Financial Statement Schedules:
<PAGE>
EXHIBIT 2.1
PURCHASE AND EXCHANGE AGREEMENT
by and among
NASSAU BROADCASTING PARTNERS, L.P.,
THE SELLERS LISTED ON THE
SIGNATURE PAGES HEREOF,
SELLERS' AGENT
and
NASSAU BROADCASTING PARTNERS, INC.
Dated as of March 24, 2000
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
Section 1.1 Certain Definitions ....................................... 2
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Section 1.2 Cross References .......................................... 8
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Section 1.3 Singular and Plural ....................................... 10
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ARTICLE II
Purchase and Exchange of Subject Interests; Closing
Section 2.1 Purchase and Exchange ..................................... 10
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Section 2.2 Cash Consideration and Payment; Deposit for Purchase;
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Contribution and Exchange ................................. 10
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Section 2.3 Time and Place of Closing ................................. 11
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Section 2.4 The Closing ............................................... 11
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Section 2.5 Purchase and Sale of Shares of NBP ........................ 14
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Section 2.6 Net Working Capital Adjustments ........................... 14
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ARTICLE III
Representations and Warranties of Sellers as to the Companies
Section 3.1 Organization; Authorization; etc .......................... 16
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Section 3.2 Capitalization ............................................ 17
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Section 3.3 Financial Statements ...................................... 18
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Section 3.4 Licenses .................................................. 19
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Section 3.5 Operation of Radio Stations; FCC Reports .................. 19
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Section 3.6 Consents .................................................. 19
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Section 3.7 Contracts, Leases, Options and Commitments ................ 20
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Section 3.8 Assets .................................................... 20
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Section 3.9 Trade Rights, etc ......................................... 20
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Section 3.10 Changes since December 31, 1999 ........................... 21
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Section 3.11 Significant Customers ..................................... 22
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Section 3.12 Litigation, etc ........................................... 22
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Section 3.13 Employees and Employee Benefit Plans ...................... 23
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Section 3.14 Insurance ................................................. 24
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Section 3.15 Taxes ..................................................... 24
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Section 3.16 Authorized Signatories .................................... 25
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Section 3.17 Brokers, Finders, etc ..................................... 25
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Section 3.18 Real Property ............................................. 25
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Section 3.19 Holding Companies ......................................... 26
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Section 3.20 Subsidiaries .............................................. 26
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Section 3.21 Environmental Matters ..................................... 26
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Section 3.22 Accounts Receivable ....................................... 26
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Section 3.23 Acquisition Agreements .................................... 26
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Section 3.24 Affiliate Transactions .................................... 27
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Section 3.25 No Misrepresentation ...................................... 27
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ARTICLE IIIA
Representations and Warranties of Sellers as to Organization, Authorization,
etc.
Section 3A.1. Organization; Authorization; etc .......................... 27
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Section 3A.2. Investment by Continuing Sellers 28
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ARTICLE IV
Representations and Warranties of Buyer and NBP
Section 4.1 Organization; Authorization; etc .......................... 29
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Section 4.2 Capitalization ............................................ 30
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Section 4.3 Financial Statements ...................................... 30
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Section 4.4 Licenses .................................................. 31
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Section 4.5 Operation of Radio Stations FCC Reports ................... 31
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Section 4.6 Consents .................................................. 31
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Section 4.7 Assets .................................................... 32
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Section 4.8 Trade Rights, etc ......................................... 32
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Section 4.9 Changes Since December 31, 1999 ........................... 32
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Section 4.10 Litigation, etc ........................................... 33
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Section 4.11 Taxes ..................................................... 33
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Section 4.12 Brokers, Finders, etc ..................................... 34
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Section 4.13 Real Property ............................................. 34
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Section 4.14 Subsidiaries .............................................. 34
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Section 4.15 Reserved .................................................. 34
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Section 4.16 Insurance ................................................. 34
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Section 4.17 Investment by Buyer ....................................... 34
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Section 4.18 Accounts Receivable ....................................... 35
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Section 4.19 Environmental Matters ..................................... 35
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Section 4.20 No Misrepresentation ...................................... 35
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ARTICLE V
Covenants of the Parties
Section 5.1 Covenants of Sellers ...................................... 36
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Section 5.2 Covenant of Buyer Regarding Aurora Communications Lease ... 40
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Section 5.3 Additional Covenants of Buyer ............................. 40
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Section 5.4 Covenants of Sellers and Buyer ............................ 42
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ARTICLE VI
Conditions to the Closing
Section 6.1 Conditions of the Parties ................................. 44
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Section 6.2 Conditions of Buyer ....................................... 45
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Section 6.3 Conditions of Sellers ..................................... 46
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ARTICLE VII
Indemnity
Section 7.1 Indemnity and Indemnification Procedure ................... 47
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Section 7.2 Limitation of Indemnification Liability ................... 49
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Section 7.3 Definition of Damages or Damages .......................... 51
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Section 7.4 Survival .................................................. 51
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ARTICLE VIII
Termination
Section 8.1 Termination ............................................... 51
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Section 8.2 Effect of Termination ..................................... 53
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ARTICLE IX
Miscellaneous
Section 9.1 Control of the Radio Stations ............................. 54
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Section 9.2 Benefitting Sellers ....................................... 54
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Section 9.3 Buyer Incorporation ....................................... 54
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Section 9.4 Assignment of Rights; Successors and Assigns .............. 55
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Section 9.5 Notices ................................................... 55
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Section 9.6 Expenses .................................................. 56
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Section 9.7 Appointment of Sellers' Agent ............................. 56
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Section 9.8 Remedies .................................................. 57
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Section 9.9 Publicity and Disclosures ................................. 58
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Section 9.10 Interpretation ............................................ 58
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Section 9.11 Counterparts .............................................. 58
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Section 9.12 No Implied Waiver ......................................... 58
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Section 9.13 Entire Agreement .......................................... 58
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Section 9.14 Governing Law ............................................. 58
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Section 9.15 Amendment ................................................. 58
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EXHIBITS AND SCHEDULES
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Exhibit A Schedule of Subject Interests, Purchase and Exchange
Consideration, etc.
Exhibit B Form of Escrow Agreement
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of Employment Termination and Non-Competition
Agreement
Exhibit E Form of Second Restated Securityholders' Agreement
Exhibit F Form of Amendment to Restated Investment Agreement
Exhibit G Fourth Restated Agreement of Limited Partnership
Schedule 1.1(a) Aurora Permitted Encumbrances
Schedule 1.1(b) Nassau Permitted Encumbrances
Schedule 1.1(c) Radio Stations
Schedule 1.1(d) Reduction Liabilities
Schedule 3.1(c) Consents and Approvals
Schedule 3.1(e) Certain Information about the Companies
Schedule 3.2 Capitalization
Schedule 3.3 Financial and Operating Statements Delivered
Schedule 3.4(a) FCC Licenses
Schedule 3.4(b) Pending Applications
Schedule 3.6(a) Consents and Approvals of Government Authorities
Schedule 3.7 Contracts, Leases, etc.
Schedule 3.9 Trade Rights, etc.
Schedule 3.10 Adverse Changes
Schedule 3.12 Litigation, etc.
Schedule 3.13 Employees and Employee Benefit Plans
Schedule 3.14 Insurance
Schedule 3.16 Authorized Signatories
Schedule 3.18 Real Property
Schedule 3.19 Holding Company Matters
Schedule 3.21 Environmental Matters
Schedule 3.22 Accounts Receivable
Schedule 3.24 Affiliate Transactions
Schedule 3A.1(c) Consents and Approvals
Schedule 4.1 Consents and Approvals
Schedule 4.1(d) Certain Information about the Nassau Companies
Schedule 4.2 Capitalization
Schedule 4.3 Financial and Operating Statements Delivered
Schedule 4.4(a) FCC Licenses
Schedule 4.4(b) Pending Applications
Schedule 4.6 Consents and Approvals of Governmental Authorities
Schedule 4.8 Trade Rights, Etc.
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Schedule 4.9 Adverse Changes
Schedule 4.10 Litigation, etc.
Schedule 4.13 Real Property
Schedule 4.18 Accounts Receivable
Schedule 4.19 Environmental Matters
Schedule 5.1(a) Severance and Termination Payments
Schedule 5.3(a) Conduct of Business
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PURCHASE AND EXCHANGE AGREEMENT
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PURCHASE AND EXCHANGE AGREEMENT dated as of March 24, 2000 (this
"Agreement") among Nassau Broadcasting Partners, L.P., a Delaware limited
partnership ("Buyer"); the parties hereto listed as "Sellers" on the signature
pages hereof (collectively, "Sellers"); BancAmerica Capital Investors SBIC I,
L.P., as agent for the Sellers ("Sellers' Agent"); and Nassau Broadcasting
Partners, Inc., a Delaware corporation and the managing general partner of Buyer
("NBP").
WITNESSETH:
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WHEREAS, the AMI Sellers (as defined in Article I below) own all of the
capital stock (the "AMI Shares") of Aurora Management, Inc., a Delaware
corporation ("AMI"); the AMI Shares are more fully described in Exhibit A;
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WHEREAS, the Allied Sellers (as defined in Article I below) own all of the
capital stock (the "AAA" Shares") of Allied Aurora Acquisition Corp., a Maryland
corporation ("AAA," together with AMI, the "Corporate Holders"); and the AMI
Sellers and the Allied Sellers are referred to herein as the "Corporation
Sellers"); the AAA Shares are more fully described in Exhibit A.
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WHEREAS, the LLC Sellers (as defined in Article I below), together with the
Corporate Holders, own all of the membership and other limited liability company
ownership interests of Aurora Communications, LLC, a Delaware limited liability
company("Aurora Communications") (such ownership interests owned by the LLC
Sellers being referred to herein as the "LLC Interests"; the LLC Interests,
together with the AMI Shares and the AAA Shares, being referred to herein as the
"Subject Interests"); the LLC Interests are more fully described in Exhibit A;
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WHEREAS, Aurora Communications owns all of the membership and other limited
liability company ownership interests of Aurora Holding, LLC, a Delaware LLC
("Aurora Holding");
WHEREAS, Aurora Holding owns all of the membership and other limited
liability company ownership interests of each of Aurora of Bridgeport, LLC, a
Delaware limited liability company ("Aurora Bridgeport"), Aurora of Bridgeport
License Company, LLC, a Delaware limited liability company ("ABLC"), Aurora of
Westchester, LLC, a Delaware limited liability company ("Aurora Westchester"),
Aurora of Westchester License Company, LLC, a Delaware limited liability company
("AWLC"), Aurora of Danbury, LLC, a Delaware limited liability company ("Aurora
Danbury"), and Aurora of Danbury License Company, LLC, a Delaware limited
liability company ("ADLC," and together with Aurora Bridgeport, ABLC, Aurora
Westchester, AWLC and Aurora Danbury, the "Radio Station Companies"; the Radio
Station
<PAGE>
Companies, together with AMI, AAA, Aurora Communications and Aurora Holding, the
"Companies"); and
WHEREAS, subject to the terms and conditions set forth herein, certain of
the Sellers as indicated in Exhibit A ("Exiting Sellers"), desire to sell all of
their Subject Interests to Buyer for cash, and the other Sellers as indicated in
Exhibit A ("Continuing Sellers"), desire to sell a portion of their Subject
Interests to Buyer for cash and to contribute the remaining portion of their
Subject Interests to Buyer in exchange for equity interests in Buyer, and Buyer
desires to effect such purchases and such contribution and exchange (the
foregoing transactions being referred to herein as the "Purchase and Exchange").
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1 Certain Definitions. As used in this Agreement, the following
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terms shall have the following meanings:
"Acquisition Indebtedness" means (i) all borrowings under the New Nassau
Credit Facility, (ii) the Nassau Mezzanine Notes and (iii) any other
indebtedness for borrowed money incurred by any Nassau Company or NBP in
connection with the consummation of the Purchase and Exchange, the Allentown
Acquisition or the acquisition of any other Person or the equity or assets of
any other Person.
"Affiliate" means an "affiliate" as defined in Rule 12b-2 promulgated
pursuant to the Securities Exchange Act of 1934, as amended.
"Allentown Acquisition" means the transactions contemplated by the Asset
Purchase Agreement, dated as of February 29, 2000, among Buyer, Clear Channel
Broadcasting, Inc. and Clear Channel Broadcasting Licenses, Inc.
"Allied Sellers" means Allied Capital Corporation and Allied Investment
Corporation, each a Maryland corporation.
"AMI Sellers" means BancAmerica Capital Investors SBIC I, L.P., a Delaware
limited partnership, Osborn and Washington.
"Aurora Material Adverse Effect" means any change or effect that is or
would be materially adverse to the Condition of the Companies taken as a whole,
excluding any changes
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or effects caused by changes in general economic conditions or changes generally
affecting the radio broadcasting industry.
"Aurora Permitted Encumbrances" means: (a) Encumbrances for taxes,
assessments and other levies, fees or charges imposed by any Governmental
Authority which are not due and payable as of the Closing Date or, if due and
payable as of the Closing Date, are accrued on the Closing Balance Sheet; (b)
mechanic's and similar statutory liens for labor, materials or supplies provided
in the ordinary course of business for amounts which are not delinquent and
which could not reasonably be expected to have an Aurora Material Adverse
Effect; (c) zoning, building and other land use laws imposed by any Governmental
Authority; (d) any minor Encumbrances affecting title which do not materially
interfere with the use of the Companies' assets or the operation of their
businesses and which do not materially adversely affect the value of such assets
or businesses; (e) Encumbrances securing Reduction Liabilities; (f) Encumbrances
securing any indebtedness of the Companies under the Existing Aurora Credit
Facilities; and (g) any Encumbrances described in Schedule 1.1(a).
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"Business Day" means any day other than a Saturday, Sunday or legal holiday
in the State of Delaware.
"Buyer Incorporation" means a change in the form of organization of Buyer
from a limited partnership to a corporation, including the transfer of all
assets and liabilities of Buyer to its corporate successor and all other
transactions consummated in connection therewith.
"Cash Percentage" means, with respect to any Seller, that percentage set
forth for such Seller on Exhibit A.
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"Closing" means the consummation of the Purchase and Exchange.
"Closing Date" means (a) the later of(i) the date five Business Days after
the date on which the grant of FCC consent to all of the FCC Applications have
become Final Orders, or (ii) if such grants have become Final Orders with a
condition materially adverse to Buyer, any Company or any Seller, the date five
Business Days after the date the party hereto to which such condition applies
elects to comply with such condition (or, if such condition applies to any
Company, the date five Business Days after Buyer elects to cause such Company to
comply with such condition), or (b) such other date upon which the parties may
agree to close the Purchase and Exchange.
"Code" means the Internal Revenue Code of 1986, as amended.
"Condition," with respect to any Person, means the business, operations,
condition (financial or otherwise) or results of operations of such Person or,
with respect to more than one Person, of the Persons taken as a whole.
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"Cremona" means Vincent M. Cremona.
"Encumbrances" means all liens, encumbrances, mortgages, pledges, security
interests, conditional sales agreements, charges, options, rights of first
refusal, reservations, restrictions or other encumbrances or defects in title.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchanged Subject Interests" means the Subject Interests described in
Exhibit A to be exchanged for Nassau Equity Interests hereunder.
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"Existing Aurora Credit Facilities" means (i) the Credit Agreement, dated
as of August 31, 1999, among Aurora Holding, Heller Financial, Inc. and the
other agents and lenders party thereto and (ii) the Subordinated Loan Agreement,
dated as of September 10, 1999, among the Radio Station Companies, Aurora
Communications, Aurora Holding, Allied Capital Corporation and Allied Investment
Corporation.
"Existing Nassau Credit Facility" means the Loan Agreement, dated as of
August 28, 1998, among Buyer, AMERESCO Commercial Finance, Inc. and the other
lender parties thereto.
"FCC" means the Federal Communications Commission.
"FCC Application," with respect to a Radio Station, means the application
for an FCC order granting approval of the transfer of control of the Radio
Station Company holding the FCC License of such Radio Station to Buyer as
contemplated by this Agreement.
"FCC License," with respect to a Radio Station, means the licenses, permits
and authorizations, together with any renewals, extensions or modifications
thereof as may occur between the date hereof and the Closing Date, held by the
Radio Station Company which is the licensee of such Radio Station or by any of
the Companies or any of the Sellers with respect to such Radio Station.
"Final Order" means any action of the FCC which has not been reversed,
stayed, enjoined, set aside, annulled or suspended and with respect to which no
requests are pending for administrative or judicial review, reconsideration,
appeal or stay, and the time for filing any such requests and the time for the
FCC to set aside the action on its own motion shall have expired.
"Fully Diluted Basis" means, with respect to the Nassau Equity Interests,
as of a particular time, the total outstanding Nassau Equity Interests as of
such time, determined by treating all outstanding options (including options
under the Option Agreement (as defined in the Master Agreement)), warrants
(including warrants issued in connection with the Nassau Mezzanine Notes) and
other rights for the purchase or other acquisition of Nassau Equity
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Interests (whether or not then vested or exercisable) as having been exercised
and by treating all outstanding securities directly or indirectly convertible
into or exchangeable for Nassau Equity Interests (whether or not then
exercisable or convertible) as having been so converted or exchanged.
"Generally Accepted Accounting Principles" means generally accepted
accounting principles in the United States of America as set forth in
pronouncements of the Financial Accounting Standards Board and the American
Institute of Certified Public Accountants, as such principles are from time to
time supplemented and amended.
"Governmental Authority" means any foreign, federal, state or local
government, political subdivision or governmental or regulatory authority,
agency, board, bureau, commission, instrumentality or court or
quasi-governmental authority.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indemnified Party" means any party or parties making an Indemnity Claim
against an Indemnifying Party under Article VII.
"Indemnifying Party" means any party or parties against whom an Indemnity
Claim is made under Article VII.
"Individual Sellers" means Osborn, Washington and Cremona.
"IPO" means an initial public offering of Nassau Common Stock.
"LLC Sellers" means Heller Financial, Inc., a Delaware corporation,
UnionBanCal Venture Corporation, a Delaware corporation, Osborn, Washington,
Cremona and Aurora Management Group, LLC.
"Master Agreement" means the Third Master Amendment and Agreement dated as
of December 30, 1997 among Buyer, certain affiliates of Buyer and certain other
Persons.
"New Nassau Credit Facility" means the credit agreement that Buyer or a
current or future subsidiary of Buyer intends to enter into with Merrill Lynch
Capital Corporation and other syndicate lenders providing for borrowings of up
to $144,000,000, as described and agreed upon between Buyer and Merrill Lynch
Capital Corporation in a Commitment Letter dated February 24, 2000 and executed
by each party.
"Nassau Common Stock" means common stock of the corporate successor to
Buyer pursuant to the Buyer Incorporation.
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"Nassau Companies" means Buyer and all of its subsidiaries.
"Nassau Equity Interests" means (i) if the Buyer Incorporation shall have
occurred before or simultaneously with the Closing, the Nassau Common Stock or
(ii) if the Buyer Incorporation shall not have occurred before or simultaneously
with the Closing, the Nassau Partnership Interests.
"Nassau Material Adverse Effect" means any change or effect that is or
would be materially adverse to the Condition of the Nassau Companies taken as a
whole, excluding any changes or effects caused by changes in general economic
conditions or changes generally affecting the radio broadcasting industry.
"Nassau Mezzanine Notes" means approximately $60,000,000 of Senior Discount
Notes of Buyer and warrants to purchase equity securities of Buyer, which Buyer
intends to issue to several institutions, as described in Buyer's February 2000
Offering Memorandum.
"Nassau Partnership Interests" means the partnership interests of Buyer
described in Exhibit A, including the capital accounts, rights to allocation of
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income, losses, deductions, credits and distributions of cash flow and capital
items of Buyer and all rights to vote or otherwise exercise any right, title or
interest, in each case associated with such partnership interests.
"Nassau Permitted Encumbrances" means: (a) Encumbrances for taxes,
assessments and other levies, fees or charges imposed by any Governmental
Authority which are not due and payable as of the Closing Date; (b) mechanics
and similar statutory liens for labor, materials or supplies provided in the
ordinary course of business for amounts which are not delinquent and which could
not reasonably be expected to have a Nassau Material Adverse Effect; (c) zoning,
building and other land use laws imposed by any Governmental Authority; (d) any
minor Encumbrances affecting title which do not materially interfere with the
use of the Nassau Companies' assets or operation of their businesses and which
do not materially adversely affect the value of such assets or businesses; (e)
Encumbrances securing any indebtedness of any of the Nassau Companies under the
Existing Nassau Credit Facility, (f) Encumbrances securing any Acquisition
Indebtedness and (g) any Encumbrances described in Schedule 1.1(b).
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"Net Working Capital" means the current assets of the Companies (including
cash and cash equivalents) minus the current liabilities of the Companies, in
each case determined in accordance with Generally Accepted Accounting
Principles. For purposes hereof, (i) the current assets of the Companies shall
exclude receivables arising under the Barter Agreements and (ii) the current
liabilities of the Companies (A) shall include (1) outstanding payables not
satisfied in the ordinary course and (2) all transaction expenses, bonus
payments and severance payments incurred by the Companies in connection with the
Purchase and Exchange (specifically excluding, however, any payments to Osborn
under the Employment Termination and Non-
6
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Competition Agreement and any payments contemplated by Section 5.2), and (B)
shall exclude (1) the current portion of any long-term indebtedness of the
Companies (which shall include the obligations of any Company as lessee under
any capital lease) and (2) payables arising under Barter Agreements and (C) all
other non-cash items.
"Net Working Capital Adjustments" mean the adjustments to the Cash
Consideration in respect of the Net Working Capital of the Companies as provided
in Section 2.6.
"Osborn" means Frank D. Osborn, Allison Waite Osborn, Caroline Ladner
Osborn, Elizabeth Andrew Osborn, Frank William Osborn and Katherine Nelson
Osborn.
"Pass-through Entity" means a partnership, within the meaning of Treasury
Regulation Section 301.7701-2(c)(1), or a wholly owned entity described in
Treasury Regulation 301.7701-2(c)(2).
"Person" means an individual, corporation, partnership, limited liability
company, trust, association or other entity, including any Governmental
Authority.
"Purchased Subject Interests" means the Subject Interests described on
Exhibit A to be sold for the Cash Consideration hereunder.
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"Radio Station" means any of the radio stations listed on Schedule 1.1(c)
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and any other radio station owned and operated by any Company.
"Reduction Liabilities" means (i) all liabilities of the Companies as of
the Closing Date other than current liabilities and (ii) the current portion of
any long-term indebtedness of the Companies (which shall include the obligations
of any Company as lessee under any capital lease), in each case, as required by
Generally Accepted Accounting Principles to be accrued on the Closing Balance
Sheet. The Reduction Liabilities shall include (i) all indebtedness of Aurora
Holding outstanding immediately prior to the Closing under the Existing Aurora
Credit Facilities, including all principal, interest, fees and other amounts
then owing thereunder or payable upon the prepayment of any such indebtedness
upon the Closing, and (ii) the liabilities described on Schedule 1.1(d).
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"Subject Interest Percentage" means, with respect to any Seller, that
percentage set forth for such Seller on Exhibit A.
"Treasury Regulation" means the permanent and temporary regulations of the
U.S. Department of the Treasury promulgated under the Code, as such regulations
may be lawfully changed from time to time (including corresponding provisions of
succeeding regulations).
"Washington" means Frank G. Washington.
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Section 1.2 Cross References. The following terms defined elsewhere in this
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Agreement in the Sections set forth below shall have the respective meanings
therein defined:
AAA Preamble
AAA Financial Statements Section 3.3(b)
AAA Sellers Preamble
ABLC Preamble
ADLC Preamble
Agreement Preamble
Allied Sellers Preamble
AMI Preamble
AMI Financial Statements Section 3.3(b)
AMI Sellers Preamble
AMI Shares Preamble
Auditor Section 2.6(c)
Aurora Bridgeport Preamble
Aurora Communications Preamble
Aurora Danbury Preamble
Aurora Equity Interests Section 3.2
Aurora Holding Preamble
Aurora Westchester Preamble
AWLC Preamble
Barter Agreement Section 5.1(e)
Buyer Preamble
Buyer Indemnified Parties Section 7.1
Buyer Repairs Section 8.1(d)
Buyer/NBP Equity Interests Section 4.2
Cash Consideration Section 2.2(a)
Closing Balance Sheet Section 2.6(b)
Closing Net Working Capital Section 2.6(b)
Closing NWC Payment Amount Section 2.6(d)
Companies Preamble
Continuing Sellers Preamble
Corporate Holders Preamble
Corporate Holders Financial
Statements Section 3.3(b)
Corporation Sellers Preamble
Damage or Damages Section 7.3
Disputed Claim Section 7.1(f)
Employee Plans Section 3.13
Employment Termination and Non-
Competition Agreement Section 2.4(d)
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Environmental Matters Section 7.1(a)
ERISA Affiliate Section 3.13
Escrow Agent Section 2.2(b)
Escrow Agreement Section 2.2(b)
Escrow Deposit Section 2.2(b)
Estimated Closing Net Working
Capital Section 2.6(a)
Estimated NWC Payment Amount Section 2.6(a)
Exchange Interests Section 3A.2(a)
Exiting Sellers Preamble
Expiration Date Section 7.4
FCC Consent Section 3.6(a)
GT Section 2.6(b)
Indemnity Claim Section 7.1(d)
Interim Financial Statements Section 3.3(a)
Leased Real Property Section 3.18
LLC Interests Preamble
LLC Sellers Preamble
Nassau Leased Real Property Section 4.13
Nassau Owned Real Property Section 4.13
Nassau Real Property Section 4.13
NBP Preamble
NBP Common Stock Section 2.5
Notice of Claim Section 7.1(d)
Owned Real Property Section 3.18
Partnership Rights Agreements Section 2.4(f)
Payment Event Section 2.2(b)
Proprietary Information Section 5.4(c)
Purchase and Exchange Preamble
Radio Station Companies Preamble
Real Property Section 3.18
Securities Act Section 3A.2(b)
Seller Indemnified Parties Section 7.1(c)
Sellers Preamble
Sellers Repairs Section 8.1(c)
Sellers' Agent Preamble
Subject Interests Preamble
Tax/Taxes Section 3.15(b)
Tax Return Section 3.15(c)
Third Party Claim Section 7.1(e)
Transaction Agreements Section 9.7
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Section 1.3 Singular and Plural. Terms defined in the singular shall have
-------------------
comparable meanings when used in the plural, and vice versa.
ARTICLE II
Purchase and Exchange of Subject Interests; Closing
Section 2.1 Purchase and Exchange. On the basis of the representations,
---------------------
warranties, covenants and agreements and subject to the terms and conditions
hereof and the satisfaction or waiver of the conditions set forth herein,
Exiting Sellers agree to sell for cash and Continuing Sellers agree to sell for
cash and exchange for Nassau Equity Interests, and Buyer agrees to so purchase
and exchange, at the Closing, all of the Subject Interests as provided in this
Article II.
Section 2.2 Cash Consideration and Payment; Deposit for Purchase;
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Contribution and Exchange
- -------------------------
(a) Buyer shall purchase the Purchased Subject Interests for cash
consideration (the "Cash Consideration") equal to One Hundred Fifty Million
Dollars ($150,000,000), (i) minus the amount of the Reduction Liabilities and
(ii) subject to the Net Working Capital Adjustments. Except as provided in
Section 2.6, the Cash Consideration shall be payable to Sellers at the Closing
according to their respective Cash Percentages. Buyer shall make all payments of
the Cash Consideration by wire transfer of immediately available funds according
to the wire instructions for Sellers set forth in Exhibit A.
(b) On the date of this Agreement, Buyer shall deposit with Chase
Manhattan Trust Company, National Association (the "Escrow Agent") by wire
transfer of immediately available funds the amount of $7,000,000 (the "Escrow
Deposit") as a deposit to secure Buyer's performance hereunder, to be held by
the Escrow Agent pursuant to the terms of the Escrow Agreement being executed
simultaneously herewith among Buyer, Sellers and the Escrow Agent, a copy of
which Escrow Agreement is attached hereto as Exhibit B (the "Escrow Agreement").
If the Closing takes place as herein provided, then the Escrow Deposit (or, in
the event that the amount of the Escrow Deposit as of the Closing Date is less
than $7,000,000, such amount) shall be credited against the Cash Consideration
as set forth in Section 2.2(a) and paid to Sellers according to their respective
Cash Percentages, and the earnings thereon shall be paid to Buyer, all as
provided in the Escrow Agreement. If the Closing does not take place because of
a Payment Event (defined below) then, pursuant to the Escrow Agreement, the
Escrow Deposit and the earnings thereon shall be paid to Aurora Communications
as liquidated damages. Payment of such liquidated damages shall be Sellers' sole
remedy against Buyer and, upon payment thereof, neither Buyer nor any Seller
shall thereafter have any recourse against the other under or on account of this
Agreement. In any other case if the Closing does not occur, then, pursuant to
the Escrow Agreement, the Escrow Deposit and the earnings thereon shall be paid
to Buyer. Delivery of the Escrow Deposit and the earnings thereon by the Escrow
Agent shall be
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made, in accordance with the procedures and other provisions set forth in the
Escrow Agreement. For purposes of this Section 2.2(b), a "Payment Event" shall
mean (i) the failure of the Closing to occur as a result of Buyer's failure to
meet the closing conditions set forth in Sections 6.1(a), 6.1(b), 6.1(d),
6.3(d), 6.3(f) or 6.3(g), (ii) the failure of the Closing to occur as a result
of the failure of any party (other than any Seller or any Company) to execute
the agreements contemplated by Section 2.4(e) and the Partnership Rights
Agreements, as applicable, as described in Section 6.1(c) and (iii) the
termination of this Agreement by Sellers pursuant to Section 8.1(b)(ii).
(c) Continuing Sellers shall contribute the Exchanged Subject
Interests to Buyer in exchange for (i) if the Buyer Incorporation shall have
occurred before or simultaneously with the Closing, shares of Nassau Common
Stock as provided in Section 2.4(e), or (ii) if the Buyer Incorporation shall
not have occurred before or simultaneously with the Closing, Nassau Partnership
Interests as provided in the Partnership Rights Agreements and as provided in
Section 2.4(f).
Section 2.3 Time and Place of Closing. The Closing shall take place at
-------------------------
10:00 A.M. on the Closing Date at the offices of Skadden, Arps, Slate, Meagher &
Flom LLP, New York, New York, or at such other place as Sellers' Agent and Buyer
agree.
Section 2.4 The Closing. At the Closing:
-----------
(a) Sellers shall convey, transfer, and assign to Buyer, and shall
deliver to Buyer such instruments of conveyance, transfer, and assignment as
shall be sufficient to convey, transfer, and assign to Buyer, sole and exclusive
right, title and interest in and to all the Subject Interests free and clear of
all Encumbrances. The Corporate Holders shall deliver to Buyer certificates
representing the AMI Shares or the AAA Shares, as applicable, with stock
transfer tax stamps affixed, if required, duly endorsed for transfer or with
stock powers duly executed in blank attached, in good form for delivery.
(b) Buyer shall deliver to Sellers the Cash Consideration as set
forth in Section 2.2(a) and shall issue to Continuing Sellers, according to the
percentages set forth in Exhibit A, the Nassau Equity Interests as provided in
Section 2.2(c) and this Section 2.4.
(c) Buyer and Continuing Sellers shall execute and deliver a
Registration Rights Agreement substantially in the form of Exhibit C providing
for the registration rights to Continuing Sellers with respect to Buyer
described therein.
(d) Buyer and Osborn shall execute and deliver, and Sellers shall
cause Aurora Communications to execute and deliver, an Employment Termination
and Non-Competition Agreement substantially in the form of Exhibit D (the
"Employment Termination and Non-Competition Agreement").
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(e) If the Buyer Incorporation shall have occurred before or
simultaneously with the Closing, Buyer and, to the extent applicable as provided
in clause (ii) below, Continuing Sellers shall execute and deliver, as
applicable, each of the following.
(i) Buyer shall deliver to Continuing Sellers shares of Nassau
Common Stock representing, in the aggregate, at least 21.07% of the aggregate
Nassau Equity Interests determined on a Fully Diluted Basis, but without giving
effect to the IPO or any other issuance and sale of Nassau Equity Interests for
a consideration per Nassau Equity Interest greater than or equal to the
valuation per Nassau Equity Interest agreed upon by Buyer and the Continuing
Sellers in connection with the transfer of Nassau Equity Interests to the
Continuing Seller hereunder, with each Continuing Seller to receive shares of
Nassau Common Stock representing the percentage of the aggregate Nassau Equity
Interests set forth in Exhibit A for such Continuing Seller; provided, that if
--------
at any time Buyer shall issue or sell any additional Nassau Equity Interests for
a consideration per share or unit of Nassau Equity Interests less than the
valuation per share or unit of Nassau Equity Interests agreed upon by Buyer and
the Continuing Sellers in connection with the transfer of Nassau Equity
Interests to the Continuing Sellers hereunder, such equity interest of the
Continuing Sellers shall be adjusted by multiplying (A) the current equity
interest (as previously adjusted hereunder) by (B) a fraction, (1) the numerator
of which shall be the number of outstanding Nassau Equity Interests determined
on a Fully Diluted Basis immediately prior to the issuance of such additional
Nassau Equity Interests plus the number of additional Nassau Equity Interests so
issued and (2) the denominator of which shall be the number of outstanding
Nassau Equity Interests immediately prior to the issuance of such additional
Nassau Equity Interests plus the number of Nassau Equity Interests which the
aggregate consideration for the total number of such additional Nassau Equity
Interests so issued would purchase at the valuation per share or unit of Nassau
Equity Interests agreed upon by Buyer and the Continuing Sellers in connection
with the transfer of Nassau Equity Interests to the Continuing Sellers
hereunder; and
(ii) (A) Buyer shall deliver to each Continuing Seller one or
more stock certificates representing such number of shares of Nassau Common
Stock to be received by such Continuing Seller (and upon such delivery, such
shares of Nassau Common Stock shall be fully paid and non-assessable); and (B)
Buyer shall execute and deliver documents or instruments which terminate (1) the
Master Agreement (but only after it shall have become effective for purposes of
consummating the transactions contemplated by Sections 2 through 5 thereof), (2)
the Amended Investment Agreement (as defined in the Master Agreement) (but only
after payment of the amounts provided by Section 1 thereof) and (3) the Amended
Securityholders' Agreement (as defined in the Master Agreement).
(f) If the Buyer Incorporation shall not have occurred before or
simultaneously with the Closing, Buyer and, in the case of the agreements
referred to in clauses (i) and
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(iv) below, Continuing Sellers shall execute and deliver the following
agreements (collectively, the "Partnership Rights Agreements"):
(i) Continuing Sellers shall contribute a portion of their
Subject Interests, as set forth in Exhibit A hereto, in exchange for Nassau
Partnership Interests representing, in the aggregate, at least 20.906% of the
aggregated Nassau Partnership Interests determined on a Fully Diluted Basis, but
without giving effect to the IPO or any other issuance and sale of Nassau Equity
Interests for a consideration per Nassau Equity Interest greater than or equal
to the valuation per Nassau Partnership Interest agreed upon by Buyer and the
Continuing Sellers in connection with the transfer of Nassau Partnership
Interests to the Continuing Seller hereunder, with each Continuing Seller to
receive Nassau Partnership Interests representing the percentage of the
aggregate Nassau Equity Interests set forth in Exhibit A for such Continuing
Seller; provided, that if at any time Buyer shall issue or sell any additional
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Nassau Equity Interests for a consideration per share or unit of Nassau Equity
Interests less than the valuation per share or unit of Nassau Equity Interests
agreed upon by Buyer and the Continuing Sellers in connection with the transfer
of Nassau Equity Interests to the Continuing Sellers hereunder, such equity
interest of the Continuing Sellers shall be adjusted by multiplying (A) the
current equity interest (as previously adjusted hereunder) by (B) a fraction,
(1) the numerator of which shall be the number of outstanding Nassau Equity
Interests determined on a Fully Diluted Basis immediately prior to the issuance
of such additional Nassau Equity Interests plus the number of additional Nassau
Equity Interests so issued and (2) the denominator of which shall be the number
of outstanding Nassau Equity Interests immediately prior to the issuance of such
additional Nassau Equity Interests plus the number of Nassau Equity Interests
which the aggregate consideration for the total number of such additional Nassau
Equity Interests so issued would purchase at the valuation per share or unit of
Nassau Equity Interests agreed upon by Buyer and the Continuing Sellers in
connection with the transfer of Nassau Equity Interests to the Continuing
Sellers hereunder;
(ii) a Second Restated Securityholders' Agreement
substantially, in the form of Exhibit E;
(iii) an Amendment to Restated Investment Agreement
substantially in the form of Exhibit F;
(iv) a document or instrument terminating the Master
Agreement (but only after it shall have become effective for purposes of
consummating the transactions contemplated by Sections 2 through 5 thereof); and
(v) a Fourth Restated Agreement of Limited Partnership of
Buyer substantially in the form of Exhibit G.
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Buyer shall cause each of the Partnership Rights Agreements to be executed
and delivered at or prior to the Closing by all other parties whose execution
and delivery thereof is necessary to give effect thereto upon the Closing.
Section 2.5 Purchase and Sale of Shares of NBP. On the basis of the
----------------------------------
representations, warranties, covenants and agreements and subject to the
satisfaction or waiver of the conditions set forth herein, but only in the event
that the Buyer Incorporation shall not have occurred before or simultaneously
with the Closing, Buyer agrees to sell to the Continuing Sellers and each
Continuing Seller agrees to purchase, at the Closing, shares of the Common
Stock, $0.01 par value per share, of NBP (the "NBP Common Stock"), representing,
in the aggregate, at least 21.07% of the aggregate equity interest in NBP
determined on a Fully Diluted Basis, but without giving effect to any sale of
NBP Common Stock for a consideration per share of NBP Common Stock greater than
or equal to the valuation per share of NBP Common Stock of agreed upon by Buyer
and the Continuing Sellers in connection with the transfer of NBP Common Stock
to the Continuing Seller hereunder, as set forth on Exhibit A for each
Continuing Seller; provided, that if at any time NBP shall issue or sell any
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additional equity interests for a consideration per share less than the
valuation per share of NBP Common Stock agreed upon by NBP and the Continuing
Sellers in connection with the transfer of NBP Common Stock to the Continuing
Sellers hereunder, such equity interest of the Continuing Sellers shall be
adjusted by multiplying (A) the current equity interest of the Continuing
Sellers (as previously adjusted hereunder) by (B) a fraction, (1) the numerator
of which shall be the number of outstanding equity interests of NBP determined
on a fully diluted basis immediately prior to the issuance of such additional
equity interests plus the number of additional equity interests so issued and
(2) the denominator of which shall be the number of outstanding equity interests
immediately prior to the issuance of such additional equity interests plus the
number of equity interests which the aggregate consideration for the total
number of such additional equity interests so issued would purchase at the
valuation per share or unit of equity interests agreed upon by NBP and the
Continuing Sellers in connection with the transfer of NBP Common Stock to the
Continuing Sellers hereunder. At the Closing, (i) each Continuing Seller shall
pay the aggregate purchase price to be paid by such Continuing Seller for such
purchase to Buyer in immediately available funds and (ii) Buyer shall deliver to
such Continuing Seller one or more stock certificates representing the shares of
NBP Common Stock so purchased by such Continuing Seller against receipt of the
purchase price to be paid by such Continuing Seller (and upon such delivery
against such receipt, such shares of NBP Common Stock shall be fully paid and
non-assessable).
Section 2.6 Net Working Capital Adjustments
--------------------------------
(a) At the Closing, Sellers shall cause Aurora Communications to
deliver to Buyer its good faith estimate of the Net Working Capital of the
Companies as of the Closing Date (which may be positive or negative) (the
"Estimated Closing Net Working Capital"), together with a reasonably detailed
explanation of the calculation thereof. If the Estimated Closing Net Working
Capital is less than zero, then the difference between zero and the
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Estimated Closing Net Working Capital shall be deducted from the Cash
Consideration payable to Sellers at the Closing according to their respective
Cash Percentages. If the Estimated Closing Net Working Capital is greater than
zero, Buyer shall pay the difference between the Estimated Net Working Capital
and zero (the "Estimated NWC Payment Amount") to Sellers at the Closing
according to their respective Cash Percentages.
(b) As soon as reasonably practicable following the Closing Date, and
in any event within sixty (60) calendar days thereafter, Buyer shall (i) cause
the Companies to prepare (x) a consolidated pro forma balance sheet of the
Companies as of the Closing Date (the "Closing Balance Sheet") and (y) a
calculation of the Net Working Capital as reflected on the Closing Balance Sheet
(the "Closing Net Working Capital"), (ii) cause the Closing Balance Sheet and
the calculation of Closing Net Working Capital to be audited by Grant Thornton
LLP ("GT"), and (iii) deliver the Closing Balance Sheet and the calculation of
Closing Net Working Capital, together with the audit letter of GT, to the
Sellers' Agent. The Closing Balance Sheet shall be prepared in accordance with
Generally Accepted Accounting Principles and on a basis consistent with the
preparation of the historical consolidated financial statements of the Companies
and shall fairly present the consolidated financial position of the Companies as
of the Closing.
(c) Upon delivery of the Closing Balance Sheet, Buyer shall cause the
Companies to provide Sellers' Agent full access to the books and records of the
Companies to the extent reasonably related to its evaluations of the Closing
Balance Sheet and the calculation of the Closing Net Working Capital. If
Sellers' Agent shall disagree with the calculation of the Closing Net Working
Capital, it shall notify Buyer of such disagreement in writing, in reasonable
detail (in light of the information then available to Sellers' Agent), within
thirty (30) days after its receipt of the Closing Balance Sheet. In the event
Sellers' Agent does not provide such a notice of disagreement within such thirty
(30) day period, Sellers' Agent and Sellers shall be deemed to have accepted the
Closing Balance Sheet and the calculation of the Closing Net Working Capital
delivered by Buyer, which shall be final, binding and conclusive for all
purposes hereunder. In the event any such notice of disagreement is timely
provided by Sellers' Agent, Buyer and Sellers' Agent shall use their reasonable
best efforts for a period of thirty (30) days (or such longer period as they may
mutually agree) to resolve any disagreements with respect to the calculation of
the Closing Net Working Capital. If, at the end of such period, they are unable
to resolve such disagreements, then Ernst & Young LLP or such other independent
accounting firm among the "Big Five" as may be mutually selected by Sellers'
Agent and Buyer (the "Auditor") shall resolve any remaining disagreements. The
Auditor shall advise the parties in writing as promptly as practicable, but in
any event within thirty (30) days of the date on which such dispute is referred
to the Auditor, based solely on written submissions forwarded by Buyer and
Sellers' Agent to the Auditor within ten (10) Business Days following the
Auditor's selection, whether the Closing Balance Sheet was prepared in
accordance with the standards set forth in this Section 2.6 and (only with
respect to the remaining disagreements submitted to the Auditor) whether and to
what extent, if any, the Closing Net Working Capital determination
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<PAGE>
requires adjustment. The fees and expenses of the Auditor shall be paid one-half
by Buyer and one-half by Sellers' Agent on behalf of Sellers. The determination
of the Auditor shall be final, conclusive and binding on the parties.
(d) In the event that the Closing Net Working Capital as finally
determined pursuant to Section 2.6(c) is:
(i) At least $50,000 greater than the Estimated Closing Net
Working Capital, Buyer shall promptly pay the difference between the Closing Net
Working Capital and the Estimated Closing Net Working Capital (the "Closing NWC
Payment Amount") to Sellers according to their respective Cash Percentages; or
(ii) At least $50,000 less than the Estimated Closing Net
Working Capital, Sellers (or Sellers' Agent on Sellers' behalf) shall promptly
pay the difference between the Estimated Net Working Capital and the Closing Net
Working Capital to Buyer, with each Seller to pay such Seller's Cash Percentage
of such difference.
(e) Any amount payable by Buyer or Sellers pursuant to this Section
2.6 shall be paid by wire transfer of immediately available funds according to
the wire instructions of the payee or payees set forth in Exhibit A, with each
Seller to pay or be paid, as the case may be, such Seller's Cash Percentage of
such amount.
ARTICLE III
Representations and Warranties of Sellers as to the Companies
Sellers severally (and not jointly and severally), according to their
respective Subject Interest Percentages, represent and warrant as to each of the
following, except that (i) only the AMI Sellers severally (and not jointly and
severally), according to their respective Subject Interest Percentages, make the
representations and warranties relating to AMI and (ii) only the Allied Sellers
severally (and not jointly and severally), according to their respective Subject
Interest Percentages, make the representations and warranties relating to AAA.
Section 3.1 Organization; Authorization; etc.
---------------------------------
(a) Each of the Companies is a corporation or limited liability
company duly organized or formed, validly existing and in good standing under
the laws of its jurisdiction of incorporation, organization or formation.
(b) Each Company (i) has full corporate or limited liability
company power to own all of its properties and assets and to carry on its
business as it is now being conducted and (ii) is duly qualified to do business
and is in good standing in each jurisdiction in which the
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conduct of its business requires it to be so qualified, except where failure to
be so qualified or in good standing would not have an Aurora Material Adverse
Effect.
(c) Neither the execution and delivery of this Agreement nor
performance by any Seller of its obligations hereunder does or will (i) conflict
with any Company's certificate of incorporation or by-laws, limited liability
company agreement or other constitutive documents or (ii) except as listed in
Schedule 3.1(c), (x) conflict with or result in a breach of (or give rise to any
right of termination or acceleration of) any term of, or require any consent
under, any lease, contract or other agreement or instrument by which any Company
is bound or with respect to which any Company is an obligor or guarantor or to
which any property or asset of any Company is subject, (y) give rise to any
Encumbrance upon any assets or property of any Company, or (z) violate any
judgment or order of any Governmental Authority to which any Company is subject,
except where such conflict, breach, Encumbrance or violation would not have an
Aurora Material Adverse Effect.
(d) Sellers have delivered to Buyer true and complete copies of the
certificate of incorporation and by-laws, limited liability company agreement or
other constitutive documents of each of the Companies.
(e) Schedule 3.1(e) sets forth as to each Company its jurisdiction
of incorporation or formation and the jurisdictions in which it is qualified to
do business as a foreign corporation or foreign limited liability company.
Section 3.2 Capitalization. Schedule 3.2 sets forth (i) as to each of AMI
--------------
and AAA, its authorized capital stock, the number of shares of each class
thereof outstanding, the record and beneficial owners of such outstanding shares
of capital stock and the numbers and classes of such outstanding shares owned by
such owners and (ii) as to each other Company, its authorized membership and
other limited liability company ownership interests, the number of units or
other ownership interests of each class thereof outstanding, the record and,
with respect to Aurora Holding and each Radio Station Company, the beneficial
owners of such outstanding units or other ownership interests and the numbers
and classes of such outstanding units or other ownership interests owned by such
owners (such outstanding shares and limited liability company ownership
interests together being referred to herein as the "Aurora Equity Interests").
The Aurora Equity Interests, as set forth in Schedule 3.2, are all of the issued
and outstanding shares of capital stock or membership or other limited liability
company ownership interests of the respective Companies and the owners of the
Aurora Equity Interests, as set forth in Schedule 3.2, are all of the record
owners of the Aurora Equity Interests. All of the Aurora Equity Interests are
duly authorized and validly issued and, in the case of shares of capital stock,
fully paid and non-assessable, and, except for the Subject Interests, are owned
by the Companies as set forth in Schedule 3.2 free and clear of any Encumbrances
except restrictions imposed by federal and state securities law, the Third
Amended and Restated Limited Liability Company Agreement of Aurora
Communications and that certain Investor Rights Agreement, dated as of
17
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May 3, 1999, among AMI and its shareholders. Except as set forth on Schedule
3.2, there are no outstanding warrants, options or other rights to acquire
capital stock or membership or other limited liability company ownership
interests, or securities convertible into capital stock or membership or other
limited liability company ownership interests, of any of the Companies.
Section 3.3 Financial Statements
--------------------
(a) Sellers have previously delivered to Buyer true and complete
copies of (i) the unaudited consolidated and consolidating balance sheets of the
Companies (other than AMI and AAA) as of December 31, 1999 and the consolidated
and consolidating statements of income and cash flows of the Companies for the
period beginning January 20, 1999 through December 31, 1999 and (ii) the monthly
operating statements of the Companies (other than AMI and AAA) for the month
ended January 31, 2000. Except as set forth on Schedule 3.3, such financial
statements and operating statements were prepared (and the financial statements
to be delivered to Buyer pursuant to Section 5.1 (a)(iv) (the "Interim Financial
Statements") will be prepared) in accordance with Generally Accepted Accounting
Principles consistently applied and present (or, in the case of the Interim
Financial Statements, will present) fairly in all material respects the
financial position, results of operations and other information included therein
as of the dates or for the periods specified therein, subject, in the case of
such monthly statements (and the Interim Financial Statements), only to normal
year-end adjustment consisting of normal recurring items which do not, in the
aggregate, materially and adversely affect the financial position, results of
operations and other information from that presented.
(b) The AMI Sellers have previously delivered to Buyer true and
complete copies of the consolidated and consolidating balance sheet of AMI as of
December 31, 1999 and the consolidated and consolidating statement of income of
AMI for the period April 30, 1999 through December 31, 1999 (the "AMI Financial
Statements"). The AMI Financial Statements were prepared in accordance with
Generally Accepted Accounting Principles consistently applied, and present
fairly in all material respects the financial position, results of operations
and other information included therein as of the dates or for the periods
specified therein, subject only to normal year-end adjustment consisting of
normal recurring items which do not, in the aggregate, materially and adversely
affect the financial position, results of operations and other information from
that presented.
(c) Except as set forth on Schedule 3.3, all accounting ledgers and
other books and records of the Companies are located at (i) in the case of AMI,
the principal office of Aurora Communications in Stamford, Connecticut, (ii) in
the case of AAA, 1919 Pennsylvania Avenue NW, 3rd Floor, Washington, DC 20006,
and (iii) in the case of each of the other Companies, the principal office of
Aurora Communications in Stamford, Connecticut.
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Section 3.4 Licenses
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(a) Sellers have furnished to Buyer true copies of all the FCC
Licenses (which are identified on Schedule 3.4(a)), which constitute all
required licenses, permits and authorizations for the day and night operation of
the Radio Stations and associated auxiliary facilities of the respective Radio
Station Companies indicated on such Schedule. Each Radio Station has the right
to use the call letters it presently uses (as listed on Schedule 3.9), pursuant
to the rules and regulations of the FCC. Each Company has complied in all
material respects with the terms and conditions of the respective FCC Licenses
applicable to it and with the FCC's other requirements. The FCC's most recent
renewals of the FCC Licenses were not challenged by any petition to deny or by
any competing application.
(b) Each Company possesses all material governmental licenses,
permits, approvals and other authorizations required by such Company in the
conduct of its business. Except as identified in Schedule 3.4(b), no
application, action or proceeding is pending for the renewal or modification of
any FCC License or any of such licenses, permits, approvals or authorizations,
and no application, action or proceeding is pending or, to each Seller's
knowledge, threatened that may result in the denial of the application for
renewal, the revocation, modification, nonrenewal or suspension of any of the
FCC Licenses or any of such licenses, permits, approvals or authorizations, the
issuance of a cease-and-desist order, or the imposition of any administrative or
judicial sanction and, to each Seller's knowledge, there is no basis for any
such denial, revocation, modification, non-renewal or suspension or any such
order or sanction.
Section 3.5 Operation of Radio Stations: FCC Reports
----------------------------------------
(a) Each of the Radio Stations is being operated in all material
respects in accordance with the FCC Licenses, the Communications Act of 1934, as
amended, the rules and regulations thereunder, and all other material legal
requirements, federal, state and local, applicable to the Radio Stations.
(b) To the knowledge of each Seller, all applications, reports,
notices and other documents required to be filed by the Companies with the FCC
or any other Governmental Authority have been filed and complied with in all
material respects and are complete and correct as filed and the licensee Company
of each Radio Station has timely placed in its public inspection file all
documentation required by the FCC to be placed in such file by it.
Section 3.6 Consents.
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(a) Except for the consent of the FCC to the transfer of the
Subject Interests and control of the Companies holding the FCC Licenses to Buyer
hereunder (the "FCC Consent"), the filing of necessary reports and notifications
and the receipt of necessary governmental
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approvals under the HSR Act and as set forth in Schedule 3.6(a), no consent or
approval by, or filing with, any Governmental Authority is required by any
Seller or any Company in connection with the execution or delivery of this
Agreement by Sellers or the consummation of the Purchase and Exchange.
(b) None of the Sellers knows of any facts that would cause the FCC
to deny the FCC Consent.
Section 3.7 Contracts, Leases, Options and Commitments. Sellers have
------------------------------------------
delivered to Buyer true copies of the material contracts, leases, options,
commitments and agreements (other than Barter Agreements) listed in Schedule
3.7. Schedule 3.7 identifies: (i) all Barter Agreements (as defined in Section
5.1(e)) to which any Radio Station Company is a party, including the dollar
amount of the broadcasting time or number of spot announcements owed by the
Radio Stations under the Barter Agreements; (ii) all agreements relating to any
indebtedness for borrowed money of the Companies; (iii) all commitments and
other agreements for the purchase of any materials, supplies or equipment, other
than commitments and other agreements that were entered into in the ordinary
course of business and that involve an expenditure by any Company of less than
$100,000 for any one commitment or two or more related commitments; (iv) all
capital leases providing for annual payments in excess of $20,000 and all leases
or other rental agreements for real estate under which any Company is either
lessor or lessee; (v) all employment and consulting agreements to which any
Company is a party that provide for compensation in excess of $50,000 a year;
(vi) all collective bargaining agreements to which any Company is a party and
(vii) all contracts, leases, options, commitments and agreements (written or
oral) requiring such Company to make or entitling such Company to receive annual
payments in excess of $25,000 (other than sales of advertising time). Except as
set forth in Schedule 3.7, each Company (and, to each Seller's knowledge, each
other party to the contracts, leases, options, commitments and agreements listed
in Schedule 3.7) has complied in all material respects with and is not in
material default under any of the contracts, leases, options, commitments and
agreements listed on Schedule 3.7. Except as set forth in Schedule 3.7, all of
such contracts, leases, options, commitments and agreements are valid, binding
and in full force and effect and will continue in full force and effect without
change following the Purchase and Exchange without obtaining the consent of any
other party thereto, except as such enforceability may be limited by applicable
bankruptcy, insolvency or other laws affecting creditors' rights generally or by
general principles of equity.
Section 3.8 Assets. Each Company has good and marketable title to all
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assets and properties owned by it, free and clear of all Encumbrances, other
than Aurora Permitted Encumbrances.
Section 3.9 Trade Rights, etc. Schedule 3.9 lists the call letters,
-----------------
trademarks, tradenames and other trade rights and marks used by the Radio
Station Companies in the operation of their Radio Stations. Except as listed on
Schedule 3.9, no Company has licensed,
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consented to or waived, or has any knowledge of, any other Person's use of any
such call letters, trademarks, tradenames and other trade rights and marks. None
of the Sellers knows of any challenge or claim with respect to the use of any
such call letters, trademarks, tradenames or other trade rights or marks by the
appropriate Radio Station Company. To each Seller's knowledge, the Radio Station
Companies collectively possess adequate and enforceable common law rights to use
(without payment) the call signs, trademarks, tradenames and other trade rights
and marks used in the operation of the Radio Station Companies' business within
the respective jurisdictions where such call signs, trademarks, tradenames, and
other rights and marks are currently used. None of the Radio Station Companies
has received any notice of conflict which asserts any rights of others with
respect to any of such call signs, trademarks, tradenames or other trade rights
or marks, and Sellers do not know of any basis for the assertion of any such
rights. To the knowledge of each Seller, none of the Companies is infringing any
patent, copyright or trademark of any third party and no claim has been made or
threatened against any Company alleging any such violation. None of the
Companies is a party to or bound by any license or other agreement requiring the
payment by it of any royalty or similar payment other than music license
agreements with ASCAP, BMI and SESAC and other agreements referred to in
Schedule 3.7.
Section 3.10 Changes since December 31, 1999. Except as set forth in
-------------------------------
Schedule 3.10 or in any other Schedule to this Agreement, since December 31,
1999 there has not been:
(a) any Aurora Material Adverse Effect, and each Radio Station
Company has operated its business, including its Radio Stations, in the ordinary
course of business;
(b) any change in any of the licenses, permits or franchises of any
Radio Station Company which has had or would have an Aurora Material Adverse
Effect, or any change in the methods of accounting or accounting practice, which
have had or may reasonably be expected to have an Aurora Material Adverse Effect
or a material adverse effect on the licenses, permits or franchises of the Radio
Station Companies as a whole;
(c) any damage, destruction or other casualty loss which
constitutes an Aurora Material Adverse Effect;
(d) any amendment, modification or termination of any existing, or
entering into any new, contract, agreement, lease, or other commitment
(including any borrowing or commitment to borrow, any capital lease or any
commitment to enter into a capital lease or any sale of assets or commitment to
sell assets), which is material to the Condition of the Radio Station Companies
as a whole, except for this Agreement and as contemplated by this Agreement;
21
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(e) any disposition by any Radio Station Company of any asset which
had a net book value at the time of disposition of $100,000 or more, but not
more than $300,000 for all such dispositions;
(f) any direct or indirect redemption, purchase or other
acquisition of any capital stock, membership interest or other limited liability
company ownership interest of any Company or any declaration, setting aside or
payment of any dividend or other distribution on or in respect of any capital
stock, membership interest or other limited liability ownership interest of any
Company;
(g) any transaction between any Company and any Seller or any
Affiliate of any Seller (other than another Company), except for transactions
relating to provision of corporate services, insurance and "overhead" by Sellers
in the ordinary course consistent with past practice;
(h) any change in or commitment to change the compensation payable
to any of any Company's officers, directors, managers, employees or agents, or
any bonus payment or similar arrangements made to or with any of such officers,
directors, employees or agents other than in the ordinary course of business and
consistent with past practice;
(i) any capital expenditure by any Company in excess of $100,000;
(j) any action by any Company to amend its articles of
incorporation or bylaws, limited liability company agreement or other
constitutive documents; or
(k) any issuance or retirement of any equity or debt securities by
any Company or any grant by any Company of any option or issuance of any warrant
or securities convertible into such securities.
Section 3.11 Significant Customers. No advertising customer of any Radio
---------------------
Station Company represented more than 5% of such Radio Station Company's
revenues in the fiscal year ended December 31, 1999.
Section 3.12 Litigation, etc. Except as set forth in Schedule 3.12:
---------------
(a) No action, litigation, arbitration or other proceeding (and, to
the knowledge of each Seller, no investigation) is pending by or against or, to
the knowledge of each Seller, threatened against any Company or Radio Station
which, if adversely determined, would reasonably be expected to have an Aurora
Material Adverse Effect.
(b) No Company is subject or party to any judgment or order of or
stipulation with any court or other Governmental Authority, or in violation of
any provision of any law,
22
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license, permit, approval or authorization (including applicable wage and hour,
equal employment, safety and other provisions of law relating to such Company's
employees), which judgment, order, stipulation or violation has had or would
reasonably be expected to have an Aurora Material Adverse Effect.
Section 3.13 Employees and Employee Benefit Plans. Schedule 3.13 lists all
------------------------------------
full and part-time employees of each Company and their base compensation rates
as of December 31, 1999 and all pension, retirement, profit-sharing, stock
option, bonus, group insurance, equity and other benefit or incentive plans,
arrangements or agreements and all material employment, termination or severance
arrangements or agreements sponsored by, maintained by, contributed to or
required to be contributed to by any Company or by any trade or business,
whether or not incorporated (an "ERISA Affiliate"), that together with any
Company would be deemed a "single employer" within the meaning of section
4001(b) of ERISA, whether written or oral, for the benefit of any employees or
former employee of any Company or any Company Subsidiary (collectively, the
"Employee Plans"). Sellers have delivered true and complete copies of all
Employee Plans to Buyer. No Company either contributes or is required to
contribute to any multiemployer plan, as defined in Section 414(f) of the Code
and Section 400l(a)(3) of ERISA. No Employee Plan is subject to Title IV of
ERISA and no Company has at any time during the seven year period ending on the
date of this Agreement maintained or contributed to, any defined benefit plan
covered by Title IV of ERISA, or incurred any liability during such period under
Title IV of ERISA, and the transactions contemplated by this Agreement will not
subject any Company to liability under Title IV of ERISA. Each Employee Plan
which is intended to be qualified under Section 401(a) of the Code is so
qualified, and each related trust is exempt from taxation under Section 501(a)
of the Code. There is no plan or commitment to create any Employee Plan or to
modify or change any Employee Plan. Each of the Employee Plans has been operated
and administered in all material respects in accordance with its terms and
applicable law. There is no material liability under ERISA or otherwise with
respect to any Employee Plan other than for the payment or provision of the
benefits due thereunder in accordance with its terms, which has been incurred
or, based upon such facts as exist on the date hereof, may reasonably be
expected to be incurred. All accrued obligations of each Company with respect to
the Employee Plans have been fully satisfied in their entirety. No amounts
payable under the Employee Plans will fail to be deductible for federal income
tax purposes by virtue of section 280G of the Code. The consummation of the
transactions contemplated by this Agreement will not, either alone or in
combination with another event, (i) entitle any current or former employee or
officer of any Company or any ERISA Affiliate to severance pay, unemployment
compensation or any other payment, except as expressly provided in this
Agreement, or (ii) accelerate the time of payment or vesting, or increase the
amount of compensation due any such employee or officer. No Employee Plan
provides medical, surgical, hospitalization, death or similar benefits (whether
or not insured) for employees or former employees of any of the Companies or any
of their subsidiaries for periods extending beyond their retirement or other
termination of service, other than (i) coverage mandated by applicable law, (ii)
survivor benefits under any "pension plan," or (iii) benefits the full cost of
which is
23
<PAGE>
borne by the current or former employee (or his beneficiary). There are no
pending, threatened or anticipated claims by or on behalf of any Employee Plan,
by an employee or beneficiary covered under such Employee Plan, or otherwise
involving any such Employee Plan (other than routine claims for benefits). No
Seller or Company knows of any efforts to organize any employees of any Radio
Station, and no strike or labor dispute involving any Radio Station has occurred
or, to each Seller's knowledge, is threatened. None of the employees of any
Company is represented by any labor union nor are there any collective
bargaining agreements otherwise in effect with respect to such employees.
Section 3.14 Insurance. Schedule 3.14 lists all insurance policies
---------
maintained by or on behalf of each Company, all of which policies are in full
force and effect and shall be maintained in full force and effect through the
Closing.
Section 3.15 Taxes. (a) Each of the Companies has timely filed all federal,
-----
state, local and foreign Tax Returns that it was required to file, and such Tax
Returns are correct and complete in all material respects. There are no Tax
sharing or similar agreements in effect between or among any Sellers and any of
the Companies. Neither AAA nor AMI is or has ever been, a member of an
affiliated group (within the meaning of Section 1504(a) of the Code or any
similar group defined under a similar provision of state, local or foreign law)
filing a consolidated federal income tax return. Each Company has paid, or has
set up an adequate reserve on its balance sheet dated as of December 31, 1999
for the payment of, all Taxes with respect to any period ending on or before
December 31, 1999. For the purposes of the preceding sentence, December 31, 1999
shall be treated as the last day of a taxable period whether or not it is in
fact the last day of a taxable period. Since December 31, 1999, no Company has
incurred any material liability for Taxes except in the ordinary course of
business. No election under Section 341(f) of the Code has been made to treat
any Company as a "consenting corporation" (as defined in Section 341(f) of the
Code). There are no liens for Taxes upon any property or assets of the
Companies, except for liens for Taxes that are not yet due and payable. There
are no matters under discussion between any Company and any taxing authority in
respect of any Tax relating to any Company. Each of the Companies (except for
AMI and AAA) has been a Pass-Through Entity for federal, state and local income
tax purposes from the date of its formation, and no election has been made under
Treasury Regulation Section 301.7701-3 by or with respect to any Company (except
for AMI and AAA) for such entity to be treated as an entity other than a
Pass-Through Entity. If an election or deemed election under Section 338 of the
Code is made, or if any assets of any Company are sold to Buyer or any of its
Affiliates after the Closing, Buyer shall be liable for and shall indemnify
Sellers for all resulting income tax liabilities of Sellers and the Companies;
such indemnification obligation shall survive until the expiration of the
statute of limitations, plus any extensions under applicable law, with respect
to the tax returns of Sellers and the Companies affected by any such election,
deemed election or asset sale, plus thirty days.
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(b) For purposes of this Agreement, the term "Tax" or "Taxes" shall mean
all taxes, charges, fees, levies or other like assessments imposed by the United
States, or any state, local or foreign government or subdivision or agency
thereof whether computed on a separate, consolidated, unitary, combined or any
other basis (including, without limitation, net or gross income, gross receipts,
alternative or add-on minimum, profits, stamps, premium, environmental stamp,
duty, property, value-added, excise, sales, withholding, social security,
occupation, use, service, service use, license, payroll, franchise, transfer and
recording taxes, fees and charges, windfall profits, severance, customs, import,
export, employment or similar taxes) and such terms shall include any interest,
fines, penalties and additional amounts imposed or with respect to any such
taxes, charges, fees, levies or other like assessments, and (ii) any liability
for the payment of any amounts of the type described in (i) as a result of being
a transferee of or a successor to any person, or as a result of any express or
implied obligation to indemnify any other person.
(c) For purposes of this Agreement, the term "Tax Return" shall mean any
----------
return, statement, report, form (including, without limitation, any estimated,
withholding, or information tax returns or reports) or other document or
information required to be supplied or actually provided to a governmental
authority in connection with Taxes.
Section 3.16 Authorized Signatories. Schedule 3.16 lists the names of all
----------------------
authorized signatories on bank accounts and safe deposit boxes maintained by
each Company, of all employees holding credit cards issued in the name of any
Company and of all Persons holding powers of attorney for any Company or, with
respect to his position as an officer, any officer of any Company.
Section 3.17 Brokers, Finders, etc. None of the Sellers or the Companies
---------------------
has employed, or is subject to any claim of, any broker, finder, consultant or
intermediary in connection with the Purchase and Exchange who might be entitled
to a fee or commission from Buyer upon consummation of the Purchase and
Exchange.
Section 3.18 Real Property. Schedule 3.18 contains a list and brief
-------------
description of all real properties owned (the "Owned Real Property") or leased
(the "Leased Real Property") by the Radio Station Companies, including all
structures located on those real properties (the Owned Real Property and the
Leased Real Property being collectively referred to herein as the "Real
Property"). Except as set forth on that Schedule and except for any Aurora
Permitted Encumbrance, the Radio Station Companies have good and marketable
title to the Owned Real Property, free and clear of any Encumbrance. All
improvements on the Owned Real Property are in accordance with all applicable
laws, ordinances, regulations and orders, including, those applicable to zoning,
environment and the establishment and maintenance of working conditions for
labor. None of the Sellers knows of any law, ordinance, regulation, order,
restriction or agreement, including any zoning law, that would restrict the
present operations of the Radio Station Companies or the presently planned
expansion or alteration of or addition to the
25
<PAGE>
structures located on any of the Real Property. Except as disclosed on Schedule
3.18, the Purchase and Exchange will not adversely affect the Radio Station
Companies' right to use the Real Property for the same purpose and to the same
extent as they were being used by the Radio Station Companies prior to the date
of this Agreement.
Section 3.19 Holding Companies. Except as set forth in Schedule 3.19 or as
-----------------
contemplated by or provided in this Agreement, none of the Companies (other than
the Radio Station Companies) (i) owns or holds any property or assets or
conducts any business (other than the ownership of the membership or other
limited liability company ownership interests in any other Company as set forth
in Schedule 3.2), (ii) has any liabilities (other than any indebtedness or other
liability under the Existing Aurora Credit Facilities), (iii) has entered into
any contractual obligation on behalf of itself or (iv) holds or is subject to
any FCC License or any other license, permit, authorization or approval of any
Governmental Authority.
Section 3.20 Subsidiaries. None of the Companies has any direct or indirect
------------
subsidiaries, except for another Company. Other than as reflected in Schedule
3.2, none of the Companies owns, directly or indirectly, any shares or other
equity interest or securities in any business organization, entity or
enterprise.
Section 3.21 Environmental Matters. Except as set forth in any
---------------------
environmental report delivered by Sellers to Buyer prior to the date of this
Agreement and except as otherwise set forth on Schedule 3.21, no hazardous or
toxic substance or waste regulated under any applicable environmental, health or
safety law has been generated, stored, transported or released on, in, from or
to the Real Property. Except as set forth in any environmental report delivered
by Sellers to Buyer prior to the date of this Agreement and except as set forth
on Schedule 3.21, the Companies have complied in all material respects with all
environmental, health and safety laws applicable to the Radio Stations.
Section 3.22 Accounts Receivable. Except as set forth on Schedule 3.22, the
-------------------
accounts receivable of the Companies have arisen in the ordinary course of
business and are valid, subject, however, to the reserves for bad or
questionable accounts provided for on the latest dated balance sheet included in
the financial statements described in Section 3.3. Schedule 3.22 sets forth the
aging of accounts receivable of the Companies as of December 31, 1999. Except as
set forth on Schedule 3.22, each account receivable of the Companies described
on Schedule 3.22 represents the bona fide sale and delivery of goods or services
to, or as directed by, the account debtors set forth on such Schedule. None of
such accounts receivable is represented by a note or chattel paper. Except as
set forth on Schedule 3.22, there has been no change in policy or practice of
any of the Companies relating to the collection of accounts receivable of any of
the Companies or the establishment of reserves with respect thereto since
December 31, 1999.
Section 3.23 Acquisition Agreements. None of the Sellers or the Companies
----------------------
has made any claim (or knows of any reasonable basis for any claim) for
indemnification under any
26
<PAGE>
acquisition agreement pursuant to which any of the Sellers or their Affiliates
acquired ownership of any of the Companies or any assets of any of the
Companies. All of Sellers' rights to indemnification and other rights and
remedies under all such acquisition agreements (if any) are assignable to Buyer
hereunder (and Sellers agree to so assign, at Buyer's request at or after the
Closing, any or all of such rights and remedies to Buyer).
Section 3.24 Affiliate Transactions. Except for Sellers' acquisition of
----------------------
ownership of the Companies and as set forth on Schedule 3.24, there has not been
any transaction between any Company and any Seller or any Affiliate of any
Seller (other than another Company).
Section 3.25 No Misrepresentation. None of this Agreement, Exhibit A
--------------------
hereto, any Schedule or any certificate furnished or to be furnished by or on
behalf of any Seller or any Company pursuant to this Agreement contains, or will
contain, any untrue statement of a material fact or omits, or will omit, to
state a material fact necessary to make the statements contained herein or
therein not misleading.
ARTICLE IIIA
Representations and Warranties of Sellers as to Organization,
Authorization, etc.
Each Seller severally (and not jointly and severally) represents and
warrants, with respect to such Seller, that:
Section 3A.1. Organization: Authorization: etc.
--------------------------------
(a) Such Seller (if such Seller is not an Individual Seller) is a
corporation, limited partnership or limited liability company duly organized or
formed, validly existing and in good standing under the laws of its jurisdiction
of incorporation, organization or formation.
(b) Such Seller (if such Seller is not an Individual Seller) has
all requisite corporate, partnership or limited liability company power to
execute and deliver this Agreement and to perform its obligations hereunder. If
such Seller is an Individual Seller, such Seller has all requisite power to
execute and deliver this Agreement and to perform its obligations hereunder.
Such execution, delivery and performance by such Seller (if such Seller is not
an Individual Seller) have been duly authorized by all necessary corporate,
partnership or limited liability company action. This Agreement is the legal,
valid and binding obligation of such Seller, enforceable in accordance with its
terms.
(c) Neither the execution and delivery of this Agreement nor
performance by such Seller of its obligations hereunder does or will (i)
conflict with such Seller's certificate or incorporation or by-laws, partnership
agreement, limited liability company agreement or other
27
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constitutive documents or (ii) except as listed in Schedule 3A.1(c), (x)
conflict with or result in a breach of any term of, or require any consent
under, any contract, or other agreement or instrument by which such Seller is
bound, (y) give rise to any Encumbrance upon any of such Seller's Subject
Interests, or (z) violate any judgment or order of any Governmental Authority to
which such Seller is subject, except where such conflict, breach, Encumbrance or
violation would not have an Aurora Material Adverse Effect.
(d) Such Seller owns the Subject Interests described on Schedule
3.2 free and clear of any Encumbrances, except for restrictions imposed by
federal and state securities laws and the Third Amended and Restated Limited
Liability Company Agreement of Aurora Communications.
Section 3A.2. Investment by Continuing Sellers.
--------------------------------
(a) Such Continuing Seller is acquiring the Nassau Equity
Interests and shares of common stock of NBP to be acquired by such Continuing
Seller pursuant hereto (such Continuing Seller's "Exchange Interests") for its
own account for investment and not with a view to, or for sale in connection
with, any distribution thereof, nor with any present intention of distributing
or selling the same; and, except as contemplated or permitted by this Agreement,
such Continuing Seller has no present or contemplated agreement, undertaking,
arrangement, obligation, indebtedness or commitment providing for the
disposition thereof.
(b) Such Continuing Seller understands that such Continuing
Seller's Exchange Interests have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), or any state securities law, by reason
of their issuance in a transaction exempt from the registration requirements of
the Securities Act and such laws, and that they must be held indefinitely unless
they are subsequently registered under the Securities Act and such laws or a
subsequent disposition thereof is exempt from registration. The certificates for
such Continuing Seller's Exchange Interests shall bear a legend to such effect,
and appropriate stop transfer instructions shall be issued.
(c) Such Continuing Seller has not been formed for the specific
purpose of acquiring Exchange Interests pursuant to this Agreement. Such
Continuing Seller understands the term "accredited investor" as used in
Regulation D promulgated under the Securities Act and represents and warrants to
Buyer and NBP that such Continuing Seller is an "accredited investor" for
purposes of acquiring Exchange Interests.
(d) Such Continuing Seller has sufficient knowledge and
experience in business and financial matters and with respect to investment in
securities of privately held companies so as to enable it to analyze and
evaluate the merits and risks of the investment contemplated hereby and is able
to bear the economic risk of such investment. Such Continuing Seller has
carefully reviewed the representations concerning Buyer and NBP contained in
this
28
<PAGE>
Agreement and has made detailed inquiry concerning Buyer and NBP, their
respective businesses and personnel; Buyer has made available to such Continuing
Seller any and all written information that such Continuing Seller has requested
and have answered, to such Continuing Seller's satisfaction, all inquiries made
by such Continuing Seller. Such Continuing Seller has adequate assets and means
of providing for its needs and contingencies to sustain a complete loss of such
Continuing Seller's investment in Buyer and NBP. Such Continuing Seller's
overall commitment to investments that are not readily marketable is not
disproportionate to such Continuing Seller's assets; and such Continuing
Seller's investment in such Continuing Seller's Exchange Interests will not
cause such overall commitment to become excessive.
ARTICLE IV
Representations and Warranties of Buyer and NBP
Subject to Sections 9.2 and 9.3, Buyer and, solely for purposes of Sections
4.1, 4.2, 4.3 and 4.15, NBP represent and warrant that:
Section 4.1 Organization: Authorization: etc.
--------------------------------
(a) Each of the Nassau Companies and NBP is a corporation, limited
partnership or limited liability company duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or formation.
Each of Buyer and NBP has all requisite corporate, partnership or limited
liability company power to execute and deliver this Agreement and to perform its
obligations hereunder. Such execution, delivery and performance by each of Buyer
and NBP have been duly authorized by all necessary corporate, partnership or
limited liability company action. This Agreement is the legal, valid and binding
obligation of Buyer and NBP, enforceable in accordance with its terms. Each of
the Nassau Companies and NBP (i) now has and, after consummation of the Purchase
and Exchange, will have full corporate, partnership or limited liability company
power to own all of its properties and assets and to carry on its business and
(ii) is now and, after consummation of the Purchase and Exchange, will be duly
qualified to do business and in good standing in each jurisdiction in which the
conduct of its business requires it or will require it to be so qualified,
except where failure to be so qualified or in good standing would not have a
Nassau Material Adverse Effect.
(b) Neither the execution and delivery of this Agreement nor
performance by Buyer or NBP of its obligations hereunder does or will (i)
conflict with Buyer's or NBP's partnership agreement, articles of incorporation
or by-laws or other constitutive documents or (ii) (x) except as set forth in
Schedule 4.1, conflict with or result in a breach of (or give rise to any right
of termination or acceleration of) any term of, or require any consent under,
any lease, contract or other agreement or instrument by which Buyer or NBP is
bound or (y) violate any judgment or order of any court or other governmental
authority to which Buyer or NBP is
29
<PAGE>
subject, except where such conflict, breach or violation would not have a Nassau
Material Adverse Effect.
(c) Buyer has delivered to Sellers' Agent true and complete copies
of the certificate of incorporate and by-laws, partnership agreement, limited
liability company agreement or other constitutive documents of each of the
Nassau Companies. NBP has delivered to Sellers' Agent time and complete copies
of its certificate of incorporation and by-laws.
(d) Schedule 4.1(d) sets forth as to each of the Nassau Companies
and NBP its jurisdiction of incorporation or formation and the jurisdictions in
which it is qualified to do business as a foreign limited partnership, foreign
corporation or foreign limited liability company.
Section 4.2 Capitalization. Schedule 4.2 sets forth (i) as to each Nassau
--------------
Company, its equityholders and number, type and class of equity interests of
such Nassau Company owned by such equityholders and (ii) as to NBP, its
authorized capital stock, the number of shares of each class thereof
outstanding, the record owners of such outstanding shares of capital stock and
the numbers and classes of such outstanding shares owned by such owners (such
outstanding partnership interests and capital stock being referred to herein as
the "Buyer/NBP Equity Interests"). The Buyer/NBP Equity Interests, as set forth
in Schedule 4.2, are all of the issued and outstanding equity interests of the
Nassau Companies and all of the issued and outstanding capital stock of NBP. All
of the Buyer/NBP Equity Interests are duly authorized and validly issued and, in
the case of outstanding capital stock, fully paid and non-assessable. Except as
set forth on Schedule 4.2, there are no options or other rights to acquire
equity interests, or securities convertible into equity interests, of the Nassau
Companies or NBP.
Section 4.3 Financial Statements.
--------------------
(a) Buyer has previously delivered to Sellers true and complete
copies of the unaudited consolidated balance sheet of the Nassau Companies as of
December 31, 1999 and the consolidated statements of income and cash flows of
the Nassau Companies for the year then ended. NBP has previously delivered to
Sellers true and complete copies of the unaudited balance sheet of NBP as of
December 31, 1999 and the statements of income and cash flows of NBP for the
December 31, 1999 then ended. Such financial statements were prepared in
accordance with Generally Accepted Accounting Principles consistently applied
(except for the omission of footnotes), and present fairly in all material
respects the financial position, results of operations and other information
included therein as of the date and for the period specified therein.
(b) Except as set forth on Schedule 4.3, all accounting ledgers and
other books and records of the Nassau Companies and NBP are located at the
principal office of Buyer in Princeton, New Jersey.
30
<PAGE>
Section 4.4 Licenses.
--------
(a) Buyer has furnished to Sellers true copies of all FCC licenses
(which are identified on Schedule 4.4(a)), which constitute all required
licenses and permits and authorizations for the day and night operation of the
radio stations and associated auxiliary facilities of such radio stations
operated by the radio stations indicated on such Schedule. Each such radio
station has the right to use the call letters it presently uses (as listed on
Schedule 4.8), pursuant to the rules and regulations of the FCC. Each Nassau
Company has complied in all material respects with the terms and conditions of
the respective FCC licenses applicable to it and with the FCC's other
requirements. The FCC's most recent renewals of such FCC licenses were not
challenged by any petition to deny or by any competing application.
(b) Each Nassau Company possesses all material governmental
licenses, permits, approvals and other authorizations required by such Nassau
Company in the conduct of its business. Except as identified in Schedule 4.4(b),
no application, action or proceeding is pending for the renewal or modification
of any of such licenses, permits, approvals or authorizations, and no
application, action or proceeding is pending or, to Buyer's knowledge,
threatened that may result in the denial of the application for renewal, the
revocation, modification, nonrenewal or suspension of any of such licenses,
permits, approvals or authorizations, the issuance of a cease-and-desist order,
or the imposition of any administrative or judicial sanction and, to Buyer's
knowledge, there is no basis for any such denial, revocation, modification, non-
renewal or suspension or any such order or sanction.
Section 4.5 Operation of Radio Stations FCC Reports.
---------------------------------------
(a) Each of the radio stations owned by a Nassau Company is being
operated in all material respects in accordance with the FCC licenses applicable
thereto, the Communications Act of 1934, as amended, the rules and regulations
thereunder, and all other material legal requirements, federal, state and local,
applicable to such radio stations.
(b) To Buyer's knowledge, all applications, reports, notices and
other documents required to be filed by the Nassau Companies with the FCC or any
other Governmental Authority have been filed and complied with in all material
respects and are complete and correct as filed and the licensee company of each
radio station owned by the Nassau Companies has timely placed in its public
inspection file all documentation required by the FCC.
Section 4.6 Consents.
--------
(a) Except for the FCC Consent, the filing of necessary reports and
notifications and the receipt of necessary governmental approvals under the HSR
Act, any filings
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<PAGE>
with any Governmental Authority required to be made in connection with the Buyer
Incorporation and as set forth in Schedule 4.6, no consent or approval by, or
filing with, any Governmental Authority or other third party is required in
connection with the execution or delivery of this Agreement by Buyer or NBP or
the consummation of the Purchase and Exchange.
(b) Neither Buyer nor NBP knows of any facts that would cause the
FCC to deny the FCC Consent.
Section 4.7 Assets. Each Nassau Company has good and marketable title to
------
the assets and properties owned by it, free and clear of all Encumbrances, other
than Nassau Permitted Encumbrances.
Section 4.8 Trade Rights. etc. Schedule 4.8 lists the call letters,
-----------------
trademarks, tradenames and other trade rights and marks used by the Nassau
Companies in the operation of their radio stations. Except as listed on Schedule
4.8, no Nassau Company has licensed, consented to or waived, and Buyer has no
knowledge of, any other Person's use of any such call letters, trademarks,
tradenames and other trade rights and marks. Buyer does not know of any
challenge or claim with respect to the use by any of the Nassau Companies any of
the call letters, trademarks, tradenames or other trade rights or marks used by
the Nassau Companies in the operation of the radio stations owned by them. To
Buyer's knowledge, the Nassau Companies collectively possess adequate and
enforceable common law rights to use the call signs, trademarks, tradenames and
other trade rights and marks so used by them within the respective jurisdictions
where such call signs, trademarks, tradenames, and other rights and marks are
currently used. None of the Nassau Companies has received any notice of conflict
which asserts any rights of others with respect to any of such call signs,
trademarks, tradenames or other trade rights or marks, and Buyer does not know
of any basis for the assertion of any such rights. To Buyer's knowledge, none of
the Nassau Companies is infringing any patent, copyright or trademark of any
third party and no claim has been made or threatened against any Nassau Company
alleging any such violation.
Section 4.9 Changes Since December 31. 1999. Except as set forth in
-------------------------------
Schedule 4.9 or in any other Schedule to this Agreement, since December 31, 1999
there has not been:
(a) any Nassau Material Adverse Effect, and each Nassau Company has
operated its business, including its radio stations, in the ordinary course of
business;
(b) any change in any of the licenses, permits or franchises of any
Nassau Company which has had or would have a Nassau Material Adverse Effect, or
any change in the methods of accounting or accounting practice, which have had
or may reasonably be expected to have an Nassau Material Adverse Effect or a
material adverse effect on the licenses, permits or franchises of the Nassau
Companies as a whole;
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(c) any damage, destruction or other casualty loss which
constitutes a Nassau Material Adverse Effect;
(d) any direct or indirect redemption, purchase or other
acquisition of any partnership interest, capital stock, membership interest or
other limited liability company ownership interest of any Nassau Company or any
declaration setting aside or payment of any dividend or other distribution on or
in respect of any partnership interest, capital stock, membership interest or
other limited liability ownership interest of any Nassau Company;
(e) any action by any Nassau Company to amend it articles or
incorporation or by-laws, limited liability company agreement or other
constitutive documents; or
(f) any issuance or retirement of any equity or debt securities by
any Nassau Company or any grant by any Nassau Company of any option or issuance
of any warrant or securities convertible into such securities.
Section 4.10 Litigation. etc. Except as set forth in Schedule 4.10:
---------------
(a) No action, litigation, arbitration or other proceeding (and to
the knowledge of Buyer, no investigation) is pending by or against or, to the
knowledge of Buyer, threatened against any Nassau Company which, if adversely
determined, would reasonably be expected to have a Nassau Material Adverse
Effect.
(b) No Nassau Company is subject or party to any judgment or order
of or stipulation with any court or other Governmental Authority, or in
violation of any provision of any law, license, permit, approval or
authorization, which judgment, order, stipulation or violation has had or would
reasonably be expected to have a Nassau Material Adverse Effect.
Section 4.11 Taxes. Each of the Nassau Companies has timely filed all
-----
federal, state, local and foreign Tax Returns that it was required to file, and
such Tax Returns are correct and complete in all material respects. Each Nassau
Company has paid, or has set up an adequate reserve on its balance sheet dated
as of December 31, 1999 for the payment of, all federal, state, local and
foreign Taxes with respect to any period ending on or before December 31, 1999.
For the purposes of the preceding sentence, December 31, 1999 shall be treated
as the last day of a taxable period whether or not it is in fact the last day of
a taxable period. Since December 31, 1999, no Nassau Company has incurred any
material liability for federal, state, local and foreign Taxes except in the
ordinary course of business. There are no matters under discussion between any
Nassau Company and any taxing authority in respect of any Tax assessment
relating to any Nassau Company. Each of the Nassau Companies has been a
Pass-Through Entity for federal, state and local income tax purposes from the
date of its formation, and no election has been
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made under Treasury Regulation Section 301.7701-3 by or with respect to any
Nassau Company for such entity to be treated as an entity other than a
Pass-Through Entity.
Section 4.12 Brokers, Finders, etc. No Nassau Company has employed, and is
---------------------
subject to any claim of, any broker, finder, consultant or intermediary in
connection with the Purchase and Exchange who might be entitled to a fee or
commission from any Seller upon consummation of the Purchase and Exchange.
Section 4.13 Real Property. Schedule 4.13 contains a list and brief
-------------
description of all real properties owned (the "Nassau Owned Real Property") or
leased (the "Nassau Leased Real Property") by the Nassau Companies, including
all structures located on those real properties (the Nassau Owned Real property
and the Nassau Leased Real Property being collectively referred to herein as the
"Nassau Real Property"). Except as set forth on that Schedule and except for any
Nassau Permitted Encumbrance, the Nassau Companies have good and marketable
title to the Nassau Owned Real Property, free and clear of any Encumbrances,
except for any Nassau Permitted Encumbrances. All improvements on the Nassau
Owned Real Property are in accordance with all applicable laws, ordinances
regulations and orders including those applicable to zoning, environment and the
establishment and maintenance of working conditions for labor. Buyer knows of no
law, ordinance, regulation, order, restriction or agreement, including any
zoning law that would restrict the present operations of the Nassau Companies.
The Purchase and Exchange will not adversely affect the Nassau Companies' right
to use the Nassau Real Property for the same purpose and to the same extent as
they were being used by the Nassau Companies prior to the date of this
Agreement.
Section 4.14 Subsidiaries. None of the Nassau Companies has any direct or
------------
indirect subsidiaries, except for another Nassau Company. Other than as
reflected in Schedule 4.2, none of the Nassau Companies owns, directly or
indirectly, any shares or other equity interest or securities in any business
organization, entity or enterprise.
Section 4.15 Reserved.
--------
Section 4.16 Insurance. The insurance policies maintained by Buyer and its
---------
subsidiaries are adequate in scope, coverage (including for fire, casualty,
liability and extended coverage) and amount for the business conducted by them,
in light of policies maintained by other companies similarly situated in the
industry.
Section 4.17 Investment by Buyer.
-------------------
(a) Buyer is acquiring the Subject Interests for its own account
for investment and not with a view to, or for sale in connection with, any
distribution thereof, nor with any present intention of distributing or selling
the same; and Buyer has no present or contemplated
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agreement, undertaking, arrangement, obligation, indebtedness or commitment
providing for the disposition thereof.
(b) Buyer understands that the Subject Interests have not been
registered under the Securities Act, or any state securities law, by reason of
their issuance in a transaction exempt from the registration requirements of the
Securities Act and such laws, and that they must be held indefinitely unless
they are subsequently registered under the Securities Act and such laws or a
subsequent disposition thereof is exempt from registration.
(c) Buyer has sufficient knowledge and experience in business and
financial matters and with respect to investment in securities of privately held
companies so as to enable it to analyze and evaluate the merits and risks of the
investment contemplated hereby and is able to bear the economic risk of such
investment. Buyer has carefully reviewed the representations concerning the
Companies contained in this Agreement and has made detailed inquiry concerning
the Companies, their respective business and personnel; Sellers have made
available to Buyer any and all written information that Buyer has requested and
have answered to, to Buyer's satisfaction, all inquiries made by Buyer.
Section 4.18 Accounts Receivable. Except as set forth on Schedule 4.18, the
-------------------
accounts receivable of the Nassau Companies have arisen in the ordinary course
of business and are valid, subject, however, to the reserved for bad or
questionable accounts provided for on the latest dated balance sheet included in
the financial statements described in Section 4.3. Except as set forth on
Schedule 4.18, each account receivable of the Nassau Companies described on
Schedule 4.18 represents the bona fide sale and delivery of goods or services
to, or as directed by, the account debtors set forth on such Schedule. None of
such accounts receivable is represented by a note or chattel paper. Except as
set forth on Schedule 4.18, there has been no change in policy or practice of
any of the Nassau Companies relating to the collection of accounts receivable of
any of the Companies or the establishment of reserves with respect thereto since
December 31, 1999.
Section 4.19 Environmental Matters. Except as set forth in any
---------------------
environmental report delivered by Buyer to Sellers prior to the date of this
Agreement and except as otherwise set forth on Schedule 4.19, to Buyer's
knowledge no hazardous or toxic substance or waste regulated under any
applicable environmental, health or safety law has been generated, stored,
transported or released on, in, from or to any Nassau Real Property. Except as
set forth in any environmental report delivered by Buyer to Sellers prior to the
date of this Agreement and except as set forth on Schedule 4.19, to Buyer's
knowledge the Nassau Companies have complied in all material respects with all
environmental, health and safety laws applicable to radio stations owned by the
Nassau Companies.
Section 4.20 No Misrepresentation. None of this Agreement, any Exhibit, any
--------------------
Schedule or any certificate furnished or to be furnished by or on behalf of
Buyer or NBP
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pursuant to this Agreement contains, or will contain, any untrue statement of a
material fact or omits, or will omit, to state a material fact necessary to make
the statements contained herein or therein not misleading.
ARTICLE V
Covenants of the Parties
Section 5.1 Covenants of Sellers. Sellers, severally (and not jointly and
--------------------
severally) covenant that between the date hereof and the Closing Date:
(a) Conduct of Business. Except as set forth in Schedule 5.1(a):
-------------------
(i) The business of each Radio Station Company and the
operations of each Radio Station will be conducted only in the ordinary course
of business as heretofore conducted; each Radio Station Company will use
reasonable efforts to maintain the character, quality and content of its Radio
Stations' programming and will maintain advertising and other promotional
expenditures substantially consistent with past practices; and each Radio
Station Company will use all reasonable efforts to preserve and maintain its
business and properties intact, keep available the services of its employees,
and preserve each Radio Station Company's relationships with its suppliers,
customers, sales representatives and others having business relations with it,
and generally to maintain the reputation of its Radio Stations in its
broadcasting area; each Company will pay its debts and taxes when due (other
than any debts or taxes the amount or validity of which are currently being
contested in good faith by appropriate proceedings and with respect to which
reserves in conformity with Generally Accepted Accounting Principles have been
provided on the books of such Company) and pay or perform its other material
obligations when due; and the representation and warranty in Section 3.19 shall
be true and correct at all times;
(ii) No Company will sell, or otherwise dispose of or
encumber (other than Aurora Permitted Encumbrances), or obligate itself to sell,
lease or otherwise dispose of or encumber (except for Aurora Permitted
Encumbrances), any of its assets other than in the ordinary course of business,
or acquire or merge or consolidate with or into any other Person, or enter into
any agreements relating to any of the foregoing; provided, however, that this
provision shall not prevent any disposition by a Company of any assets required
to be so disposed by the FCC or any Governmental Authority;
(iii) Except in accordance with such Company's normal
compensation practices, no Company will, except as may be required by existing
contracts listed in Schedule 3.7, increase, or obligate itself to increase, the
compensation payable or to become payable by such Company to any of its
employees, or incur any material additional obligations with respect to any such
employees;
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(iv) As soon as practicable after they are prepared (but in
any event no later than April 15, 2000 in the case of the financial statements
referred to in clause (A) below), Sellers shall furnish to Buyer (A) the
consolidated and consolidating balance sheets and statements of income and cash
flows of the Companies, as audited by Ernst & Young LLP, for the period
beginning January 20, 1999 and ending December 31, 1999, and (B) all financial
reports and statements relating to the operation of each Company that are
prepared in the ordinary course of business, including monthly reports of sales
and revenue, monthly operating statements, quarterly balance sheets, and any
other similar documents prepared by Sellers or such Company relating to such
Company (and all such monthly, quarterly or other periodic reports and
statements referred to in this clause (B) shall be furnished to Buyer within
thirty (30) days of the end of the relevant month, quarter or period);
(v) Sellers shall promptly notify Buyer in writing of, and
furnish any information Buyer may request with respect to, (i) any claim,
litigation, proceeding or governmental investigation threatened or asserted by
or against any of the Companies, (ii) any event or condition relating to any
Seller or any of its Affiliates that would cause any of the conditions to
Buyer's obligation to consummate the Purchase and Exchange not to be fulfilled
and (iii) any occurrence of any kind that would have an Aurora Material Adverse
Effect;
(vi) None of Sellers or their Affiliates (other than a
Company) will enter into any transaction with any Company, except (x)
transactions relating to the provision of corporate services, insurance and
"overhead" in the ordinary course consistent with past practice, (y) the
Purchase and Exchange and (z) transactions required in order for the
representations and warranties of Sellers contained in this Agreement to be true
and correct at the Closing;
(vii) No Radio Station Company will enter into any broadcast
time sales agreement, or other material contract, commitment or understanding
except those that are in the ordinary course of business and are consistent with
the Radio Station Company's past business practices;
(viii) None of Sellers or the Companies shall, without Buyer's
prior written consent, by any act or omission within the reasonable control of
any Seller or any Company or its agents, surrender, modify, forfeit or fail to
seek renewal on regular terms of, any of the FCC Licenses held by or applicable
to any Radio Station Company or its Radio Stations or cause the FCC to institute
any proceedings for the cancellation or modification thereof (and Sellers
represent and warrant severally (and not jointly and severally) that no such
proceeding is now pending or, to Each Seller's knowledge, threatened), or fail
to prosecute with due diligence any pending application to the FCC except that
nothing contained herein shall prevent any Company from making any transfer of
an FCC License to any other Company;
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(ix) No Company will grant any severance or termination pay
(i) to any executive officer or (ii) to any other employee except payments made
in connection with the termination of employees who are not executive officers
in amounts consistent with such Company's policies and past practices or
pursuant to written agreements outstanding and identified in Schedule 3.7;
(x) No Company will commence any litigation other than (x)
for the routine collection of bills or (y) in such cases where such Company in
good faith determines that failure to commence suit would result in the material
impairment of such Company's business, provided that such Company notifies Buyer
prior to the filing of such a suit;
(xi) No Company will declare or pay any dividends on or make
any other distributions (whether in cash, stock or property) in respect of any
of its equity securities, or split, combine or reclassify any of its equity
securities; provided, that any Radio Station Company may pay such dividends or
make such distributions to another Radio Station Company;
(xii) No Company will repurchase or otherwise acquire,
directly or indirectly, any of its equity securities except from non-executive
officers or other similar personnel in accordance with agreements existing as of
the date hereof and identified in Schedule 3.7 that require the repurchase of
securities in connection with any termination of service to such Company;
(xiii) No Company will issue, deliver or sell or authorize or
propose the issuance, delivery or sale of, any securities of any class, type or
kind, or subscriptions, rights, warrants or options to acquire, or enter into
other agreements or commitments of any character obligating it to issue any such
securities;
(xiv) No Company will cause, permit or propose any amendments
to its articles of incorporation or by-laws, limited liability company agreement
or other constitutive documents;
(xv) No Company will incur any indebtedness for borrowed
money (other than ordinary course trade payables or pursuant to existing credit
facilities in the ordinary course of business), enter into any capital lease or
guarantee any indebtedness of others; and
(xvi) If any of the contracts on Schedule 3.7 are subject to
expiration or termination before the Closing, the Company which is a party to
such contract shall use reasonable efforts to extend such contracts on
reasonable terms in accordance with its past practice unless such Company shall
determine that such expiration or termination is in the best interest (financial
and otherwise) of such Company.
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(b) Access to Companies.
-------------------
(i) Sellers shall permit, and shall cause the Companies to
permit, upon reasonable notice and during regular business hours, any
individuals designated by Buyer to observe any aspect of the business of any
Company or the operations of any Radio Station as shall be reasonably necessary
for Buyer to assume management duties after the Closing. Nothing herein shall
limit any Seller's or any Company's right and obligation to manage, control,
direct and supervise the employees and operations of such Company or any Radio
Station.
(ii) Sellers shall give, and shall cause the Companies to
give, to Buyer and to Buyer's attorneys, accountants, engineers and other agents
or representatives, and to Buyer's lenders, underwriters, financial advisors or
potential lenders and their attorneys, agents and representatives, reasonable
access, during normal business hours, to all of any Company's properties, books,
contracts, commitments and records, and will furnish Buyer and such lenders or
potential lenders during such period with copies thereof and any other
information relating to any such Company as Buyer or such underwriters,
financial advisors or lenders or potential lenders may reasonably request.
Sellers and Buyer and such banks, firms or lending institutions shall cooperate
to minimize the disruption to operations that may be caused by such access.
(c) Cooperation with respect to Financing. Sellers shall cooperate,
-------------------------------------
and shall cause the Companies to cooperate, with Buyer, Buyer's lenders and
potential lenders and their attorneys, agents and representatives in Buyer's
obtaining the financing required to consummate the Purchase and Exchange.
(d) No Solicitation. From the date hereof to the Closing or the
---------------
termination of this Agreement, none of the Sellers or any Company shall,
directly or indirectly, through any of their officers, directors, employees,
representatives or agents, encourage, solicit or initiate discussions or
negotiations with, or knowingly provide any information to, any Person or group
(other than Buyer, its lenders and potential lenders and their respective agents
and representatives) concerning any merger, sale of substantial assets, sale of
shares of equity securities or similar transaction involving any Company.
(e) Barter Agreements. From the date hereof to the Closing Date,
-----------------
Sellers shall not permit any Radio Station Company to enter into a barter,
trade, or similar agreement (a "Barter Agreement") for the sale of more than
$50,000 of air time without Buyer's written consent (which consent shall not be
unreasonably withheld or delayed).
(f) Reduction Liabilities. During the period from the delivery of
---------------------
the certificate of the Chief Financial Officer of Aurora Communications required
to be delivered pursuant to Section 6.2(c) to the Closing, none of the Reduction
Liabilities shall be increased
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(whether through the incurrence of any additional indebtedness or otherwise)
from the amounts thereof stated in such certificate.
Section 5.2 Covenant of Buyer Regarding Aurora Communications Lease. Buyer
-------------------------------------------------------
agrees that, for a period of one year from and after the Closing, it will (i)
cause Aurora Communications to continue the Lease Agreement dated July 1999
between Three Stamford Landing Associates LLC and Aurora Communications and (ii)
permit Osborn to continue to occupy the lease premises (with telephone and
utility services to be provided to the lease premises as they are currently
provided) at no cost to Osborn. During such one year period, Buyer will make, or
cause Aurora Communications to make, monthly payments of $13,000 to or as
directed by Osborn solely for the purposes of paying rent and occupancy costs
under such lease and other administrative expenses. Unless Osborn (or his
designee) shall have assumed (subject to landlord approval) Aurora
Communication's obligations under such lease at the end of such one year period
and shall have given Buyer notice of his intent to do so at least 90 days prior
to the end of such period, Osborn shall vacate the lease premises at the end of
such period. At the Closing, Buyer shall cause the Companies to convey to Osborn
or to any Person designated by Osborn, without charge, all of the office
furniture and equipment located on the leased premises (other than any such
furniture and equipment constituting fixtures or owned by any Person other than
Osborn or any Company).
Section 5.3 Additional Covenants of Buyer. Subject to Section 9.2, Buyer
-----------------------------
covenants that, between the date hereof and the Closing Date:
(a) Conduct of Business. Except (other than with respect to clauses
-------------------
(iii) and (iv) below) as contemplated by the Buyer Incorporation or the IPO or
as set forth in Schedule 5.3(a):
(i) The business of each Nassau Company and the operations
of each radio station will be conducted only in the ordinary course of business
as heretofore conducted; each Nassau Company will use reasonable efforts to
maintain the character, quality and content of its radio station's programming
and will maintain advertising and other promotional expenditures substantially
consistent with past practices; and each Nassau Company will use all reasonable
efforts to preserve and maintain its business and properties intact, keep
available the services of its employees, and preserve each Nassau Company's
relations with its suppliers, customers, sales representatives and others having
business relations with it, and generally to maintain the reputation of its
radio stations in its broadcasting area; each Nassau Company will pay its debts
and taxes when due (other than any debts or taxes the amount or validity of
which are currently being contested in good faith and appropriate proceedings
and with respect to which reserved in conformity with Generally Accepted
Accounting Principles have been provided on the books of such Nassau Company),
and pay or perform its other material obligations when due;
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(ii) No Nassau Company will sell, or otherwise dispose of or
encumber (other than Nassau Permitted Encumbrances), or obligate itself to sell,
lease or otherwise dispose of or encumber (except for Nassau Permitted
Encumbrances), any of its assets other than in the ordinary course of business,
or acquire or merge or consolidate with or into any other Person, or enter into
any agreements relating to any of the foregoing; provided, however, that this
provision shall not prevent any disposition by any Nassau Company of any assets
required to be so disposed by the FCC or any Governmental Authority;
(iii) As soon as practicable after they are prepared (but in
any event no later than March 31, 2000 in the case of the financial statement
referred to in clause (A) below), Buyer shall furnish to Sellers' Agent (A) the
consolidated balance sheets and statements of income and cash flows of the
Nassau Companies, as audited by Grant Thornton LLP, for the period beginning
January 1, 1999 and ending December 31, 1999, and (B) all consolidated financial
reports and statements relating to the operation of the Nassau Companies that
are prepared in the ordinary course of business, including monthly reports of
sale and revenue, monthly operating systems quarterly balance sheets, and any
other similar documents prepared by the Nassau Companies relating to the Nassau
Companies (and all such monthly, quarterly or other periodic reports and
statements referred to in this clause (B) shall be furnished to Sellers' Agent
within thirty (30) days of the end of the relevant month, quarter or period);
(iv) Buyer shall promptly notify Sellers' Agent in writing
of, and furnish any information Sellers' Agent may request with respect to, (i)
any claim, litigation, proceeding or governmental investigation threatened or
asserted by or against any of the Nassau Companies, (ii) any event or condition
relating to Buyer or any of its Affiliates that would cause any of the
conditions to Sellers' obligation to consummate the Purchase and Exchange not to
be fulfilled and (iii) any occurrence of any kind that would have a Nassau
Material Adverse Effect;
(v) No Nassau Company shall, without Sellers' Agent's prior
written consent, by any act or omission within the reasonable control of such
Nassau Company or its agents, surrender, forfeit or fail to seek renewal on
regular terms of, any FCC license held by or applicable to it or cause the FCC
to institute any proceedings for the cancellation or modification thereof (no
such proceeding being now pending or, to Buyer's knowledge, threatened), or fail
to prosecute with due diligence any pending application to the FCC, except that
nothing contained herein shall prevent any Nassau Company from making any
transfer of an FCC license to any company wholly owned (directly or indirectly)
by Buyer;
(vi) No Nassau Company will commence any litigation other
than (x) for the routine collection of bills or (y) in such cases where such
Nassau Company in good faith determines that failure to commence suit would
result in the material impairment of such Nassau Company's business, provided
that such Nassau Company notifies Sellers' Agent prior to the filing of such a
suit;
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(vii) Buyer will not declare or pay any dividends on or make
any other distributions (whether in cash, stock or property) in respect of any
of its equity securities, or split, combine or reclassify any of its equity
securities; provided, that any Nassau Company may pay such dividends or make
such distributions to another Nassau Company;
(viii) No Nassau Company (other than Buyer pursuant to the
Master Agreement, the Amended and Restated Option Agreement referred to in the
Master Agreement and the July 31, 1995 Letter referred to in the Master
Agreement) will repurchase or otherwise acquire, directly or indirectly, any of
its equity securities, except from non-executive officers or other similar
personnel in accordance with agreements existing as of the date hereof and
delivered to Sellers prior to the date hereof that require the repurchase of
securities in connection with any termination of service to such Nassau Company,
and except that up to $8 million of equity securities of Buyer may be
repurchased or otherwise acquired by the Nassau Companies;
(ix) No Nassau Company (other than Buyer pursuant to the
Master Agreement, the Amended and Restated Option Agreement referred to in the
Master Agreement and the July 31, 1995 Letter referred to in the Master
Agreement) will issue, deliver or sell or authorize or propose the issuance,
delivery or sale of, any securities of any class, type or kind, or
subscriptions, rights, warrants or options to acquire, or enter into other
agreements or commitments of any character obligating it to issue any such
securities, except pursuant to or in connection with (1) the Existing Nassau
Credit Facility, (2) any Acquisition Indebtedness or (3) an IPO; and
(x) No Nassau Company will cause, permit or propose any
amendments to its partnership agreements, articles or incorporation or by-laws,
limited liability company agreement or other constitutive documents, other than
pursuant to the Master Agreement or the Buyer Incorporation and other than any
amendments that would not adversely affect the Nassau Equity Interests to be
received by Continuing Sellers at the Closing.
(b) Access to Nassau Companies. Buyer shall give, and shall cause
--------------------------
the Nassau Companies to give, to Sellers' Agent and to its attorneys,
accountants, engineers and other agents or representatives, reasonable access,
during normal business hours, to all of any Nassau Company's properties, books
contracts, commitments and records, and will furnish Sellers' Agent during such
period with copies thereof and any other information relating to any such Nassau
Company as Sellers' Agent may reasonably request. Sellers' Agent and Buyer shall
cooperate to minimize the disruption to operations that may be caused by such
access.
Section 5.4 Covenants of Sellers and Buyer. Sellers, jointly and severally,
------------------------------
and Buyer covenant that:
(a) FCC Application. Sellers and Buyer shall cooperate in the
---------------
preparation and filing, within ten days after the date hereof, of FCC
Applications for each of the Radio
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Stations. The parties shall cooperate in the diligent submission of any
additional information requested by the FCC with respect to such FCC
Applications, and shall take all reasonable steps that are necessary and proper
to the expeditious prosecution of such FCC Applications to a favorable
conclusion.
(b) HSR Act. Sellers and Buyer shall cooperate in the preparation
-------
and filing, within ten days after the date hereof, of any reports or
notifications that may be required to be filed under the HSR Act in connection
with the Purchase and Exchange with each of the Department of Justice and the
Federal Trade Commission, and Sellers and Buyer promptly shall comply with all
requests for further documents and information made by the Department of Justice
or the Federal Trade Commission, and shall furnish to the other all such
information in its possession as may be necessary for the completion of the
reports or notifications to be filed by the other.
(c) Confidentiality. Except as required by law, or unless otherwise
---------------
agreed to in writing by the other party, Buyer and each Seller agrees that for a
period of five years following the date hereof, it (i) will keep all Proprietary
Information (as defined below) of the disclosing party confidential (other than
disclosures to the receiving party's equity holders, board of directors, senior
management, personnel and legal and accounting and financial advisors on a "need
to know" basis) and (ii) will not use Proprietary Information of the disclosing
party for any purpose other than for purposes of evaluating or effecting the
Purchase and Exchange. For purposes of this Section 5.4(c), "Proprietary
Information" means information about the disclosing party regardless of the form
in which it is communicated that contains or otherwise reflects information
about the disclosing party, other than for information that (i) becomes
generally available to the public other than as a result of disclosure by the
receiving party or any of its representatives, (ii) was available to the
receiving party on a non-confidential basis prior to the disclosure of such
information to the receiving party, provided that the source of such information
was not known to the receiving party to be bound by a confidentiality agreement
with, or other contractual, legal or fiduciary obligation of confidentiality to,
the disclosing party with respect to such information, or (iii) becomes
available on a non-confidential basis from a source other than the disclosing
party or its representatives, provided that the source of such information was
not known by the receiving party to be bound by a confidentiality agreement
with, or other contractual, legal or fiduciary obligation of confidentiality to,
the disclosing party with respect to such information. If this Agreement is
terminated as provided in Article VIII, each receiving party, at its own expense
shall return to the disclosing party all books, records and other documents and
papers obtained from the disclosing party, and all copies, that contain or
consist of Proprietary Information
(d) Reasonable Commercial Efforts. Except as otherwise provided
-----------------------------
herein, the parties hereto agree to cooperate and use their reasonable
commercial efforts to consummate the Purchase and Exchange.
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(e) Further Assurances. Each party shall cooperate and take such actions,
------------------
and execute such other documents, at the Closing or subsequently, as may be
reasonably requested by another party in order to more effectively transfer the
Subject Interests from Sellers to Buyer and to issue the Nassau Equity Interests
to Continuing Sellers and to otherwise carry out the other provisions and
purposes of this Agreement.
ARTICLE VI
Conditions to the Closing
The obligations of the parties identified in the respective sections below
to consummate the Purchase and Exchange are subject to the satisfaction or
waiver in writing, at or prior to the Closing, of the conditions set forth in
such respective sections:
Section 6.1 Conditions of the Parties. The obligations of Sellers, on the
-------------------------
one hand, and Buyer and NBP, on the other hand (considering Sellers to be one
party and Buyer and NBP to be one party for this Section 6.1):
(a) The other party's representations and warranties in this
Agreement shall be true and correct in all material respects (or, in the case of
any representation or warranty that expressly contains a materiality or similar
qualification, in all respects) at and as of the Closing as though made at and
as of such time, except for changes contemplated by the this Agreement, and
except to the extent that a different time is specifically stated in any such
representation and warranty; and the other party's covenants and agreements in
this Agreement shall have been performed or complied with in all material
respects at or prior to the Closing;
(b) Buyer and NBP, on the one hand, or each Seller, on the other
hand, shall have delivered a certificate executed by (i) if such party is a
corporation, such party's President and Secretary, (ii) if such party is a
partnership or limited liability company, a general partner or authorized member
or manager of such party or (iii) if such party is an individual, such
individual, in each case, dated the Closing Date, certifying the fulfillment of
the condition in Section 6.1(a) and, in the case of each Seller, the conditions
in Section 6.2(d) and (e);
(c) Each party (other than Buyer, NBP, Sellers, Sellers' Agent or
Aurora Communications) whose execution and delivery is necessary for
effectiveness thereof shall have executed and delivered the agreements
contemplated by Section 2.4(e) and the Partnership Rights Agreements, as
applicable, and the Employment Termination and Non-Competition Agreement as
contemplated by Section 2.4;
(d) The other party shall have delivered an opinion of counsel,
dated the Closing Date, as agreed to by each party hereto;
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(e) Final Orders granting the FCC's consent and approval to the
transfer of control of the FCC Licenses for all of the Radio Stations to Buyer
as contemplated by the Agreement shall have been obtained as contemplated by the
definition of "Closing Date" in Section 1.1; and
(f) All applicable waiting periods shall have expired and all
necessary approvals shall have been obtained under the HSR Act with respect to
the Purchase and Exchange.
Section 6.2 Conditions of Buyer. The obligations of Buyer and NBP:
-------------------
(a) The consents approvals and other actions of any Governmental
Authority listed in Schedules 3.1(c), 3.4(b), 3.6(a), 3.7 and 3A.1(c) shall have
been obtained, in form and substance reasonably satisfactory to Buyer and its
counsel.
(b) No action or proceeding shall have been instituted or
threatened by any governmental authority which seeks to restrain or prohibit the
Purchase and Exchange, or which seeks to subject Buyer to any liability, penalty
or restriction in connection with this Agreement or the Purchase and Exchange;
and no injunction or order prohibiting the Purchase and Exchange shall be in
effect.
(c) Not later than three days prior to the Closing, Sellers shall
have delivered to Buyer, each in form satisfactory to Buyer, (i) a certificate
signed by the Chief Financial Officer of Aurora Communications, setting forth,
in reasonable detail, the Reduction Liabilities, as of the Closing Date, and the
individual and aggregate amounts thereof and (ii) letters from the Companies'
lenders (A) setting forth the Reduction Liabilities owed or payable to such
lenders in reasonable detail (including as to principal, interest, prepayment
fees and all other amounts then owing or that would be payable upon the payment
of all principal on the Closing Date) and (B) identifying all Encumbrances held
by such lenders and all related UCC and other lien filings then on file. All
such Reduction Liabilities shall be prepayable in accordance with their terms
upon or in connection with the Closing.
(d) All intercompany accounts between any of the Companies and any
of the Sellers shall have been paid in full.
(e) None of the FCC Licenses shall have been revoked or suspended;
and there shall not have been any adverse change in the terms and conditions of
any FCC License with respect to any Radio Station, except to the extent that any
such revocation, suspension or change has not resulted in and would not result
in an Aurora Material Adverse Effect; and no proceeding for any such revocation,
suspension or change shall be in effect or shall have been threatened.
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(f) All proceedings taken in accordance with the Purchase and
Exchange and all documents incident to such proceedings shall be reasonably
satisfactory to counsel to Buyer.
(g) Sellers shall have provided to Buyer a report of the
appropriate filing officers in the jurisdictions in which the Radio Stations or
other assets of the Companies are located indicating the absence of filings of
financing statements and other liens of record (other than those reflecting the
liens and security interests identified in Schedule 3.8) with their respective
offices under the Uniform Commercial Code with respect to any of the Radio
Stations or other assets of the Companies and dated not more than five (5)
Business Days prior to the Closing Date.
(h) Buyer shall have received the written resignation of (i) all
officers and members of the Boards of Directors of the Corporate Holders and
(ii) all managers, officers, directors or similar representatives of each other
Company (in each case effective at or prior to the Closing).
Section 6.3 Conditions of Sellers. The obligations of Sellers (or, in the
---------------------
case of Section 6.3(c), solely the Continuing Sellers):
(a) No action or proceeding shall have been instituted or
threatened by any governmental authority which seeks to restrain or prohibit the
Purchase and Exchange, or which seeks to subject any Seller to any liability,
penalty or restriction in connection with this Agreement or the Purchase and
Exchange; and no injunction or order prohibiting the Purchase and Exchange shall
be in effect.
(b) The consents, approvals and other actions of any Governmental
Authority listed in Schedules 4.1, 4.4(a) and 4.4(b) shall have been obtained,
in form and substance reasonably satisfactory to Sellers and their counsel.
(c) None of the Nassau Companies' FCC licenses shall have been
revoked or suspended, and there shall not have been any adverse change in the
terms and conditions of any such FCC license with respect to any radio station
owned by the Nassau Companies, except to the extent that any such revocation,
suspension or change has not resulted in and would not result in a Nassau
Material Adverse Effect; and no proceeding for any such revocation, suspension
or change shall be in effect or shall have been threatened.
(d) All proceedings taken in accordance with the Purchase and
Exchange and all documents incident to such proceedings shall be reasonably
satisfactory to counsel to Sellers.
(e) The FCC shall have granted its consent to the transactions
contemplated by the Master Agreement and such grant shall have become a Final
Order.
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(f) In the event that the Buyer Incorporation has occurred prior to
or will occur simultaneously with the Closing, the IPO shall have occurred or
shall occur simultaneously with the Closing.
(g) Buyer shall have executed and delivered to BACI, upon the
request of BACI, all forms and information required by the rules and regulations
of the United States Small Business Administration.
ARTICLE VII
Indemnity
Section 7.1 Indemnity and Indemnification Procedure.
---------------------------------------
(a) Subject to the limitations set forth in Section 7.2 and to
Sections 7.4 and 9.2, from and after the Closing Date, Sellers, severally (and
not jointly and severally), according to their respective Subject Interests
Percentages, shall indemnify and hold harmless Buyer and NBP and their
respective officers, directors, partners, employees, Affiliates, agents,
representatives, successors and assigns (collectively, the "Buyer Indemnified
Parties") from and against and in respect of any and all Damages resulting from
any breach of any representation, warranty, covenant or agreement of Sellers in
this Agreement, except for the representations, warranties, covenants and
agreements described in Section 7.1(b).
(b) Subject to the limitations set forth in Section 7.2 and to
Sections 7.4 and 9.2, from and after the Closing each Seller shall severally
(and not jointly and severally) indemnify and hold harmless the Buyer
Indemnified Parties from and against any and all Damages resulting from (1) the
breach of any representation or warranty made by such Seller in Article IIIA, or
(2) any breach of any covenant or agreement to be performed by such Seller under
Sections 2.4(a), 2.4(c), 2.5, 2.6(d)(ii), 5.1(d), 5.4(c), 5.4(d) or 5.4(e).
(c) Subject to Sections 7.1(h), 7.4, 9.2 and 9.3 and to the
limitations set forth in Section 7.2, from and after the Closing Date, Buyer
shall indemnify Sellers and their respective officers, directors, partners,
members, employees, Affiliates, agents, representatives, successors and assigns
(collectively, the "Seller Indemnified Parties") from and against and in respect
of any and all Damages resulting from any breach of any representation,
warranty, covenant or agreement of Buyer or NBP in this Agreement.
(d) Subject to Section 7.1(h), if any matter shall arise which, in
the opinion of an Indemnified Party, constitutes or may give rise to Damages
subject to indemnification by the Indemnifying Party as provided in this Article
VII (an "Indemnity Claim"), such Indemnified Party shall give prompt written
notice (a "Notice of Claim") of such Indemnity Claim to the Indemnifying Party
setting forth the relevant facts and circumstances of such Indemnity Claim in
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reasonable detail and the amount of indemnity (to the extent the Indemnified
Party can reasonably determine such amount) sought from the Indemnifying Party
with respect thereto. A failure to give such notice or delay in giving such
notice shall not affect the Indemnified Party's right to indemnification or the
Indemnifying Party's obligation to indemnify as set forth in this Agreement,
except to the extent the Indemnifying Party is actually prejudiced by such
failure or delay.
(e) If any Indemnity Claim is based on any demand, suit, claim or
assertion of liability by one or more third parties against any of the Buyer
Indemnified Parties that could give rise to an indemnification obligation under
Section 7.1(a) against Sellers (a "Third Party Claim"), the obligations and
liabilities of the parties with respect to any Third Party Claim shall be
subject to the following additional terms and conditions:
(i) Sellers' Agent (on behalf of Sellers) shall have the
right to undertake, by counsel or other representatives of its own choosing, the
defense or opposition to such Third Party Claim by written notice to Buyer.
(ii) In the event that Sellers' Agent shall elect not to
undertake such defense or opposition, or, within twenty (20) days after written
notice to Sellers' Agent of any such Third Party Claim from Buyer, Sellers'
Agent shall fail to undertake to defend or oppose, Buyer (upon further written
notice to Sellers' Agent) shall undertake the defense, opposition, compromise or
settlement of such Third Party Claim, by counsel of its own choosing on behalf
of and for the account and risk of Sellers.
(A) Buyer shall conduct the defense of or opposition to such
Third Party Claim as would a reasonable and prudent Person to whom no
indemnity is available.
(B) Buyer and Sellers' Agent and their respective counsel or
other representatives shall cooperate in good faith with respect to such
Third Party Claim.
(C) Buyer shall not compromise or settle such Third Party
Claim or consent to entry of any judgment, without the written consent of
Sellers' Agent, which consent shall not be unreasonably withheld or
delayed.
(f) Anything herein to the contrary notwithstanding: (i) Sellers'
Agent (on behalf of Sellers) shall have the right, at Sellers' own cost and
expense, to participate in the defense, opposition, compromise or settlement of
any Third Party Claim; (ii) Sellers' Agent shall not, without Buyer's written
consent, settle or compromise any Third Party Claim or consent to entry of any
judgment which does not include as an unconditional term thereof the giving by
the claimant or the plaintiff to Buyer of a release from all liability in
respect of such Third Party Claim or which includes any non-monetary relief; and
(iii) in the event that Sellers' Agent
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undertakes defense of or opposition to any Third Party Claim, Buyer, by counsel
of its own choosing and at its sole cost and expense, shall have the right to
consult with Sellers' Agent and its counsel or other representatives concerning
such Third Party Claim; and (iv) Sellers' Agent and Buyer and their respective
counsel or other representatives shall cooperate in good faith with respect to
any Third Party Claim.
(g) Any Third Party Claim not disputed shall be paid by Sellers
within thirty (30) days after receiving notice of the Third Party Claim. A
"Disputed Claim" shall mean a Third Party Claim which Sellers' Agent objects to
in writing within thirty (30) days after receiving notice of the Third Party
Claim. In the event there is a Disputed Claim, Sellers shall be required to pay
Buyer the amount of all Damages for which Sellers have been found liable, such
payment to be made within ten (10) days after there is a final determination
with respect to such Disputed Claim. A final determination of a Disputed Claim
shall be (i) a judgment of any court determining the validity of such Disputed
Claim, if no appeal is pending from such judgment and if the time to appeal
therefrom has elapsed; (ii) an award of any arbitration determining the validity
of such Disputed Claim, if there is not pending any motion to set aside such
award and if the time within which to move to set aside such award has elapsed;
(iii) a written determination of the dispute with respect to such Disputed Claim
signed by the parties thereto (specifically including Sellers' Agent if Sellers'
Agent has elected to participate in such determination as provided in this
Section 7.1) or their attorneys; (iv) a written acknowledgment of Sellers or
Sellers' Agent that Sellers no longer dispute the validity of such claim or (v)
such other evidence of final determination of a Disputed Claim as shall be
acceptable to the parties thereto (specifically including Sellers' Agent if
Sellers' Agent has elected to participate in such determination as provided in
this Section 7.1). No undertaking of defense or opposition to a Third Party
Claim by Sellers' Agent or Sellers shall be construed as an acknowledgment by
Sellers that they are liable to Buyer with respect to the Third Party Claim at
issue or other similar Third Party Claims.
Section 7.2 Limitation of Indemnification Liability. Except to the extent
---------------------------------------
expressly provided in Section 7.2(g), the liability of any Indemnifying Party
for indemnification under Section 7.1 and for all other claims under this
Agreement or with respect to the Purchase and Exchange shall be limited as
follows:
(a) Except as provided in Section 2.2(b), the indemnification
provisions contained in this Article VII set forth the exclusive remedies for
money damages owing from Sellers to the Buyer Indemnified Parties and from Buyer
to the Seller Indemnified Parties that arise under this Agreement. Buyer shall
have no indemnification obligations under this Article VII in the event that the
Escrow Deposit and all earnings thereon are payable to Sellers pursuant to the
third sentence of Section 2.2(b).
(b) Except with respect to Damages otherwise indemnifiable
hereunder arising out of (i) the breach of the representations and warranties
contained in Section 3.1, 3.2,
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3A.1, 3.6, 4.1, 4.2 or 4.6, (ii) Buyer's failure to satisfy its obligations to
pay the Cash Consideration as provided in Section 2.2 or (iii) the failure of
Buyer or Sellers' Agent's and Sellers to satisfy their respective payment
obligations in respect of the Net Working Capital Adjustments as provided in
Section 2.6, no Indemnifying Party shall have any liability for any Damages
otherwise indemnifiable by such Indemnifying Party hereunder unless the
aggregate amount of Damages exceeds $1,000,000, in which event the Indemnifying
Party shall have liability for such Indemnifiable Damages only to the extent
that the aggregate amount of such Damages exceeds $250,000.
(c) No Indemnifying Party shall have any liability for any Damages
with respect to which a Notice of Claim has not been given to the Sellers' Agent
or Buyer (as applicable) prior to the applicable Expiration Date. The
Indemnifying Party shall continue to be liable for any Indemnity Claim for which
a Notice of Claim has been given prior to the applicable Expiration Date until
such Indemnity Claim has been satisfied or otherwise resolved as provided in
this Article VII.
(d) Except with respect to Damages otherwise indemnifiable
hereunder arising out of the breach of the representations and warranties
contained in Section 3.1, 3.2, 3A.1, 3.6, 4.1, 4.2 or 4.6, no Indemnifying Party
shall have any liability for any Damages otherwise indemnifiable by such
Indemnifying Party hereunder to the extent that the aggregate amount of such
Damages exceeds $7,000,000.
(e) Except as otherwise set forth in Section 7.1(a), no
Indemnifying Party shall have liability for any Damages otherwise indemnifiable
hereunder arising out of (i) any matter disclosed in all material respects in
this Agreement (including the Exhibits hereto and Schedules) or in any
agreement, certificate, document or other instrument delivered by or on behalf
of any Indemnifying Party pursuant to this Agreement or (ii) any matter known to
Buyer or Sellers, as applicable, as of the Closing Date.
(f) Sellers shall not have liability for any Damages to the extent
that the matter forming the basis for such Damages was taken into account in the
calculation of Closing Net Working Capital.
(g) Notwithstanding anything to the contrary contained herein, the
limitations on the Indemnifying Parties' indemnification liability in this
Section 7.2 shall not apply to (i) common law fraud or any right of recission or
(ii) equitable relief in the nature of specific performance or injunctive relief
with respect to this Agreement prior to the Closing Date. In addition, no
indemnification under this Article VII shall apply to any breaches by any party
under the Escrow Agreement, the Partnership Rights Agreements or the Employment
Termination and Non-Competition Agreement and each party to such agreements
shall have good remedies as may be available at law or in equity with respect to
any such breaches.
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Section 7.3 Definition of Damages or Damages. For purposes of this
--------------------------------
Agreement, "Damage" or "Damages" shall mean any and all liabilities, losses,
damages, actions, suits, proceedings, claims, demands, judgments, costs and
expenses (including reasonable accountants' and attorneys' fees) of every nature
and character (but specifically excluding indirect costs or special or
consequential damages) arising out of the matters or circumstances referred to
in Section 7.1. The amount of any indemnifiable Damages hereunder shall be
reduced by the amount of (a) insurance proceeds actually received net of
deductibles, incidental expenses and costs of collection, (b) proceeds (other
than insurance proceeds) or amounts from third parties (regardless of when
received but only if actually received), and (c) any tax benefits which are
reasonably anticipated to be realized by the Buyer Indemnified Parties or the
Seller Indemnified Parties, as applicable, in each case of clauses (a), (b) or
(c), in connection with or as a result of such Damages.
Section 7.4 Survival.
--------
(a) The representations, warranties, covenants and agreements shall
survive the Closing for the applicable Expiration Date. For this purpose, the
Expiration Date shall mean:
(i) With respect to the representations and warranties
contained in Sections 3.15 and 4.11, the Expiration Date shall be that date that
is 30 days after the expiration of the applicable statute of limitations (as it
may be extended under applicable law).
(ii) With respect to all other representations and warranties
contained in this Agreement, the Expiration Date shall be the first anniversary
of the Closing Date.
(iii) With respect to the covenants and agreements contained
in this Agreement, the Expiration Date shall be that date on which the
applicable statute of limitations expires.
ARTICLE VIII
Termination
Section 8.1 Termination. This Agreement (other than with respect to
-----------
Sections 5.2(a) and 8.2) may be terminated at any time prior to the Closing:
(a) by mutual consent of all the parties hereto;
(b) by Buyer, on the one hand, or by Sellers, on the other hand
(considering Buyer to be one party, and Sellers to be one party, for the
purposes of this Section 8.1(b)), if
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(i) the Closing shall not have occurred prior to the first
anniversary of the date hereof;
(ii) if all of the conditions to the other party's
obligations to consummate the Purchase and Exchange and the Closing provided in
Article VI shall have been satisfied and the other party fails to close the
Purchase and Exchange on the Closing Date; or
(iii) if the Mass Media Bureau or the FCC en banc by written
order refuses to approve without a hearing the FCC Applications for all the
Radio Stations owned by all the Radio Station Companies, or if the FCC issues
its order granting approval of any such FCC Application but with a condition
materially adverse to Buyer or any Seller and the party to which the condition
applies does not elect (or with a condition materially adverse to any Company
and Buyer does not elect to cause such Company) to comply with such condition
within fifteen (15) days after the date the FCC's order becomes a Final Order;
provided, that neither party may terminate this Agreement pursuant to this
Section 8.1(b) if it is at that time in material breach of this Agreement;
(c) by Buyer if any loss, damage or other occurrence prevents
broadcast transmissions by WICC AM, WEBE FM, WRKI FM, WFAS AM or WFAS FM for
more than three continuous days, provided that if Buyer does not terminate this
Agreement pursuant to this Section 8.1(c) within ten days of notice by Sellers'
Agent (which notice Sellers' Agent shall give as soon as practicable after it
becomes aware of any loss, damage or other occurrence which is reasonably likely
to prevent broadcast transmissions by any Radio Station for more than three
continuous days), Sellers shall, jointly and severally, at Sellers' expense,
cause the Radio Station Company that owns and operates such Radio Station
promptly to restore transmissions and replace the damaged property in a manner
substantially similar to that previously conducted or existing (the "Sellers
Repairs") and, in such event, Buyer shall not be entitled to terminate this
Agreement by reason of such failure to broadcast. If the Sellers Repairs have
not been completed at the time the Closing would otherwise be held, then the
Closing shall be deferred until a date within fifteen days after Sellers' Agent
has notified Buyer of the completion of the Sellers Repairs, the Closing Date to
be selected by Sellers upon not less than five days' prior notice to Buyer. If
the Sellers Repairs have not been completed and Buyer so notified by the close
of business on the tenth day following date on which the Closing would otherwise
have occurred, Buyer may terminate this Agreement. If the Closing Date would be
after the period permitted by the FCC's Final Orders, Sellers and Buyer shall
file an appropriate application with the FCC for an extension of time within
which to complete the Closing. Notwithstanding anything in this Section 8.1(c)
to the contrary, if the Sellers Repairs would cost in the aggregate more than
$1,000,000 in excess of amounts covered by insurance, Sellers may terminate this
Agreement unless Buyer agrees to bear the cost in excess of $1,000,000. The need
for any Sellers Repairs shall not constitute a breach by Sellers of any
covenant, representation or warranty hereunder, if Sellers fulfill their
obligations under this Section 8.1(c);
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(d) by Sellers if any loss, damage or other occurrence prevents
broadcast transmissions by WPST FM, WJLK FM or WOBM FM for more than three
continuous days, provided that if Sellers do not terminate this Agreement
pursuant to this Section 8.1(d) within ten days of notice by Buyer (which notice
Buyer shall give as soon as practicable after it becomes aware of any loss,
damage or other occurrence which is reasonably likely to prevent broadcast
transmissions by any such radio station for more than three continuous days),
Buyer shall, at Buyer's expense, cause the Nassau Company that owns and operates
such radio station promptly to restore transmissions and replace the damaged
property in a manner substantially similar to that previously conducted or
existing (the "Buyer Repairs") and, in such event, Seller shall not be entitled
to terminate this Agreement by reason of such failure to broadcast. If the Buyer
Repairs have not been completed at the time the Closing would otherwise be held,
then the Closing shall be deferred until a date within fifteen days after Buyer
has notified Sellers' Agent of the completion of the Buyer Repairs, the Closing
Date to be selected by Buyer upon not less than five days' prior notice to
Sellers' Agent. If the Buyer Repairs have not been completed and Sellers' Agent
so notified by the close of business on the tenth day following date on which
the Closing would otherwise have occurred Seller may terminate this Agreement.
If the Closing Date would be after the period permitted by the FCC's Final
Orders, Sellers and Buyer shall file an appropriate application with the FCC for
an extension of time within which to complete the Closing. Notwithstanding
anything in this Section 8.1(d) to the contrary, if the Buyer Repairs would cost
in the aggregate more than $1,000,000 in excess of amounts covered by insurance,
Buyer may terminate this Agreement unless Sellers agree to bear the cost in
excess of $1,000,000. The need for any Buyer Repairs shall not constitute a
breach by Buyer of any covenant, representation or warranty hereunder, if Buyer
fulfills its obligations under this Section 8.1(d);
(e) by Sellers if the FCC shall not have granted its consent to the
transactions contemplated by the Master Agreement and such grant shall not have
become a Final Order by the earlier of the Closing Date or June 30, 2000.
Section 8.2 Effect of Termination. Upon termination of this Agreement
---------------------
pursuant to any provision of this Article VIII, this Agreement shall be void and
of no other effect, and there shall be no liability by reason of this Agreement
or the termination hereof on the part of any party hereto or on the part of the
respective directors, officers, employees, agents or shareholder of any of them,
in each case except for the willful breach of any representations, warranties,
covenant or agreements contained herein, provided, that in the event of such
--------
termination, no Seller shall have any liability by reason of the breach by any
Seller of any representation, warranty, covenant or agreement contained herein
and any such liability under this Section 8.2 shall be born by Aurora
Communications, and provided further, that in the event that such termination
----------------
occurs in connection with a Payment Event, Sellers' sole and exclusive remedy
with respect thereto shall be the payment of the Escrow Deposit and the earnings
thereon pursuant to Section 2.2(b) and the Escrow Agreement.
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ARTICLE IX
Miscellaneous
Section 9.1 Control of the Radio Stations. Between the date hereof and the
-----------------------------
Closing Date, Buyer shall not directly or indirectly control, supervise or
direct or attempt to control, supervise or direct the operation of any of the
Radio Stations, but such operation shall be the sole responsibility of and in
the complete discretion of Sellers and the Companies, subject only to the
provisions of this Agreement.
Section 9.2 Benefitting Sellers. The representations, warranties, covenants
-------------------
and agreements of Buyer in this Agreement are made for the benefit of all of the
Sellers, except that (x) the representations and warranties of Buyer in Article
IV (other than in Section 4.1, 4.6, 4.12 and 4.17), and (y) the covenants of
Buyer in Section 5.3 (other than in clause (a)(iv)(i) thereof), are made solely
for the benefit of the Continuing Sellers, and no Exiting Seller or any officer,
director, partner, member, employee, Affiliate, agent, representative, successor
or assign of any Exiting Seller shall be entitled to any indemnification under
Article VII on the basis of any such provision of this Agreement so stated to be
solely for the benefit of the Continuing Sellers.
Section 9.3 Buyer Incorporation. In the event that the Buyer Incorporation
-------------------
occurs before or simultaneously with the Closing:
(a) All provisions of this Agreement relating to NBP (but solely as
such provisions relate to NBP) shall be deemed to have no effect, provided that
the rights and obligations of NBP under the indemnification provisions of
Article VII (and any provision of this Agreement that would form the basis of an
Indemnity Claim thereunder) shall continue to be effective to the extent that
either (i) NBP shall have suffered any Damages otherwise indemnifiable under
such Article or (ii) any Seller shall have suffered any Damages otherwise
indemnifiable under such Article based on the breach of any representation or
warranty of NBP made on the date of the execution of this Agreement or the
breach of any covenant or agreement of NBP in this Agreement which constitutes
an obligation of NBP to be satisfied before the earlier of the Buyer
Incorporation or the Closing.
(b) All references to "Buyer" in this Agreement shall be deemed to
be references to (i) Nassau Broadcasting Partners, L.P. before the occurrence of
the Buyer Incorporation or (ii) the corporate successor of Buyer from and after
the occurrence of the Buyer Incorporation.
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(c) Buyer shall have the right to amend any disclosure Schedule
(including Schedules 4.1(d) and 4.2) before or at the time of the Closing solely
to reflect the occurrence of the Buyer Incorporation, provided that such
amendment is not materially adverse to Sellers.
Section 9.4 Assignment of Rights; Successors and Assigns.
--------------------------------------------
(a) Sellers acknowledge that Buyer may assign its rights under this
Agreement to (i) the corporate successor of Buyer pursuant to the Buyer
Incorporation and (ii) the institutional lender or lenders which provide Buyer
with financing for the Purchase and Exchange (as security for such financing),
provided that such assignment shall not be effective unless Buyer shall have
defaulted on its obligations to such institutional lender or lenders under the
agreements governing such financing.
(b) This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns;
provided, that, except as provided in Section 9.4(a), this Agreement cannot be
assigned in whole or in part by any party without the express written consent of
each of the other parties and no provision of this Agreement shall be
enforceable by, or create or evidence any right of, any third party.
Section 9.5 Notices. All notices, requests, demands or other communications
-------
in connection with this Agreement shall be in writing and shall be deemed to
have been duly given when delivered by hand; or when sent by facsimile
transmission, receipt confirmed; or when mailed by first class, certified mail,
postage prepaid; in each case as follows:
(A) If to any Sellers or Sellers' Agent:
BancAmerica Capital Investors SBIC I, L.P.
100 North Tryon Street, 25th Floor
Charlotte, North Carolina 28255
Attention: Robert H. Sheridan, III
Attention: Craig A. Elson
Facsimile: 704-386-6432
with a copy to:
Kennedy Covington Lobdell & Hickman, L.L.P.
Bank of America Corporate Center
100 North Tryon Street, Suite 4200
Charlotte, North Carolina 28202
Attention: Eugene C. Pridgen, Esq.
Facsimile: 704-331-7598
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(B) If to Buyer:
Nassau Broadcasting Partners, L.P.
c/o Nassau Broadcasting Partners, Inc.
619 Alexander Road, Third Floor
Princeton, New Jersey 08540
Attention: Michael S. Libretti
Facsimile: 609-452-6017
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Attention: Phyllis G. Korff, Esq.
Facsimile: 917-777-2694
Section 9.6 Expenses. Each party shall bear the expenses incurred by it in
--------
connection with the preparation and consummation of this Agreement and its
portion of the FCC Applications and all reports, notifications and other
documents or filings under the HSR Act contemplated hereby. Buyer, on the one
hand, and the Companies, on the other hand, shall share equally all FCC filing
fees in connection with the FCC Applications and all Department of Justice and
Federal Trade Commission filing fees in connection with such agencies' review of
the transactions contemplated by this Agreement under the HSR Act. All expenses
of the Companies under this Section 9.6 shall be accrued as current liabilities
on the Closing Balance Sheet. The Corporation Sellers shall pay any stock
transfer taxes incurred in connection with the transfer of the AMI Shares or the
AAA Shares, as applicable.
Section 9.7 Appointment of Sellers' Agent. Each Seller appoints the
-----------------------------
Sellers' Agent (with full power of substitution) as his or its agent and
attorney-in-fact to act for him or it and in his or its name in connection with
all matters related to this Agreement and the other agreements contemplated
hereby (collectively the "Transaction Agreements") and the transactions
contemplated by the Transaction Agreements, and each of them gives the Sellers'
Agent full power and authority to deliver certificates or other evidence of
ownership for his or its Subject Interests, to take all action contemplated to
be taken by the Sellers' Agent under the Transaction Agreements, to receive on
his or its behalf the purchase price for his Equity Interests payable pursuant
to Article II, to execute amendments to the Transaction Agreements (so long as
such amendment has been properly authorized by Sellers pursuant to Section
9.15), to give and receive all notices and other communications relating to the
Transaction Agreements, and to execute any instruments and documents that the
Sellers' Agent may determine necessary in the exercise of his authority pursuant
to this power of attorney, all without notice to any of them and with the same
effect as if they had themselves taken such action; and each of the Sellers
56
<PAGE>
acknowledges and agrees that they shall be bound by, and Buyer and NBP may rely
and act upon, any action taken by Sellers' Agent on behalf of the Sellers and
upon any instruments and documents signed by him with the same force and effect
as if they had themselves so acted. By his execution hereof, Sellers' Agent
hereby accepts such appointment and agrees to act as Sellers' Agent under the
Transaction Agreements and in connection therewith.
Sellers' Agent shall not be liable to Sellers for any action taken or
omitted by Sellers' Agent in good faith, and in no event shall Sellers' Agent be
liable or responsible except for his own gross negligence or willful misconduct.
Sellers shall be liable, jointly and severally, to hold Sellers' Agent (acting
in such capacity, but not in his capacity as a Seller) harmless from, and to
indemnify and reimburse Sellers' Agent for, all amounts paid by Sellers' Agent
pursuant to the Transaction Documents and all claims, liabilities, losses, and
expenses (including out-of-pocket and incidental expenses reasonably incurred
and reasonable legal fees) arising in connection with any action, suit or claim
arising under the Transaction Agreements, provided that Sellers' Agent has not
acted with gross negligence, bad faith or willful misconduct with respect to any
of the events relating to such claims, liabilities, losses or expenses.
Section 9.8 Remedies. (a) Sellers acknowledge that the Subject Interests to
--------
be sold and exchanged pursuant to this Agreement are unique and that Buyer has
no adequate remedy at law if Sellers and the Companies shall fail to perform any
of their obligations hereunder, and Sellers therefore confirm and agree that
Buyer's right to specific performance is essential to protect the rights and
interests of Buyer. Accordingly, in addition to any other remedies that Buyer
may have hereunder or at law or in equity or otherwise, Sellers hereby agree
that Buyer shall have the right to have all obligations, undertakings,
agreements and other provisions of this Agreement specifically performed by
Sellers and the Companies, and that Buyer shall have the right to obtain an
order or decree of such specific performance, or other equitable relief, in any
court of competent jurisdiction.
(b) Except as otherwise set forth in Sections 2.2(b) and 8.2, Buyer
acknowledges that the NBP Common Stock and the Nassau Equity Interests to be
sold and exchanged pursuant to this Agreement are unique and that Sellers have
no adequate remedy at law if Buyer and NBP shall fail to perform any of their
obligations hereunder, and Buyer and NBP therefore confirm and agree that,
subject to Sections 2.2(b) and 8.2, Sellers' right to specific performance is
essential to protect the rights and interests of Sellers. Accordingly, except as
otherwise set forth in Sections 2.2(b) and 8.2, in addition to any other
remedies that Sellers may have hereunder or at law or in equity or otherwise,
Buyer hereby agrees that Sellers shall have the right to have all obligations,
undertakings, agreements and other provisions of this Agreement specifically
performed by Buyer and NBP, and that Sellers shall have the right to obtain an
order or decree of such specific performance, or other equitable relief, in any
court of competent jurisdiction.
57
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Section 9.9 Publicity and Disclosures. No press release or other public
-------------------------
disclosure, either written or oral, of the Purchase and Exchange or any of the
other transactions contemplated hereby shall be made by any of the parties
without the prior knowledge and consent of the other parties.
Section 9.10 Interpretation. When a reference is made in this Agreement to
--------------
an Article, Section, Schedule or Exhibit, such reference shall be to an Article
or Section of, or Schedule or an Exhibit to, this Agreement unless otherwise
indicated. The words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without limitation."
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. When reference is made herein to "the business of" a Person,
such reference shall be deemed to include the business of all direct and
indirect subsidiaries of such Person. Reference to the subsidiaries of a Person
shall be deemed to include all direct and indirect subsidiaries of such Person.
Section 9.11 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and which together
constitute the same agreement.
Section 9.12 No Implied Waiver. No failure or delay on the part of a party
-----------------
hereto to exercise any right, power or privilege shall be deemed a waiver of any
rights and remedies to which such party may be entitled.
Section 9.13 Entire Agreement. This Agreement (which includes the Schedules
-----------------
and Exhibits hereto) sets forth the entire understanding of the parties with
respect to the subject matter hereof and, incorporates and merges any and all
previous communications, understandings and agreements, oral or written.
Section 9.14 Governing Law. This Agreement shall be governed by and
-------------
construed and enforced in accordance with the laws of the State of Delaware
(without reference to such State's conflicts of law rules) except with respect
to matters governed by federal law relating to radio communications.
Section 9.15 Amendment. Subject to applicable law, this Agreement may be
---------
amended or supplemented only by a writing signed by Buyer, Sellers (subject to
the last sentence of this Section 9.15) and each other party hereto whose rights
or obligations are affected by such amendment or supplement. No waiver of
compliance with any provision or condition of this Agreement shall be effective
unless evidenced by a writing signed by the party against whom enforcement of
such waiver is sought. Notwithstanding the foregoing, any amendment, supplement
or waiver of any provision or condition of this Agreement shall be binding on
all of the Sellers (and Sellers' Agent) if evidenced by a writing signed by
Sellers entitled to receive a
58
<PAGE>
majority of the consideration to be received by Sellers hereunder or by Sellers'
Agent; provided that any amendment, supplement or waiver that would change the
amount, form or timing of receipt of the consideration to be provided to Sellers
by Buyer hereunder or would otherwise materially adversely affect the rights of
the Exiting Sellers relative to Continuing Sellers shall not be effective unless
signed by each Seller.
[signatures on following pages]
59
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
BUYER:
NASSAU BROADCASTING PARTNERS, L.P.
By: Nassau Broadcasting Partners, Inc., as
Managing General Partner
By:
----------------------------------------
Name:
Title:
SELLERS:
BANCAMERICA CAPITAL INVESTORS SBIC I,
L.P., AS A SELLER AND AS SELLERS' AGENT
By: BANCAMERICA CAPITAL
MANAGEMENT SBIC I, LLC, its general partner
By: BANCAMERICA CAPITAL
MANAGEMENT I, L.P., its sole member
By: BACM I GP, LLC, its general partner
By:
----------------------------------------
Name: Robert H. Sheridan III
Title: Managing Director
<PAGE>
FRANK D. OSBORN
ALLISON WAITE OSBORN
CAROLINE LADNER OSBORN
ELIZABETH ANDREW OSBORN
FRANK WILLIAM OSBORN
KATHERINE NELSON OSBORN
-------------------------------------------
Frank D. Osborn, on behalf of himself and
as Attorney-in-Fact
-------------------------------------------
Frank G. Washington
-------------------------------------------
Vincent M. Cremona
HELLER FINANCIAL, INC.
By:
----------------------------------------
Name:
Title:
<PAGE>
ALLIED CAPITAL CORPORATION
By:
----------------------------------------
Name:
Title:
ALLIED INVESTMENT CORPORATION
By:
----------------------------------------
Name:
Title:
UNIONBANCAL VENTURE CORPORATION
By:
----------------------------------------
Name:
Title:
By:
----------------------------------------
Name:
Title:
<PAGE>
AURORA MANAGEMENT GROUP, LLC
By:
----------------------------------------
Frank D. Osborn
Authorized Person
NASSAU BROADCASTING PARTNERS, INC.
By:
----------------------------------------
Name:
Title:
AURORA COMMUNICATIONS, LLC,
solely with respect to its rights, duties,
obligations and with agreements set forth
in Section 8.2 hereof
By: AURORA MANAGEMENT, INC.,
its sole Manager
By:
----------------------------------------
Name:
Title:
63
<PAGE>
EXHIBIT 2.3
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of February 29,
2000 among Clear Channel Broadcasting, Inc., a Nevada corporation ("CCB"), Clear
Channel Broadcasting Licenses, Inc., a Nevada corporation ("CCBL") (CCB and
CCBL, collectively, "Seller"), and Nassau Broadcasting Partners, L.P., a
Delaware limited partnership ("Buyer").
Recitals
--------
A. Seller owns and operates the following radio broadcast stations
(collectively, the "Stations") pursuant to certain authorizations issued by the
Federal Communications Commission (the "FCC"):
WEEX (AM), Easton, Pennsylvania
WODE-FM, Easton, Pennsylvania
B. Subject to the terms and conditions set forth herein, Buyer desires to
acquire the Station Assets (defined below).
C. Clear Channel Communications, Inc. (Seller's parent), CCU Merger Sub,
Inc. and AMFM Inc. are parties to an Agreement and Plan of Merger dated October
2, 1999 (the "AMFM Agreement").
Agreement
---------
NOW, THEREFORE, taking the foregoing into account, and in consideration of
the mutual covenants and agreements set forth herein, the parties, intending to
be legally bound, hereby agree as follows:
ARTICLE 1: PURCHASE OF ASSETS
- -----------------------------
1.1. Station Assets. On the terms and subject to the conditions hereof, on
the Closing Date (defined below), Seller shall sell, assign, transfer, convey
and deliver to Buyer, and Buyer shall purchase and acquire from Seller, all of
the right, title and interest of Seller in and to all of the assets, properties,
interests and rights of Seller of whatsoever kind and nature, real and personal,
tangible and intangible, which are used exclusively in the operation of the
Stations and specifically described in this Section 1.1, but excluding the
Excluded Assets as hereafter defined (the "Station Assets"):
(a) all licenses, permits and other authorizations which are issued
to Seller by the FCC with respect to the Stations (the "FCC Licenses") and
described on Schedule 1.l(a), including any renewals or modifications thereof
between the date hereof and Closing;
<PAGE>
(b) all equipment, electrical devices, antennae, cables, tools,
hardware, office furniture and fixtures, office materials and supplies,
inventory, motor vehicles, spare parts and other tangible personal property of
every kind and description which are used exclusively in the operation of the
Stations and listed on Schedule 1.1(b), except any retirements or dispositions
thereof made between the date hereof and Closing in the ordinary course of
business and consistent with past practices of Seller (the "Tangible Personal
Property");
(c) all Time Sales Agreements and Trade Agreements (both defined in
Section 2.1), Real Property Leases (defined in Section 7.7), and other
contracts, agreements, and leases which are used in the operation of the
Stations and listed on Schedule 1.1(c), together with all contracts,
agreements, and leases made between the date hereof and Closing in the ordinary
course of business that are used in the operation of the Stations (the "Station
Contracts");
(d) all of Seller's rights in and to the Stations' call letters and
Seller's rights in and to the trademarks, trade names, service marks,
franchises, copyrights, computer software, programs and programming material,
jingles, slogans, logos, and other intangible property which are used
exclusively in the operation of the Stations and listed on Schedule 1.1(d)
(the "Intangible Property");
(e) Seller's rights in and to all the files, documents, records, and
books of account (or copies thereof) relating exclusively to the operation of
the Stations, including the Stations' local public files, programming
information and studies, blueprints, technical information and engineering data,
advertising studies, marketing and demographic data, sales correspondence, lists
of advertisers, credit and sales reports, and logs, but excluding records
relating to Excluded Assets (defined below); and
(f) any real property which is used exclusively in the operation of
the Stations (including any of Seller's appurtenant easements and improvements
located thereon) and described on Schedule 1.1(f) (the "Real Property").
The Station Assets shall be transferred to Buyer free and clear of
liens, claims and encumbrances ("Liens") except for (i) Assumed Obligations
(defined in Section 2.1), (ii) liens for taxes not yet due and payable and for
which Buyer receives a credit pursuant to Section 3.3, (iii) such liens,
easements, rights of way, building and use restrictions, exceptions,
reservations and limitations that do not in any material respect detract from
the value of the property subject thereto or impair the use thereof in the
ordinary course of the business of the Stations, and (iv) any items listed on
Schedule 1.1(b) (collectively, "Permitted Liens").
1.2. Excluded Assets. Notwithstanding anything to the contrary contained
herein, the Station Assets shall not include the following assets along with all
rights, title and interest therein (the "Excluded Assets"):
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<PAGE>
(a) all cash and cash equivalents of Seller, including without
limitation certificates of deposit, commercial paper, treasury bills, marketable
securities, asset or money market accounts and all such similar accounts or
investments;
(b) all accounts receivable or notes receivable arising in the
operation of the Stations prior to Closing;
(c) all tangible and intangible personal property of Seller disposed
of or consumed in the ordinary course of business of Seller between the date of
this Agreement and Closing;
(d) all Station Contracts that terminate or expire prior to Closing
in the ordinary course of business of Seller;
(e) Seller's name, corporate minute books, charter documents,
corporate stock record books and such other books and records as pertain to the
organization, existence or share capitalization of Seller, duplicate copies of
the records of the Stations, and all records not relating exclusively to the
operation of the Stations;
(f) contracts of insurance, and all insurance proceeds or claims made
thereunder;
(g) except as provided in Section 10.4, all pension, profit sharing
or cash or deferred (Section 401(k)) plans and trusts and the assets thereof and
any other employee benefit plan or arrangement and the assets thereof, if any,
maintained by Seller; and
(h) all rights, properties and assets described on Schedule 1.2(h),
and all rights, properties and assets not specifically described in Section
1.1.
ARTICLE 2: ASSUMPTION OF OBLIGATIONS
-------------------------
2.1. Assumed Obligations. On the Closing Date, Buyer shall assume the
obligations of Seller (the "Assumed Obligations") arising after Closing under
the Station Contracts, including without limitation all agreements for the sale
of advertising time on the Stations for cash in the ordinary course of business
("Time Sales Agreements") and all agreements for the sale of advertising time on
the Stations for non-cash consideration ("Trade Agreements").
2.2. Retained Obligations. Buyer does not assume or agree to discharge or
perform and will not be deemed by reason of the execution and delivery of this
Agreement or any agreement, instrument or document delivered pursuant to or in
connection with this Agreement or otherwise by reason of the consummation of
the transactions contemplated hereby, to have assumed or to have agreed to
discharge or perform, any liabilities, obligations or commitments of Seller of
any nature whatsoever whether accrued, absolute, contingent or otherwise and
-3-
<PAGE>
whether or not disclosed to Buyer, other than the Assumed Obligations (the
"Retained Obligations").
ARTICLE 3: PURCHASE PRICE
--------------
3.1. Purchase Price. In consideration for the sale of the Station Assets
to Buyer, in addition to the assumption of the Assumed Obligations, Buyer shall
at Closing (defined below) deliver to Seller by wire transfer of immediately
available funds, Thirty Million Dollars ($30,000,000) subject to adjustment
pursuant to Section 3.3 (the "Purchase Price").
3.2. Deposit. On the date of this Agreement, Buyer shall deposit an amount
equal to 20% of the Purchase Price (the "Deposit") with NationsBank/Bank of
America (the "Escrow Agent") pursuant to the Escrow Agreement (the "Escrow
Agreement") of even date herewith among Buyer, Seller and the Escrow Agent. At
Closing, the Deposit shall be applied to the Purchase Price and any interest
accrued thereon shall be disbursed to Buyer. If this Agreement is terminated by
Seller due to Buyer's failure to consummate the Closing on the Closing Date or
if this Agreement is otherwise terminated by Seller pursuant to Section
16.1(c), the Deposit and any interest accrued thereon shall be disbursed to
Seller as partial payment of liquidated damages pursuant to Section 16.3. If
this Agreement is terminated for any other reason, the Deposit and any interest
accrued thereon shall be disbursed to Buyer.
3.3. Prorations and Adjustments. Except as otherwise provided herein, all
deposits, reserves and prepaid and deferred income and expenses relating to the
Station Assets or the Assumed Obligations and arising from the conduct of the
business and operations of the Stations shall be prorated between Buyer and
Seller in accordance with generally accepted accounting principles as of 11:59
p.m. on the date immediately preceding the Closing Date. Such prorations shall
include, without limitation, all ad valorem, real estate and other property
taxes (but excluding taxes arising by reason of the transfer of the Station
Assets as contemplated hereby which shall be paid as set forth in Section 13.1),
business and license fees, music and other license fees (including any
retroactive adjustments thereof), utility expenses, amounts due or to become due
under Station Contracts, rents, lease payments and similar prepaid and deferred
items. Real estate taxes shall be apportioned on the basis of taxes assessed for
the preceding year, with a reapportionment, if any, as soon as the new tax rate
and valuation can be ascertained. Except as otherwise provided herein, the
prorations and adjustments contemplated by this Section 3.3, to the extent
practicable, shall be made on the Closing Date. As to those prorations and
adjustments not capable of being ascertained on the Closing Date, an adjustment
and proration shall be made within ninety (90) calendar days of the Closing
Date. In the event of any disputes between the parties as to such adjustments,
the amounts not in dispute shall nonetheless be paid at the time provided herein
and such disputes shall be determined by an independent certified public
accountant mutually acceptable to the parties, and the fees and expenses of such
accountant shall be paid one-half by Seller and one-half by Buyer.
3.4. Allocation. The Purchase Price shall be allocated among the Station
Assets in a manner as mutually agreed between the parties based upon an
appraisal prepared by Bond &
-4-
<PAGE>
Pecaro (whose fees shall be paid one-half by Seller and one-half by Buyer).
Seller and Buyer agree to use the allocations determined pursuant to this
Section 3.4 for all tax purposes, including without limitation, those matters
subject to Section 1060 of the Internal Revenue Code of 1986, as amended.
ARTICLE 4: CLOSING
-------
4.1. Closing. The consummation of the sale and purchase of the Station
Assets (the "Closing") shall occur on a date (the "Closing Date") and at a time
and place designated solely by Seller after FCC Consent (defined below), subject
to satisfaction or waiver of the conditions to Closing contained herein (other
than those to be satisfied at Closing). If requested by Seller, prior to Closing
the parties shall hold a pre-closing conference at a time and place designated
by Seller, at which the parties shall provide (for review only) all documents to
be delivered at Closing under this Agreement, each duly executed but undated,
and otherwise confirm their ability to timely consummate the Closing.
ARTICLE 5: GOVERNMENTAL CONSENTS
---------------------
Closing is subject to and conditioned upon (i) prior FCC consent (the "FCC
Consent" to the assignment of the FCC Licenses to Buyer, (ii) United States
Department of Justice ("DOJ") prior approval (the "DOJ Consent") of the
transactions contemplated hereby, including without limitation any such approval
as may be necessary to enable Seller to consummate the merger under the AMFM
Agreement, and (iii) expiration or termination of any applicable waiting period
("HSR Clearance") under the HSR Act (defined below).
5.1. FCC. On a date designated by Seller, Buyer and Seller shall file an
application with the FCC (the "FCC Application") requesting the FCC Consent.
Buyer and Seller shall diligently prosecute the FCC Application and otherwise
use their best efforts to obtain the FCC Consent as soon as possible. If the FCC
Consent imposes upon Buyer any condition (including without limitation any
divestiture condition), Buyer shall timely comply therewith.
5.2. HSR. If not previously filed, then within five (5) business days
after the execution of this Agreement, Buyer and Seller shall make any required
filings with the Federal Trade Commission and the DOJ pursuant to the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") with
respect to the transactions contemplated hereby (including a request for early
termination of the waiting period thereunder), and shall thereafter promptly
respond to all requests received from such agencies for additional information
or documentation.
5.3. General. Buyer and Seller shall notify each other of all documents
filed with or received from any governmental agency with respect to this
Agreement or the transactions contemplated hereby. Buyer and Seller shall
furnish each other with such information and assistance as such the other may
reasonably request in connection with their preparation of any governmental
filing hereunder. If Buyer becomes aware of any fact relating to it which would
prevent or delay the FCC Consent, the DOJ Consent or HSR Clearance, Buyer shall
promptly
-5-
<PAGE>
notify Seller thereof and take such steps as necessary to remove such
impediment, including but not limited to divesting any stations and terminating
any agreements to acquire or program or market any stations.
ARTICLE 6: REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer hereby makes the following representations and warranties to Seller:
6.1. Organization and Standing. Buyer is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization, and
is qualified to do business in each jurisdiction in which the Station Assets are
located. Buyer has the requisite power and authority to execute and deliver this
Agreement and all of the other agreements and instruments to be executed and
delivered by Buyer pursuant hereto (collectively, the "Buyer Ancillary
Agreements"), to consummate the transactions contemplated hereby and thereby and
to comply with the terms, conditions and provisions hereof and thereof.
6.2. Authorization. The execution, delivery and performance of this
Agreement and the Buyer Ancillary Agreements by Buyer have been duly authorized
and approved by all necessary action of Buyer and do not require any further
authorization or consent of Buyer. This Agreement is, and each Buyer Ancillary
Agreement when executed and delivered by Buyer and the other parties thereto
will be, a legal, valid and binding agreement of Buyer enforceable in accordance
with its respective terms, except in each case as such enforceability may be
limited by bankruptcy, moratorium, insolvency, reorganization or other similar
laws affecting or limiting the enforcement of creditors' rights generally and
except as such enforceability is subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
6.3. No Conflicts. Neither the execution and delivery by Buyer of this
Agreement and the Buyer Ancillary Agreements or the consummation by Buyer of any
of the transactions contemplated hereby or thereby nor compliance by Buyer with
or fulfillment by Buyer of the terms, conditions and provisions hereof or
thereof will: (i) conflict with any organizational documents of Buyer or any
law, judgment, order or decree to which Buyer is subject; or (ii) require the
approval, consent, authorization or act of, or the making by Buyer of any
declaration, filing or registration with, any third party or any foreign,
federal, state or local court, governmental or regulatory authority or body,
except the FCC Consent and DOJ Consent, and, if applicable, HSR Clearance.
6.4. Qualification. Buyer is legally, financially and otherwise qualified
to be the licensee of, acquire, own and operate the Stations under the
Communications Act of 1934, as amended (the "Communications Act") and the rules,
regulations and policies of the FCC. There are no facts that would, under
existing law and the existing rules, regulations, policies and procedures of the
FCC, disqualify Buyer as an assignee of the FCC Licenses or as the owner and
operator of the Stations. No waiver of any FCC rule or policy is necessary for
the FCC Consent to be obtained. There is no action, suit or proceeding pending
or threatened against Buyer which questions the legality or propriety of the
transactions contemplated by this
-6-
<PAGE>
Agreement or could materially adversely affect Buyer's ability to perform its
obligations hereunder. Buyer has and will have available on the Closing Date
sufficient funds to enable it to consummate the transactions contemplated
hereby.
6.5. No Finder. No broker, finder or other person is entitled to a
commission, brokerage fee or other similar payment in connection with this
Agreement or the transactions contemplated hereby as a result of any agreement
or action of Buyer or any party acting on Buyer's behalf, except Seratin Bros.,
Inc., whose fee will be paid by Buyer.
ARTICLE 7: REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller makes the following representations and warranties to Buyer:
7.1. Organization. Seller is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, and is
qualified to do business in each jurisdiction in which the Station Assets are
located. Seller has the requisite power and authority to execute and deliver
this Agreement and all of the other agreements and instruments to be executed
and delivered by Seller pursuant hereto (collectively, the "Seller Ancillary
Agreements"), to consummate the transactions contemplated hereby and thereby and
to comply with the terms, conditions and provisions hereof and thereof.
7.2. Authorization. The execution, delivery and performance of this
Agreement and the Seller Ancillary Agreements by Seller have been duly
authorized and approved by all necessary action of Seller and do not require any
further authorization or consent of Seller. This Agreement is, and each Seller
Ancillary Agreement when executed and delivered by Seller and the other parties
thereto will be, a legal, valid and binding agreement of Seller enforceable in
accordance with its respective terms, except in each case as such enforceability
may be limited by bankruptcy, moratorium, insolvency, reorganization or other
similar laws affecting or limiting the enforcement of creditors' rights
generally and except as such enforceability is subject to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
7.3. No Conflicts. Neither the execution and delivery by Seller of this
Agreement and the Seller Ancillary Agreements or the consummation by Seller of
any of the transactions contemplated hereby or thereby nor compliance by Seller
with or fulfillment by Seller of the terms, conditions and provisions hereof or
thereof will: (i) conflict with any organizational documents of Seller or any
law, judgment, order, or decree to which Seller is subject or, except as set
forth on Schedule 1.1(c), any Station Contract; or (ii) require the approval,
consent, authorization or act of, or the making by Seller of any declaration,
filing or registration with, any third party or any foreign, federal, state or
local court, governmental or regulatory authority or body, except the FCC
Consent and DOJ Consent and, if applicable, HSR Clearance.
-7-
<PAGE>
7.4. FCC Licenses. Seller (or one of the companies comprising Seller) is
the holder of the FCC Licenses described on Schedule 1.1(a). The FCC Licenses
are in full force and effect and have not been revoked, suspended, canceled,
rescinded or terminated and have not expired. There is not pending any action by
or before the FCC to revoke, suspend, cancel, rescind or materially adversely
modify any of the FCC Licenses (other than proceedings to amend FCC rules of
general applicability), and there is not now issued or outstanding, by or before
the FCC, any order to show cause, notice of violation, notice of apparent
liability, or notice of forfeiture against Seller with respect to the Stations.
The Stations are operating in compliance in all material respects with the FCC
Licenses, the Communications Act, and the rules, regulations and policies of the
FCC.
7.5. Taxes. Seller has, in respect of the Stations' business, filed all
foreign, federal, state, county and local income, excise, property, sales, use,
franchise and other tax returns and reports which are required to have been
filed by it under applicable law and has paid all taxes which have become due
pursuant to such returns or pursuant to any assessments which have become
payable.
7.6. Personal Property. Schedule 1.1(b) contains a list of all material
items of Tangible Personal Property included in the Station Assets. Seller has
title to the Tangible Personal Property free and clear of Liens other than
Permitted Liens.
7.7. Real Property. Schedule 1.1(f) contains a description of all Real
Property included in the Station Assets. Seller has fee simple title to the
owned Real Property ("Owned Real Property") free and clear of Liens other than
Permitted Liens. Schedule 1.1(f) includes a description of each lease of Real
Property or similar agreement included in the Station Assets (the "Real Property
Leases"). The Owned Real Property includes, and the Real Property Leases
provide, access to the Stations' facilities. To Seller's knowledge, the Real
Property is not subject to any suit for condemnation or other taking by any
public authority.
7.8. Contracts. Each of the Station Contracts (including without
limitation each of the Real Property Leases) is in effect and is binding upon
Seller and, to Seller's knowledge, the other parties thereto (subject to
bankruptcy, insolvency, reorganization or other similar laws relating to or
affecting the enforcement of creditors' rights generally). Seller has performed
its obligations under each of the Station Contracts in all material respects,
and is not in material default thereunder, and to Seller's knowledge, no other
party to any of the Station Contracts is in default thereunder in any material
respect.
7.9. Environmental. Except as set forth in any environmental report
delivered by Seller to Buyer prior to the date of this Agreement and except as
set forth on Schedule 1.1(f), to Seller's knowledge, no hazardous or toxic
substance or waste regulated under any applicable environmental, health or
safety law has been generated, stored, transported or released on, in, from or
to the Real Property included in the Station Assets. Except as set forth in any
environmental report delivered by Seller to Buyer prior to the date of this
Agreement and except as set forth on Schedule 1.1(f), to Seller's knowledge,
Seller has
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complied in all material respects with all environmental, health and safety laws
applicable to the Stations.
7.10. Intangible Property. Schedule 1.1(d) contains a description of the
material Intangible Property included in the Station Assets. Except as set forth
on Schedule 1.1(d), Seller has received no notice of any claim that its use of
the Intangible Property infringes upon any third party rights. Except as set
forth on Schedule 1.1(d), Seller owns or has the right to use the Intangible
Property free and clear of Liens other than Permitted Liens.
7.11. Compliance with Law. Seller has complied in all material respects
with all laws, regulations, rules, writs, injunctions, ordinances, franchises,
decrees or orders of any court or of any foreign, federal, state, municipal or
other governmental authority which are applicable to the operation of the
Stations. There is no action, suit or proceeding pending or threatened against
Seller in respect of the Stations that will subject Buyer to liability or which
questions the legality or propriety of the transactions contemplated by this
Agreement. To Seller's knowledge, there are no governmental claims or
investigations pending or threatened against Seller in respect of the Stations
(except those affecting the industry generally).
7.12. No Finder. No broker, finder or other person is entitled to a
commission, brokerage fee or other similar payment in connection with this
Agreement or the transactions contemplated hereby as a result of any agreement
or action of Seller or any party acting on Seller's behalf.
ARTICLE 8: ACCOUNTS RECEIVABLE
- ------------------------------
8.1. Accounts Receivable. All accounts receivable arising prior to the
Closing Date in connection with the operation of the Stations, including but not
limited to accounts receivable for advertising revenues for programs and
announcements performed prior to the Closing Date and other broadcast revenues
for services performed prior to the Closing Date, shall remain the property of
Seller (the "Accounts Receivable") and Buyer shall not acquire any right or
interest therein. For a period of six months from Closing (the "Collection
Period"), Buyer shall collect the Accounts Receivable in the normal and ordinary
course of Buyer's business and shall apply all such amounts collected to the
debtor's oldest account receivable first. Buyer's obligation shall not extend to
the institution of litigation, employment of counsel or a collection agency or
any other extraordinary means of collection. During the Collection Period,
neither Seller or its agents shall make any direct solicitation of any such
account debtor for collection purposes or institute litigation for the
collection of amounts due. Any amounts relating to the Accounts Receivable that
are paid directly to Seller shall be retained by Seller. Within ten calendar
days after the end of each month, Buyer shall make a payment to Seller equal to
the amount of all collections of Accounts Receivable during the preceding month.
At the end of the Collection Period, any remaining Accounts Receivable shall be
returned to Seller for collection.
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ARTICLE 9: COVENANTS OF SELLER
-------------------
9.1. Seller's Covenants. Seller covenants and agrees with respect to the
Stations that, between the date hereof and Closing, except as permitted by this
Agreement or with the prior written consent of Buyer, which shall not be
unreasonably withheld, Seller shall:
(a) operate the Stations in the ordinary course of business
consistent with past practice and in all material respects in accordance with
FCC rules and regulations and with all other applicable laws, regulations, rules
and orders;
(b) not, other than in the ordinary course of business in accordance
with past practice, sell, lease or dispose of or agree to sell, lease or dispose
of any of the Station Assets, or create, assume or permit to exist any Liens
upon the Station Assets, except for Permitted Liens;
(c) furnish Buyer with such information relating to the Station
Assets as Buyer may reasonably request, at Buyer's expense and provided such
request does not interfere unreasonably with the business of the Stations;
(d) after Seller publicly announces the transaction contemplated by
this Agreement and files this Agreement with the FCC, then, when reasonably
requested by Buyer, provide Buyer access to the Station facilities that are
included in the Station Assets during the Stations' normal business hours,
provided such access does not interfere unreasonably with the business of the
Stations; and
(e) make available to Buyer, and authorize its accountants to
cooperate and make available to Buyer, at Buyer's expense and reasonable request
such financial information regarding the Stations as is maintained by Seller on
a basis not consolidated with other stations.
ARTICLE 10: JOINT COVENANTS
---------------
Buyer and Seller hereby covenant and agree that between the date hereof and
Closing:
10.1. Cooperation. Subject to express limitations contained elsewhere
herein, each party (i) shall cooperate fully with one another in taking any
reasonable actions (including without limitation, reasonable actions to obtain
the required consent of any governmental instrumentality or any third party)
necessary or helpful to accomplish the transactions contemplated by this
Agreement, including but not limited to the prompt satisfaction of any condition
to Closing set forth herein, and (ii) shall not take any action that conflicts
with its obligations hereunder or that causes its representations and warranties
to become untrue in any material respect.
10.2. Control of Stations. Buyer shall not, directly or indirectly,
control, supervise or direct the operations of the Stations prior to Closing.
Such operations, including complete
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control and supervision of all Station programs, employees and policies, shall
be the sole responsibility of Seller.
10.3. Consents to Assignment. The parties shall use commercially
reasonable efforts to obtain any third party consents necessary for the
assignment of any Station Contract (which shall not require any payment to any
such third party). To the extent that any Station Contract may not be assigned
without the consent of any third party, and such consent is not obtained prior
to Closing, this Agreement and any assignment executed pursuant hereto shall not
constitute an assignment thereof, but to the extent permitted by law shall
constitute an equitable assignment by Seller and assumption by Buyer of Seller's
rights and obligations under the applicable Station Contract, with Seller making
available to Buyer the benefits thereof and Buyer performing the obligations
thereunder on Seller's behalf.
10.4. Employee Matters.
(a) Prior to Closing, Seller shall deliver to Buyer a list of
employees of the Stations that Seller does not intend to retain after Closing.
Buyer may interview and elect to hire such listed employees, but not any other
employees of Seller. Buyer is obligated to hire only those employees that are
under employment contracts (and assume Seller's obligations and liabilities
under such employment contracts) which are included in the Station Contracts.
With respect to employees hired by Buyer ("Transferred Employees"), to the
extent permitted by law Seller shall provide Buyer access to its personnel
records and such other information as Buyer may reasonably request prior to
Closing. With respect to such hired employees, Seller shall be responsible for
the payment of all compensation and accrued employee benefits payable by it
until Closing and thereafter Buyer shall be responsible for all such obligations
payable by it. Buyer shall cause all employees it hires to be eligible to
participate in its "employee welfare benefit plans" and "employee pension
benefit plans" (as defined in Section 3(l) and 3(2) of ERISA, respectively) in
which similarly situated employees are generally eligible to participate;
provided, however, that all such employees and their spouses and dependents
shall be eligible for coverage immediately after Closing (and shall not be
excluded from coverage on account of any pre-existing condition) to the extent
provided under such plans. For purposes of any length of service requirements,
waiting periods, vesting periods or differential benefits based on length of
service in any such plan for which such employees may be eligible after Closing,
Buyer shall ensure that service with Seller shall be deemed to have been service
with the Buyer. In addition, Buyer shall ensure that each such employee receives
credit under any welfare benefit plan of Buyer for any deductibles or co-
payments paid by such employees and dependents for the current plan year under a
plan maintained by Seller. Notwithstanding any other provision contained herein,
Buyer shall grant credit to each such employee for all unused sick leave accrued
as of Closing as an employee of Seller. Notwithstanding any other provision
contained herein, Buyer shall assume and discharge Seller's liabilities for the
payment of all unused vacation leave accrued by such employees as of Closing.
(b) As soon as administratively feasible following the execution of
a closing agreement with the Internal Revenue Service relating to the tax-
qualified status of Seller's
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401(k) Plan (the "Savings Plan") and the issuance of a favorable determination
letter as to the tax-qualified status of the Savings Plan under Section 401(a)
of the Code (or an opinion of counsel that the form of the Savings Plan is so
qualified), Buyer and Seller shall enter into a 401(k) plan asset transfer
agreement pursuant to which Buyer shall establish a defined contribution plan
(or cover Transferred Employees under an existing defined contribution plan
sponsored by Buyer) for the benefit of Transferred Employees who were
participants in the Savings Plan. Such Transferred Employees are referred to
hereinafter as the "Savings Plan Employees."
(c) Following execution of the agreement contemplated in clause (b)
above, Seller shall cause to be transferred from the Savings Plan to the plan
covering the Savings Plan Employees (the "Transferee Savings Plan") the
liability for the account balances of the Savings Plan Employees (including
outstanding loan balances of Savings Plan Employees), together with cash, cash
equivalents or other mutually acceptable property, the value of which on such
transfer date is equal to such liability, and Buyer shall cause the Transferee
Savings Plan to accept such transfer, all in accordance with the rules and
regulations under Section 414(l) of the Code.
(d) Pending completion of the transfers described in this Section,
Seller and Buyer shall make arrangements for any distributions, if any, to the
Savings Plan Employees from the Savings Plan. Seller and Buyer shall provide
each other with access to information reasonably necessary in order to carry out
the provisions of this paragraph. In addition, until the asset transfer is
effectuated, Buyer shall cooperate with the reasonable requests of Seller to
continue to withhold from the pay checks of Transferred Employees' who have
outstanding loan balances in the Seller's 401(k) Savings Plan and Buyer shall
remit such withheld amounts to the Seller in a timely fashion such that the
outstanding loans do not go into default.
10.5. 1031 Exchange. At or prior to Closing, Seller may assign its rights
under this Agreement (in whole or in part) to a qualified intermediary (as
defined in Treasury regulation section 1.1031(k)-1(g)(4)) or similar entity
or arrangement ("Qualified Intermediary"). Upon any such assignment, Seller
shall promptly give written notice thereof to Buyer, and Buyer shall cooperate
with the reasonable requests of Seller and any Qualified Intermediary in
connection therewith. Without limiting the generality of the foregoing, if
Seller gives notice of such assignment, Buyer shall (i) promptly provide Seller
with written acknowledgment of such notice and (ii) at Closing, pay the Purchase
Price (or any portion thereof designated by the Qualified Intermediary) to or on
behalf of the Qualified Intermediary (which payment shall, to the extent
thereof, satisfy the obligations of Buyer to make such payment hereunder).
Seller's assignment to a Qualified Intermediary will not relieve Seller of any
of its duties or obligations herein. Except for the obligations of Buyer set
forth in this Section, Buyer shall not have any liability or obligation to
Seller for the failure of the contemplated exchange to qualify as a like-kind
exchange under Section 1031 of the Internal Revenue Code unless such failure is
the result of the material breach or default by Buyer under this Agreement.
10.6. Trust. Notwithstanding anything in this Agreement to the contrary,
Seller may at its option assign this Agreement (in whole or part) and assign and
transfer the Station Assets
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(in whole or in part) to a trustee to hold and operate pursuant to a trust
agreement, provided such trustee assumes Seller's duties and obligations
hereunder with respect to the Station Assets held in such trust.
ARTICLE 11: CONDITIONS OF CLOSING BY BUYER
------------------------------
The obligations of Buyer hereunder are, at its option, subject to
satisfaction, at or prior to Closing, of each of the following conditions:
11.1. Representations, Warranties and Covenants. The representations and
warranties of Seller made in this Agreement shall be true and correct in all
material respects as of the Closing Date except for changes permitted or
contemplated by the terms of this Agreement, and the covenants and agreements to
be complied with and performed by Seller at or prior to Closing shall have been
complied with or performed in all material respects. Buyer shall have received a
certificate dated as of the Closing Date from Seller, executed by an authorized
officer of Seller to the effect that the conditions set forth in this Section
have been satisfied.
11.2. Governmental Consents. The FCC Consent and DOJ Consent, and, if
applicable, HSR Clearance, shall have been obtained, and no court or
governmental order prohibiting Closing shall be in effect.
ARTICLE 12: CONDITIONS OF CLOSING BY SELLER
-------------------------------
The obligations of Seller hereunder are, at its option, subject to
satisfaction, at or prior to Closing, of each of the following conditions:
12.1. Representations, Warranties and Covenants. The representations and
warranties of Buyer made in this Agreement shall be true and correct in all
material respects as of the Closing Date except for changes permitted or
contemplated by the terms of this Agreement, and the covenants and agreements to
be complied with and performed by Buyer at or prior to Closing shall have been
complied with or performed in all material respects. Seller shall have received
a certificate dated as of the Closing Date from Buyer, executed by an authorized
officer of Buyer, to the effect that the conditions set forth in this Section
have been satisfied.
12.2. Governmental Consents. The FCC Consent and DOJ Consent, and, if
applicable, HSR Clearance, shall have been obtained, and no court or
governmental order prohibiting Closing shall be in effect.
12.3. AMFM Closing. The closing under the AMFM Agreement shall have been
consummated.
ARTICLE 13: EXPENSES
--------
13.1. Expenses. Each party shall be solely responsible for all costs and
expenses incurred by it in connection with the negotiation, preparation and
performance of and
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compliance with the terms of this Agreement, except that (i) all recordation,
transfer and documentary taxes, fees and charges, and any excise, sales or use
taxes, applicable to the transfer of the Station Assets shall be paid by Buyer,
(ii) all FCC filing fees shall be paid equally by Buyer and Seller, and (iii)
all HSR Act filing fees and expenses shall be paid by Buyer.
ARTICLE 14: DOCUMENTS TO BE DELIVERED AT CLOSING
------------------------------------
14.1. Seller's Documents. At Closing, Seller shall deliver or cause to be
delivered to Buyer:
(i) certified copies of resolutions authorizing its execution,
delivery and performance of this Agreement, including the consummation of the
transactions contemplated hereby;
(ii) the certificate described in Section 11.1; and
(iii) such bills of sale, assignments, special warranty deeds,
documents of title and other instruments of conveyance, assignment and transfer
as may be necessary to convey, transfer and assign the Station Assets to Buyer,
free and clear of Liens, except for Permitted Liens.
14.2. Buyer's Documents. At Closing, Buyer shall deliver or cause to be
delivered to Seller:
(i) the certified copies of resolutions authorizing its execution,
delivery and performance of this Agreement, including the consummation of the
transactions contemplated hereby;
(ii) the certificate described in Section 12.1; and
(iii) such documents and instruments of assumption as may be
necessary to assume the Assumed Obligations, and the Purchase Price in
accordance with Section 3.1 hereof.
ARTICLE 15: SURVIVAL; INDEMNIFICATION.
--------------------------
15.1. Survival. The covenants, agreements, representations and warranties
in this Agreement shall survive Closing for a period of six (6) months from the
Closing Date whereupon they shall expire and be of no further force or effect,
except those under (i) this Article 15 that relate to Damages (defined below)
for which written notice is given by the indemnified party to the indemnifying
party prior to the expiration, which shall survive until resolved and (ii)
Sections 2.1 (Assumed Obligations), 3.3 (Adjustments), 3.4 (Allocation), 8.1
(Accounts Receivable) and 13.1 (Expenses), and indemnification obligations with
respect to such provisions, which shall survive until performed.
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15.2. Indemnification.
(a) From and after the Closing, Seller shall defend, indemnify and
hold harmless Buyer from and against any and all losses, costs, damages,
liabilities and expenses, including reasonable attorneys' fees and expenses
("Damages") incurred by Buyer arising out of or resulting from: (i) any breach
or default by Seller under this Agreement; (ii) the Retained Obligations; or
(iii) the business or operation of the Stations before Closing; provided,
however, that (i) Seller shall have no liability to Buyer hereunder until, and
only to the extent that, Buyer's aggregate Damages exceed $500,000 and (ii) the
maximum liability of Seller hereunder shall be $1,000,000.
(b) From and after the Closing, Buyer shall defend, indemnify and hold
harmless Seller from and against any and all Damages incurred by Seller arising
out of or resulting from: (i) any breach or default by Buyer under this
Agreement; (ii) the Assumed Obligations; or (iii) the business or operation of
the Stations after Closing.
15.3. Procedures. The indemnified party shall give prompt written notice to
the indemnifying party of any demand, suit, claim or assertion of liability by
third parties or other circumstances that could give rise to an indemnification
obligation hereunder against the indemnifying party (a "Claim"), but a failure
to give such notice or delaying such notice shall not affect the indemnified
party's right to indemnification and the indemnifying party's obligation to
indemnify as set forth in this Agreement, except to the extent the indemnifying
party's ability to remedy, contest, defend or settle with respect to such Claim
is thereby prejudiced. The obligations and liabilities of the parties with
respect to any Claim shall be subject to the following additional terms and
conditions:
(a) The indemnifying party shall have the right to undertake, by
counsel or other representatives of its own choosing, the defense or opposition
to such Claim.
(b) In the event that the indemnifying party shall elect not to
undertake such defense or opposition, or, within twenty (20) days after written
notice (which shall include sufficient description of background information
explaining the basis for such Claim) of any such Claim from the indemnified
party, the indemnifying party shall fail to undertake to defend or oppose, the
indemnified party (upon further written notice to the indemnifying party) shall
have the right to undertake the defense, opposition, compromise or settlement of
such Claim, by counsel or other representatives of its own choosing, on behalf
of and for the account and risk of the indemnifying party (subject to the right
of the indemnifying party to assume defense of or opposition to such Claim at
any time prior to settlement, compromise or final determination thereof).
(c) Anything herein to the contrary notwithstanding: (i) the
indemnified party shall have the right, at its own cost and expense, to
participate in the defense, opposition, compromise or settlement of the Claim;
(ii) the indemnifying party shall not, without the indemnified party's written
consent, settle or compromise any Claim or consent to entry of any judgment
which does not include as an unconditional term thereof the giving by
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the claimant or the plaintiff to the indemnified party of a release from all
liability in respect of such Claim; and (iii) in the event that the indemnifying
party undertakes defense of or opposition to any Claim, the indemnified party,
by counsel or other representative of its own choosing and at its sole cost and
expense, shall have the right to consult with the indemnifying party and its
counsel or other representatives concerning such Claim and the indemnifying
party and the indemnified party and their respective counsel or other
representatives shall cooperate in good faith with respect to such Claim.
(d) All claims not disputed shall be paid by the indemnifying party
within thirty (30) days after receiving notice of the Claim. "Disputed Claims"
shall mean claims for Damages by an indemnified party which the indemnifying
party objects to in writing within thirty (30) days after receiving notice of
the Claim. In the event there is a Disputed Claim with respect to any Damages,
the indemnifying party shall be required to pay the indemnified party the amount
of such Damages for which the indemnifying party has, pursuant to a final
determination, been found liable within ten (10) days after there is a final
determination with respect to such Disputed Claim. A final determination of a
Disputed Claim shall be (i) a judgment of any court determining the validity of
a Disputed Claim, if no appeal is pending from such judgment and if the time to
appeal therefrom has elapsed; (ii) an award of any arbitration determining the
validity of such disputed claim, if there is not pending any motion to set aside
such award and if the time within which to move to set aside such award has
elapsed; (iii) a written termination of the dispute with respect to such claim
signed by the parties thereto or their attorneys; (iv) a written acknowledgment
of the indemnifying party that it no longer disputes the validity of such claim;
or (v) such other evidence of final determination of a disputed claim as shall
be acceptable to the parties. No undertaking of defense or opposition to a Claim
shall be construed as an acknowledgment by such party that it is liable to the
party claiming indemnification with respect to the Claim at issue or other
similar Claims.
ARTICLE 16: TERMINATION
-----------
16.1. Termination. This Agreement may be terminated at any time prior to
Closing as follows:
(a) by mutual written consent of Buyer and Seller;
(b) by written notice of Buyer to Seller if Seller (i) does not
satisfy the conditions or perform the obligations to be satisfied or performed
by it on the Closing Date; or (ii) otherwise breaches in any material respect
any of its representations or warranties or defaults in any material respect in
the performance of any of its covenants or agreements herein contained and such
breach or default is not cured within the Cure Period (defined below);
(c) by written notice of Seller to Buyer if Buyer (i) does not satisfy
the conditions or perform the obligations to be satisfied or performed by it on
the Closing Date; or (ii) otherwise breaches in any material respect any of its
representations or warranties or defaults in any material respect in the
performance of any of its covenants or agreements
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herein contained and such breach or default is not cured within the Cure Period
(defined below);
(d) by written notice of Buyer to Seller, or by Seller to Buyer, if
the FCC denies the FCC Application;
(e) by written notice of Seller to Buyer if the Closing shall not have
been consummated on or before the date four months after the date of this
Agreement; or
(f) by written notice of Seller to Buyer if the AMFM Agreement is
terminated or expires.
The term "Cure Period" as used herein means a period commencing the date
Buyer or Seller receives from the other written notice of breach or default
hereunder and continuing until the earlier of (i) thirty (30) days thereafter or
(ii) the Closing Date; provided, however, that if the breach or default cannot
reasonably be cured within such period but can be cured before the Closing Date,
and if diligent efforts to cure promptly commence, then the Cure Period shall
continue as long as such diligent efforts to cure continue, but not beyond the
Closing Date. Except as set forth below, the termination of this Agreement shall
not relieve any party of any liability for breach or default under this
Agreement prior to the date of termination. Notwithstanding anything contained
herein to the contrary, Section 13.1 shall survive any termination of this
Agreement.
16.2. Remedies. The parties recognize that if either party refuses to
consummate the Closing pursuant to the provisions of this Agreement or either
party otherwise breaches or defaults such that the Closing has not occurred
("Breaching Party"), monetary damages alone will not be adequate to compensate
the non-breaching party ("Non-Breaching Party") for its injury. Such Non-
Breaching Party shall therefore be entitled to obtain specific performance of
the terms of this Agreement in lieu of, and not in addition to, any other
remedies, including but not limited to monetary damages, that may be available
to it; provided however, that Seller may elect to recover liquidated damages in
lieu of obtaining specific performance. If any action is brought by the Non-
Breaching Party to enforce this Agreement, the Breaching Party shall waive the
defense that there is an adequate remedy at law. In the event of a default by
the Breaching Party which results in the filing of a lawsuit for damages,
specific performance, or other remedy, the Non-Breaching Party shall be entitled
to reimbursement by the Breaching Party of reasonable legal fees and expenses
incurred by the Non-Breaching Party, provided that the Non-Breaching Party is
successful in such lawsuit.
16.3. Liquidated Damages. If Seller terminates this Agreement due to
Buyer's failure to consummate the Closing on the Closing Date or if this
Agreement is otherwise terminated by Seller pursuant to Section 16.1(c), then
Buyer shall pay Seller as liquidated damages an amount equal to 25% of the
Purchase Price. It is understood and agreed that such liquidated damages amount
represents Buyer's and Seller's reasonable estimate of actual damages and does
not constitute a penalty and shall, if elected by and paid to Seller, be
Seller's sole and exclusive remedy hereunder.
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ARTICLE 17: MISCELLANEOUS PROVISIONS
------------------------
17.1. Casualty Loss. In the event any loss or damage of the Station Assets
exists on the Closing Date, Buyer and Seller shall consummate the Closing and
Seller shall assign to Buyer the proceeds of any insurance payable to Seller on
account of such damage or loss.
17.2. Further Assurances. After the Closing, Seller shall from time to
time, at the request of and without further cost or expense to Buyer, execute
and deliver such other instruments of conveyance and transfer and take such
other actions as may reasonably be requested in order to more effectively
consummate the transactions contemplated hereby to vest in Buyer good title to
the Station Assets, and Buyer shall from time to time, at the request of and
without further cost or expense to Seller, execute and deliver such other
instruments and take such other actions as may reasonably be requested in order
more effectively to relieve Seller of any obligations being assumed by Buyer
hereunder.
17.3. Assignment. Except as set forth in Sections 10.5 (1031 Exchange) and
10.6 (Trust), neither party may assign this Agreement without the prior written
consent of the other party hereto. With respect to any permitted assignment, the
parties shall take all such actions as are reasonably necessary to effectuate
such assignment, including but not limited to cooperating in any appropriate
filings with the FCC or other governmental authorities. All covenants,
agreements, statements, representations, warranties and indemnities in this
Agreement by and on behalf of any of the parties hereto shall bind and inure to
the benefit of their respective successors and permitted assigns of the parties
hereto.
17.4. Amendments. No amendment, waiver of compliance with any provision or
condition hereof or consent pursuant to this Agreement shall be effective unless
evidenced by an instrument in writing signed by the party against whom
enforcement of any waiver, amendment, change, extension or discharge is sought.
17.5. Headings. The headings set forth in this Agreement are for
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement.
17.6. Governing Law. The construction and performance of this Agreement
shall be governed by the laws of the State of Texas without giving effect to the
choice of law provisions thereof.
17.7. Notices. Any notice, demand or request required or permitted to be
given under the provisions of this Agreement shall be in writing, including by
facsimile, and shall be deemed to have been received on the date of personal
delivery, on the third day after deposit in the U.S. mail if mailed by
registered or certified mail, postage prepaid and return receipt requested, on
the day after delivery to a nationally recognized overnight courier service if
sent by an overnight delivery service for next morning delivery or when
delivered by facsimile transmission, and shall be addressed as follows (or to
such other address as any party may request by written notice):
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if to Seller: c/o Clear Channel Broadcasting, Inc.
200 Concord Plaza, Suite 600
San Antonio, Texas 78216
Attention: President
Facsimile: (210) 822-2299
with a copy (which shall
not constitute notice) to: Wiley, Rein & Fielding
1776 K Street, N.W.
Washington, D.C. 20006
Attention: Richard J. Bodorff, Esq.
Facsimile: (202) 719-7049
if to Buyer: Nassau Broadcasting Partners, L.P.
619 Alexander Road, Third Floor
Princeton, New Jersey 08540
Attention: Louis F. Mercatanti, Jr.
Facsimile: (609) 924-1584
with a copy (which shall not
constitute notice) to: Sterns and Weinroth
50 West State Street
P.O. Box 1298
Trenton, New Jersey 08607-1298
Attention: Mark Schorr, Esq.
Facsimile: (609) 392-7956
17.8. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which together
will constitute one and the same instrument.
17.9. No Third Party Beneficiaries. Nothing herein expressed or implied is
intended or shall be construed to confer upon or give to any person or entity
other than the parties hereto and their successors or permitted assigns, any
rights or remedies under or by reason of this Agreement.
17.10. Severability. The parties agree that if one or more provisions
contained in this Agreement shall be deemed or held to be invalid, illegal or
unenforceable in any respect under any applicable law, this Agreement shall be
construed with the invalid, illegal or unenforceable provision deleted, and the
validity, legality and enforceability of the remaining provisions contained
herein shall not be affected or impaired thereby.
17.11. Entire Agreement. This Agreement embodies the entire agreement and
understanding of the parties hereto and supersedes any and all prior agreements,
arrangements
-19-
<PAGE>
and understandings relating to the matters provided for herein. This Agreement
does not supersede any confidentiality agreement relating to the Stations.
[SIGNATURE PAGE FOLLOWS]
-20-
<PAGE>
SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT
------------------------------------------
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
SELLER: CLEAR CHANNEL BROADCASTING, INC.
CLEAR CHANNEL BROADCASTING LICENSES, INC.
By: /s/ Mark P. Mays
-----------------------------------
Name: Mark P. Mays
Title: President
BUYER: NASSAU BROADCASTING PARTNERS, L.P.
By: Nassau Broadcasting Partners, Inc.,
its general partner
By:
-----------------------------------
Name:
Title:
<PAGE>
SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT
------------------------------------------
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
SELLER: CLEAR CHANNEL BROADCASTING, INC.
CLEAR CHANNEL BROADCASTING LICENSES, INC.
By:
-------------------------------------
Name:
Title:
BUYER: NASSAU BROADCASTING PARTNERS, L.P.
By: Nassau Broadcasting Partners, Inc.,
its general partner
By: /s/ Louis F. Meuethas
--------------------------------------
Name: Louis F. Meuethas
Title: President
<PAGE>
Schedules
- ---------
1.1(a) - FCC Licenses
1.1(b) - Tangible Personal Property
1.1(c) - Station Contracts
1.1(d) - Intangible Property
1.1(f) - Real Property
1.2(h) - Excluded Assets
<PAGE>
PURCHASE AGREEMENT SCHEDULES
WODE-FM, EASTON, PENNSYLVANIA
WEEX(AM), EASTON, PENNSYLVANIA
Unless otherwise defined, or the context otherwise clearly requires, terms
defined in the Agreement shall have such meanings when used herein.
Certain of the representations and warranties in the Agreement are made
subject to the disclosures in these Schedules as if these Schedules had been set
forth in the Agreement. Although the schedule numbers set forth below correspond
to the section numbers in the Agreement, any information disclosed herein shall
be deemed to be disclosed with respect to all sections of the Agreement where
such disclosures would be relevant or appropriate. Except as otherwise expressly
indicated herein, all disclosures set forth herein are made as of the date of
the Agreement. Moreover, the statements or disclosures made herein are solely
for the purposes contemplated by the Agreement, and nothing stated herein shall
constitute or be deemed to constitute an admission of liability or error by
Seller.
<PAGE>
Schedule 1.1(a)
FCC Licenses
------------
LICENSES
- --------
WEEX(AM) - Licensee: Clear Channel Broadcasting Licenses, Inc.
- -------------------------------------------------------------
Call Sign Type Expiration Date
- --------- ---- ---------------
WEEX(AM) Main 8/01/06
(BL-990430DC)
KR-7838 Remote Pickup 8/01/06
KPH-794 Remote Pickup 8/01/06
KB-97366 Remote Pickup 8/01/06
WODE-FM - Licensee: Clear Channel Broadcasting Licenses, Inc.
- -------------------------------------------------------------
Call Sign Type Expiration Date
- --------- ---- ---------------
WODE-FM Main 8/01/06
(BRH-980331XG)
<PAGE>
Schedule 1.1(b)
Tangible Personal Property
--------------------------
(list attached)
The Station Assets include all equipment and other tangible personal
property that is owned by Seller and used solely in the operation of the
Station(s) (and that is not used to operate any other radio station), whether or
not identified on the attached list, except for Excluded Assets.
Equipment and other tangible personal property used in the operation of the
Station(s) and also used in the operation of any other radio station or
stations, whether or not identified on the attached list, (i) if used in the
operation of radio station(s) being retained by Seller, will be Excluded Assets
and (ii) if used in the operation of radio station(s) being conveyed by Seller
to a third party, will be allocated by Seller, with items allocated to the
Station(s) being Station Assets and items allocated to other radio stations
being Excluded Assets.
The attached list identifies items of tangible personal property used in
the operation of the Station(s) as of a date prior to this Agreement (which may
be set forth on such list). It includes items of Tangible Personal Property
included in the Station Assets, but may also include items that are Excluded
Assets.
The Station Assets do not include any Excluded Assets, whether or not
identified on the attached list. Without limiting the foregoing, the Station
Assets do not include any shared items that are Excluded Assets as provided
above, any tangible personal property disposed of or consumed in the ordinary
course of business, or any towers, generators, buildings, fences, fixtures or
improvements included in tower sites that are Excluded Assets, whether or not
identified on the attached list.
<PAGE>
<TABLE>
<CAPTION>
September 16, 1999 Page 1
10:31 AM
Clear Channel Metroplex, Inc.
FILE LISTING REPORT
WODE-FM
- --------------------------------------------------------------------------------------------------------------------
SYS No Ext A Co Asset No Desc Location CI G/L Asset Acct In-Svc P Dep Department Vendor/Mfg Disposal Acquired
C No Date T Meth Date Value
- --------------------------------------------------------------------------------------------------------------------
Book: Internal FY: December
-----------------------------
<S> <C>
019209 000 A 723118258 11330723111032 03/01/98 P SLFM 72311
BUILDING
Type: 133 Count= 1
018953 000 A 723118002 11350723111032 03/01/98 P SLFM 72311
REALISTIC MINI-SPEAKER
018954 000 A 723118003 11350723111032 03/01/98 P SLFM 72311
BLACK & DECKER GRINDER.
018955 000 A 723118004 11350723111032 03/01/98 P SLFM 72311
FILE 2 DRAWER
018956 000 A 723118005 11350723111032 03/01/98 P SLFM 72311
STAND TYPEWRITER
018957 000 A 723118006 11350723111032 03/01/98 P SLFM 72311
REALISTIC SCT-74 DUAL CA
018958 000 A 723118007 11350723111032 03/01/98 P SLFM 72311
RADIO SHACK CASSETTE DE
018959 000 A 723118008 11350723111032 03/01/98 P SLFM 72311
CABINETS 7' WOOD
018960 000 A 723118009 11350723111032 03/01/98 P SLFM 72311
IOMEGA ZIP 100 ZIP DRIVE
018961 000 A 723118010 11350723111032 03/01/98 P SLFM 72311
NAKAJIMA AE-710 TYPEWRIT
018964 000 A 723118013 11350723111032 03/01/98 P SLFM 72311
RACK 2' PORTABLE
018965 000 A 723118014 11350723111032 03/01/98 P SLFM 72311
RACK 2 FT
018966 000 A 723118015 11350723111032 03/01/98 P SLFM 72311
RACK 2' PORTABLE
018967 000 A 723118016 11350723111032 03/01/98 P SLFM 72311
2 FURMAN HR-2 2 CH HEADP
018969 000 A 723118018 11350723111032 03/01/98 P SLFM 72311
SHARP 10" TV
018970 000 A 723118019 11350723111032 03/01/98 P SLFM 72311
OPTIMUS BOOMBOX
018971 000 A 723118020 11350723111032 03/01/98 P SLFM 72311
SYMETRIX A-220 STEREO RE
018972 000 A 723118021 11350723111032 03/01/98 P SLFM 72311
TEKNIKA SPEAKER
018973 000 A 723118022 11350723111032 03/01/98 P SLFM 72311
SENCORE AUTOMATIC TRNSI
018974 000 A 723118023 11350723111032 03/01/98 P SLFM 72311
RADIO SHACK FREQUENCY C
018975 000 A 723118024 11350723111032 03/01/98 P SLFM 72311
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
September 16, 1999 Page 2
10:31 AM
Clear Channel Metroplex, Inc.
FILE LISTING REPORT
WODE-FM
- --------------------------------------------------------------------------------------------------------------------
SYS No Ext A Co Asset No Desc Location CI G/L Asset Acct In-Svc P Dep Department Vendor/Mfg Disposal Acquired
C No Date T Meth Date Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
RADIO SYSTEMS 2 X 8 ADA
018976 000 A 723118025 11350723111032 03/01/98 P SLFM 72311
TRIPPLITE PR-35 POWER CO
018977 000 A 723118026 11350723111032 03/01/98 P SLFM 72311
3 ULTIMATE TELESCOPING
018978 000 A 723118027 11350723111032 03/01/98 P SLFM 72311
RADIO SYSTEMS 2 X 8 ADA
018979 000 A 723118028 11350723111032 03/01/98 P SLFM 72311
CITIZEN GSX-190 DOT MATR
018980 000 A 723118029 11350723111032 03/01/98 P SLFM 72311
JBL CONTROL I SPEAKER
018981 000 A 723118030 11350723111032 03/01/98 P SLFM 72311
CUSTOM DESK, WOOD, LARG
018982 000 A 723118031 11350723111032 03/01/98 P SLFM 72311
TRIPPLITE PR-30 POWER CO
018983 000 A 723118032 11350723111032 03/01/98 P SLFM 72311
ATI DA208 2 X 4 ADA
018984 000 A 723118033 11350723111032 03/01/98 P SLFM 72311
DBX 900 SERIES MAINFRAME
018985 000 A 723118034 11350723111032 03/01/98 P SLFM 72311
SHURE SM58 MIC
018986 000 A 723118035 11350723111032 03/01/98 P SLFM 72311
SHURE SM58 MIC
018987 000 A 723118036 11350723111032 03/01/98 P SLFM 72311
2 YAMAHA S112111 SPEAKER
018988 000 A 723118037 11350723111032 03/01/98 P SLFM 72311
2 YAMAHA 5112111 SPEAKE
018989 000 A 723118038 11350723111032 03/01/98 P SLFM 72311
CROWN POWER BASE STEREO
018990 000 A 723118039 11350723111032 03/01/98 P SLFM 72311
CROWN PS-200 2 CH AMP
018991 000 A 723118040 11350723111032 03/01/98 P SLFM 72311
CROWN POWER BASE 1 STERE
018992 000 A 723118041 11350723111032 03/01/98 P SLFM 72311
CROWN POWERBASE-1 STEREO
018993 000 A 723118042 11350723111032 03/01/98 P SLFM 72311
CELLULAR ONE CELL PHONE
018994 000 A 723118043 11350723111032 03/01/98 P SLFM 72311
SHURE M267 3 CH ST MIXER
018995 000 A 723118044 11350723111032 03/01/98 P SLFM 72311
EXCALIBAR HC-I HYBRID
018996 000 A 723118045 11350723111032 03/01/98 P SLFM 72311
BE 904-9150 4 CH SATELLI
018997 000 A 723118046 11350723111032 03/01/98 P SLFM 72311
DBX 942 NOISE REDUCTION
018998 000 A 723118047 11350723111032 03/01/98 P SLFM 72311
OPTIMUS SCP-31 CASSETTE
018999 000 A 723118048 11350723111032 03/01/98 P SLFM 72311
DBX 941A NOISE REDUCTION
019000 000 A 723118049 11350723111032 03/01/98 P SLFM 72311
EV RE-20 MIC
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
September 16, 1999 Page
10:31 AM Clear Channel Metroplex, Inc.
FILE LISTING REPORT
- -----------------------------------------------------------------------------------------------------------------------------------
SYS No Ext A Co Asset No Desc Location CI G/L Asset Acct In-Svc P Dep Department Vendor/Mfg Disposal Acquired
C No Date T Meth Date Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
019001 000 A 723118050 11350723111032 03/01/98 P SLFM 72311
GENTNER HYBRID CONTROLL
019002 000 A 723118051 113S0723111032 03/01/98 P SLFM 72311
GEMINI CD-4700 CD PLAYER
019003 000 A 723118052 11350723111032 03/01/98 P SLFM 72311
GENTNER HYBRID CONTROLL
019004 000 A 723118053 11350723111032 03/01/98 P SLFM 72311
GEMINI CD-4700 CD PLAYER
019005 000 A 723118054 11350723111032 03/01/98 P SLFM 72311
DENON DRW-660 DUAL CASSE
019006 000 A 723118055 11350723111032 03/01/98 P SLFM 72311
2 CHAIRS SECRETARIAL
019007 000 A 723118056 11350723111032 03/01/98 P SLFM 72311
RADIO SHACK 5 CH MIXER
019008 000 A 723118057 11350723111032 03/01/98 P SLFM 72311
2 EV RE-20 MICROWAVES
019009 000 A 723118058 11350723111032 03/01/98 P SLFM 72311
SENCORE FC45 FREQUENCY C
019010 000 A 723118059 11350723111032 03/01/98 P SLFM 72311
CUSTOM REMOTE AM XMTR M
019011 000 A 723118060 11350723111032 03/01/98 P SLFM 72311
RACK 7'
019012 000 A 723118061 11350723111032 03/01/98 P SLFM 72311
RACK 5'
019013 000 A 723118062 11350723111032 03/01/98 P SLFM 72311
FOSTEX DMT-8VL 8 CH HD R
019014 000 A 723118063 11350723111032 03/01/98 P SLFM 72311
FOSTEX DMT-8VL 8 CH HD R
019015 000 A 723118064 11350723111032 03/01/98 P SLFM 72311
PATCH BAY 1 X 24
019016 000 A 723118065 11350723111032 03/0l/98 P SLFM 72311
PATCH BAY 2 X 24
019017 000 A 723118066 11350723111032 03/01/98 P SLFM 72311
PATCH BAY 2 X 24
019018 000 A 723118067 11350723111032 03/01/98 P SLFM 72311
PATCH BAY 2 X 24
019019 000 A 723118068 11350723111032 03/01/98 P SLFM 72311
2 JBL CONTROL 5 SPEAKERS
019020 000 A 723118069 11350723111032 03/01/98 P SLFM 72311
2 TRIPLITE UPS, SMALL
019021 000 A 723118070 11350723111032 03/01/98 P SLFM 72311
2 FOSTEX RM765 SPEAKERS
019022 000 A 723118071 11350723111032 03/01/98 P SLFM 72311
2 JBL SPEAKERS
019023 000 A 723118072 11350723111032 03/01/98 P SLFM 72311
2 ANTENNAS 6 ELEMENT YA
019024 000 A 723118073 11350723111032 03/01/98 P SLFM 72311
2 EV SENTRY 100A SPEAKER
019025 000 A 723118074 11350723111032 03/01/98 P SLFM 72311
BK 1474 30 MHS OSCOPE
019026 000 A 723118075 11350723111032 03/01/98 P SLFM 72311
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
September 16, 1999 Page
10:31 AM Clear Channel Metroplex, Inc.
FILE LISTING REPORT
- -----------------------------------------------------------------------------------------------------------------------------------
SYS No Ext A Co Asset No Desc Location CI G/L Asset Acct In-Svc P Dep Department Vendor/Mfg Disposal Acquired
C No Date T Meth Date Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
2 SHURE SM7 MICS
019027 000 A 723118076 11350723111032 03/01/98 P SLFM 72311
TECHNICS SL-1200MK2 TURN
019028 000 A 723118077 11350723111032 03/01/98 P SLFM 72311
4 SHELVES 3' X 4' CART
019029 000 A 723118078 11350723111032 03/01/98 P SLFM 72311
DBX 286A MIC PROCESSOR
019030 000 A 723118079 11350723111032 03/01/98 P SLFM 72311
DBX 286A MIC PROCESSOR
019031 000 A 723118080 11350723111032 03/01/98 P SLFM 72311
TASCAN 202MKII DUAL CASS
019032 000 A 723118081 11350723111032 03/01/98 P SLFM 72311
BIAMP 2-CH GRAPHIC EQUA
019033 000 A 723118082 11350723111032 03/01/98 P SLFM 72311
2 DBX 942A NOISE REDUCTI
019034 000 A 723118083 11350723111032 03/01/98 P SLFM 72311
2 EV RE-20 MICS
019035 000 A 723118084 11350723111032 03/01/98 P SLFM 72311
2 DBX 903 COMP/LIMS
019036 000 A 723118085 11350723111032 03/01/98 P SLFM 72311
COMPUTER 486 W/SVGA
019037 000 A 723118086 11350723111032 03/01/98 P SLFM 72311
SPECTRA SONICS 610 COMPR
019038 000 A 723118087 11350723111032 03/01/98 P SLFM 72311
ORBAN 622B 2 CH PARAMETR
019039 000 A 723118088 11350723111032 03/01/98 P SLFM 72311
CUSTOM COMP/LIM
019040 000 A 723118089 11350723111032 03/01/98 P SLFM 72311
2 PATCH BAYS I X 24
019041 000 A 723118090 11350723111032 03/01/98 P SLFM 72311
PI AG-51 AUDIO GENERATOR
019042 000 A 723118091 11350723111032 03/01/98 P SLFM 72311
VIRTEX STARGUIDE II SATE
019043 000 A 723118092 11350723111032 O3/01/98 P SLFM 72311
PI AA-51 AUDIO ANALYZER
019044 000 A 723118093 11350723111032 03/01/98 P SLFM 72311
REVOX B77MKIT 2 CH REEL-
019045 000 A 723118094 11350723111032 03/01/98 P SLFM 72311
OTARI MX-5050 2 CH REEL-
019046 000 A 723118095 11350723111032 03/01/98 P SLFM 72311
REVOX B226 CD PLAYER
019047 000 A 723118096 11350723111032 03/01/98 P SLFM 72311
DBX 1066 2 CH COMPRESSOR
019048 000 A 723118097 11350723111032 03/01/98 P SLFM 72311
SONY CDP-90 CD PLAYER
019049 000 A 723118098 11350723111032 03/01/98 P SLFM 72311
OTARI MX-5050 2 CH REEL-
019050 000 A 723118099 11350723111032 03/01/98 P SLFM 72311
REVOX B77MKII 2 CH REEL-
019051 000 A 723118100 11350723111032 03/01/98 P SLFM 72311
DBX 166A COMP/LIM
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
September 16, 1999 Page
10:31 AM Clear Channel Metroplex, Inc.
FILE LISTING REPORT
- -----------------------------------------------------------------------------------------------------------------------------------
SYS No Ext A Co Asset No Desc Location CI G/L Asset Acct In-Svc P Dep Department Vendor/Mfg Disposal Acquired
C No Date T Meth Date Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
019052 000 A 723118101 11350723111032 03/01/98 P SLFM 72311
OTARI MX-5050 2 CH REEL-
0 19053 000 A 723118102 11350723111032 03/01/98 P SLFM 72311
CUSTOM CONSOLE, WOOD, S
019054 000 A 723118103 11350723111032 03/01/98 P SLFM 72311
CUSTOM CONSOLE, WOOO, SM
0 19055 000 A 723118104 11350723111032 03/01/98 P SLFM 72311
SCIENTIFIC ATLANTA 7300
019056 000 A 723118105 11350723111032 03/01/98 P SLFM 72311
EVENTIDE H3000B ULTRA HA
019057 000 A 723118106 11350723111032 03/01/98 P SLFM 72311
MISC TOOLS
019058 000 A 723118107 11350723111032 03/01/98 P SLFM 72311
MARTI RPT-30 RPU XMTR W/
019059 000 A 723118108 11350723111032 03/01/98 P SLFM 72311
MARTI RPT-30 RPU XMTR
019060 000 A 723118109 11350723111032 03/01/98 P SLFM 72311
MARTI SRPT-40 RPU XMTR
019061 000 A 723118110 11350723111032 03/01/98 P SLFM 72311
MARTI RPT-15 RPU XMTR
019062 000 A 723118111 11350723111032 03/01/98 F SLFM 72311
ALESIS ADAT 8 TRACK VHS
019063 000 A 723118112 11350723111032 03/01/98 P SLFM 72311
WEGENER DR185 QPSK DIGIT
019064 000 A 723118113 11350723111032 03/01/98 P SLFM 72311
FOSTEX D-5 DAT RECORDER
019065 000 A 723118114 11350723111032 03/01/98 P SLFM 72311
FOSTEX D-5 DAT RECORDER
019066 000 A 723118115 11350723111032 03/01/98 P SLFM 72311
SONY MX-16 8 CH MIC MIXE
019067 000 A 723118116 11350723111032 03/01/98 P SLFM 72311
MISC PARTS, LARGE QUANT
019068 000 A 723118117 11350723111032 03/01/98 P SLFM 72311
ALESIS MICROVERB 4 DIGIT
019069 000 A 723118118 11350723111032 03/01/98 P SLFM 72311
SAGE EAS ENDEC EAS SYSTE
019070 000 A 723118119 11350723111032 03/01/98 P SLFM 72311
SAGE EAS ENDEC EAS SYSTE
019071 000 A 723118120 11350723111032 03/01/98 P SLFM 72311
4 PATCH BAYS 1 X 24
019072 000 A 723118121 11350723111032 03/01/98 P SLFM 72311
GATES 5 CH AUDIO CONSOL
019073 000 A 723118122 11350723111032 03/01/98 P SLFM 72311
2 DENON DN-950A /951FA C
019075 000 A 723118124 11350723111032 03/01/98 P SLFM 72311
2 DENON DN-950FA CD PLAY
019076 000 A 723118125 11350723111032 03/01/98 P SLFM 72311
PYRAMID PM-2700 4 CH ST
019077 000 A 723118126 11350723111032 03/01/98 P SLFM 72311
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
September 16, 1999 Page
10:31 AM Clear Channel Metroplex, Inc.
FILE LISTING REPORT
- -----------------------------------------------------------------------------------------------------------------------------------
SYS No Ext A Co Asset No Desc Location CI G/L Asset Acct In-Svc P Dep Department Vendor/Mfg Disposal Acquired
C No Date T Meth Date Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
PYRAMID PM-2700 5 CH MIX
019078 000 A 723118127 11350723111032 03/01/98 P SLFM 72311
3 DENON DN-951 FA CD PLA
019079 000 A 723118128 11350723111032 03/01/98 P SLFM 72311
2 SHURE LX WIRELESS MICS
019080 000 A 723118129 11350723111032 03/01/98 P SLFM 72311
AUDIO ARTS A-50 8 CH AUD
019081 000 A 723118130 11350723111032 03/01/98 P SLFM 72311
AUDIO ARTS A-50 12 CH AU
019082 000 A 723118131 11350723111032 03/01/98 P SLFM 72311
MCCURDY 12 CH AUDIO CON
019083 000 A 723118132 11350723111032 03/01/98 P SLFM 72311
360 SYSTEMS SHORTCUT HD
019084 000 A 723118133 11350723111032 03/01/98 P SLFM 72311
AUDIO VAULT AVR SERVER
019214 000 A 723118263 11350723111032 07/01/98 P SLFM 72311
PENTIUM 233 MMX COMPUTER
025145 000 A 723118266 11350723111032 11/01/98 P SLFM 72311
17" COLOR NONITOR
---------
019085 000 A 723118134 11370723111032 03/01/98 P SLFM 72311
FILE ROLL AROUND
019086 000 A 723118135 11370723111032 03/01/98 P SLFM 72311
FILE ROLL AROUND
019087 000 A 723118136 11370723111032 03/01/98 P SLFM 72311
TABLE FOLDING, PORTABLE
019088 000 A 723118137 11370723111032 03/01/98 P SLFM 72311
FILE 2 DRAWER
019089 000 A 723118138 11370723111032 03/01/98 P SLFM 72311
FILE 2 DRAWER
019090 000 A 723118139 11370723111032 03/01/98 P SLFM 72311
FILE 2 DRAWER
019091 000 A 723118140 11370723111032 03/01/98 P SLFM 72311
FILE 2 DRAWER
019092 000 A 723118141 11370723111032 03/01/98 P SLFM 72311
STAND MICROWAVE
019093 000 A 723118142 11370723111032 03/01/98 P SLFM 72311
TABLE METAL, SHORT, SMA
019095 000 A 723118144 11370723111032 03/01/98 P SLFM 72311
TABLE FAX STAND
019096 000 A 723118145 11370723111032 03/01/98 P SLFM 72311
TABLE PRINTER STAND
019097 000 A 723118146 11370723111032 03/01/98 P SLFM 72311
CABINET 7' METAL
019098 000 A 723118147 11370723111032 03/01/98 P SLFM 72311
CHAIR REGULAR
019099 000 A 723118148 11370723111032 03/01/98 P SLFM 72311
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
September 16, 1999 Page
10:31 AM Clear Channel Metroplex, Inc.
FILE LISTING REPORT
- -----------------------------------------------------------------------------------------------------------------------------------
SYS No Ext A Co Asset No Desc Location CI G/L Asset Acct In-Svc P Dep Department Vendor/Mfg Disposal Acquired
C No Date T Meth Date Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
CABINETS 6' METAL
019101 000 A 723118150 11370723111032 03/01/98 P SLFM 72311
STAND PRINTER STAND
019102 000 A 723118151 11370723111032 03/01/98 P SLFM 72311
BIN METAL, MEDIUM
019103 000 A 723118152 11370723111032 03/01/96 P SLFM 72311
TABLE TYPE STAND
019104 000 A 723118153 11370723111032 03/01/98 P SLFM 72311
CHAIR REGULAR
019105 000 A 723118154 11370723111032 03/01/98 P SLFM 72311
TABLE GLASS W/LAMP, SMA
019106 000 A 723118155 11370723111032 03/01/98 P SLFM 72311
TABLE LARGE, METAL
019107 000 A 723118156 11370723111032 03/01/98 P SLFM 72311
SHELVES 5' WOOD
019108 000 A 723118157 11370723111032 03/01/98 P SLFM 72311
FILE 4 DRAWER
019109 000 A 723118158 11370723111032 03/01/98 P SLFM 72311
FILE 4 DRAWER
019110 000 A 723118159 11370723111032 03/01/98 P SLFM 72311
FILE 4 DRAWER
019111 000 A 723118160 11370723111032 03/01/98 P SLFM 72311
FILE LATERAL, 2 DRAWER
019112 000 A 723118161 11370723111032 03/01/98 P SLFM 72311
FILE LATERAL, 4 DRAWER
019113 000 A 723118162 11370723111032 03/01/98 P SLFM 72311
FILE LATERAL, 4 DRAWER
019114 000 A 723118163 11370723111032 03/01/98 P SLFM 72311
DESK METAL
019115 000 A 723118164 11370723111032 03/01/98 P SLFM 72311
DESK METAL
019116 000 A 723118165 11370723111032 03/01/98 P SLFM 72311
DESK METAL
019117 000 A 723118166 11370723111032 03/01/98 P SLFM 72311
2 CHAIRS REGULAR
019118 000 A 723118167 11370723111032 03/01/98 P SLFM 72311
2 CHAIRS REGULAR
019119 000 A 723118168 11370723111032 03/01/98 P SLFM 72311
2 CHAIRS REGULAR
019120 000 A 723118169 11370723111032 03/01/98 P SLFM 72311
CHAIR SECRETARIAL
019121 000 A 723118170 11370723111032 03/01/98 P SLFM 72311
CHAIR SECRETARIAL
019122 000 A 723118171 11370723111032 03/01/98 P SLFM 72311
2 FILES 4 DRAWER
019123 000 A 723118172 11370723111032 03/01/98 P SLFM 72311
GB PAPER SHREDDER
019124 000 A 723118173 11370723111032 03/01/98 P SLFM 72311
DESK METAL W/RETURN
019125 000 A 723118174 11370723111032 03/01/98 P SLFM 72311
MAGNAVOX 19" TV
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
September 16, 1999 Page
10:31 AM Clear Channel Metroplex, Inc.
FILE LISTING REPORT
- -----------------------------------------------------------------------------------------------------------------------------------
SYS No Ext A Co Asset No Desc Location CI G/L Asset Acct In-Svc P Dep Department Vendor/Mfg Disposal Acquired
C No Date T Meth Date Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
019126 000 A 723118175 11370723111032 03/01/98 P SLFM 72311
DESK COMPUTER WORK CENT
019127 000 A 723118176 11370723111032 03/01/98 P SLFM 72311
DESK METAL W/RETURN
019128 000 A 723118177 11370723111032 03/01/98 P SLFM 72311
DESK METAL W/CREDENZA
019129 000 A 723118178 11370723111032 03/01/98 P SLFM 72311
DESK WOOD
019130 000 A 723118179 11370723111032 03/01/98 P SLFM 72311
3 FILES 2 DRAWER
019131 000 A 723118180 11370723111032 03/01/98 P SLFM 72311
PANASONIC VCR
019132 000 A 723118181 11370723111032 03/01/98 P SLFM 72311
MAYTAG FRIG. LARGE
019133 000 A 723118182 11370723111032 03/01/98 P SLFM 72311
PANASONIC MICROWAVE
019134 000 A 723118183 11370723111032 03/01/98 P SLFM 72311
DESK WOOD. LARGE
019136 000 A 723118185 11370723111032 03/01/98 P SLFM 72311
3 SHELVES 7' METAL
019137 000 A 723118186 11370723111032 03/01/98 P SLFM 72311
SENTRY 1150 SAFE. SMALL
019139 000 A 723118188 11370723111032 03/01/98 P SLFM 72311
COUCH CLOTH
019140 000 A 723118189 11370723111032 03/01/98 P SLFM 72311
COUCH CLOTH
019141 000 A 723118190 11370723111032 03/01/98 P SLFM 72311
4 CHAIRS REGULAR
019143 000 A 723118192 11370723111032 03/01/98 P SLFM 72311
2 CHAIRS SECRETARIAL
019144 000 A 723118193 11370723111032 03/01/98 P SLFM 72311
2 CHAIRS SECRETARIAL
019145 000 A 723118194 11370723111032 03/01/98 P SLFM 72311
2 CHAIRS SECRETARIAL
019146 000 A 723118195 11370723111032 03/01/98 P SLFM 72311
DESK RECEPTIONIST, LARG
019147 000 A 723118196 11370723111032 03/01/98 P SLFM 72311
TABLE CONFERENCE, 8'
019148 000 A 723118197 11370723111032 03/01/98 P SLFM 72311
3 CHAIRS SECRETARIAL
019149 000 A 723118198 11370723111032 03/01/98 P SLFM 72311
3 CHAIRS SECRETARIAL
019150 000 A 723118199 11370723111032 03/01/98 P SLFM 72311
3 CHAIRS SECRETARIAL
019164 000 A 723118213 11370723111032 03/01/98 P SLFM 72311
6 DIVIDERS 5' X 6'
019168 000 A 723118217 11370723111032 03/01/98 P SLFM 72311
10 DESKS METAL
019171 000 A 723118220 11370723111032 03/01/98 P SLFM 72311
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
September 16, 1999 Page 9
10:31 AM Clear Channel Metroplex, Inc.
FILE LISTING REPORT
- -----------------------------------------------------------------------------------------------------------------------------------
SYS No Ext A Co Asset No Desc Location CI G/L Asset Acct In-Svc P Dep Department Vendor/Mfg Disposal Acquired
C No Date T Meth Date Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
10 CHAIRS SECRETARIAL
019176 000 A 723118225 11370723111032 03/01/98 P SLFM 72311
10 CHAIRS EXECUTIVE
--------
Type: 137 Count= 67 32035.00
018952 000 A 723118001 11380723111032 02/01/98 P SLFM 72311
2-PRECISION COMPTER SYST
019100 000 A 723118149 11380723111032 03/01/98 P SLFM 72311
HP SCANNER
019135 000 A 723118184 11380723111032 03/01/98 P SLFM 72311
HP DJ 660C DESKJET PRINT
019142 000 A 723118191 11380723111032 03/01/98 P SLFM 72311
APC SMARTUPS 1000 UPS
019151 000 A 723118200 11380723111032 03/01/98 P SLFM 72311
HP LJ 5L LASER PRINTER
019157 000 A 723118206 11380723111032 03/01/98 P SLFM 72311
HP LJ 4L LASER PRINTER
019158 000 A 723118207 11380723111032 03/01/98 P SLFM 72311
HP LJ IIP LASER PRINTER
019162 000 A 723118211 11380723111032 03/01/98 P SLFM 72311
CANON LBP-43OW LASER PRI
019165 000 A 723118214 11380723111032 03/01/98 P SLFM 72311
COMPUTER 586 W/SVGA
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
September 16, 1999 Page 10
10:31 AM Clear Channel Metroplex, Inc.
FILE LISTING REPORT
- -----------------------------------------------------------------------------------------------------------------------------------
SYS No Ext A Co Asset No Desc Location CI G/L Asset Acct In-Svc P Dep Department Vendor/Mfg Disposal Acquired
C No Date T Meth Date Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
019173 000 A 723118222 11380723111032 03/01/98 P SLFM 72311
CANON 7000 LASER FAX
019174 000 A 723118223 11380723111032 03/01/98 P SLFM 72311
CANON 5500 LASER FAX
019175 000 A 723118224 11380723111032 03/01/98 P SLFM 72311
CANON 5500 LASER FAX
019210 000 A 723118259 11380723111032 03/03/98 P SLFM 72311
HP 4000 SE PRINTER
019211 000 A 723118260 11380723111032 04/01/98 P SLFM 72311
2 PENTIUM 200 COMPUTER
019212 000 A 723118261 11380723111032 05/01/98 P SLFM 72311
HP 4000 SE PRINTER
019213 000 A 723118262 11380723111032 05/01/98 P SLFM 72311
NETWORK FILE SERVER
025143 000 A 723118264 11380723111032 11/01/98 P SLFM 72311
DELL COMPUTER
025522 000 A 723119001 11380723111032 03/01/99 P SLFM 72311
2 DELL P6350 COMPUTERS
025524 000 A 723119002 11380723111032 03/01/99 P SLFM 72311
WIN NT 4.0 SERVER
025530 000 A 723119003 11380723111032 03/01/99 P SLFM 72311
NETWORK CABLE RUNS
025584 000 A 723119006 11380723111032 04/01/99 P SLFM 72311
DELL P6350 G1 COMPUTER
025585 000 A 723119007 11380723111032 04/01/99 P SLFM 72311
DELL P6350 G1 COMPUTER
025586 000 A 723119008 11380723111032 04/01/99 P SLFM 72311
DELL P6350 G1 COMPUTER
025587 000 A 723119009 11380723111032 04/01/99 P SLFM 72311
DELL P6400 GX1p/T COMPUTER
025589 000 A 723119005 11380723111032 04/01/99 P SLFM 72311
HP LASERJET 4000 PRINTER
027675 000 A 723119010 11380723111032 06/01/99 P SLFM 72311
Special Configuration-Del 450 PII
027676 000 A 723119011 11380723111032 06/01/99 P SLFM 72311
2-Dell P6350 G1
--------
019178 000 A 723118227 11400723111032 03/01/98 P SLFM 72311
PATCH BAY 2 X 24
019179 000 A 723118228 11400723111032 03/01/98 P SLFM 72311
PI AM-19D(210) ANTENNA M
019180 000 A 723118229 11400723111032 03/01/98 P SLFM 72311
SAGE EAS ENDEC RECEIVER
019181 000 A 723118230 11400723111032 03/01/98 P SLFM 72311
2 RACKS 7'
019182 000 A 723118231 11400723111032 03/01/98 P SLFM 72311
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
September 16, 1999 Page
10:31 AM Clear Channel Metroplex, Inc.
FILE LISTING REPORT
- -----------------------------------------------------------------------------------------------------------------------------------
SYS No Ext A Co Asset No Desc Location CI G/L Asset Acct In-Svc P Dep Department Vendor/Mfg Disposal Acquired
C No Date T Meth Date Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
DBX 290 STEREO REVERB
019183 000 A 723118232 11400723111032 03/01/98 P SLFM 72311
BELAR STEREO MONITOR
019184 000 A 723118233 11400723111032 03/01/98 P SLFM 72311
APHEX COMPELLER 300 2 CH
019185 000 A 723118234 11400723111032 03/01/98 P SLFM 72311
BELAR FM MONITOR
019186 000 A 723118235 11400723111032 03/01/98 P SLFM 72311
BELAR SCA MONITOR
019188 000 A 723118237 11400723111032 03/01/98 P SLFM 72311
BELAR AM MONITOR
019189 000 A 723118238 11400723111032 03/01/98 P SLFM 72311
GREGG LAB AUDIO PROCESS
019190 000 A 723118239 11400723111032 03/01/98 P SLFM 72311
ELECTRO IMPULSE DPTC 20K
019191 000 A 723118240 11400723111032 03/01/98 P SLFM 72311
HARRIS MSP95 FM AUDIO CP
019192 000 A 723118241 11400723111032 03/01/98 P SLFM 72311
ORBAN B100A AUDIO PROCES
019193 000 A 723118242 11400723111032 03/01/98 P SLFM 72311
3 GENTNER COMP/LIMS
019194 000 A 723118243 11400723111032 03/01/98 P SLFM 72311
2 MARTI BR-10 RPU RECEIV
019195 000 A 723118244 11400723111032 03/01/98 P SLFM 72311
TOWER 40' SMALL
019196 000 A 723118245 11400723111032 03/01/98 P SLFM 72311
HELIAX 3" FOR AM & 100
019197 000 A 723118246 11400723111032 03/01/98 P SLFM 72311
HELIAX 3" FOR FM & 100
019198 000 A 723118247 11400723111032 03/01/98 P SLFM 72311
HARRIS THE-1 FM EXCITER
019199 000 A 723118248 11400723111032 03/01/98 P SLFM 72311
SHIVELEY 6 BAY FM ANTEN
019200 000 A 723118249 11400723111032 03/01/98 P SLFM 72311
GATES FMC-6 6 BAY FM ANT
019201 000 A 72311 8250 11400723111032 03/01/98 P SLFM 72311
GATES BC-IH I KW AM XMTR
019202 000 A 723118251 11400723111032 03/01/98 P SLFM 72311
HARRIS GATES ONE I KW AM
019203 000 A 723118252 11400723111032 03/01/98 P SLFM 72311
ANTENNA 50M AM ANTENNA
019204 000 A 723118253 11400723111032 03/01/98 P SLFM 72311
HARRIS HT20CD 2OKW FM XM
019205 000 A 723118254 11400723111032 03/01/98 P SLFM 72311
ANTENNA 131.4M FM TOWER
019206 000 A 723118255 11400723111032 03/01/98 P SLFM 72311
GATES FM 20H3 20 KW FM X
025144 000 A 723118265 11400723111032 11/01/98 P SLFM 72311
NEW GUY WIRES
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
September 16, 1999 Page
10:31 AM Clear Channel Metroplex, Inc.
FILE LISTING REPORT
- -----------------------------------------------------------------------------------------------------------------------------------
SYS No Ext A Co Asset No Desc Location CI G/L Asset Acct In-Svc P Dep Department Vendor/Mfg Disposal Acquired
C No Date T Meth Date Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
019207 000 A 723118256 11430723111032 03/01/98 P SLFM 72311
CHEVROLET BLAZER 1996
019208 000 A 723118257 11430723111032 03/01/98 P SLFM 72311
2 CHEVROLET ASTRO VANS -
025580 000 A 723119004 11490723111032 04/01/99 P SLFM 72311
ELECTRICAL/AIR CONDITIONING -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
September 16, 1999 Page
10:31 AM Clear Channel Metroplex, Inc.
FILE LISTING REPORT WEEX-AM
- -----------------------------------------------------------------------------------------------------------------------------------
SYS No Ext A Co Asset No Desc Location CI G/L Asset Acct In-Svc P Dep Department Vendor/Mfg Disposal Acquired
C No Date T Meth Date Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Book: Internal FY: December
---------------------------
019215 000 A 723128002 11370723121032 03/01/98 P SLM 72312
TOUCAN MASCOT CUSTOM
Grand Total Count = 1
</TABLE>
<PAGE>
Schedule 1.1(c)
Station Contracts
-----------------
Some or all of the contracts listed below are used in the operation of
multiple stations. Prior to Closing, Seller may designate any such shared
contract as an Excluded Asset. The rights and obligations under shared contracts
not so excluded will be equitably allocated among Seller, Buyer and (if
designated by Seller) one or more third parties in a manner determined by Seller
in accordance with the equitable allocation principles set forth below.
Unless designated by Seller, such shared contracts will not be assigned to
Buyer but, (whether or not assigned) Buyer will cooperate with Seller and (any
third party designated by Seller) in such allocation and the Station Contracts
(and Assumed Obligations) will include Buyer's allocated portion of obligations
under such shared contracts (without need for further action and whether such
allocation occurs before or after Closing). If designated by Seller, such
allocation will occur by termination of the shared contract and execution of new
contracts.
The equitable allocation principles are as follows: (i) any allocation set
forth herein shall control; (ii) if none, then any allocation set forth in the
shared contract shall control; (iii) if none, then industry custom shall be
applied; (iv) if none, then quantifiable proportionate benefit shall be applied;
and (v) if not quantifiable, then reasonable accommodation.
Contracts marked below with an asterisk require third party notice or
consent to be assigned. Any written employment agreements of employees that
Seller elects to retain pursuant to Section 10.4 shall be Excluded Assets.
1. All Time Sales Agreements
2. All Trade Agreements
3. The Real Property Leases (if any) described on Schedule 1.1(f)
4. Any other contracts, agreements or leases designated by Seller and made in
the ordinary course of business that are used in the operation of any
Station.
5. Any Arbitron Agreements and National Representation Agreements that apply
to the Stations (if any such contracts apply to the Stations, then Buyer
shall enter agreements at Closing for Station's/Stations' remaining
obligations under Seller's agreements)
6. The following:
WEEX(AM
- -------
* 1. Local Station Per Program Radio Licenses Agreement with ASCAP
<PAGE>
* 2. BMI Single Station Radio Per Program Agreement
* 3. Seasonal New York Yankees Baseball Broadcasting Agreement with Madison
Square Garden Network
4. Program License Agreement with Mutual Broadcasting System ("Week in
Review")
5. Program License Agreement with Westwood One Entertainment ("Jim
Bohannon Show")
6. Program License Agreement with Westwood One Entertainment ("On the
Garden Line with Jerry Baker")
7. Program License Agreement with Westwood One Entertainment ("Ask the
Handyman with Glen Haege")
* 8. Affiliation Agreement with USA Radio Network and TBC Media Service
(Daybreak USA)
* 9. Affiliation Agreement with USA Radio Network and TBC Media Service
(USA Radio Network Top of the Hour News)
* 10. Affiliation Agreement with USA Radio Network and TBC Media Service
(USA Radio Programming)
* 11. Program License Agreement with Westwood One Entertainment (G. Gordon
Liddy)
* 12. Program License Agreement with Westwood One Entertainment (Tom Leykis
Show)
* 13. Radio Program License Agreement with Echo Radio Productions, Inc.
("$ecret $ of Suces$")
14. WOR Radio Network Broadcast Agreement - Bob Grant with WOR Radio
Network ("The Bob Grant Show")
15. Radio Programming License Agreement with COX Radio, Inc. (Motley Fool)
16. Affiliation Agreement with Prosper Entertainment (The Movie Show on
Radio)
17. Agreement with SESAC, Inc. and Paterson Allentown Broadcasting
Corporation re: WIPI-AM
<PAGE>
18. Representation Agreement with Clear Channel Radio Sales
WODE-FM
- -------
1. Local Station Blanket Radio License Agreement with ASCAP
2. BMI Single Station Radio Blanket License Agreement
3. Premiere Mediabase 24/7 License Agreement with Premier Radio Networks,
Inc.
* 4. Licensing Agreement for "Rock & Roll's Greatest Hits" with ABC Radio
Network
* 5. Licensing Agreement for "American Gold" with ABC Radio Network
6. Westwood One Radio Networks Affiliation Agreement
7. JAM Productions Agreement with JAM Creative Productions, Inc. (license
for 10 cuts from the "Do It Again" jingle series)
* 8. Radio Computing Services, Inc. Software products License Agreement
9. Radio Advertising Bureau, Inc. Contract
10. Letter Agreement for consulting services provided by Patrick
Programming Services
11. Promosuite Contract with Broadcast Manager, Inc.
12. Hot Track Broadcast Agreement with Paul Dickson/Hot Tracks
* 13. Associated Press Agreement for Radio
14. SESAC, Inc. Radio Broadcasting Performance License
15. Representation Agreement with Clear Channel Radio Sales and Clear
Channel Communications
EMPLOYMENT AGREEMENTS
- ---------------------
WODE-FM/WEEX(AM)
- ----------------
1. Agreements with Michael A. Lotito in Sales
<PAGE>
2. Agreements with Frederick J. Milander, Jr. in Sales
3. Agreement with Brian K. Engler as Air Personality
4. Agreement with Dave M. Halperin as Chief Operator/Disc Jockey
5. Agreement with David M. Moore as Account Executive Sales Department
* 6. Agreement with Alicea Layne Ptak regarding job duties as Air
Personality
7. Agreement with David A. Worman regarding job duties in AM Operations
8. Agreement with Paul Glodfelter regarding job duties as Air Personality
WEEX(AM)
- --------
1. Agreement with John M. Johnston regarding job duties as WEEX Program
Director
WODE-FM
- -------
1. Agreement with Jason A. Causa in Sales
2. Agreement with Joseph R. Hafner, Jr. in Sales
3. Agreement with Maria L. Check regarding job duties as FM Personality
4. Agreement with Richard R. Mantz regarding job duties as Announcer-Air
Personality
5. Agreement with Karen E. Raughley regarding job duties as On-Air
Personality
6. Agreement with William Sheridan III regarding job duties as Program
Director
7. Agreement with Peggy Castranova in Sales
8. Agreement with Trisha Kroll in Sales
<PAGE>
Schedule 1.1(d)
Intangible Property
-------------------
WODE-FM
- -------
WODE
WEEX(AM)
- --------
WEEX
<PAGE>
Schedule 1.1(f)
Real Property
-------------
OWNED REAL ESTATE
- -----------------
WODE-FM/WEEX(AM)
- ----------------
1. Tower & Studio Site for both stations - by Special Warranty Deed for
property known as Northampton County Uniform parcel Identifier: Map
K9SE4, Block 14, Lot 8
REAL ESTATE CONTRACTS
- ---------------------
WODE-FM
- -------
1. Tower Space License Agreement for space on tower located at 300 East
Rock Road, Allentown, Pennsylvania
<PAGE>
Schedule 1.2(h)
Excluded Assets
---------------
Any assets or categories of assets identified as Excluded Assets on Schedule
1.1(b)
<PAGE>
ESCROW AGREEMENT
----------------
(Clear Channel/Nassau)
($6,000,000)
THIS ESCROW AGREEMENT (the "Agreement") is made as of February 29, 2000
among Clear Channel Broadcasting, Inc., a Nevada corporation ("Seller"), Nassau
Broadcasting Partners, L.P., a Delaware limited partnership ("Buyer"), and Bank
of America, a national banking association ("Escrow Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Seller and Buyer are parties to an Asset Purchase Agreement (the
"Purchase Agreement") of even date herewith pursuant to which Buyer is to
deposit funds with the Escrow Agent in connection with the purchase and sale of
certain radio broadcast stations.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and intending to be legally bound, Seller, Buyer and
Escrow Agent hereby agree as follows:
Section 1. Escrow Account and Deposit. The Escrow Agent has established, or
simultaneously with the execution hereof will establish, an account (the "Escrow
Account") into which Buyer has deposited, or simultaneously with the execution
hereof will deposit, Six Million Dollars ($6,000,000). Upon receipt thereof, the
Escrow Agent shall provide Buyer and Seller confirmation thereof, and shall hold
and disburse such deposit as set forth in this Agreement. Such deposit shall be
invested in the Bank of America Business Investment Account or a money market
fund investing solely in securities issued by the United States, as directed by
Buyer and Seller. Such deposit, as increased or decreased based upon such
investment results, is referred to herein as the "Deposit." For tax purposes,
interest and other income earned on the Deposit shall be reported as income of
Buyer, the Escrow Agent shall file a Form 1099 consistent with such treatment,
and Buyer shall provide Escrow Agent with executed Forms W-8 and W-9, as
requested by Escrow Agent.
Section 2. Release of Deposit by Escrow Agent. The Escrow Agent shall
promptly release all or a portion of the Deposit to Buyer or Seller, as the case
may be, upon the first to occur of the following circumstances:
(a) if the Escrow Agent receives written instructions from Seller
stating that Seller is entitled to the Deposit pursuant to the Purchase
Agreement and that Seller has delivered to Buyer a copy of such notice, and
directing the Escrow Agent to disburse the Deposit, then the Escrow Agent shall
disburse the Deposit in accordance with such instructions;
<PAGE>
(b) if the Escrow Agent receives joint written instructions from
Seller and Buyer directing the Escrow Agent to disburse the Deposit, then the
Escrow Agent shall disburse the Deposit in accordance with such instructions; or
(c) if the Escrow Agent receives a final order of a court of
competent jurisdiction authorizing the Escrow Agent to disburse the Deposit,
then the Escrow Agent shall disburse the Deposit in accordance with such order.
Section 3. Reliance by Escrow Agent. The Escrow Agent shall be entitled to
rely upon and act in accordance with any of: (a) written notice of Buyer
pursuant to Section 2(a) hereof, (b) the joint written instructions of Seller
and Buyer, and (c) a final order of a court of competent jurisdiction
authorizing the Escrow Agent to release the Deposit, or any portion thereof, to
Buyer or Seller.
Section 4. Conflicting Demands. If conflicting demands are made upon the
Escrow Agent, the Escrow Agent shall not be required to resolve such
controversy or take any action, but may await resolution of the controversy by
joint instructions from Seller and Buyer or by appropriate legal proceedings;
provided, however, that, notwithstanding the foregoing, if the Escrow Agent
receives written notice of Seller pursuant to Section 2(a), then Escrow Agent
shall disburse the Deposit in accordance with the instructions set forth therein
regardless of any conflicting demand, and in doing so Escrow Agent shall not
become liable in any way and shall be indemnified as provided in Section 5.
Section 5. Indemnification; Fees of Escrow Agent. Buyer and Seller shall
jointly and severally pay, and hold the Escrow Agent harmless against, all
costs, charges, damages and attorneys' fees which the Escrow Agent in good faith
may incur or suffer in connection with or arising out of this Agreement. The
Escrow Agent shall be entitled to a fee for services it renders hereunder in the
amount set forth on Schedule A attached hereto, which shall be paid one-half by
the Seller and one-half by Buyer.
Section 6. Rights and Duties of Escrow Agent.
(a) No assignment of the interest of any of the parties hereto shall
be binding upon the Escrow Agent unless and until written evidence of such
assignment in a form satisfactory to the Escrow Agent shall be filed with and
accepted by the Escrow Agent.
(b) The Escrow Agent may rely or act upon orders or directions signed
by the proper parties, or bearing a signature or signatures reasonably believed
by the Escrow Agent to be genuine.
(c) The Escrow Agent shall have no duties other than those expressly
imposed on it herein and shall not be liable for any act or omission except for
its own gross negligence or willful misconduct.
-2-
<PAGE>
(d) In the event that the Deposit or any proceeds thereof shall be
attached, garnished, or levied upon by an order of any court, or the delivery
thereof shall be stayed or enjoined by an order of court, or any order, judgment
or decree shall be made or entered by any court affecting the property deposited
under this Agreement, or any part thereof, the Escrow Agent is hereby expressly
authorized in its sole discretion to obey and comply with all writs, orders or
decrees so entered or issued, which it is advised by legal counsel of its own
choosing is binding upon it, whether with or without jurisdiction, and in case
the Escrow Agent obeys or complies with any such writ, order or decree it shall
not be liable to any of the parties hereto or to any other person, firm or
corporation, by reason of such compliance notwithstanding that such writ, order
or decree be subsequently reversed, modified, annulled, set aside or vacated.
(e) The Escrow Agent may resign by giving sixty (60) days written
notice of resignation, specifying the effective date thereof. Within thirty (30)
days after receiving the aforesaid notice, the Seller and Buyer agree to appoint
a successor escrow agent to which the Escrow Agent shall transfer the Deposit or
any proceeds thereof then held in escrow under this Agreement. If a successor
escrow agent has not been appointed and/or has not accepted such appointment by
the end of the 30-day period, the Escrow Agent may at its sole option: (i) apply
to a court of competent jurisdiction for the appointment of a successor escrow
agent, and the costs, expenses and reasonable attorneys' fees which are incurred
in connection with such a proceeding shall be paid one-half by the Seller and
one-half by Buyer, or (ii) continue to hold the Deposit until it receives an
order from a court of competent jurisdiction or joint written instructions of
Seller and Buyer directing the Escrow Agent to release the Deposit.
Section 7. Disputes. Except as provided in Section 4, in the event of any
disagreement between any of the parties resulting in conflicting or adverse
claims or demands being made to the Deposit, the Escrow Agent shall be entitled,
at its sole option, to refuse to comply with or recognize any such claims or
demands as long as the disagreement shall continue, and in doing so, Escrow
Agent shall not become liable in any way to any person for failure or refusal to
comply with such conflicting or adverse claims or demands, and its duties
hereunder with regard to such disputed Deposit shall be suspended until the
rights of the claimants have been fully adjudicated or the differences adjusted
between the parties and the Escrow Agent shall have been notified thereof in
writing signed by all parties interested. In the event the differences between
the parties with regard to the disputed Deposit have not been adjusted, and the
Escrow Agent has been so notified, within ten (10) days following receipt of
notice by Escrow Agent of conflicting or adverse claims or demands, Escrow Agent
may, but shall not be obligated to, interplead the disputed Deposit in court,
and thereupon Escrow Agent shall be fully and completely discharged of its
duties as Escrow Agent with regard to the Deposit. The parties shall be jointly
and severally liable to Escrow Agent for all fees and expenses, including legal
fees, incurred by Escrow Agent in exercising its rights.
Section 8. Notices. Any notice or other communication required or permitted
hereunder shall be deemed to have been sufficiently given when delivered
personally, by facsimile, recognized air courier, or registered or certified
mail, return receipt requested, addressed as follows:
-3-
<PAGE>
if to Seller: c/o Clear Channel Broadcasting, Inc.
200 Concord Plaza, Suite 600
San Antonio, Texas 78216
Attention: President
Facsimile: (210) 822-2299
with a copy (which shall not
constitute notice) to: Wiley, Rein & Fielding
1776 K Street, N.W.
Washington, D.C. 20006
Attention: Richard J. Bodorff, Esq.
Facsimile: (202) 719-7049
if to Buyer: Nassau Broadcasting Partners, L.P.
619 Alexander Road, Third Floor
Princeton, New Jersey 08540
Attention: Louis F. Mercatanti, Jr.
Facsimile: (609) 924-1584
with a copy (which shall not
constitute notice) to: Sterns and Weinroth
50 West State Street
P.O. Box 1298
Trenton, New Jersey 08607-1298
Attention: Mark Schorr, Esq.
Facsimile: (609) 392-7956
if to Escrow Agent: Bank of America
Private Banking
8300 Greensboro Drive
Third Floor
McLean, Virginia 22102
Attention: Susan B. Poliquin, Vice President
Facsimile No.: (703) 761-9203
or to such other address as may be specified by any party in a written notice to
the other parties.
Section 9. Governing Law. This Agreement shall be construed under the laws
of the District of Columbia.
Section 10. Waiver. This Agreement may be amended or modified, and any term
may be waived, only if such amendment, modification or waiver is in writing and
signed by all parties.
-4-
<PAGE>
Section 11. No Third Party Beneficiaries. This Agreement is a personal one,
the duty of the Escrow Agent being only to the parties hereto, their successors
or assigns, and to no other person whatsoever.
Section 12. Counterparts. This Agreement may be executed in separate
counterparts.
[SIGNATURE PAGE FOLLOWS]
849991
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<PAGE>
SIGNATURE PAGE TO ESCROW AGREEMENT
----------------------------------
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective duly authorized officers all as of the day and year
first above written.
SELLER: CLEAR CHANNEL BROADCASTING, INC.
By: /s/ Mark P. Mays
-----------------------------------------
Name: Mark P. Mays
Title: Pres.
BUYER: NASSAU BROADCASTING PARTNERS, L.P.
By: Nassau Broadcasting Partners, Inc.,
its general partner
By:
-----------------------------------------
Name:
Title:
ESCROW AGENT: BANK OF AMERICA
By:
-----------------------------------------
Name:
Title:
<PAGE>
SIGNATURE PAGE TO ESCROW AGREEMENT
----------------------------------
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective duly authorized officers all as of the day and
year first above written.
SELLER: CLEAR CHANNEL BROADCASTING, INC.
By:
-----------------------------------------
Name:
Title:
BUYER: NASSAU BROADCASTING PARTNERS, L.P.
By: Nassau Broadcasting Partners, Inc.,
its general partner
By: /s/ Louis F. Mercatanti, Jr.
-----------------------------------------
Name: Louis F. Mercatanti, Jr.
Title: President
ESCROW AGENT: BANK OF AMERICA
By:
-----------------------------------------
Name:
Title:
<PAGE>
SIGNATURE PAGE TO ESCROW AGREEMENT
----------------------------------
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective duly authorized officers all as of the day and year
first above written.
SELLER: CLEAR CHANNEL BROADCASTING, INC.
By:
-----------------------------------------
Name:
Title:
BUYER: NASSAU BROADCASTING PARTNERS, L.P.
By: Nassau Broadcasting Partners, Inc.,
its general partner
By:
-----------------------------------------
Name:
Title:
ESCROW AGENT: BANK OF AMERICA
By: /s/ Susan B. Poliquin
-----------------------------------------
Name: Susan B. Poliquin
Title: Vice President
<PAGE>
SCHEDULE A
----------
ESCROW AGENT FEE
----------------
$1,500
<PAGE>
Re: Nassau
Escrow Wire Instructions
The Escrow Deposit ($6,000,000) should be wired to the Escrow Agent in
accordance with the following instructions:
Bank: Bank of America
City/State: Washington, DC
Routing#: 054001204
Beneficiary: Bank of America, Escrow Agent for Clear Channel/Nassau
Account#: 1920511160
849709
<PAGE>
CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENT
--------------------------------------------
This Confidentiality and Non-Disclosure Agreement (the "Agreement") dated
as of December 15, 1999, is by and between Clear Channel Communications, Inc.,
acting on behalf of itself and its subsidiaries ("CCC") and AMFM, Inc., acting
on behalf of itself and its subsidiaries ("AMFM"), (CCC and AMFM, collectively
and individually, the "Disclosing Party") and Nassau Broadcasting Partners, L.P.
(the "Interested Party").
In connection with Interested Party's desire to explore the possibility of
entering into a transaction with Disclosing Party or with one of its affiliates
(the "Transaction"), Disclosing Party is furnishing certain information to the
Interested Party that is non-public, confidential or proprietary in nature (the
"Information").
In consideration of Disclosing Party's disclosure to it of the Information,
the Interested Party agrees that it will keep the Information confidential and
that the Information shall not, without the prior written consent of Disclosing
Party, be disclosed by the Interested Party or by its affiliates, directors,
officers, partners, agents or employees (collectively, "Representatives"), in
any manner whatsoever, in whole or in part, and shall not be used by the
Interested Party or its Representatives other than in connection with the
Transaction. Moreover, the Interested Party agrees to transmit the Information
only to such of its Representatives who need to know the Information for the
sole purpose of assisting the Interested Party in the Transaction, who are
informed of this Agreement and who agree to be bound by the terms hereof as if a
party hereto. In any event, the Interested Party shall be fully liable for any
breach of this Agreement by its Representatives.
The term "Information" shall exclude any information to the extent that
such information (1) is or becomes generally available to the public other than
as a result of acts by the Interested Party or its Representatives in violation
of this agreement, (2) is in the possession of the Interested Party or its
Representatives prior to disclosure by Disclosing Party or (3) is disclosed to
the Interested Party or its Representatives on a non-confidential basis by a
person other than Disclosing Party or its Representatives that, to the
Interested Party's knowledge after due inquiry, is not restricted from
disclosing such information to the Interested Party or to its Representatives
by any contractual, fiduciary or other legal obligation. For the purposes of
this agreement, the term "person" shall be construed broadly and shall include,
without limitation, any natural person, corporation, partnership, trust,
association or other entity.
Without the prior written consent of Disclosing Party, neither the
Interested Party nor its Representatives shall disclose to any person
(including, but not limited to, other persons and entities possibly interested
in the same or any similar transaction) the fact that it has received any of the
Information or that discussions or negotiations are taking place concerning the
Transaction, including the possible terms and status thereof.
Interested Party agrees that, without the Disclosing Party's prior
written consent, Interested Party will not, for a period of two years from the
date of this Agreement, directly or indirectly, (i) solicit the employment of
any key employee, officer or senior manager of the Disclosing Party or (ii) hire
any key employee, officer or senior manager employed by the Disclosing Party or
<PAGE>
any former key employee, officer or senior manager whose employment with the
Disclosing Party has ceased within 90 days of such solicitation or hire.
The Interested Party agrees that, unless an agreement for a transaction is
made, at the earlier of the conclusion of its review of the Information, or
within three business days of Disclosing Party's request, all copies of the
Information in any form whatsoever (including but not limited to any reports,
memoranda or other materials prepared by the Interested Party or at its
direction) will be destroyed or will be delivered by the Interested Party and
its Representatives to Disclosing Party.
If the Interested Party or anyone to whom it supplies the Information
receives a request to disclose all or any part of the Information under the
terms of a subpoena or order issued by a court of competent jurisdiction or by a
governmental body, the Interested Party agrees to (i) immediately notify
Disclosing Party of the existence, terms and circumstances surrounding such a
request, (ii) consult with Disclosing Party on the advisability of taking
legally available steps to resist or narrow such request, and (iii) if
disclosure of such Information is legally required, furnish only such portion of
the information it is legally compelled to disclose.
Interested Party understands that the Disclosing Party has endeavored to
include in the Information those materials which it believes to be reliable and
relevant for the purpose of Interested Party's evaluation, but Interested Party
acknowledges that neither the Disclosing Party nor any of its representatives or
advisors, makes any representation or warranty as to the accuracy or
completeness of the Information. Interested Party agrees that neither the
Disclosing Party nor any of its representatives or advisors, shall have any
liability to Interested Party or to any Representatives as a result of the use
of the Information by Interested Party or Representatives, and Interested Party
understands that only those particular representations and warranties which may
be made by the Disclosing Party to the purchasers of the assets of the
Disclosing Party in a definitive agreement, when, as and if it is executed, and
subject to such limitations and restrictions as may be specified in such
definitive agreement, shall have any legal effect.
The Interested Party acknowledges and agrees that in the event of any
breach of this agreement, Disclosing Party would be irreparably and immediately
harmed and could not be made whole by monetary damages. Accordingly, the parties
agree that Disclosing Party, in addition to any other remedy to which it may be
entitled in law or equity, shall be entitled to an injunction or injunctions
(without the posting of any bond) to prevent breaches of this agreement and/or
to compel specific performance of this agreement, and that neither the
Interested Party nor its Representatives will oppose the granting of such
relief. The prevailing party also agrees to reimburse the non-prevailing party
for all costs and expenses, including attorneys' fees, incurred by it in
enforcing the obligations of the Interested Party and its Representatives
hereunder.
Interested Party acknowledges that Interested Party is aware, and that
Interested Party will advise such Representatives who are informed as to the
matters which are the subject of this letter, that the federal and state
securities laws prohibit any person who has received material, non-public
information concerning a publicly traded company from purchasing or selling
securities of such company or from communicating such information to any other
person under circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell
2
<PAGE>
This Confidentially and Non-Disclosure Agreement is executed by the below
parties as of the date first stated above.
INTERESTED PARTY _____________________________________
By: /s/ Louis Mercatanti
----------------------------------
Name: Louis Mercatanti
Title: Chairman
DISCLOSING PARTY CLEAR CHANNEL COMMUNICATIONS, INC.
By: /s/ Randall T. Mays
----------------------------------
Name: Randall T. Mays
Title: Executive Vice President
DISCLOSING PARTY AM/FM, INC.
By: /s/ D. Geoff Armstrong
----------------------------------
Name: D. Geoff Armstrong
Title: EVP/CFO
<PAGE>
Exhibit 2.5
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into this 21st day of January, 1999
between MULTICULTURAL RADIO BROADCASTING, INC., a New Jersey corporation
("Seller") and NASSAU BROADCASTING PARTNERS, L.P., a Delaware limited
partnership ("Buyer").
STATEMENT OF FACTS
1. Seller is the licensee and operator of radio station WJHR-AM,
licensed to Flemington, New Jersey (the "Station").
2. Subject to the consent of the Federal Communications
Commission ("FCC"), Buyer desires to acquire the Station, and all of the assets,
leases, contracts, agreements, licenses, and other property used or useful in
the operation of the Station, with certain exceptions as provided herein, and
the Seller desires to transfer such assets to Buyer.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties intending to be legally bound hereby, agree as follows:
1 . SALE AND TRANSFER OF ASSETS.
At the Closing, Seller will sell, assign, transfer and deliver to Buyer
the following:
1.1 ASSETS TO BE TRANSFERRED. Subject to the terms and conditions
of this Agreement, on the Closing Date (as defined in Section 10.1), Seller
shall sell, convey, assign, transfer and deliver to Buyer, and Buyer shall
purchase and accept, all of the business, rights, properties and assets, real
and personal, tangible and intangible, of every type and description owned by
Seller and used or held for use in connection with the business and operations
of the Station together with all rights and privileges associated with such
assets and business of the Station, except for Excluded Assets (as defined in
Section 1.2) (collectively, the "Assets"). Without limiting the foregoing, the
Assets shall include the following:
1.1 (a) LICENSES AND AUTHORIZATIONS. Subject to prior FCC
consent, all of the FCC authorizations issued to the Seller, as listed and
described in SCHEDULE 1.1(a) with respect to the Station and their auxiliaries,
including without limitation, all rights in and to the call letters WJHR-AM and
any variations thereof, to the extent that they can be conveyed, and all
applications therefor, together with any renewals, extensions or modifications
thereof and additions thereto or applications filed between the date hereof and
the Closing Date (collectively, "Licenses"). All of Seller's interest in the
Licenses will be assigned to Buyer as hereinafter provided;
1
<PAGE>
1.1(b) TANGIBLE PERSONAL PROPERTY. All equipment, electrical
devices, antennas, cables, vehicles, furniture, fixtures, towers, office
materials and supplies, hardware, tools, spare parts, records, tapes, discs,
carts and other tangible personal property of every kind and description owned
by Seller and used or held for use (including those not in operating condition)
in connection with the business and operations of-the Station on the Closing
Date, including without limitation those listed and described on SCHEDULE 1.1(b)
attached hereto or any replacements thereafter acquired prior to the Closing
Date (except as may be consumed in the ordinary course of business) and
including all rights under manufacturers' and vendors' warranties to the extent
transferable;
1.1(c) OWNED REAL PROPERTY. Seller currently leases the real
property which contains the radio station studio and towers, which such lease is
more fully described in Section 1.1(d) below. As part of that lease, Seller has
an option to purchase the real estate. Seller shall exercise its option to
purchase on or before 6/15/00 and close on the purchase on or before the date of
closing hereunder. At the time of closing under the Agreement, Seller agrees to
convey the real property to Buyer. Buyer agrees to pay as additional
consideration the sum of $225,000.00, plus the sum of $2,250.00 per month for
the number of months Seller holds the real estate until closing hereunder, plus
a sum equal to Seller's closing costs actually paid for the acquisition of the
real estate.
In the event Seller is unable to acquire the real
estate prior to closing, Seller shall assign its lease of the premises to Buyer.
1.1(d) LEASED REAL PROPERTY. Any of the leases of real
property with respect to real property leased by Seller and used or held for use
in connection with the business and operations of the Station on the Closing
Date, described on SCHEDULE 1. 1 (d) attached hereto, to the extent such leases
are transferable ("Leased Property"). The lease terms shall continue as set
forth in the leases for the Leased Property;
1.1(e) AGREEMENTS FOR SALE OF TIME: TRADE/BARTER AGREEMENTS.
Those orders and agreements now existing for the sale of advertising time on the
Station, to the extent of the unexpired portion thereof, for cash ("Cash
Agreements") as listed and described in SCHEDULE 1.1(e)-1; those orders,
agreements and arrangements for the exchange of advertising time, to the extent
of the unexpired portion thereof for consideration other than cash ("Trade Out
Agreements"), as listed and described in SCHEDULE 1. 1 (e)-2; all Cash
Agreements and all Trade Out Agreements entered into in the ordinary course of
business between the date hereof and the Closing Date to the extent of the
unexpired portion thereof, provided that trade payables do not exceed trade
receivables; all to the extent transferable or assignable.
1.1(f) OTHER CONTRACTS. All unexpired contracts, agreements,
arrangements, commitments or understandings, written or oral described in
SCHEDULE
2
<PAGE>
1.1(f) (including those entered into in the ordinary course of business prior to
the Closing Date) hereto, to the extent transferable or assignable;
1.1(g) INTANGIBLE RIGHTS. Any trademarks, trade names, service
marks, franchises, patents, jingles, slogans, logotypes and other intangible
rights, owned and used or held for use by Seller on the Closing Date in
connection with the business and operations of the Station, including those
listed and described on SCHEDULE 1.1(g) hereto to the extent that Seller has the
right to use and assign them;
1.1(h) PROGRAMMING AND COPYRIGHTS. All programs and
programming materials and elements, music libraries and software of whatever
form or nature owned by Seller and used or held for use in connection with the
business and operation of the Station on the Closing Date, whether recorded on
tape or any other media or intended for live performance, and whether completed
or held in production and any related common law and statutory copyrights owned
by Seller and used or held for use in connection with the business and
operations of the Station, or licensed or sublicensed to Seller in connection
therewith, to the extent that Seller has the right to use and assign them;
1.1(i) FCC RECORDS. All FCC station logs and other records
that relate to the operation of the Station as are required to be maintained
under the rules and regulations of the FCC, including, but not limited to, an
up-to-date and complete local public file;
1.1(j) FILES AND RECORDS. All original files and other records
of Seller relating to the business and operations of the Station owned and in
the possession of Seller (other than records relating to the corporate nature of
Seller such as corporate minutes, corporate tax records and similar corporate
records), including without limitation all available schematics, blueprints,
engineering data, customer lists, reports, specifications, projections,
statistics, promotional graphics, original art work, mats, plates, negatives and
other advertising, marketing or related materials, and copies of all other
technical and financial information concerning the Station and the Assets; and
1.1(k) GOODWILL. All of Seller's goodwill in, and going
concern value of, the Station.
1.2 EXCLUDED ASSETS. There shall be excluded from the Assets, and
retained by Seller, to the extent in existence on the Closing Date the following
assets listed in SCHEDULE 1.2 (collectively, the "Excluded Assets"):
1.2(a) CASH AND INVESTMENTS. All cash on hand or in bank
accounts, and any and all other cash equivalents, including without limitation
certificates of deposit, commercial paper, treasury bills, asset or money market
accounts and all such similar
3
<PAGE>
accounts or investments, or notes or other entitlements evidencing loans
receivable and any securities owned or held by Seller;
1.2(b) CERTAIN ASSETS. Pension, profit sharing and savings
plan and trusts and any assets thereof;
1.2(c) CONSIDERATION. The consideration delivered by Buyer to
Seller pursuant to this Agreement;
1.2(d) FILES AND RECORDS. The files and records referred to in
the parenthetical in Section 1.1 (j);
2. PURCHASE PRICE AND PAYMENT.
2.1 PURCHASE PRICE. Buyer shall at Closing pay to Seller as
consideration for all of the Assets to be sold and bought hereunder pursuant to
Section 1.1, the sum of Two Million Five Hundred Thousand Dollars
($2,500,000.00) including any sums for the real estate, if applicable, as
described in Section 1.1(c) ("Purchase Price"), including the funds to be
deposited pursuant to Section 2.2 plus the assumption of liabilities described
elsewhere in this Agreement.
2.2 EARNEST MONEY DEPOSIT, LIQUIDATED DAMAGES. Buyer shall
cause to be deposited the sum of One Hundred and Thirty Thousand Dollars
($130,000.00) (the "Escrow Amount") with Timothy R. Smith, Esq. (the "Escrow
Agent") upon execution of this Agreement. All funds are to be held by the Escrow
Agent in an interest-bearing account until the Closing, as hereinafter defined,
with all interest thereon accruing to Buyer pursuant to the terms of the Escrow
Agreement attached hereto as EXHIBIT A. At the Closing, unless otherwise
provided herein, Escrow Agent shall deliver the Escrow Amount together with any
accrued interest thereon, to Seller in accordance with the terms of the Escrow
Agreement. The accrued interest shall be credited to the Purchase Price.
In the event of rightful termination of this Agreement pursuant to Section
14.1(a), (b) or (c) the Escrow Amount, together with any and all interest
accrued thereon, shall be returned to Buyer. In the event of rightful
termination of this Agreement by Seller as the result of a Buyer's Event of
Default as defined in Section 14.2 and Seller is not in material breach of its
obligations and representations hereunder, Buyer shall cause the Escrow Amount
("Liquidated Damages Amount") to be paid to Seller as liquidated damages, and
not as a penalty, with all interest on the Escrow Amount accruing to the benefit
of the Seller. The parties agree that the Liquidated Damages Amount constitutes
a reasonable sum considering all of the circumstances existing on the date of
this Agreement, including the relationship of the sum to the range of harm to
Seller that could be reasonably anticipated and the anticipation that proof of
actual damages
4
<PAGE>
would be costly or inconvenient, in the event of Buyer's inability or failure to
close as provided herein. In placing their initials at the place provided below,
Buyer and Seller each specifically confirms the accuracy of the statements made
above and the fact that each was represented by counsel who explained the
consequences of this liquidated damages provision at the time this Agreement was
made.
SELLER INITIAL HERE
--------
BUYER INITIAL HERE
--------
2.3 METHOD OF PAYMENT OF PURCHASE Price. The Purchase Price shall
be paid at the Closing as follows:
2.3(a) ESCROW AMOUNT. Escrow Agent shall deliver the Escrow
Amount to Seller in accordance with the terms of the Escrow Agreement.
2.3(b) BALANCE OF PURCHASE PRICE. In addition to the Escrow
Amount to be delivered to Seller by the Escrow Agent pursuant to Subsection
2.3(a) hereof, the Buyer shall deliver to Seller a wire transfer payable as
directed by Seller in the amount of Two Million Three Hundred Seventy Thousand
Dollars ($2,370,000.00), plus any sum due for the real estate, if applicable, as
described in Section 1.1(c).
3. NO ASSUMPTION OF LIABILITIES.
The (i) leases described in Section 1.1(d), (ii) orders and agreements
described in Section 1.1(e), (iii) contracts, agreements, arrangements,
commitments and understandings described in Schedule 1.1(f) and (iv) the trade
payables (to the extent they do not exceed trade receivables) of the Seller
outstanding on the Closing Date, are herein referred to as the "Assumed
Obligations" and are the only agreements, contracts, obligations or commitments
of Seller, whether known or unknown, contingent or otherwise that are to be
assumed by Buyer as of the Closing Date. Except for the Assumed Obligations,
Seller shall be solely responsible, and there shall be no assumption of
liability by Buyer, for any agreement, contract, obligation or commitment of
Seller, whether known or unknown, contingent or otherwise, relating to either
the Station or any of the affairs of Seller, including, but not limited to, any
agreement, executed or executory, relating to the exchange of time on the
Station for goods, wares, services, promotions, merchandising or anything other
than cash. Buyer shall not be obligated to perform any contract, agreement,
obligation or commitment of Seller, whether known or unknown, contingent or
otherwise, not specifically assigned to and assumed by Buyer hereunder.
4. SELLER'S REPRESENTATIONS AND WARRANTIES.
5
<PAGE>
As used in this Section 4, references to Seller's knowledge shall mean
Seller's knowledge after Seller has exercised due diligence in making inquiries
of its personnel. Seller represents and warrants that the following statements
as to Seller and the Assets and the Station are correct as of the date hereof
and will be correct at the Closing Date.
4.1 LICENSES, AUTHORIZATION AND COMPLIANCE THEREWITH. Seller owns
and/or has all franchises, licenses, permits, consents, approvals or
authorizations of any public or governmental agency materially necessary to the
conduct by Seller of its business as now conducted, including, but not limited
to, the Licenses described in Schedule 1. 1 (a) hereto, without any material
conflict with the rights of others, all of which are in full force and effect
and to the best knowledge of Seller subject to no lien, charge, encumbrance, or
limitation. Without material exception, Seller is in compliance with all of its
obligations with respect thereto; and no event has occurred which permits, or
after notice or lapse of time or both would permit, the revocation or
termination of any of the foregoing or would materially adversely affect the
rights of Seller thereunder.
Except as may be provided in SCHEDULE 1.1 (a), Seller has no knowledge
of any applications or any material complaints or proceedings pending or
threatened as of the date hereof before the FCC directly relating to the
business or operation of the Station other than proceedings which generally
affect the broadcast industry. Further, on the Closing Date, the Station will,
unless otherwise provided in Section 4.8(b) below, be on the air operating at
full licensed power (consistent with the FCC's Rules and Regulations, the
Communications Act of 1934, as amended (the "Act"), and regulations promulgated
thereunder) under their present licenses. All FCC requirements for such
authority will have been met, and there will be no uncorrected FCC violations.
If notice of any such violation (other than violations that involve Buyer) is
received or if Seller hereinafter becomes aware of any such violation prior to
Closing, Seller, at its own expense, shall eliminate and cause to be removed all
such violations by the date of Closing. All returns, reports and statements
required to be filed with the FCC or other governmental agency relating to the
Station have been or will be duly and timely filed, and all said reports,
returns and statements are or will be complete and correct as filed. The "Public
Inspection File" of the Station will be complete and in full compliance with
Section 73.3526 of the FCC's Rules and Regulations on the Closing Date.
4.2 ASSETS/FEE PROPERTY.
4.2(a) ASSETS/RIGHTS, ETC. TO SELL. Seller is the owner of and
will at the Closing Date have good title to the Assets, and will on the Closing
Date have full legal right, power and authority to assign, transfer and sell the
Assets to Buyer, free and clear of all claims, security interests, mortgages,
pledges, liens and other encumbrances of every nature whatsoever. No action is
pending or, to the knowledge of Seller, threatened, which would contest the
ownership of, or right to transfer, any of the Assets. The Assets will not at
the Closing Date be subject to any contract, sale or other agreement, except as
disclosed in writing to and expressly assumed or taken
6
<PAGE>
subject to by Buyer hereunder, and the delivery of the Assets to Buyer pursuant
to the provisions of this Agreement will transfer good and valid title thereto,
free and clear of all claims, security interests, mortgages, pledges, liens and
other encumbrances of every nature whatsoever.
4.2(b) CONDITION OF TANGIBLE PERSONAL PROPERLY. The equipment
described in SCHEDULE 1.1(b) hereto comprises all the equipment used to operate
the Station as it is presently being operated in material compliance with the
FCC's Rules and Regulations. From the date hereof until Closing, the Station and
equipment will be operated and maintained in accordance with good engineering
practices and to the best of Seller's knowledge in material compliance with all
of the FCC's Rules and Regulations. Except as disclosed in Schedule 1.1(b),
there are no material defects in any of the structures, improvements, electronic
equipment or other tangible personal assets of the Station, all of which are in
operating condition subject to normal wear and tear.
4.2(c) FEE PROPERTY. With respect to the Fee Property:
(i) Seller is not a "foreign person" as that term is
used in Internal Revenue Code Section 1445 ("IRC ss.1445"), and Seller agrees to
furnish Buyer, at or prior to Closing, an Affidavit of Non-Foreign Status or any
other documentation required under IRC ss.1445 to evidence that Seller is not a
"foreign person";
(ii) Except as listed on SCHEDULE 4.2, there are no
leases, rental agreements or other agreements relating to the Fee Property which
are to remain in effect after Buyer takes title to the Fee Property; and
(iii) Seller has not received any written notice with
respect to the Fee Property of any threatened rezoning, annexation, condemnation
or modification proceeding which proceeding is still pending.
4.3 CONTRACTS, LEASES, AGREEMENTS, ETC. Each of the contracts,
agreements, easements, licenses and leases (collectively, "Contracts") described
in Sections 1.1 (d), 1.1 (e) and 1.1 (f) hereto is as to Seller valid, binding
and enforceable in accordance with its terms and Seller is not in any material
respect in default thereunder. Except for Contracts marked with an asterisk on
Schedules 1.1(d), 1.1(e)-l, 1.1(e)-2 and 1.1(f) ("Contract Schedules"), no
consents are required to assign to Buyer Seller's interest in any such Contract.
Each such Contract may be assumed by Buyer without any material adverse change,
and is now, and on the Closing Date will be, in full force and effect.
4.4 EMPLOYEES AND AGREEMENTS RELATING TO EMPLOYMENT.
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4.4(a) No labor union is currently certified, or otherwise
recognized, as the collective bargaining representative for any of the Station's
employees. Seller has no actual knowledge of any labor strike, or other employee
or labor controversy or dispute pending which would materially affect the
operation of the Station.
4.4(b) Seller is not, and on the Closing Date will not be,
except as disclosed on Schedule 4.4, a party to (a) any labor contract, (b) any
vacation pay, severance pay or other benefit arrangement (including ERISA or
similar plans) with its employees, or (c) any employment contract or agreement
which is not terminable upon termination notice of thirty (30) days.
4.5 LITIGATION. Except as disclosed on SCHEDULE 4.5, there are no
actions, judgments, suits, proceedings, investigations or inquiries pending or,
to the knowledge of Seller , threatened against Seller in connection with this
Station or questioning the validity of any action taken or to be taken in
connection with the implementation of the provisions of this Agreement, at law
or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, agency, court or instrumentality,
domestic or foreign. Seller does not know or have reasonable grounds to know of
any factors or circumstances which might be the basis of any action, suit or
proceeding relating to this station; and, to the best of Seller's knowledge,
except as disclosed in SCHEDULE 4.5, Seller has complied with all applicable
statutes and regulations of all governmental authorities and agencies having
jurisdiction over Seller's ownership and operation of this Station.
4.6 COMPLIANCE WITH LAW.
4.6(a) GENERALLY. Seller has complied and is in compliance in
all material respects with all laws, rules, regulations, and orders of any
governmental entity applicable to Seller, the Assets and the Fee Property,
including, without limitation, the Act and rules and regulations thereunder
("Applicable Laws"). Seller has not been charged with and is not under
investigation for any violation of Applicable Laws, nor, to the knowledge of
Seller, is there any basis for any such charge or investigation.
4.6(b) REAL ESTATE MATTERS. To Seller's best knowledge, all of
the Real Property and all structures, transmitters, towers, equipment and
improvements located thereon conform in all material respects with all
applicable laws and regulations, including, without limitation, environmental,
building and zoning laws and regulations, and no notice or actual knowledge of
any violation of zoning, building or other laws, statutes and ordinances and
regulations relating to such real property has been received or is known and
there is no proposed, pending or threatened condemnation proceeding or similar
action affecting any such Real Property.
4.6(c) HAZARDOUS MATERIALS. Except as disclosed on SCHEDULE
4.6, or as disclosed to Buyer as a result of the environmental inspection
referred to in Section
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7.3(b), to the best of Seller's knowledge, no hazardous or toxic materials (as
hereinafter defined) exist in any structure located on, or exist on or under the
surface of the Real Property. For purposes of this Agreement, "hazardous or
toxic material" shall mean waste, substances, materials, smoke, gas, pollutants,
contaminants, asbestos or asbestos related products, PCB'S, petroleum, crude oil
(or any fraction or distillate thereof or particulate matter designated as
hazardous, toxic or dangerous, or requiring special handling, treatment or
storage whether or not designated hazardous, toxic or dangerous under any
environmental laws. For purposes of this Agreement "environmental law" shall be
interpreted to mean the Comprehensive Environmental Response Compensation and
Liability Act, any successor to such law, and/or any other applicable federal,
state, or local environmental, health or safety law, rule or regulation
concerning the treating, producing, handling, storing, releasing, spilling,
leaking, pumping, pouring, emitting, or dumping of any waste, substance,
materials, smoke, gas or particulate matter or imposing liability or standards
in connection therewith.
4.7 EXISTENCE AND POWERS; NO CONFLICT. Seller is a New Jersey
corporation duly organized, validly existing and in good standing under the laws
of the State of New Jersey, and is duly authorized to conduct business in the
State of New Jersey, and has the power and authority to own or lease its
properties and to carry on business as now being conducted, and has all
requisite power and authority to enter into, deliver and perform this Agreement.
The execution, delivery, and performance of this Agreement by Seller has been
duly and validly authorized by the Board of Directors of Seller, and no other
action is required. Except as disclosed on Schedule 4.7, neither the execution
and delivery of this Agreement by Seller, nor the compliance by Seller with the
respective terms thereof: (i) will, to the best of Seller's knowledge, breach
any Applicable Laws; (ii) will conflict with or result in a breach of or
constitute a default (or an event which, with notice or lapse of time, or both,
would become a default) under any of the terms, conditions or provisions of any
judgment, order, arbitration, injunction, decree or ruling of any court or
governmental authority to which Seller or any of the Assets is subject or of
Seller's Articles of Incorporation or any agreement, commitment, arrangement,
lease, insurance policy, or other instrument to which Seller is a party or by
which it is bound; (iii) will result in the creation of any lien, equitable
lien, tax lien, mortgage, charge, security interest or other encumbrance upon
any of the Assets; (iv) to Seller's best knowledge will give to any other person
any interests or rights, including rights of termination or cancellation, in or
with respect to any of the priorities, assets, agreements, contracts or business
of Seller; (v) will result in the loss or adverse modifications of the Licenses
or any other license, franchise, permit or other governmental authorization
granted to or held by Seller; or (vi) require the consent of any person except
as disclosed in this Agreement.
4.8 OPERATION OF STATION.
4.8(a) The Station has been, and shall continue to be,
operated (1) in
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compliance with the Licenses and the Applicable Laws, and (2) in a manner which
will not expose human beings to any level of non-ionizing radiation higher than
the levels recommended for human exposure in FCC Report & Order ET Docket 93-62,
released August 1, 1996.
4.8(b) Seller shall give prompt written notice to Buyer if (i)
the transmission of the regular broadcast programming of the Station in the
normal and usual manner is interrupted or discontinued other than as a result of
weekly routine maintenance or public utility company activity, (ii) the Station
is operated at less than seventy-five (75%) of its licensed operating power for
a period in excess of (A) twenty-four (24) consecutive hours or (B) an aggregate
of seventy-two (72) hours in any thirty (30) day period; (iii) the Station
operates at reduced power for ten (10) days, thereby requiring written
notification to the FCC pursuant to Section 73.1560(d) of the FCC Rules; or (iv)
the programming format of the Station is materially changed.
4.9 INSURANCE. Buyer will obtain any and all insurance.
Notwithstanding the foregoing, existing insurance policies, set forth on
Schedule 4.9, are now and on the Closing Date will be in effect in accordance
with their terms without default.
4.10 ABSENCE OF INSOLVENCY. No insolvency proceedings of any
character, including, without limitation, bankruptcy, receivership,
reorganization, composition or arrangement with creditors, voluntary or
involuntary, affecting the Seller or any of its respective assets or properties,
are pending or, to the knowledge of Seller threatened, and Seller has made no
assignment for the benefit or creditors, nor taken any action with a view to, or
which would constitute the basis for, the institution of any such insolvency
proceedings.
4.11 INTANGIBLES. Seller has the right to use all the patents,
copyrights, service or trademarks and trade names, call letters, logos, slogans
and other intangible property or rights ("Intangibles") presently used in
conjunction with the operation of the Station, together with any goodwill
associated therewith. To the best of Seller's knowledge, these Intangibles are
subject to no pending or threatened challenge and none of the Intangibles is
being infringed by the activities or operations of any third person, and none is
subject to any outstanding order, judgment, decree, stipulation or agreement
restricting the use thereof.
4.12 FINANCIAL STATEMENTS. Seller has furnished Buyer with copies
of the following financial statements: WJHR 1998 Income and Expenses and WJHR
1999 Projections and Expenses. The Financial Statements are complete and correct
in all material respects, were prepared on a GAAP basis and present fairly the
financial position and results of operation of Seller at the dates and for the
periods to which they relate. Seller represents that Seller has retained work
papers, files, ledgers and other records and that Seller will make the same
reasonably available to Buyer for purposes
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of review of the same by Buyer or Buyer's representatives in connection with
this Agreement or Buyer's pending public offering of certain securities.
4.13 TAXES. As of the Closing Date, Seller shall have timely and
duly filed with the appropriate governmental agencies all tax returns,
declarations of estimated tax, and tax reports required to be filed by it, and
all taxes and other assessments which Seller is required to pay, withhold or
collect have been timely and duly paid, withheld and collected. There are no
present disputes as to taxes of any nature payable by Seller with respect to the
Station, and it has not filed an IRS Form 872 ("Consent Fixing Period of
Limitations Upon Assessment of Income Tax") or otherwise agreed to extend the
time for assessment of any taxes against it for any year. Any additional taxes,
interest, penalties, assessments and deficiencies that shall become due and
payable with respect to any tax return or tax obligation of Seller shall be the
sole responsibility of Seller.
4.14 ABSENCE OF CERTAIN CHANGES. There has not been (i) any
material adverse change in the property of Seller or any material labor dispute,
grievance or organizational effort affecting the Assets, taken as a whole; (ii)
any physical damage, destruction or loss (not covered by insurance) materially
and adversely affecting the Assets or business of Seller, taken as a whole;
(iii) any sale, assignment, lease or other transfer or disposition of any of the
assets or properties of Seller, except in the ordinary course of business and
with adequate replacement property being acquired as necessary; or (iv) any
waiver of any right resulting in a materially adverse affect on the Assets.
5. BUYER'S REPRESENTATIONS AND WARRANTIES.
Buyer represents and warrants that the following statements as to Buyer
are correct as of the date hereof and will be correct at the Closing Date:
5.1 FCC QUALIFICATIONS. Buyer is qualified and knows of no reason
why Buyer should not be found to be qualified to acquire the Licenses.
5.2 EXISTENCE AND POWERS; NO CONFLICT. Buyer is a limited
partnership duly formed, validly existing and in good standing under the laws of
the State of Delaware and is authorized to do business in the State of New
Jersey and has the power and authority to own or lease its properties and to
carry on business as now being conducted, and has all requisite power and
authority to enter into, deliver and perform this Agreement. The execution,
delivery, and performance of this Agreement by Buyer have been duly and validly
authorized by Buyer's corporate general partner and no other action is required.
Neither execution and delivery of this Agreement by Buyer, nor the compliance by
Buyer with the respective terms thereof: (i) will, to Buyer's best knowledge,
breach any Applicable Laws; (ii) will conflict with or result in a breach of or
constitute a default (or an event which, with notice or lapse of time, or both,
would
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become a default), under any of the terms, conditions or provisions of, any
judgment order arbitration injunction, decree or ruling of any court or
governmental authority to which buyer is subject, or any of Buyer's partnership
agreement, or any contract commitment arrangement or agreement to which Buyer is
party or by which it may be bound; or (iii) require the consent of any person
except as disclosed in this Agreement.
5.3 DISCLOSURE. No covenant, representation or warranty made by
Buyer in this Agreement and no statement made in any certificate or document
furnished or to be furnished by Buyer in connection with the transactions
contemplated by this Agreement contains or will contain as of the date made and
the Closing Date any untrue statement of a material fact or omits or will omit
to state any material fact necessary to make such representation, warranty or
statement not misleading to Seller.
5.4 LITIGATION. Except as disclosed on SCHEDULE 5.4, there are no
actions, judgments, suits, proceedings, investigations or inquiries pending or,
to the knowledge of Buyer, threatened against or affecting Buyer or questioning
the validity of any action taken in connection with the implementation of the
provisions of this Agreement, at law or in equity, or before or by any federal,
state, municipal or other governmental department, commission, board, agency,
court or instrumentality, domestic or foreign. Buyer does not know or have
reasonable grounds to know of any factors or circumstances which might be the
basis of any action, suit or proceeding; and, to the best of Buyer's knowledge,
except as disclosed in SCHEDULE 5.4, Buyer has complied with all applicable
statutes and regulations of all governmental authorities and agencies having
jurisdiction over Buyer.
5.5 ABSENCE OF INSOLVENCY. No insolvency proceedings of any
character, including, without limitation, bankruptcy, receivership,
reorganization, composition or arrangement with creditors, voluntary or
involuntary, affecting the Buyer or any of its respective assets or properties,
are pending or, to the knowledge of Buyer, threatened, and Buyer has made no
assignment for the benefit or creditors, nor taken any action with a view to, or
which would constitute the basis for, the institution of any such insolvency
proceedings.
6. CONDUCT PRIOR TO CLOSING.
6.1 ACCESS AND INFORMATION. Upon reasonable, advance notice,
Seller shall give Buyer and its representatives reasonable access throughout the
period prior to Closing to the operations, properties, books, contracts,
agreements, leases, commitments and records of the Station at reasonable times,
provided that the normal operations of Seller's business shall not be disrupted.
In addition, Seller shall deliver to Buyer copies of all of the Station's
monthly operating statements and monthly sales reports, as may exist; and
furnish such additional information concerning the Station as Buyer may from
time to time reasonably request. Notwithstanding the foregoing, Buyer shall not
communicate with Seller's customers without Seller's advance written consent.
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6.2 CONDUCT OF STATION BUSINESS. Between the date hereof and
Closing:
6.2(a) Seller shall make all reasonable efforts to produce the
consent of any third parties necessary for the assignment to Buyer of any
contract, lease or agreement marked with an asterisk and listed on the Contract
Schedules;
6.2(b) Seller shall (i) conduct the business of the Station in
a prudent and responsible manner in good faith and operate and maintain the
Station and the Assets in accordance with good engineering and Seller's past
practices and in compliance with the terms of the Licenses and Applicable Laws;
(ii) keep all of the Assets to be transferred hereunder in substantially the
same operating condition and repair as of the date hereof, reasonable wear and
tear excepted; and (iii) use all reasonable efforts to preserve the customers,
goodwill and business reputation of the Station;
6.2(c) Seller shall not outside the ordinary course of
business (i) hire additional personnel or unreasonably increase the compensation
or bonuses payable to any of the Station's employees; (ii) enter into an
agreement to sell, assign, lease, exchange or otherwise transfer or dispose of
any of the Assets; (iii) enter into any new contract or renegotiate, modify,
amend, renew, or terminate any existing contract, except that Seller may, in the
ordinary and usual course of business, enter into: (1) agreements for the sale
of time on the Station for such rates and on such terms as are consistent with
Seller's normal and usual practices; (2) any contract(s) terminable on thirty
(30) days notice or less without premium or penalty; or (3) any contract(s)
consented to by Buyer in writing; (iv) change the Station's call letters, or
change the Station's facilities, or apply to the FCC for any construction
permit(s) (except that this limitation shall not apply to an application for
extension of time to construct under a construction permit outstanding as of the
date of this Agreement, without Buyer's consent, which will not be unreasonably
withheld or delayed, or make any material adverse changes in the Station's
leasehold improvements and other improvements and fixtures; or (v) except as
required by law or any governmental agency, disclose any information relating to
the Station to any third party, other than to Seller's authorized employees,
agents and professional advisors in the ordinary course of business and other
than to Buyer and Buyer's authorized representatives as provided for herein;
6.2(d) Seller shall maintain in full force and effect the
insurance described in SCHEDULE 4.9; and
6.2(e) Seller shall give Buyer notice of any unusual operating
problems or developments affecting Seller between the date hereof and the
Closing Date, including, but not limited to, any problem or development which
would materially adversely affect the Assets, and keep Buyer fully apprised of
all matters having material financial impact on Seller.
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6.3 BUYER'S INSPECTIONS AND APPROVALS.
6.3(a) Seller agrees to convey and Buyer agrees to accept such
title to the Fee Property as the title company shall be willing to insure on its
standard from and at standard rates, such title to be subject to (i) all
standard exclusions and printed exceptions in the standard form of owner's
policy of title insurance; (ii) encroachments and all other matters that would
be disclosed by a current and accurate survey of the Fee Property; (iii) liens
for taxes and assessments not yet due and payable; (iv) easements for public
utilities affecting the Fee Property; (v) all easements, covenants, restrictions
and rights-of-way affecting the Fee Property; and (vi) both (a) any applicable
zoning ordinances, other land use laws and regulations, and (b) those matters,
if any, which are waived by Buyer pursuant to this Paragraph 6 ( the foregoing
title matters are hereinafter referred to as the "Permitted Title Exceptions").
Within thirty (30) days of the Closing Date, the Buyer shall order, at Buyer's
sole cost and expense, a title commitment from a title insurance company
authorized to do business in the Commonwealth of Pennsylvania (the
"Commitment"). If the Commitment reveals a defect in title which is not one of
the Permitted Title Exceptions, or if prior to the Closing Date a defect in
title arises after the date of the Commitment, either of which defect is not one
of the Permitted Title Exceptions, Buyer may either waive such defect or give
prompt (within ten (10) days of receipt of such commitment or endorsement (time
being of the essence) written notice to Seller of such defect in title,
whereupon Seller shall attempt to cure such defect prior to the Closing. If
Seller is unable or unwilling to cure, on or before the Closing Date, any defect
as to which Buyer has notified Seller as hereinabove provided and if Buyer does
not waive such defect, this Agreement may be terminated, at the Buyer's sole
option, the Escrow Amount shall be returned to Buyer, and thereafter neither
party shall have any liability or obligation to the other pursuant to this
Agreement except for those obligations specifically stated to survive
cancellation or termination.
If Seller is unable or unwilling to cure, on or before the
Closing Date, any defect as to which Buyer has notified Seller as hereinabove
provided and if Buyer does not waive such defect, Buyer shall use such portion
of the Purchase Price on the to pay or discharge any liens or encumbrances that
are not Permitted Title Exceptions or waived by Buyer, and shall deliver to
Buyer at Closing instruments in recordable form and sufficient to satisfy such
liens or encumbrances of record, together with the cost of recording or filing
said instruments. If agreed by Buyer, at Buyer's sole option, Seller may deposit
sufficient monies with Buyer's title company acceptable to and required by it to
assure their discharge, but only if the title company will insure title to the
Fee Property clear of such matters or insure against their enforcement out of
the Fee Property.
6.3(b) ENVIRONMENTAL AUDIT. Buyer shall perform, at its
expense, such environmental investigations and audits (an "Audit") of the Real
Property as it deems appropriate, including, without limitation (i) conditions
with respect to contamination or
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pollution of surface or ground waters, soil and air, (ii) the disposal,
presence, release or threat of release of hazardous or toxic material thereon,
and (iii) compliance with environmental laws or other Applicable Laws. If the
Audit discloses a condition which materially contradicts the representations in
Section 4.6(c), Buyer may, at its sole option, either:
(1) Elect to consummate the purchase of all the Assets
in which case Seller shall bear the cost of remediating such condition in an
amount not to exceed $25,000 and such amount shall be deducted from the Purchase
Price; or
(2) Terminate this Agreement, in which case the Escrow
Amount shall be returned to Buyer, and thereafter neither party shall have any
liability or obligation to the other pursuant to this Agreement except for those
obligations specifically stated to survive cancellation or termination.
6.3(c) ENGINEERING INSPECTION. It is agreed that within ten
(10) days prior to the Closing Date, Buyer's engineer may inspect the property
transferred to insure that the equipment complies with all warranties and
conditions set forth herein. Seller agrees to extend full cooperation to said
engineer, including such access to the equipment and to logs pertaining thereto
at such time or times as said engineer shall reasonably request. If Buyer's
engineer reports that the equipment fails to comply with said warranties, and
Seller disputes the report, Buyer and Seller shall jointly hire and pay a
consulting engineer to give a report on the disputed item(s). The consulting
engineer's report shall be final, and Seller shall repair any equipment that the
consulting engineer reports does not meet the warranty set forth in Subsection
4.2(b) prior to the Closing; provided, however, Seller's obligation to repair
shall not exceed Fifteen Thousand Dollars ($15,000). If the repairs required
exceed such amount and Seller refuses to make such repairs in excess of the cap,
Buyer may, at its sole option, either proceed with this Agreement or terminate
this Agreement and have the Escrow Amount returned to it.
6.4(a) RISK OF LOSS/ASSETS. The risk of any loss, damage or
destruction to any of the Assets from fire or other casualty or cause shall be
borne by the Seller at all times prior to 12:01 a.m. on the Closing Date. Upon
the occurrence of any loss or damage to any material portion of the Assets as a
result of fire, casualty or other cause prior to Closing, Seller shall notify
Buyer of same in writing immediately, stating with particularity the extent of
such loss or damage incurred, the cause thereof if known, and the extent to
which restoration, replacement and repair of the Assets lost or destroyed will
be reimbursed under any insurance policy with respect thereto. Subject to the
provisions hereof, Buyer shall have the option (but not the obligation), in the
event the loss or damage exceeds One Hundred Thousand Dollars ($100,000.00) and
the property cannot be substantially repaired or restored within one hundred
twenty (120) days, exercisable within ten (10) days after receipt of such notice
from Seller to: (i) postpone the Closing until such time as the property has
been completely repaired,
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replaced or restored, unless the same cannot be reasonably effected within two
(2) months of notification; (ii) elect to consummate the Closing and accept the
property in its "then" condition, in which event Seller shall at the Closing
assign all rights under any insurance claim covering the loss and pay over any
proceeds under any such insurance policy theretofore received by Seller with
respect thereto; or (iii) rescind this Agreement at no cost or expense to Buyer
and declare the Agreement of no further binding force and effect, if such
repairs, replacements or restorations are not completed within ninety (90) days
after the date specified herein as the Closing Date, provided that such repairs,
replacements or restorations are necessary to the normal operation of the
Station. In the event Buyer elects to postpone the Closing Date as provided in
clause (i) of this Subsection, the parties hereto will cooperate to extend the
time during which this Agreement must be closed as specified in the consent of
the FCC referred to herein.
6.5 CONFIDENTIALITY. Between the date of this Agreement and the
Closing Date, Buyer will continue to maintain strict confidentiality with
respect to all documents and information furnished by or on behalf of Seller
(except for documents of information required to be disclosed by law; subject to
Seller's right to contest such requirement), and, if this Agreement is
terminated, Buyer shall return to Seller all such documents and information.
Notwithstanding the foregoing, Buyer may make disclosure that may be required:
(i) by its lenders; (ii) pursuant to any federal or state securities laws; or
(iii) as may be necessary to advise any of Buyer's investors or advisors;
provided, that, in such case, Buyer shall advise the investors of the
confidentiality of the information, who must, as a condition of receiving such
information, agree to keep such information confidential.
6.6 PROHIBITED ACTION. Between the date of this Agreement and the
Closing Date, neither Buyer nor Seller will commit any act or omission that
would: (i) disqualify them as parties to an assignment of the Licenses or, as to
Buyer, as owner or operator of the Station and the Assets; (ii) jeopardize the
validity of the Licenses; or (iii) interfere with the existing relationships
between the Station and its advertisers, suppliers and others.
7. APPLICATION FOR FCC APPROVAL.
7.1 FILING AND PROSECUTION OF APPLICATION. No later than 90 days
prior to the expiration of the Time Brokerage Agreement executed
contemporaneously herewith, Buyer and Seller shall join in an application to the
FCC requesting the FCC's written consent to the assignment of the Licenses of
the Station to Buyer and to the consummation of the transactions contemplated by
this Agreement ("Application"). Both parties shall promptly respond to any
requests for the submission of additional information and shall vigorously
oppose any protests, petition to deny, petition for reconsideration or appeal of
the FCC's consent and approval that may be filed. Buyer and Seller shall proceed
with due diligence and promptly take all steps necessary to the
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expeditious prosecution of such application to a favorable conclusion, using
their best efforts throughout.
7.2 EXPENSES. Each party shall bear its own expenses in connection
with the preparation of the applicable sections of the Application and in
connection with the prosecution of such application. Seller and Buyer will
divide and pay equally the license transfer application fees charged by the FCC,
provided that Seller's share shall not exceed $725.
7.3 EXTENSION OF CLOSING DATE. If for any reason, the application
is not approved within 90 days, the date for closing will be extended until the
application is finally approved or denied (which is hereby defined to be a final
order denying the application which is not subject to appeal) and the Time
Brokerage executed contemporaneously herewith will be extended a like amount of
time and only when or if the application is finally denied, then either party
may, if not then in default, have the right by written notice 15 days in advance
to terminate this Agreement.
7.4 CONTROL OF STATION. This Agreement shall not be consummated
until the FCC has given its written consent to the assignment of the Licenses of
the Station. Buyer shall not, directly or indirectly, control, supervise, direct
or attempt to control, supervise or direct the operation of the Station prior to
Closing, but such operation shall be the sole responsibility of the Seller.
Both the Seller and Buyer agree that the Seller has retained
no rights of reversion of the WJHR-AM license, and no right to the reassignment
of the WJHR-AM license in the future, and has not reserved the right to use the
facilities of WJHR-AM in the future for any reason whatsoever.
7.5 BEST EFFORTS. Each party hereto agrees to use its best efforts
in the performance and fulfillment of all terms and conditions of this
transaction applicable to such party and in filing an application for the FCC's
consent, and agrees to execute such other and further documents as may be
reasonably required to carry out the intent of this Agreement.
8. BULK SALES LAW.
Buyer hereby waives compliance by Seller with the provisions of all
Bulk Sales Laws, or other similar provisions, provided, however that Seller
agrees to indemnify and hold Buyer harmless for any claims arising thereunder,
except for the Accounts Payable assumed by Buyer hereunder.
9. OBLIGATIONS UNDER CONTINUING CONTRACTS.
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Buyer shall execute and deliver to Seller at the Closing an assumption
by Buyer of Seller's obligations for the period on and after the Closing or as
to the assumed Accounts Payable prior to Closing under (i) the continuing
contracts, leases and agreements described in Section 1.1(e) and 1.1(f) hereof;
(ii) all contracts described in Section 1.1(f) hereof; (iii) Accounts Payable
outstanding on the Closing Date; and (iv) all other continuing contracts
theretofore entered into by the Seller permitted by the terms hereof in the
regular course of its business; all to the extent transferable. From and after
the Closing Date, Buyer shall perform all obligations under said contracts,
leases and agreements, and shall indemnify and hold harmless Seller from any and
all claims, liabilities and obligations, losses, damages or expenses arising out
of said contracts, agreements and leases accruing by reason of matters occurring
on and after the Closing Date. Except for the Assumed Obligations, Seller shall
remain liable for, and shall indemnify and hold harmless Buyer from, any and all
claims, liabilities, obligations, losses, damages or expenses accruing by reason
of matters occurring prior to the Closing Date under said contracts, agreements
and leases.
10. CLOSING.
Subject to the terms and conditions herein stated, the parties agree as
follows:
10.1 CLOSING DATE. The Closing of the transactions contemplated
herein shall be held on a date in time as specified by the Buyer in writing to
the Seller that is no more than ten calendar (10) days after the date upon which
the approval of the FCC required for the consummation of the transactions
contemplated herein shall become a "Final Order," but the Closing Date shall be
no later than November 18, 2001, or a later date as specified in Section 7.3 on
which Buyer and Seller mutually agree, provided, however, that "Final Order"
means an action by the FCC or its staff which is no longer subject to
administrative or judicial review, reconsideration or appeal. The Closing shall
take place at the Trenton offices of Sterns & Weinroth at 10:30 a.m. local time,
or at such other time or place as mutually agreed. In the event the parties are
unable to complete the Closing on or before the date otherwise provided in this
Section 10.1, either party may request a brief extension (up to five business
days) of that date and the other party shall not unreasonably withhold its
consent to such extension, provided that the party requesting such extension is
not already in default under the terms of this Agreement. Buyer or Seller may,
with the consent of the other, waive the requirement that the Commission's
approval of the Application shall have become a Final Order prior to the Closing
Date in order to proceed with the Closing, but agree that if closing takes place
prior to the approval becoming a "Final Order", the Unwind Agreement attached
hereto and marked EXHIBIT B shall be executed.
10.2 SELLER'S OBLIGATIONS AT CLOSING. At the Closing, Seller shall
execute and deliver or cause to be delivered to Buyer the following, in a form
and substance reasonably approved by counsel for Buyer:
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10.2(a) A Bill of Sale for all tangible personal property to
be transferred hereunder, pursuant to Section 1.1(b), containing a warranty of
title and covenant against all liens, encumbrances and restrictions of any kind
whatsoever.
10.2(b) A duly acknowledged bargain and sale deed with
covenants against grantor's acts conveying the Real Property to Buyer.
10.2(c) One or more assignments assigning to Buyer the
Licenses and intangible property to be acquired by Buyer hereunder;
10.2(d) One or more assignments assigning to Buyer the
Contracts to be assigned to Buyer hereunder together with all necessary consents
thereto and the original copies of said Contracts;
10.2(e) A certificate from Seller stating that: (i) all
representations and warranties of Seller as set forth in this Agreement or in
any statement, certificate, schedule, exhibit or other document delivered
pursuant to this Agreement by Seller are true and correct in all material
respects, as of the Closing Date; and (ii) Seller has, in all material respects,
performed and complied with all covenants, agreements and conditions required by
this Agreement to be performed or complied with by Seller at or prior the
Closing Date;
10.2(f) An opinion of Shook, Hardy & Bacon, LLP, counsel for
Seller, in the form attached hereto as EXHIBIT C, on matters other than FCC
Matters;
10.2(g) OPINION OF SELLER'S FCC COUNSEL. An opinion of Shook,
Hardy & Bacon, LLP in the form attached hereto as EXHIBIT D; -
10.2(h) FILES & RECORDS. Copies of all of the files, records
and logs referred to in Sections 1.1(i) and 1.1(j) hereof and copies of all of
the Licenses;
10.2(i) OTHER DOCUMENTS. Such other documents or instruments
as counsel for Buyer may reasonably request and in a form reasonably acceptable
to Buyer's counsel, which documents are necessary to carry into effect the
provisions of this Agreement.
10.3 BUYER'S OBLIGATIONS AT CLOSING. At the Closing, Buyer shall
execute and deliver or cause to be delivered to Seller the following in a form
and substance reasonably acceptable to Seller's counsel:
10.3(a) The Purchase Price as set forth in Section 2 of this
Agreement consisting of: (i) Executed instructions to the Escrow Agent directing
it to release to Seller the Escrow Amount in the amount of One Hundred Thirty
Thousand Dollars ($130,000) and any interest earned on the escrow; and (ii) Two
Million Three Hundred
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Seventy Thousand Dollars ($2,370,000), including any sums for the real estate,
if applicable, as described in Section 1.1(c) as the balance of the Purchase
Price, less any amount of interest earned on the escrow, payable by wire
transfer;
10.3(b) One or more assumptions assuming the Contracts and
Accounts Payable being assigned by Seller;
10.3(c) A certificate from Buyer stating that: (i) all
representations and warranties of Buyer as set forth in this Agreement or any
statement, certificate, or other document delivered pursuant to this Agreement
by Buyer are true and correct in all material respects as of the Closing Date;
and (ii) Buyer has, in all material respects, performed and complied with all
covenants, agreements, and conditions required by this Agreement to be performed
or complied with by Buyer at or prior to the Closing Date;
10.3(d) OTHER DOCUMENTS. Such other documents or instruments
as counsel for Seller may reasonably request and in a form acceptable to
Seller's counsel, which documents are necessary to carry into effect the
provisions of this Agreement.
10.4 CONDITION TO OBLIGATIONS OF BUYER. The obligation of Buyer to
consummate the purchase of the Assets at the Closing shall be subject to the
performance, in all material respects, on or prior to the Closing Date, of all
of the covenants and agreements as set forth elsewhere in this Agreement to be
performed by Seller, and upon the following additional conditions:
10.4(a) The representations and warranties of Seller shall be
true in all material respects as of the Closing Date; and
10.4(b) There shall not have occurred any material adverse
change in the condition of the Assets; and
10.4(c) The consents required from all governmental agencies
(including, without limitation, unless waived, the Final Order of the FCC) to
Buyer's acquisition of the Assets shall have been granted, without any condition
materially adverse to Buyer, and such consents shall be valid and outstanding on
the Closing Date; and
10.4(d) No action or proceeding shall be pending, challenging
the validity of this Agreement or seeking to delay the consummation of any of
the transactions for which this Agreement provides, which in the reasonable
opinion of Buyer is material to the transactions contemplated by this Agreement;
and
10.4(e) All equipment to be transferred hereunder (i) is in
reasonably good working order; (ii) is in material compliance with all
applicable FCC Rules and Regulations; and (iii) has passed the engineering
review set forth in Section 6.3(c); and
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10.4(f) Seller shall have in all material respects performed
and complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by it prior to and on the Closing
Date; and
10.4(g) All of the requirements of Section 10.2 shall have
been met. Buyer shall have the right to waive any or all of the foregoing
conditions of Closing at its sole option and risk.
10.5 CONDITION TO OBLIGATIONS OF SELLER. The obligation of Seller
to consummate the sale of the Assets at the Closing shall be subject to the
performance, in all material respects, on or prior to the Closing Date, of all
of the covenants and agreements as set forth elsewhere in this Agreement to be
performed by Buyer, and upon the following additional conditions:
10.5(a) The representations and warranties of Buyer shall be
true in all material respects as of the Closing Date; and
10.5(b) The consents required from all governmental agencies
(including, without limitation, unless waived, the Final Order of the FCC) to
Buyer's acquisition of the Assets shall have been granted, without any condition
materially adverse to Seller, and such consents shall be valid and outstanding
on the Closing Date; and
10.5(c) Buyer shall have in all material respects performed
and complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by it prior to and on the Closing
Date; and
10.5(d) All of the requirements of Section 10.3 shall have
been met.
Seller shall have the right to waive any or all of the foregoing
conditions of Closing at its sole option and risk.
10.6 FURTHER ASSURANCE. From time to time, upon request and without
further consideration on or after the Closing Date, Seller and Buyer will
execute and deliver such other instruments of conveyance and transfer and take
such other action as may be reasonably required more effectively to convey,
transfer to and vest in the Buyer, and to put the Buyer in possession and
operating control of, any part of the Assets, and, in the case of contracts and
rights, if any, which cannot be transferred effectively without the consent of
third parties which is unobtainable, to use good faith efforts to secure to the
Buyer the benefits thereof.
11. OTHER CLOSING OBLIGATIONS.
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11.1 PRORATIONS. Except as otherwise provided herein, the Buyer, by
virtue of its obligation specified in the Time Brokerage Agreement executed even
date herewith, shall be entitled to all income earned prior to and after the
Closing Date and shall similarly be responsible for reimbursement of all
liabilities and obligations incurred or payable in connection with the operation
of the station from the date of the Time Brokerage Agreement to the Closing Date
and thereafter.
11.1 (a) For reimbursement, real and personal property taxes
and utility charges relating to the Station; and
11.1 (b) For reimbursement, FCC annual regulatory fees payable
in 2001.
Within thirty (30) days after the Closing, Buyer shall deliver to Seller a
statement setting forth in reasonable detail the basis for prorations pursuant
to this Section, and Buyer shall pay to Seller, or Seller shall pay to Buyer, as
the case may be, any net amount due as the result of the proration statement
(or, if there is a dispute, the undisputed amount thereof. If Seller disputes
Buyer's determinations, or, if at any time after delivery of Buyer's statement
of determinations any party determines that any item included in the proration
is inaccurate or that an additional item should be included in the prorations,
the parties shall confer with regard to the matter and an appropriate adjustment
and payment shall be made as agreed upon by them or, if they are unable to
resolve the matter, by a firm of independent certified public accountants
mutually agreeable to the parties, whose decision on the matter shall be binding
and whose fees and expenses shall be borne equally by them.
Under the supervision of Buyer, Seller shall, in a manner consistent
with past practices, collect all accounts receivable after the Closing Date and
shall promptly pay all commissions, bonuses and other sales related expenses,
and shall provide Buyer with an accounting of all collected and uncollected
accounts receivable. Buyer shall have no obligation to pursue such collections.
11.2 FEES, SALES AND TRANSFER TAXES. All filing and recording fees
in connection with any instrument of conveyance or transfer delivered pursuant
to this Agreement shall be paid by Buyer. Transfer taxes, if any, with the
personal property and intangible assets sold and transferred hereunder shall be
paid by Buyer. Transfer taxes in respect to the real property sold and
transferred hereunder shall be paid by Seller. Sales taxes, if any, in respect
to the Assets sold and transferred hereunder shall be paid by Buyer. Buyer shall
pay the premium for a standard owner's policy of title on the Fee Property; if
Buyer desires an ALTA Policy, Buyer shall pay the additional premium therefor.
11.3 OTHER TAXES. Any and all sales taxes, unemployment insurance
and social security taxes, and all other taxes due any state, federal or local
government by Seller on or before the Closing Date shall be paid by Seller when
due.
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12. ALLOCATION OF PURCHASE PRICE.
The purchase price shall be allocated among the Assets in accordance
with EXHIBIT D hereto. Each of the parties hereto agrees to prepare and file its
tax returns reflecting the allocations in a manner consistent with this
Agreement, including preparation and filing of IRS Form 8594.
13. INDEMNIFICATION.
13.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All covenants and
agreements pertaining to matters to be performed after Closing and all
representations and warranties contained in this Agreement shall survive for a
period not to exceed three (3) years after the Closing Date ("Survival Period")
except that the representations and warranties with respect to title shall
continue indefinitely. (This provision does not include title to the Fee
Property.) No claim may be brought under this Agreement or with respect to the
transactions described herein unless written notice describing in reasonable
detail the nature and basis of such claim is given in good faith on or prior to
the last day of the Survival Period. In the event such notice is so given, the
right to indemnification with respect thereto under this Section 13 shall
survive the Survival Period until such claim is finally resolved and any
obligations with respect thereto are fully satisfied.
13.2 INDEMNITY BY SELLER. Subject to 13.1, Seller agrees to pay and
discharge and to save and protect Buyer and its officers, directors,
shareholders and affiliates free and harmless from all obligations, claims and
demands (including reasonable attorneys fees incurred by Buyer with respect
thereto) (collectively "Seller's Obligations") against, arising out of or in
connection with (a) any lease, contract or other agreement of Seller not
required to be assumed by Buyer pursuant to this Agreement; (b) the ownership of
the Station and the Assets that shall arise or accrue prior to the Closing
(except for the Assumed Obligations) and (c) any material breach or violation by
Seller of any covenant, agreement or warranty herein contained, or the
inaccuracy of any representation. of Seller made in this Agreement.
13.3 INDEMNITY BY BUYER. Subject to 13.1, Buyer agrees to pay and
discharge and to save and protect Seller and its officers, directors,
shareholders and affiliates free and harmless from all obligations, claims, and
demands (including but not limited to attorneys fees incurred by Seller with
respect thereto) against, arising out of or in connection with (a) any lease,
contract, Accounts Payable or other agreement of Seller required to be to be
assumed by Buyer pursuant to this Agreement; (b) that shall arise or accrue
against or in connection with the ownership or operation of the Station and the
Assets from and after the Closing; and (c) any material breach of violation by
Buyer of any covenant, agreement or warranty herein contained or the inaccuracy
of any representation of Buyer made in this Agreement.
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13.4 INDEMNIFICATION PROCEDURE, RIGHT OF OFFSET. In the event that
any party hereto asserts a claim for indemnification hereunder, such party
seeking indemnification shall give written notice to the indemnifying party
specifying the nature and the amount, if known, of the claim asserted. The
indemnifying party shall then have the right, using counsel reasonably
satisfactory to the party seeking indemnification, to investigate, secure,
contest or settle the claim alleged by such i third party (hereinafter called a
.. contest"), provided that the party seeking indemnification may participate
voluntarily, at its own expense, in any such contest through representatives and
counsel of its own choice, and, provided further, that any such action by the
indemnifying party relating to the contest shall be without prejudice to the
party seeking indemnification.
Except as provided otherwise in the immediately preceding sentence, and
subject to 13.1, the indemnifying party shall bear all costs of such contests
and shall indemnify and hold the party seeking indemnification harmless against
and from all costs, fees, and expenses of such contest. Unless and until the
indemnifying party elects to prosecute the contest, the party seeking
indemnification shall have the full right, at its option, to do so and to look
to the indemnifying party under the provisions of this Agreement for the amount
of the costs, if any, of prosecuting the contest. The failure of the
indemnifying party to respond in writing to the aforesaid notice of the party
seeking indemnification with respect to such contest within twenty (20) days
after the receipt thereof shall be deemed an election not to prosecute the same.
If the indemnifying party fails to prosecute the contest and the party seeking
indemnification does not prosecute the contest or does so and the decision is
rendered against it, the amount paid by the party seeking indemnification to the
third party in settlement or satisfaction of the contest shall be deemed a valid
claim hereunder. In the event that the contest involves any Seller's
Obligations, Buyer shall have the right to offset the amount of the costs, if
any, incurred by Buyer in prosecuting the contest together with any sums owed in
connection with the resolution or settlement thereof against amounts which may
be owed by Buyer to Seller.
The parties hereto shall make mutually available to each other all
relevant information in their possession relating to any such contest and shall
cooperate in the defense thereof.
14. TERMINATION BEFORE CLOSING; DEFAULT AND REMEDIES.
14.1 TERMINATION BEFORE CLOSING. If Closing shall not have
previously occurred, this Agreement may be terminated:
14.1(a) If the Closing has not occurred prior to the time
provided for in Section 10.1;
14.1(b) Pursuant to Section 7.3 hereof;
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14.1(c) By Buyer, upon the occurrence of a Seller's Event of
Default (as defined in Section 14.2(a)), upon failure of a condition precedent
to Buyer's obligation to close set forth in Section 10.4 or upon failure of a
condition precedent to Seller's obligation to close set forth in Section 10.5(c)
or 10.5(e);
14.1(d) By Seller, upon the occurrence of a Buyer's Event of
Default (as defined in Section 14.2) or upon failure of a condition precedent to
Seller's obligation to close set forth in Section 11. 5.
In the event of termination pursuant to Section 14.1(d) above upon the
occurrence of a Buyer's Event of Default as defined in Section 14.2, Seller
shall be entitled to retain the Escrow Amount as liquidated damages as provided
in Section 2.2 hereof. In the event of termination of this Agreement for any
other reason, Buyer shall be entitled to return of the Escrow Amount as provided
in Section 2.2 hereof.
14.2 DEFAULT AND REMEDIES
14.2(a) The occurrence of any one or more of the following
events shall constitute a material default of this Agreement by Buyer ("Buyer's
Event of Default"):
(i) The material breach of any representation or
warranty by Buyer hereunder unless such breach is cured prior to the Closing
Date;
(ii) The failure by Buyer to timely consummate the
transactions contemplated by this Agreement in violation of the provisions of
this Agreement;
(iii) The failure by Buyer to perform any other of its
material obligations under this Agreement, where such failure shall continue for
a period of ten (10) days after delivery of written notice of demand therefor
from Seller to Buyer; provided, however, that if more than ten (10) days are
reasonably required to cure such failure, then Buyer shall not be deemed to be
in default thereof if Buyer, in good faith, has commenced such cure within said
ten (10) day period and thereafter diligently prosecutes such cure to completion
and completes such cure prior to Closing.
14.2(b) The occurrence of any one or more of the following
events shall constitute a material default of this Agreement by Seller
("Seller's Event of Default"):
(i) The material breach of any representation or
warranty by Seller hereunder unless such breach is cured prior to the Closing
Date;
(ii) The failure by Seller to timely consummate the
transactions contemplated by this Agreement in violation of the terms of this
Agreement;
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(iii) The failure by Seller to perform any other of its
material obligations under this Agreement, where such failure shall continue for
a period of ten (10) days after delivery of written notice of demand therefor
from Buyer to Seller; provided, however, that if more than ten (10) days are
reasonably required to cure such failure, then Seller shall not be deemed to be
in default thereof if Seller, in good faith, has commenced such cure within said
ten (10) day period and thereafter diligently prosecutes such cure to completion
and completes such cure prior to Closing.
14.2(c) Seller acknowledges that the Station is of a special,
unique, and extraordinary character, and that any breach of this Agreement by
Seller could not be compensated for by damages. Accordingly, upon the occurrence
of a Seller's Event of Default, Buyer shall be entitled, provided that a Buyer's
event of default has not occurred, in addition to any other remedies that it may
have, to enforcement of this Agreement (subject to obtaining any required
approval of the FCC) by a decree of specific performance or injunctive relief
requiring Seller to fulfill its obligations under this Agreement. In any action
to specifically enforce Seller's obligation to close the transaction
contemplated by this Agreement, Seller shall waive the defense that there is an
adequate remedy at law or in equity and agrees that Buyer shall be entitled to
obtain specific performance of Seller's obligation to close hereunder without
being required to prove actual damages. As a condition to seeking specific
performance, Buyer shall not be required to tender the Purchase Price, but shall
be required to demonstrate that Buyer is ready, willing and able to tender the
Purchase Price and consummate the purchase of the Station as contemplated
hereunder.
15. ARBITRATION.
Any controversy or claim arising out of or relating to this Agreement
or any of its Exhibits, or the breach thereof shall be settled by arbitration by
one (1) arbitrator (unless the parties mutually agree to accept multiple
arbitrators) in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the
Arbitrator(s) may be entered in any court having jurisdiction thereof. The cost
of any such arbitration shall be borne equally by the parties involved unless
the arbitrator(s) deem such division of costs to be inequitable, in which event
the arbitrator(s) may allocate the costs of arbitration among the parties
thereto as they deem just and equitable under the circumstances.
16. ACCESS TO BOOKS AND RECORDS.
After the Closing Date, Buyer and Seller shall each allow the other
reasonable access during normal business hours upon reasonable prior notice to
their respective books and records pertaining to the operation of the Station
prior to the Closing Date and shall retain such records for a period of not less
than three (3) years after the Closing Date.
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17. NOTICES.
All notices and other communications hereunder shall be in writing and
be deemed to have been duly given if delivered personally or by overnight
courier or sent by telecopy (and confirmed by regular mail) or mailed by
registered mail, postage prepaid, addressed as follows:
(a) If to Seller, to:
Multicultural Radio Broadcasting, Inc.
449 Broadway
New York, New York 10013
Attention: Arthur Liu, President
with a copy to:
Mark N. Lipp, Esq.
Shook, Hardy & Bacon, LLP
801 Pennsylvania Avenue, NW
Suite 600
Washington, DC 20004
(b) If to Buyer, to:
Nassau Broadcasting Partners, L.P.
619 Alexander Road, Third Floor
Princeton, New Jersey 08540
Attention: Louis F. Mercatanti, Jr.
with a copy to:
Mark D. Schorr, Esq.
Sterns & Weinroth
A Professional Corporation
50 West State Street, Suite 1400
P.O. Box 1298
Trenton, New Jersey 08607-1298
or such other address with respect to any party hereto as such party may from
time to time notify (as provided above) to the other party hereto. Any such
notice, demand or communication shall be deemed to have been given (i) if
mailed, as of the close of the third business day following the date so mailed,
and (ii) if personally delivered or
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otherwise sent as provided above, on the date delivered or sent if sent by
telecopy and on the next business day after the date sent in all other cases.
18. CONTROL OF STATION.
Between the date of this Agreement and the Closing Date, Buyer shall
not control, manage or supervise the operation of the Station or the conduct of
the Station's business, all of which shall remain the sole responsibility and
under the control of Seller, provided that this Section 19 shall not be deemed
to be consent by Buyer to Seller's noncompliance (if any) with this Agreement.
19. EXPENSES.
Unless otherwise agreed to in writing by the parties hereto, each party
shall pay its own costs and expenses, including any and all legal and accounting
fees, of its performance and compliance with all conditions and agreements
contained herein on its or their part to be performed or complied with.
20. BROKERS.
Buyer and Seller each represent to the other that there is no finder,
consultant or broker involved in this transaction and that they have not agreed
to pay any other finder, consultant or broker fee in connection with this
transaction. If any other finder, consultant or broker claims a fee, the party
whose actions led to that claim will bear sole responsibility for paying or
settling that claim and shall indemnify the other party against the same.
21. SECTION HEADINGS.
The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
22. ENTIRE AGREEMENT; FILINGS.
(a) This Agreement and all Schedules and Exhibits attached hereto
constitute the entire agreement of the parties with respect to the subject
matter hereof and supersede all prior understandings and agreements among the
parties, whether oral or written, contain the entire understanding of the
parties and shall not be changed, modified, amended, extended, terminated,
waived or discharged except by subsequent instrument in writing signed by the
parties hereto. To the extent permitted by the FCC, the Schedules shall not be
filed with the FCC or otherwise disclosed or made public.
(b) Buyer and Seller acknowledge that this Agreement was executed
before the preparation of the required schedules and Exhibits could be
completed. Buyer and
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Seller agree that Buyer's obligation to perform under this Agreement is subject
to Buyer's review and approval of each Schedule and Exhibit which Seller is
required to provide under the terms of the Agreement.
23. COUNTERPARTS.
This Agreement may be signed upon any number of counterparts with the
same effect as if the signature to each counterpart were on the same instrument.
24. SURVIVAL.
The provisions hereof, which by their terms are to be performed or
observed after the Closing Date, shall survive the Closing hereunder in
accordance with the terms of this Agreement and shall be binding upon and inure
to the benefit of all of the parties hereto, their heirs, legal representatives,
successors and assigns.
25. CONFIDENTIALITY.
Neither party shall make any announcement or disclose to the press or
others without the other party's consent as to timing and content (which shall
not be unreasonable withheld or delayed), as to the purchase/sale of the Station
prior to the Closing. It is understood that the foregoing non-disclosure
requirement is not intended to preclude Seller from complying with the FCC's
public notice requirements or Buyer from having discussions with financial
entities, consultants and attorneys outside the Station who will also be advised
of the need and agreement for deferred disclosure and shall agree to such
confidentiality and deferred disclosure.
26. ASSIGNABILITY.
Neither the Agreement nor any rights or obligations hereunder may be
assigned by Buyer or Seller without the express prior written consent of the
other party, except that Buyer shall be permitted to assign this Agreement ot an
entity controlled by Louis F. Mercatanti, Jr.. Except as provided otherwise
herein, this Agreement shall inure to the benefit of and be binding upon the
successors and assigns of the parties.
27. GOVERNING LAW.
This Agreement shall be governed by, construed (both as to validity and
performance) and enforced in accordance with the laws of the State of New Jersey
applicable to agreements made and to be performed wholly within such
jurisdiction.
28. ATTORNEYS' FEES.
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In the event of commencement of either arbitration or suit by either
party to enforce the provisions of this Agreement, the prevailing party shall be
entitled to receive such attorneys' fees and costs as may be adjudged reasonable
in addition to any other relief granted.
29. SEVERABILITY.
Any provision of this Agreement which is unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such unenforceability without invalidating the remaining provisions hereof, and
any such unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto hereby waive any provision of law now or
hereafter in effect which renders any provision hereof unenforceable in any
respect.
30. FURTHER ACTIONS.
From time to time before, at and after the Closing, each party, at the
requesting party's expense and without further consideration, will execute and
deliver such documents to the other party as the other party may reasonably
request in order more effectively to consummate the transactions contemplated
hereby.
IN WITNESS WHEREOF, this Asset Purchase Agreement has been duly executed by the
parties hereto as of the date first above written.
MULTICULTURAL RADIO BROADCASTING, INC.
By:
------------------------------------------
Arthur Liu, President
NASSAU BROADCASTING PARTNERS, L.P.
BY: NASSAU BROADCASTING PARTNERS, INC.
ITS GENERAL PARTNER
By:
------------------------------------------
Louis F. Mercatanti, Jr., President
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Exhibit 2.7
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into this 7th day of August, 1998,
by and between Port Jervis Broadcasting Co., Inc., a New York corporation
("Seller") and Nassau Broadcasting Partners, L.P., a Delaware limited
partnership ("Buyer").
STATEMENT OF FACTS
1. Seller is the licensee and operator of radio stations WTSX-FM
and WDLC-AM licensed to Port Jervis, New York (the "Stations").
2. Buyer and Seller are parties to a Time Brokerage Agreement
dated as of August 1, 1998 ("TBA"), pursuant to which Buyer has provided an
over-the-air program service on the Stations.
3. Buyer has exercised an Option, granted pursuant to an Option
Agreement dated as of August __, 1998, to purchase all of the assets of the
Stations (the "Option Agreement").
4. Subject to the consent of the Federal Communications
Commission ("FCC"), Buyer desires to acquire the Stations, and all of the
assets, leases, contracts, agreements, licenses, and other property used or
useful in the operation of the Stations, with certain exceptions as provided
herein, and Seller desires to transfer such assets to Buyer.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties intending to be legally bound hereby, agree as follows:
1. SALE AND TRANSFER OF ASSETS.
At the Closing, Seller will sell, assign, transfer and deliver to Buyer
the following:
1.1. ASSETS TO BE TRANSFERRED. Subject to the terms and conditions
of this Agreement, on the Closing Date (as defined in Section 10.1), Seller
shall sell, convey, assign, transfer and deliver to Buyer, and Buyer shall
purchase and accept, all of the business, rights, properties and assets, real
and personal, tangible and intangible, of every type and description owned by
Seller and used or held for use in connection with the business and operations
of the Stations, together with all rights and privileges associated with such
assets and business of the Stations, except for Excluded Assets (as defined in
Section 1.2) (collectively, the "Assets"). Without limiting the foregoing, the
Assets shall include the following:
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1.1(a) LICENSES AND AUTHORIZATIONS. Subject to prior FCC
consent, all of the FCC authorizations issued to Seller with respect to the
Stations and their auxiliaries, including without limitation, all rights in and
to the call letters WTSX-FM and WDLC-AM, to the extent that they can be
conveyed, and all of those FCC authorizations listed and described on SCHEDULE
1.1(a) attached hereto, and all applications therefor, together with any
renewals, extensions or modifications thereof and additions thereto or
applications filed between the date hereof and the Closing Date (collectively,
the "Licenses"). All of Seller's interest in the Licenses will be assigned to
Buyer as hereinafter provided;
1.1(b) TANGIBLE PERSONAL PROPERTY. All equipment, electrical
devices, antennas, cables, vehicles, furniture, fixtures, towers, office
materials and supplies, hardware, tools, spare parts, records, tapes, discs,
carts and other tangible personal property of every kind and description owned
by Seller and used or held for use (including those not in operating condition)
in connection with the business and operations of the Stations on the Closing
Date, including without limitation those listed and described on SCHEDULE 1.1(b)
attached hereto or any replacements thereafter acquired prior to the Closing
Date (except as may be consumed in the ordinary course of business) and
including all rights under manufacturers' and vendors' warranties;
1.1(c) REAL PROPERTY. The real property owned and used in
connection with the operation of Stations, listed on SCHEDULE 1.1(c), including
all structures, buildings, towers, transmitters, antennas and other improvements
thereon (the "Real Property");
1.1(d) LEASED REAL PROPERTY. Any of the leases of real
property with respect to real property leased by Seller and used or held for use
in connection with the business and operations of the Stations on the Closing
Date, described on SCHEDULE 1.1(d) (the "Leased Property");
1.1(e) AGREEMENTS FOR SALE OF TIME; TRADE/BARTER AGREEMENTS.
Those orders and agreements now existing for the sale of advertising time on the
Stations, to the extent of the unexpired portion thereof, for cash as listed and
described in SCHEDULE 1.1(e)-1; those orders, agreements and arrangements for
the exchange of advertising time, to the extent of the unexpired portion thereof
for consideration other than cash ("Trade Out Agreements"), as listed and
described in SCHEDULE 1.1(e)-2; all Cash Agreements and all Trade Out Agreements
entered into in the ordinary course of business between the date hereof and the
Closing Date to the extent of the unexpired portion thereof;
1.1(f) OTHER CONTRACTS. All unexpired contracts, agreements,
equipment leases, arrangements, commitments or understandings, written or oral
("Contracts") described in SCHEDULE 1.1(f) hereto;
1.1(g) INTANGIBLE RIGHTS. Any trademarks, trade names, service
marks, franchises, patents, jingles, slogans, logotypes and other intangible
rights, owned and used or held for use by Seller on the Closing Date in
connection with the business and
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operations of the Stations, including those listed and described on SCHEDULE
1.1(g) hereto to the extent that Seller has the right to use and assign them;
1.1(h) PROGRAMMING AND COPYRIGHTS. All programs and
programming materials and elements, music libraries and software of whatever
form or nature owned by Seller and used or held for use in connection with the
business and operation of the Stations on the Closing Date, whether recorded on
tape or any other media or intended for live performance, and whether completed
or held in production and any related common law and statutory copyrights owned
by Seller and used or held for use in connection with the business and
operations of the Stations, or licensed or sublicensed to Seller in connection
therewith, to the extent that Seller has the right to use and assign them;
1.1(i) FCC RECORDS. All FCC program logs and other records
that relate to the operation of the Stations as are required to be maintained
under the rules and regulations of the FCC, including, but not limited to, an
up-to-date and complete local public file during the 36 months prior to the
Closing Date;
1.1(j) FILES AND RECORDS. All original files and other records
of Seller relating to the business and operations of the Stations owned and in
the possession of Seller, including without limitation all available schematics,
blueprints, engineering data, customer lists, reports, specifications,
projections, statistics, promotional graphics, original art work, mats, plates,
negatives and other advertising, marketing or related materials, and copies of
all other technical and financial information concerning the Stations and the
Assets during the 36 months prior to the Closing Date; and
1.1(k) GOODWILL. All of Seller's goodwill in, and going
concern value of, the Stations.
1.1(l) ACCOUNTS RECEIVABLE. Seller's accounts receivable in
respect to the Stations.
1.2 EXCLUDED ASSETS. There shall be excluded from the Assets, and
retained by Seller, to the extent in existence on the Closing Date the following
assets listed in SCHEDULE 1.2 (collectively, the "Excluded Assets"):
1.2(a) CASH AND INVESTMENTS. All cash on hand or in bank
accounts, and any and all other cash equivalents, including without limitation,
certificates of deposit, commercial paper, treasury bills, asset or money market
accounts and all such similar accounts or investments, or notes or other
entitlements evidencing loans receivable and any securities owned or held by
Seller;
1.2(b) CERTAIN ASSETS. Pension, profit sharing and savings
plan and trusts and any assets thereof;
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1.2(c) CONSIDERATION. The consideration delivered by Buyer to
Seller pursuant to this Agreement;
1.2(d) FILES AND RECORDS. The files and records referred to in
the parenthetical in Section 1.1(j);
1.2(e) INSURANCE POLICIES. All right, title and interest under
all insurance policies or contracts of insurance and all claims or rights to
payment thereunder, including insurance refunds;
1.2(f) CHOSES IN ACTION. Any and all causes of action and
claims of Seller arising out of or relating to transactions prior to the Closing
Date, including, without limitation, claims for tax refunds; and
1.2(g) FM ANTENNA SITE. All of Sellers right title and
interest in and to the FM Site as that term is defined in 1.3 below, except for
the lease set forth in 1.3.
1.3 LEASE OF ANTENNA SITE. The FM antenna site, described in the
attached SCHEDULE 1.3, (the "FM Site") is now owned by Seller. From the Closing
Date, for a period of ten (10) years, Seller shall lease to Buyer the FM Site,
for $1 per month. In the event that Seller constructs a new tower on the FM
Site, the monthly rent shall be increased to $750 per month upon completion of
such tower. Buyer shall have an option to renew the lease of the FM Site for an
additional ten year period.
2. PURCHASE PRICE AND PAYMENT.
The Buyer shall pay to Seller as consideration for all of the Assets to
be sold and bought hereunder pursuant to Section 1, the amounts described as the
Purchase Price in Section 3.1 of the Option Agreement, less any adjustments
described in Section 3.2, including credit for the Option Payment, as that term
is defined in the Option Agreement.
3. NO ASSUMPTION OF LIABILITIES.
The leases described in Section 1.1(d), the orders and agreements
described in Section 1.1(e), the liabilities incurred by Buyer pursuant to the
TBA which have not been satisfied prior to the Closing Date, and the contracts,
agreements, arrangements, commitments and understandings described in SCHEDULE
1.1(f) are herein referred to as the "Assumed Obligations" and are the only
agreements, contracts, obligations or commitments of Seller, whether known or
unknown, contingent or otherwise that are to be assumed by Buyer as of the
Closing Date. Except for the Assumed Obligations, Seller shall be solely
responsible, and there shall be no assumption of liability by Buyer, for any
agreement, contract, obligation or commitment of Seller, whether known or
unknown, contingent or otherwise, relating to either the Stations or any of the
affairs of Seller including, but not limited to, any agreement, executed or
executory, relating to the exchange of time on the Stations for goods, wares,
services, promotions, merchandising or anything other than cash. With respect to
the Assumed Obligations, it is specifically
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understood that Buyer shall assume only those obligations of Seller thereunder
accruing on or after the Closing Date. Buyer shall not be obligated to perform
any contract, agreement, obligation or commitment of Seller, whether known or
unknown, contingent or otherwise, not specifically assigned to and assumed by
Buyer hereunder.
4. SELLER'S REPRESENTATIONS AND WARRANTIES.
As used in this Section 4, references to Seller's knowledge shall mean
Seller's knowledge after Seller has exercised due diligence in making inquiries
of its personnel. Seller represents and warrants that the following statements
as to Seller and the Assets and the Stations are correct as of the date hereof
and will be correct at the Closing Date:
4.1 LICENSES, AUTHORIZATION AND COMPLIANCE THEREWITH. Seller owns
and/or has all franchises, licenses, permits, consents, approvals or
authorizations of any public or governmental agency materially necessary to the
conduct by Seller of its business as now conducted, including, but not limited
to, the Licenses described in SCHEDULE 1.1(a) hereto, without any material
conflict with the rights of others, all of which are in full force and effect,
except as set forth in SCHEDULE 1.1(a), subject to no lien, charge, encumbrance,
or limitation. Without material exception, to the best of Seller's knowledge,
Seller is in material compliance with all of its material obligations with
respect thereto; and no event has occurred which permits, or after notice or
lapse of time, or both, would permit, the revocation or termination of any of
the foregoing or would materially adversely affect the rights of Seller
thereunder.
Except as may be provided in SCHEDULE 1.1(a), Seller has no knowledge
of any applications or any material complaints or proceedings pending or to the
best of Seller's knowledge threatened as of the date hereof before the FCC
directly relating to the business or operation of the Stations other than
proceedings which generally affect the broadcast industry. Further, on the
Closing Date, except as set forth on Schedule 1.1(a), the Stations will, unless
otherwise provided, be on the air operating at full licensed power (consistent
with the FCC's Rules and Regulations, the Communications Act of 1934, as amended
(the "Act"), and regulations promulgated thereunder) under their present
licenses, not under any Special Temporary Authority, as defined by the FCC. All
FCC requirements for such authority will have been met, and there will be no
material uncorrected FCC violations. If notice of any such violation is received
or if Seller hereinafter becomes aware of any such violation prior to Closing,
Seller, at its own expense, shall eliminate and cause to be removed all such
violations by the date of Closing. All returns, reports and statements required
to be filed with the FCC or other governmental agency relating to the Stations
have been or will be duly and timely filed, and all said reports, returns and
statements are or will be complete and correct as filed. To Seller's best
knowledge, the "Public Inspection File" of the Stations will be complete and in
full compliance with Section 73.3526 of the FCC's Rules and Regulations on the
Closing Date.
4.2 ASSETS.
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4.2(a) RIGHTS, ETC. TO SELL. Seller is the owner of and will
at the Closing Date have good title to the Assets, and will on the Closing Date
have full legal right, power and authority to assign, transfer and sell the
Assets to Buyer, free and clear of all claims, security interests, mortgages,
pledges, liens and other encumbrances of every nature whatsoever, except as set
forth on Schedule 4.2(a). No action is pending or, to the knowledge of Seller,
threatened, which would contest the ownership of, or right to transfer, any of
the Assets. The Assets will not at the Closing Date be subject to any contract,
sale or other agreement, except as disclosed in writing to and expressly assumed
or taken subject to by Buyer hereunder, and the delivery of the Assets to Buyer
pursuant to the provisions of this Agreement will transfer good and valid title
thereto, free and clear of all claims, security interests, mortgages, pledges,
liens and other encumbrances of every nature whatsoever.
4.2(b) CONDITION OF TANGIBLE PERSONAL PROPERTY. The equipment
described in SCHEDULE 1.1(b) hereto comprises all the equipment used or useful
to operate the Stations as they are presently being operated and to the best of
Seller's knowledge said equipment is in material compliance with the FCC's Rules
and Regulations. From the date hereof until Closing, the Stations and equipment
will be operated and maintained in accordance with good engineering practices
and to the best of Seller's knowledge in compliance with all of the FCC's Rules
and Regulations. Except as disclosed in SCHEDULE 1.1(b), there are no material
defects in any of the structures, improvements, electronic equipment or other
tangible personal assets of the Stations, all of which are in operating
condition. All of the Stations' buildings, structures, transmitters, towers,
antennas, guy wires, ground systems, radials and other improvements are on
property that will be included within the boundaries of the Real Property and
the Leased Property.
4.2(c) REAL PROPERTY. With respect to the Real Property:
(i) Seller is not a "foreign person" as that term is
used in the Internal Revenue Code Section 1445 ("IRC ss.1445"), and Seller
agrees to furnish to Buyer, at or prior to Closing, an Affidavit of Non-Foreign
Status or any other documentation required under IRC ss.1445 to evidence that
Seller is not a "foreign person";
(ii) There are no leases, rental agreements or other
agreements relating to the Real Property which are to remain in effect after
Buyer takes title to the Real Property, and Seller will make no agreement
relating to the Real Property with any person other than Buyer;
(iii) Seller has not received any notice with respect
to the Real Property of any threatened rezoning, annexation or modification to
the general plan proceeding which proceeding is still pending.
4.3 CONTRACTS, LEASES, AGREEMENTS, ETC. To the best of Seller's
knowledge, each of the contracts, agreements, easements, licenses and leases
(collectively,
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"Contracts") described in Sections 1.1(d), 1.1(e)-1, 1.1(e)-2 and 1.1(f) hereto
is valid, binding and enforceable in accordance with its terms and Seller is not
in any material respect in default thereunder. Except for Contracts marked with
an asterisk on SCHEDULES 1.1(d), 1.1(e)-1, 1.1(e)-2 and 1.1(f) (the "Contract
Schedules"), no consents are required to assign to Buyer Seller's interest in
any such Contract. Each such Contract may be assumed by Buyer without any
material adverse change, and is now, and on the Closing Date will be, in full
force and effect.
4.4 EMPLOYEES AND AGREEMENTS RELATING TO EMPLOYMENT.
4.4(a) Attached hereto as SCHEDULE 4.4(a) is a listing of: (1)
the names of all persons currently on the payroll of the Stations, together with
the amount paid or payable to each such person for their services; (2) any bonus
or other material compensation arrangements and personnel benefits or policies
in effect, if any, for each employee; and (3) a complete copy of each such plan,
benefit, and policy.
4.4(b) Except as set forth on SCHEDULE 4.4(b), Seller has made
no representation to any of the Stations' employees concerning their employment,
if any, by Buyer after the Closing Date. Any decision by Buyer to employ any of
the employees of the Stations in the operation of the Stations on or after 12:01
a.m. on the Closing Date, other than those set forth on 4.4(b), shall be made in
its sole discretion.
4.4(c) No labor union is currently certified, or otherwise
recognized, as the collective bargaining representative for any of the Stations'
employees. Seller has no actual knowledge of any labor strike, or other employee
or labor controversy or dispute pending which would affect the operation of the
Stations.
4.4(d) Seller is not, and on the Closing Date will not be,
except as disclosed on SCHEDULE 4.4(d), a party to (a) any labor contract, (b)
any vacation pay, severance pay or other benefit arrangement (including ERISA or
similar plans) with its employees, or (c) any employment contract or agreement
which is not terminable upon termination notice of thirty (30) days.
4.5 LITIGATION. There are no actions, judgments, suits,
proceedings, investigations or inquiries pending or, to the knowledge of Seller,
threatened against or affecting Seller or questioning the validity of any action
taken or to be taken in connection with the implementation of the provisions of
this Agreement, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, agency, court or
instrumentality, domestic or foreign. Seller does not know or have reasonable
grounds to know of any factors or circumstances which might be the basis of any
action, suit or proceeding; and, to the best of Seller's knowledge, except as
disclosed in SCHEDULE 4.5, Seller has complied with all applicable statutes and
regulations of all governmental authorities and agencies having jurisdiction
over Seller.
4.6 COMPLIANCE WITH LAW.
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4.6(a) GENERALLY. Seller has complied and is in compliance in
all material respects with all laws, rules, regulations, and orders of any
governmental entity applicable to Seller and the Assets, including, without
limitation, the Act and rules and regulations thereunder ("Applicable Laws").
Seller has not been charged with and is not under investigation for any
violation of Applicable Laws, nor, to the knowledge of Seller, is there any
basis for any such charge or investigation.
4.6(b) REAL ESTATE MATTERS. All of the Real Property and all
structures, transmitters, towers, equipment and improvements located thereon
conform in all material respects with all applicable laws and regulations,
including, without limitation, environmental, building and zoning laws and
regulations, and no notice or actual knowledge of any violation of zoning,
building or other laws, statutes and ordinances and regulations relating to such
real property has been received or is known and there is no proposed, pending or
threatened condemnation proceeding or similar action affecting any such Real
Property.
4.6(c) HAZARDOUS MATERIALS. Except as set forth on Schedule
4.6(c), to the best of Seller's knowledge, no hazardous or toxic materials (as
hereinafter defined) exist in any structure located on, or exist on or under the
surface of the Real Property. For purposes of this Agreement, "hazardous or
toxic material" shall mean waste, substances, materials, smoke, gas, pollutants,
contaminants, asbestos or asbestos related products, PCB's, petroleum, crude oil
(or any fraction or distillate thereof) or particulate matter designated as
hazardous, toxic or dangerous, or requiring special handling, treatment or
storage whether or not designated hazardous, toxic or dangerous under any
environmental laws. For purposes of this Agreement, "environmental law" shall be
interpreted to mean the Comprehensive Environmental Response Compensation and
Liability Act, any successor to such law, and/or any other applicable federal,
state, or local environmental, health or safety law, rule or regulation
concerning the treating, producing, handling, storing, releasing, spilling,
leaking, pumping, pouring, emitting, or dumping of any waste, substance,
materials, smoke, gas or particulate matter or imposing liability or standards
in connection therewith.
4.7 EXISTENCE AND POWERS; NO CONFLICT. Seller is a corporation
duly formed, validly existing and in good standing under the laws of the State
of New York and has the power and authority to own or lease its properties and
to carry on business as now being conducted, and has all requisite power and
authority to enter into, deliver and perform this Agreement. The execution,
delivery, and performance of this Agreement by Seller have been duly and validly
authorized and no other action is required. Neither the execution and delivery
of this Agreement by Seller, nor the compliance by Seller with the respective
terms thereof: (i) will, to the best of Seller's knowledge, breach any
Applicable Laws; (ii) will conflict with or result in a breach of or constitute
a default (or an event which, with notice or lapse of time, or both, would
become a default) under any of the terms, conditions or provisions of any
judgment, order, arbitration, injunction, decree or ruling of any court or
governmental authority to which Seller or any of the Assets is subject or of
Seller's Certificate of Incorporation, by-laws or any agreement, commitment,
arrangement, lease, insurance policy, or other instrument to which Seller is a
party or by
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which it is bound; (iii) will result in the creation of any lien, equitable
lien, tax lien, mortgage, charge, security interest or other encumbrance upon
any of the Assets; (iv) will give to any other person any interests or rights,
including rights of termination or cancellation, in or with respect to any of
the priorities, assets, agreements, contracts or business of Seller; (v) will
result in the loss or adverse modifications of the Licenses or any other
license, franchise, permit or other governmental authorization granted to or
held by Seller; or (vi) require the consent of any person except as disclosed in
this Agreement.
4.8 OPERATION OF STATIONS.
4.8(a) The Stations have been, and shall continue to be,
operated (1) in material compliance with their Licenses and Applicable Laws, and
(2) in a manner which will not expose human beings to any level of non-ionizing
radiation higher than the levels recommended for human exposure in "Safety
Levels With Respect to Human Exposure to Radio Frequency Electromagnetic Fields,
3 kHz to 300 GHz" (ANSI/IEEE C95.1-1992), adopted by the IEEE and by the
American National Standards Institute, November 1992.
4.8(b) Seller shall give prompt written notice to Buyer if (i)
the transmission of the regular broadcast programming of either of the Stations
in the normal and usual manner is interrupted or discontinued other than as a
result of weekly routine maintenance or public utility company activity; or (ii)
either of the Stations is operated at less than ninety (90%) of its licensed
operating power, in either event for a period in excess of (A) twenty-four (24)
consecutive hours or (B) an aggregate of seventy-two (72) hours in any thirty
(30) day period; or (iii) if either of the Stations operate at reduced power for
ten (10) days, thereby requiring written notification to the FCC pursuant to
Section 73.1560(d) of the FCC Rules; or (iv) the programming format of either of
the Stations is materially changed.
4.9 INSURANCE. The insurance policies owned by Seller or of which
Seller is a named beneficiary, set forth on SCHEDULE 4.9 attached hereto, are
now and on the Closing Date will be fully in effect in accordance with their
terms, with no default in the payment of premiums on any such policy and no
ground for cancellation or avoidance of any thereof or for reduction of the
coverage provided hereby.
4.10 ABSENCE OF INSOLVENCY. No insolvency proceedings of any
character, including, without limitation, bankruptcy, receivership,
reorganization, composition or arrangement with creditors, voluntary or
involuntary, affecting the Seller or any of its respective assets or properties,
are pending or, to the knowledge of Seller, threatened, and Seller has made no
assignment for the benefit or creditors, nor taken any action with a view to, or
which would constitute the basis for, the institution of any such insolvency
proceedings.
4.11 INTANGIBLES. Seller owns and has the exclusive right to use
all the patents, copyrights, service or trademarks and trade names, call
letters, logos, slogans and other intangible property or rights ("Intangibles")
presently used in conjunction with the operation of the Stations, together with
any goodwill associated therewith. To the best of
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Seller's knowledge, the Intangibles are subject to no pending or threatened
challenge and none of the Intangibles is being infringed by the activities or
operations of any third person and none is subject to any outstanding order,
judgment, decree, stipulation or agreement restricting the use thereof.
4.12 FINANCIAL STATEMENTS. Seller has heretofore furnished
Purchaser with copies of the financial information of Seller as set forth on the
attached SCHEDULE 4.12 (the "Financial Statements"). Except as noted therein or
on SCHEDULE 4.12, the Financial Statements are complete and correct in all
material respects, were prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods indicated and
present fairly the results of operating cash flows for said periods.
4.13 TAXES. As of the Closing Date, Seller shall have timely and
duly filed with the appropriate governmental agencies all tax returns,
declarations of estimated tax, and tax reports required to be filed by it, and
all taxes and other assessments which Seller is required to pay, withhold or
collect have been timely and duly paid, withheld and collected. There are no
present disputes as to taxes of any nature payable by Seller with respect to the
Stations, and it has not filed an IRS Form 872 ("Consent Fixing Period of
Limitations Upon Assessment of Income Tax") or otherwise agreed to extend the
time for assessment of any taxes against it for any year. Any additional taxes,
interest, penalties, assessments and deficiencies that shall become due and
payable with respect to any tax return or tax obligation of Seller shall be the
sole responsibility of Seller.
4.14. ABSENCE OF CERTAIN CHANGES. Since July 1, 1998, there has not
been (i) any material adverse change in the property of Seller or any material
labor dispute, grievance or organizational effort affecting the Assets, taken as
a whole; (ii) any physical damage, destruction or loss (not covered by
insurance) materially and adversely affecting the Assets or business of Seller,
taken as a whole; (iii) any sale, assignment, lease or other transfer or
disposition of any of the assets or properties of Seller, except in the ordinary
course of business and with adequate replacement property being acquired as
necessary; or (iv) any waiver of any right resulting in a materially adverse
affect on the Assets.
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5. BUYER'S REPRESENTATIONS AND WARRANTIES.
As used in this Section 5, references to Buyer's knowledge shall mean
Buyer's knowledge after the Buyer has exercised due diligence in making
inquiries of its personnel. Buyer represents and warrants that the following
statements as to Buyer are correct as of the date hereof and will be correct at
the Closing Date:
5.1 FCC QUALIFICATIONS. Buyer is qualified under the Act, and the
rules, regulations and policies promulgated thereunder to obtain FCC approval of
the Application, as that term is defined in Section 8 of this Agreement and
serve as the licensee of the Stations. Buyer has no knowledge of any material
reason, fact, allegation or claim not stated herein which may impair Buyer's
qualifications and knows of no reason why the FCC would not approve said
Application. Between the date hereof and the Closing, Buyer will take no action
knowingly that would substantially delay FCC approval or make it not qualified.
5.2 EXISTENCE AND POWERS; NO CONFLICT. Buyer is a limited
partnership duly formed, validly existing and in good standing under the laws of
the State of Delaware and has the power and authority to own or lease its
properties and to carry on business as now being conducted, and has all
requisite power and authority to enter into, deliver and perform this Agreement.
The execution, delivery, and performance of this Agreement by Buyer have been
duly and validly authorized by Buyer's general partner, and no other action is
required. Neither execution and delivery of this Agreement by Buyer, nor the
compliance by Buyer with the respective terms hereof: (i) will, to Buyer's best
knowledge, breach any Applicable Laws; (ii) will conflict with or result in a
breach of or constitute a default (or an event which, with notice or lapse of
time, or both, would become a default), under any of the terms, conditions or
provisions of, any judgment order arbitration injunction, decree or ruling of
any court or governmental authority to which buyer is subject, or any of Buyer's
partnership agreement, or any contract, commitment, arrangement, or agreement to
which Buyer is party or by which it may be bound; or (iii) require the consent
of any person except as disclosed in this Agreement.
5.3 DISCLOSURE. No covenant, representation or warranty made by
Buyer in this Agreement and no statement made in any certificate or document
furnished or to be furnished by Buyer in connection with the transactions
contemplated by this Agreement contains or will contain any untrue statement of
a material fact or omits or will omit to state any material fact necessary to
make such representation, warranty or statement not misleading to Seller.
5.4 NO LITIGATION. There is no litigation, judgment or decree
outstanding or other judicial or administrative proceeding pending or, to the
best of Buyer's knowledge, threatened which might adversely affect Buyer's
power, authority or ability to enter into this Agreement and to carry out the
transactions contemplated herein. Buyer does not know or have reasonable grounds
to know of any factors or circumstances which might be the basis for such
litigation, proceeding or investigation.
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6. AGREEMENT NOT TO COMPETE.
6.1 AGREEMENT NOT TO COMPETE. On or before the Closing Date,
Seller and Robert I. Wein shall execute individually an Agreement Not To Compete
in the form annexed hereto as EXHIBIT D pursuant to which they shall agree not
to participate in the ownership, management, operational control of and not be
connected with or have any interest in, any radio station licensed to any
community within the counties of Sussex in the State of New Jersey, Orange in
the State of New York and Pike in the Commonwealth of Pennsylvania for a period
of three (3) years immediately following the Closing.
The parties hereto agree that the duration and area of the Agreement
Not To Compete are reasonable. In the event that any Court determines that the
duration or area, or both of them are unreasonable, and the Agreement Not To
Compete is to that extent unenforceable, the parties hereto agree that the
Agreement Not To Compete shall remain in full force and effect for the greatest
period of time and in the greatest area that would render it enforceable. Seller
agrees that damages are an inadequate remedy for any breach of this covenant and
that Buyer shall, whether or not it is pursuing any potential remedies at law,
be entitled to equitable relief, in the form of temporary, preliminary and
permanent injunctions, without bond or security, without any actual or
threatened breach of this Agreement Not To Compete.
By executing this Agreement in the space provided below, Seller and
Robert I. Wein each agree to execute such Agreement Not To Compete and deliver
such Agreement Not To Compete to Buyer at Closing.
Port Jervis Broadcasting Co., Inc.
By:
------------------------------- ---------------------------
Robert I. Wein, President Robert I. Wein
7. CONDUCT PRIOR TO CLOSING.
7.1 ACCESS AND INFORMATION. Seller shall give Buyer and its
representatives reasonable access throughout the period prior to Closing to the
operations, properties, books, contracts, agreements, leases, commitments and
records of the Stations at reasonable times, provided that the normal operations
of Seller's business shall not be disrupted.
7.2 CONDUCT OF STATION BUSINESS. Between the date hereof and
Closing:
7.2(a) Seller shall produce the consent of any third parties
necessary for the assignment to Buyer of any contract, lease or agreement marked
with an asterisk and listed on the CONTRACT SCHEDULES;
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7.2(b) Seller shall (i) conduct the business of the Stations
in a prudent and responsible manner in good faith and operate and maintain the
Stations and the Assets in accordance with good engineering and Seller's past
practices and in compliance with the terms of the Licenses and Applicable Laws;
and (ii) keep all of the Assets to be transferred hereunder in substantially the
same operating condition and repair as of the date hereof, reasonable wear and
tear excepted;
7.2(c) Except as set forth in SCHEDULE 7.2(c), Seller shall
not (i) hire additional personnel or unreasonably increase the compensation or
bonuses payable or to become payable to any of the Stations' employees; (ii)
enter into an agreement to sell, assign, lease, exchange or otherwise transfer
or dispose of any of the Assets; (iii) enter into any new contract or
renegotiate, modify, amend, renew, or terminate any existing contract, except
that Seller may, in the ordinary and usual course of business, enter into: (1)
agreements for the sale of time on the Stations for such rates and on such terms
as are consistent with Seller's normal and usual practices; (2) any contract(s)
terminable on thirty (30) days notice or less without premium or penalty; and
(3) any contract(s) consented to by Buyer in writing; (iv) change the Stations'
call letters, or change the Stations' facilities, or apply for any construction
permit(s) with the FCC, without Buyer's consent, which will not be unreasonably
withheld or delayed, or make any material adverse changes in the Stations'
leasehold improvements and other improvements and fixtures; or (v) except as
required by law or any governmental agency, disclose any information relating to
the Stations to any third party, other than to Seller's authorized employees,
agents and professional advisors in the ordinary course of business and other
than to Buyer and Buyer's authorized representatives as provided for herein;
7.2(d) Seller shall maintain in full force and effect the
insurance described in SCHEDULE 4.9; and
7.2(e) Seller shall give Buyer notice of any unusual operating
problems or developments affecting Seller between the date hereof and the
Closing Date, including, but not limited to, any problem or development which
would materially adversely affect the Assets, and keep Buyer fully apprised of
all matters having material financial impact on Seller.
7.3 BUYER'S INSPECTIONS AND APPROVALS.
7.3(a) ENGINEERING INSPECTION. It is agreed that within ten
(10) days prior to the Closing Date, Buyer's engineer may inspect the Assets to
insure that its equipment complies with all warranties and conditions set forth
herein. Seller agrees to extend full cooperation to said engineer, including
such access to the equipment and to logs pertaining thereto at such time or
times as said engineer shall reasonably request. Buyer shall furnish Seller with
a copy of the report of any inspection prior to the Closing Date. If Buyer's
engineer reports that the equipment fails to materially comply with said
warranties, Buyer may either:
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(1) Elect to consummate the purchase of the Assets in
which case Seller shall bear the cost of equipment
repair in an amount not to exceed $50,000, and such
amount shall be deducted from the Purchase Price; or
(2) Elect to consummate the purchase of the Assets
exclusive of the equipment which fails to materially
comply with warranties, in which case the Purchase
Price shall be reduced by the fair market value of such
equipment.
7.3(b) INSPECTION OF REAL ESTATE. Seller agrees to convey and
Buyer agrees to accept such title to the Real Property as the title company
shall be willing to insure on its standard form and at standard rates, such
title to be subject to: (i) all standard exclusions and printed exceptions in
the standard form of owner's policy of title insurance; (ii) encroachments and
all other matters that would be disclosed by a current and accurate survey of
the Real Property; (iii) liens for taxes and assessments not yet due and
payable; (iv) easements for public utilities affecting the Real Property; (v)
all easements, covenants, restrictions and rights-of-way affecting the Real
Property; (vi) the exceptions listed on SCHEDULE 7.3; and (vii) both (a) any
applicable zoning ordinances, other land use laws and regulations; and (b) those
matters, if any, which are waived by Buyer pursuant to this Section (the
foregoing title matters are hereinafter referred to as "Permitted Title
Exceptions"). Within thirty (30) days of the execution of this Agreement, Buyer
shall order, at Buyer's sole cost and expense, a title commitment from a title
insurance company authorized to do business in the State of New York (the
"Commitment"). If the Commitment reveals a defect in title which is not one of
the Permitted Title Exceptions, Buyer may either waive such defect or give
prompt (within ten (10) days of receipt of such commitment or endorsement, time
being of the essence) written notice to Seller of such defect in title whereupon
Seller may, at its option, attempt to cure such defect prior to the Closing or
decline to cure such defect. Nothing contained herein shall be deemed or
construed to require Seller to incur any costs and expenses, or to bring any
action or proceeding, to remove any defect in title. Notwithstanding the
foregoing, Seller shall have the right, at its sole option, to extend the
Closing Date by not more than sixty (60) days to attempt to cure any defect in
title objected to by Buyer in accordance with this Section 7. Seller shall give
Buyer no less than five (5) business days' notice of a new Closing Date.
7.3(c) ENVIRONMENTAL AUDIT. Buyer shall promptly, at its
expense, arrange for such environmental investigations and audits (the "Audit")
of the Real Property as it deems appropriate including, without limitation: (i)
conditions with respect to or contamination or pollution of surface or
groundwaters, soil and air, (ii) the disposal, presence, release or threat of
release of hazardous or toxic material thereon, and (iii) compliance with
environmental laws or other Applicable Laws. Buyer shall furnish Seller with a
copy of the report of the Audit within five (5) business days after Buyer's
receipt thereof. If the Audit discloses a condition which materially contradicts
the representations in Section 5.6(c), Buyer may either:
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(i) Elect to consummate the purchase of the Assets in
which case Seller shall bear the cost of remediating such condition in an amount
not to exceed $100,000, and such amount shall be deducted from the Purchase
Price; or
(ii) Elect to consummate the purchase of the Assets
exclusive of the portion of the Real Property on which the condition exists (and
exclusive of the lease in the event such Real Property is leased by Seller), in
which case the Purchase Price shall be reduced by the fair market value of such
Real Property without reference to such condition.
7.4 RISK OF LOSS. The risk of any loss, damage or destruction to
any of the Assets from fire or other casualty or cause shall be borne by the
Seller at all times prior to 12:01 a.m. on the Closing Date. Upon the occurrence
of any loss or damage to any material portion of the Assets as a result of fire,
casualty or other cause prior to Closing, Seller shall notify Buyer of same in
writing immediately, stating with particularity the extent of such loss or
damage incurred, the cause thereof if known, and the extent to which
restoration, replacement and repair of the Assets lost or destroyed will be
reimbursed under any insurance policy with respect thereto. Subject to the
provisions hereof, Buyer shall have the option (but not the obligation), in the
event the loss or damage exceeds One Hundred Thousand Dollars ($100,000.00) and
the property cannot be substantially repaired or restored within thirty (30)
days, exercisable within ten (10) days after receipt of such notice from Seller
to: (i) postpone the Closing until such time as the property has been completely
repaired, replaced or restored, unless the same cannot be reasonably effected
within two (2) months of notification; (ii) elect to consummate the Closing and
accept the property in its "then" condition, in which event Seller shall at the
Closing assign all rights under any insurance claim covering the loss and pay
over any proceeds under any such insurance policy theretofore received by Seller
with respect thereto; or (iii) rescind this Agreement at no cost or expense to
Buyer and declare the Agreement of no further binding force and effect, if such
repairs, replacements or restorations are not completed within ninety (90) days
after the date specified herein as the Closing Date, provided that such repairs,
replacements or restorations are necessary to the normal operation of the
Stations. In the event Buyer elects to postpone the Closing Date as provided in
clause (i) of this Subsection, the parties hereto will cooperate to extend the
time during which this Agreement must be closed as specified in the consent of
the FCC referred to herein.
7.5 CONFIDENTIALITY. Between the date of this Agreement and the
Closing Date, Buyer will maintain strict confidentiality with respect to all
documents and information furnished by or on behalf of Seller (except for
documents of information required to be disclosed by law), and, if this
Agreement is terminated, Buyer shall return to Seller all such documents and
information. Notwithstanding the foregoing, Buyer may make disclosure that may
be required: (i) by its lenders; (ii) in the preparation of federal, state and
local tax returns; (iii) pursuant to any federal or state securities laws; or
(iv) as may be necessary to advise any of Buyer's investors or advisors;
provided, that, in such case, Buyer shall advise the investors of the
confidentiality of the information.
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7.6 PROHIBITED ACTION. Between the date of this Agreement and the
Closing Date, neither Buyer nor Seller will commit any act or omission that
would: (i) disqualify them as parties to an assignment of the Licenses or, as to
Buyer, as owner or operator of the Stations and the Assets; (ii) jeopardize the
validity of the Licenses or (iii) interfere with the existing relationships
between the Stations and their advertisers, suppliers and others.
8. APPLICATION FOR FCC APPROVAL.
8.1 FILING AND PROSECUTION OF APPLICATION. As promptly as
practicable after the execution of this Agreement, and in no event later than
ten (10) business days thereafter, Buyer and Seller shall join in an application
to the FCC requesting the FCC's written consent to the assignment of the
Licenses of the Stations to Buyer and to the consummation of the transactions
contemplated by this Agreement (the "Application"). Both parties shall promptly
respond to any requests for the submission of additional information and shall
vigorously oppose any protests, petition to deny, petition for reconsideration
or appeal of the FCC's consent and approval that may be filed. Buyer and Seller
shall proceed with due diligence and promptly take all steps necessary to the
expeditious prosecution of such application to a favorable conclusion, using
their best efforts throughout.
8.2 EXPENSES. Each party shall bear its own expenses in connection
with the preparation of the applicable sections of the Application and in
connection with the prosecution of such application. Seller and Buyer will
divide and pay equally the filing and grant fees, if any, charged by the FCC.
8.3 DESIGNATION FOR HEARING. If, for any reason, the Application
is designated for hearing by the FCC or if the parties are notified by the FCC
in writing of its intention to designate the Application for hearing, either
party, if not then in default, shall have the right by written notice within
fifteen (15) days of such designation for hearing, to terminate this Agreement.
8.4 CONTROL OF STATIONS. This Agreement shall not be consummated
until the FCC has given its written consent to the assignment of the Licenses of
the Stations.
8.5 BEST EFFORTS. Each party hereto agrees to use its best efforts
in the performance and fulfillment of all terms and conditions of this
transaction applicable to such party and in filing an application for the FCC's
consent, and agrees to execute such other and further documents as may be
reasonably required to carry out the intent of this Agreement.
9. BULK SALES LAW.
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Buyer hereby waives compliance by seller with the provisions of all
Bulk Sales Laws, or other similar provisions, provided, however that Seller
agrees to indemnify and hold Buyer harmless for any claims arising thereunder.
10. CLOSING.
Subject to the terms and conditions herein stated, the parties agree as
follows:
10.1 CLOSING DATE. The Closing of the transactions contemplated
herein shall be held on a date in time, as specified by Buyer in writing to
Seller that is no less than five (5) and no more than ten calendar (10) days
after the date upon which the approval of the FCC required for the consummation
of the transactions contemplated herein shall become a "Final Order"; provided,
however, "Final Order" means the date on which the consent of the FCC is no
longer subject to administrative or judicial reconsideration, review, appeal or
stay. The parties hereby agree and stipulate that, absent the pendency of any
petition, application or motion seeking reconsideration, review, appeal or stay
of the Consent, and absent any FCC action reconsidering, reviewing, staying or
modifying the Consent, such Consent shall be treated as final as of 12:01 A.M.
on the forty-first day after the date of public notice issued by the FCC
approving the assignment of the Licenses to Buyer. The Closing shall take place
at the offices of Sterns & Weinroth, A Professional Corporation, at 9:00 A.M.
local time, or such other time or place as mutually agreed.
10.2 SELLER'S OBLIGATIONS AT CLOSING. At the Closing, Seller shall
execute and deliver or cause to be delivered to Buyer the following, in a form
and substance reasonably approved by counsel for Buyer:
10.2(a) A Bill of Sale for all tangible personal property to
be transferred hereunder, pursuant to Section 1.1(b), containing a warranty of
title and covenant against all liens, encumbrances and restrictions of any kind
whatsoever, in substantially the form attached hereto as EXHIBIT B;
10.2(b) One or more assignments assigning to Buyer the
Licenses and intangible property to be acquired by Buyer hereunder, in
substantially the form attached hereto as EXHIBIT C;
10.2(c) One or more assignments assigning to Buyer the
Contracts to be assigned to Buyer hereunder, in substantially the form attached
hereto as EXHIBIT D, together with all necessary consents thereto and the
original copies of said Contracts;
10.2(d) A certificate from Seller stating that: (i) all
representations and warranties of Seller as set forth in this Agreement or in
any statement, certificate, schedule, exhibit or other document delivered
pursuant to this Agreement by Seller are true and correct in all material
respects, as of the Closing Date; and (ii) Seller has, in all material respects,
performed and complied with all covenants, agreements and
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conditions required by this Agreement to be performed or complied with by Seller
at or prior to the Closing Date;
10.2(e) A deed transferring title to the Real Property to
Buyer;
10.2(f) A lease for the FM Site in substantially the form
attached hereto as EXHIBIT E;
10.2(g) An opinion of counsel for Seller in the form attached
hereto as EXHIBIT F;
10.2(h) An opinion of Seller's FCC Counsel in the form
attached hereto as EXHIBIT G;
10.2(i) Copies of the files, records and logs referred to in
Sections 1.1(i) and 1.1(j) hereof and copies of all of the Licenses; and
10.2(j) Such other documents or instruments as counsel for
Buyer may reasonably request and in a form reasonably acceptable to Buyer's
counsel, which documents are necessary to carry into effect the provisions of
this Agreement.
10.3 BUYER'S OBLIGATIONS AT CLOSING. At the Closing, Buyer shall
execute and deliver or cause to be delivered to Seller the following in a form
and substance reasonably acceptable to Seller's counsel:
10.3(a) The Purchase Price as set forth in Section 2;
10.3(b) One or more assumptions assuming the Contracts being
assigned by Seller;
10.3(c) A certificate from Buyer stating that: (i) all
representations and warranties of Buyer as set forth in this Agreement or any
statement, certificate, or other document delivered pursuant to this Agreement
by Seller are true and correct in all material respects as of the Closing Date;
and (ii) Seller has, in all material respects, performed and complied with all
covenants, agreements, and conditions required by this Agreement to be performed
or complied with by Seller at or prior to the Closing Date; and
10.3(d) Such other documents or instruments as counsel for
Seller may reasonably request and in a form acceptable to Seller's counsel,
which documents are necessary to carry into effect the provisions of this
Agreement.
10.4 CONDITION TO OBLIGATIONS OF BUYER. The obligation of Buyer to
consummate the purchase of the Assets at the Closing shall be subject to the
performance, in all material respects, on or prior to the Closing Date, of all
of the covenants and agreements as set forth elsewhere in this Agreement to be
performed by Seller, and upon the following additional conditions:
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10.4(a) The representations and warranties of Seller shall be
true in all material respects as of the Closing Date;
10.4(b) There shall not have occurred any material adverse
change in the condition of the Assets;
10.4(c) The consents required from all governmental agencies
(including, without limitation, the Final Order of the FCC) to Buyer's
acquisition of the Assets shall have been granted, without any condition
materially adverse to Buyer, and such consents shall be valid and outstanding on
the Closing Date;
10.4(d) No action or proceeding shall be pending or
threatened, challenging the validity of this Agreement or seeking to delay the
consummation of any of the transactions for which this Agreement provides, which
in the reasonable opinion of Buyer is material to the transactions contemplated
by this Agreement;
10.4(e) Seller shall have obtained and delivered to Buyer the
written consents of all requisite parties to assign and transfer to Buyer those
Contracts material to the operation of the Stations without conditions
materially adverse to Buyer;
10.4(f) Seller shall have in all material respects performed
and complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by it prior to and on the Closing
Date;
10.4(g) All of the requirements of Section 10.2 shall have
been met; and
10.4(h) Seller shall deliver, in form and substance
satisfactory to Buyer, an acknowledgment that Seller has retained no right or
reversion of the Licenses, has no right to the reassignment of the Licenses in
the future and has not reserved the right to use the facilities of the Stations
in the future for any reason whatsoever.
10.4(i) Seller shall agree to the allocation of the Purchase
Price among the Assets pursuant to Section 12 of this Agreement, which agreement
Seller shall not unreasonably withhold.
Buyer shall have the right to waive any or all of the foregoing
conditions of Closing at its sole option and risk.
10.5 CONDITION TO OBLIGATIONS OF SELLER. The obligation of Seller
to consummate the purchase of the Assets at the Closing shall be subject to the
performance, in all material respects, on or prior to the Closing Date, of all
of the covenants and agreements as set forth elsewhere in this Agreement to be
performed by Seller, and upon the following additional conditions:
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10.5(a) The representations and warranties of Buyer shall be
true in all material respects as of the Closing Date;
10.5(b) The consents required from all governmental agencies
(including, without limitation, the Final Order of the FCC) to Buyer's
acquisition of the Assets shall have been granted, without any condition
materially adverse to Seller, and such consents shall be valid and outstanding
on the Closing Date;
10.5(c) Buyer shall have in all material respects performed
and complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by it prior to and on the Closing
Date; and
10.5(d) All of the requirements of Section 10.3 shall have
been met.
10.5(e) Buyer shall agree to the allocation of the Purchase
Price among the Assets pursuant to Section 12 of this Agreement, which agreement
Buyer shall not unreasonably withhold.
Seller shall have the right to waive any or all of the foregoing
conditions of Closing at its sole option and risk.
10.6 FURTHER ASSURANCE. From time to time, upon request and without
further consideration on or after the Closing Date, Seller and Buyer will
execute and deliver such other instruments of conveyance and transfer and take
such other action as may be reasonably required more effectively to convey,
transfer to and vest in the Buyer, and to put the Buyer in possession and
operating control of, any part of the Assets, and, in the case of contracts and
rights, if any, which cannot be transferred effectively without the consent of
third parties which is unobtainable, to use good faith efforts to secure to the
Buyer the benefits thereof.
11. OTHER CLOSING OBLIGATIONS.
11.1 PRORATIONS. Except for the income and obligations which are
the subject of the TBA, Seller shall be entitled to all income earned or accrued
and shall be responsible for all liabilities and obligations incurred or payable
in connection with the operation of the Stations through the close of business
on the day preceding the Closing Date. Buyer shall be entitled to all income
earned or accrued and shall be responsible for all liabilities and obligations
incurred or payable in connection with the operation of the Stations after the
close of business on the day preceding the Closing Date. All overlapping items
of income or expense for which Buyer is not entitled to receive or responsible
to pay under the TBA shall be apportioned between Seller and Buyer as of the
close of business on the day preceding the Closing Date, in accordance with
generally accepted accounting principles with the understanding that Buyer shall
only have responsibility for the Assumed Obligations. Items to be apportioned
include, but are not limited to, the following:
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11.1(a) Prepaid expenses arising from payments made for goods
or services prior to the Closing Date if all or part of the goods or services
have not been received or used prior to the Closing Date (for example, rents
paid in advance for a rental period extending beyond the Closing Date);
11.1(b) Liabilities, customarily accrued, arising from
expenses incurred but unpaid as of the close of business on the day preceding
the Closing Date (for example, frequency discounts; rent; and sales
commissions); and
11.1(c) Personal property taxes and utility charges relating
to the Stations.
Within thirty (30) days after the Closing, Buyer shall deliver to
Seller a statement setting forth in reasonable detail the basis for prorations
pursuant to this Section, and Buyer shall pay to Seller, or Seller shall pay to
Buyer, as the case may be, any net amount due as the result of the proration
statement (or, if there is a dispute, the undisputed amount thereof). If Seller
disputes Buyer's determinations, or, if at any time after delivery of Buyer's
statement of determinations any party determines that any item included in the
proration is inaccurate or that an additional item should be included in the
prorations, the parties shall confer with regard to the matter and an
appropriate adjustment and payment shall be made as agreed upon by them or, if
they are unable to resolve the matter, by a firm of independent certified public
accountants mutually agreeable to the parties, whose decision on the matter
shall be binding and whose fees and expenses shall be borne equally by them.
11.2 FEES; SALES AND TRANSFER TAXES. All filing and recording fees
in connection with any instrument of conveyance or transfer delivered pursuant
to this Agreement shall be paid by Buyer. All sales and other transfer taxes, if
any, in respect of the Assets sold and transferred hereunder shall be paid by
Seller.
11.3 OTHER TAXES. Any and all sales taxes, unemployment insurance
and social security taxes, and all other taxes due any state, federal or local
government by Seller on or before the Closing Date shall be paid by Seller on,
or prior to, such time.
11.4 EMPLOYEES. On the Closing Date, Seller shall notify all
persons employed by Seller in connection with the business of the change of the
ownership of the business and shall pay all wages and bonuses owing to such
employees (and all vacation, severance pay and fringe benefits to which such
employees are entitled) such that any employee of Seller whom Buyer may elect to
retain in Buyer's employ shall have no claim against Buyer by reason of any
prior employment in Seller's business during Seller's ownership thereof.
12. ALLOCATION OF PURCHASE PRICE.
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The Purchase Price shall be allocated among the Assets pursuant to the
mutual agreement of the Buyer and Seller prior to the Closing Date. Each of the
parties hereto agrees to prepare and file its tax returns reflecting the
allocations in a manner consistent with this Agreement.
13. INDEMNIFICATION.
13.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All covenants and
agreements pertaining to matters to be performed after Closing and all
representations and warranties contained in this Agreement shall survive for a
period not to exceed two (2) years after the Closing Date ("Survival Period"),
except that the representations and warranties which the party making the same
knew or would have, through the exercise of reasonable diligence, known to be
false shall continue indefinitely. No claim which is the subject of the Survival
Period may be brought under this Agreement or with respect to the transactions
described herein unless written notice describing in reasonable detail the
nature and basis of such claim is given on or prior to the last day of the
Survival Period. In the event such notice is so given, the right to
indemnification with respect thereto under this Section 13 shall survive the
Survival Period until such claim is finally resolved and any obligations with
respect thereto are fully satisfied.
13.2 INDEMNITY BY SELLER. Seller agrees to pay and discharge and to
save and protect Buyer and its officers, directors, shareholders and affiliates
free and harmless from all obligations, claims and demands (including reasonable
attorneys' fees incurred by Buyer with respect thereto) (collectively "Seller's
Obligations") against, arising out of or in connection with (a) any lease,
contract or other agreement of Seller not assumed by Buyer pursuant to this
Agreement; (b) the ownership of the Stations or the Assets that shall arise or
accrue prior to the Closing which was not incurred by Buyer under the TBA; and
(c) any material breach or violation by Seller of any covenant, agreement or
warranty herein contained, or the inaccuracy of any representation of Seller
made in this Agreement.
13.3 INDEMNITY BY BUYER. Buyer agrees to pay and discharge and to
save and protect Seller and its officers, directors, shareholders and affiliates
free and harmless from all obligations, claims, and demands (including but not
limited to attorney fees incurred by Seller with respect thereto) against,
arising out of or in connection with (a) any lease, contract, or other agreement
of Seller to be assumed by Buyer pursuant to this Agreement; (b) that shall
arise or accrue against or in connection with the ownership or operation of the
Stations and the Assets from and after the Closing; and (c) any material breach
or violation by Buyer of any covenant, agreement or warranty herein contained or
the inaccuracy of any representation of Buyer made in this Agreement.
13.4 INDEMNIFICATION PROCEDURE; RIGHT OF OFFSET. In the event that
any party hereto asserts a claim for indemnification hereunder, such party
seeking indemnification shall give written notice to the indemnifying party
specifying the nature and the amount, if known, of the claim asserted. The
indemnifying party shall then have the right, using counsel reasonably
satisfactory to the party seeking indemnification, to investigate,
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secure, contest or settle the claim alleged by such third party (hereinafter
called a "contest"), provided that the party seeking indemnification may
participate voluntarily, at its own expense, in any such contest through
representatives and counsel of its own choice, and, provided further, that any
such action by the indemnifying party relating to the contest shall be without
prejudice to the party seeking indemnification.
Except as provided otherwise in Section 13.4, the indemnifying party
shall bear all costs of such contests and shall indemnify and hold the party
seeking indemnification harmless against and from all costs, fees, and expenses
of such contest. Unless and until the indemnifying party elects to prosecute the
contest, the party seeking indemnification shall have the full right, at its
option, to do so and to look to the indemnifying party under the provisions of
this Agreement for the amount of the costs, if any, of prosecuting the contest.
The failure of the indemnifying party to respond in writing to the aforesaid
notice of the party seeking indemnification with respect to such contest within
twenty (20) days after the receipt thereof shall be deemed an election not to
prosecute the same. If the indemnifying party fails to prosecute the contest and
the party seeking indemnification does not prosecute the contest or does so and
the decision is rendered against it, the amount paid by the party seeking
indemnification to the third party in settlement or satisfaction of the contest
shall be deemed a valid claim hereunder. In the event that the contest involves
any Seller's obligations, Buyer shall have the right to offset the amount of the
costs, if any, incurred by Buyer in prosecuting the contest together with any
sums owed in connection with the resolution or settlement thereof against
amounts which may be owed by Buyer to Seller.
The parties hereto shall make mutually available to each other all
relevant information in their possession relating to any such contest and shall
cooperate in the defense thereof.
14. TERMINATION BEFORE CLOSING; DEFAULT AND REMEDIES.
14.1 TERMINATION BEFORE CLOSING. If Closing shall not have
previously occurred, this Agreement may be terminated:
14.1(a) Pursuant to Section 7.3 hereof;
14.1(b) By Buyer, upon the occurrence of a Seller's Event of
Default (as defined in Section 14.2) or upon failure of a condition precedent to
Buyer's obligation to close set forth in Section 10.4;
14.1(d) By Seller, upon the occurrence of a Buyer's Event of
Default (as defined in Section 14.2) or upon failure of a condition precedent to
Seller's obligation to close set forth in Section 10.5;
14.1(e) By Seller upon the failure of any of the conditions
set forth in Section 10.5(b) hereof; or
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14.2 DEFAULT AND REMEDIES.
14.2(a) The occurrence of any one or more of the following
events shall constitute a material default of this Agreement by Buyer ("Buyer's
Event of Default"):
(i) The material breach of any representation or
warranty by Buyer hereunder unless such breach is cured prior to the Closing
Date;
(ii) The failure by Buyer to consummate the
transactions contemplated by this Agreement in violation of the provisions of
this Agreement;
(iii) The failure by Buyer to perform any other of its
obligations under this Agreement, where such failure shall continue for a period
of ten (10) days after delivery of written notice of demand therefor from Seller
to Buyer; provided, however, that if more than ten (10) days are reasonably
required to cure such failure, then Buyer shall not be deemed to be in default
thereof if Buyer, in good faith, has commenced such cure within said ten (10)
day period and thereafter diligently prosecutes such cure to completion and
completes such cure prior to Closing.
14.2(b) The occurrence of any one or more of the following
events shall constitute a material default of this Agreement by Seller
("Seller's Event of Default"):
(i) The material breach of any representation or
warranty by Seller hereunder unless such breach is cured prior to the Closing
Date;
(ii) The failure by Seller to consummate the
transactions contemplated by this Agreement in violation of the terms of this
Agreement;
(iii) The failure by Seller to perform any other of its
obligations under this Agreement, where such failure shall continue for a period
of ten (10) days after delivery of written notice of demand therefor from Buyer
to Seller; provided, however, that if more than ten (10) days are reasonably
required to cure such failure, then Seller shall not be deemed to be in default
thereof if Seller, in good faith, has commenced such cure within said ten (10)
day period and thereafter diligently prosecutes such cure to completion and
completes such cure prior to Closing.
14.2(c) Seller acknowledges that the Station is of a special,
unique, and extraordinary character, and that any breach of this Agreement by
Seller could not be compensated for by damages. Accordingly, upon the occurrence
of a Seller's Event of Default, Buyer shall be entitled, in addition to any
other remedies that it may have, to enforcement of this Agreement (subject to
obtaining any required approval of the FCC) by a decree of specific performance
or injunctive relief requiring Seller to fulfill its obligations under this
Agreement. In any action to specifically enforce Seller's obligation to close
the transaction contemplated by this Agreement, Seller shall waive the defense
that there is an adequate remedy at law or in equity and agrees that Buyer shall
be entitled to obtain specific performance of Seller's obligation to close
hereunder without being required to
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prove actual damages. As a condition to seeking specific performance, Buyer
shall not be required to tender the Purchase Price but shall be required to
demonstrate that Buyer is ready, willing and able to tender the Purchase Price
and consummate the purchase of the Station as contemplated hereunder.
14.2(d) Upon the occurrence of a Buyer's Event of Default,
Seller shall have only the rights set forth in Section 14.1.
15. ACCESS TO BOOKS AND RECORDS.
After the Closing Date, Buyer and Seller shall each allow the other
reasonable access during normal business hours upon reasonable prior notice to
their respective books and records pertaining to the operation of the Stations
prior to the Closing Date and shall retain such records for a period of not less
than three (3) years after the Closing Date.
16. NOTICES.
All notices and other communications hereunder shall be in writing and
be deemed to have been duly given if delivered personally or by overnight
courier or sent by telecopy or mailed by registered mail, postage prepaid,
addressed as follows:
(a) If to Seller, to:
WTSX, Inc.
P.O. Box 290
Port Jervis, NY 12771
ATTENTION: Robert I. Wein
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with a copy to:
Cuddeback & Onofry
17 East Main Street
P.O. Box 1114
Port Jervis, NY 12771
ATTENTION: Robert A. Onofry, Esq.
(b) If to Buyer, to:
Louis F. Mercatanti, Jr.
Nassau Broadcasting Partners, L.P.
600 Alexander Road
Princeton, NJ 08540
with a copy to:
Mark D. Schorr, Esq.
Sterns & Weinroth. P.C.
50 West State Street, Suite 1400
P.O. Box 1298
Trenton, NJ 08607-1298
or such other address with respect to any party hereto as such party may from
time to time notify (as provided above) to the other party hereto. Any such
notice, demand or communication shall be deemed to have been given (i) if so
mailed, as of the close of the third business day following the date so mailed,
and (ii) if personally delivered or otherwise sent as provided above, on the
date delivered or sent if sent by telecopy and on the next business day after
the date sent in all other cases.
17. CONTROL OF STATION.
Between the date hereof and the Closing Date, Seller shall manage and
control the operation of the Station subject only to the terms and conditions of
the TBA.
18. EXPENSES.
Unless otherwise agreed to in writing by the parties hereto, each party
shall pay its own costs and expenses, including any and all legal and accounting
fees, of its performance and compliance with all conditions and agreements
contained herein on its or their part to be performed or complied with.
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19. DISCLOSURE OF EXHIBITS AND SCHEDULES.
Notwithstanding anything to the contrary contained in this Agreement or
in any of the Exhibits and Schedules, any information disclosed in one Exhibit
or Schedule, as the case may be, shall be deemed to be disclosed in all Exhibits
and Schedules. Certain information set forth in the Exhibits and Schedules, as
the case may be, is included solely for informational purposes and may not be
required to be disclosed pursuant to this Agreement. The disclosure of any
information shall not be deemed to constitute an acknowledgment that such
information is required to be disclosed in connection with the representations
and warranties made by Seller in this Agreement or is material, nor shall such
information be deemed to establish a standard of materiality. Except as
expressly set forth in this Agreement, there are no representations or
warranties, express or implied, being made by Seller.
20. SECTION HEADINGS.
The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
21. ENTIRE AGREEMENT; FILINGS.
This Agreement and all Schedules and Exhibits attached hereto
constitute the entire agreement of the parties with respect to the subject
matter hereof and supersede all prior understandings and agreements among the
parties, whether oral or written, contain the entire understanding of the
parties and shall not be changed, modified, amended, extended, terminated,
waived or discharged except by subsequent instrument in writing signed by the
parties hereto. To the extent permitted by the FCC, the Schedules shall not be
filed with the FCC or otherwise disclosed or made public.
22. COUNTERPARTS.
This Agreement may be signed upon any number of counterparts with the
same effect as if the signature to each counterpart were on the same instrument.
23. SURVIVAL.
The provisions hereof, which by their terms are to be performed or
observed after the Closing Date, shall survive the Closing hereunder in
accordance with the terms of this Agreement and shall be binding upon and inure
to the benefit of all of the parties hereto, their heirs, legal representatives,
successors and assigns.
24. CONFIDENTIALITY.
Neither party shall make any announcement or disclose to the press or
others without Seller's consent (which shall not be unreasonable withheld or
delayed) as to the purchase/sale of the Stations prior to the filing of
applications with the FCC and its first
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public announcement of the assignment application. It is understood that the
foregoing non-disclosure requirement is not intended to preclude Buyer from
having discussions with financial entities, consultants, attorneys and
prospective management level employees outside the Stations, who will also be
advised of the need and agreement for deferred disclosure.
25. ASSIGNABILITY.
Neither the Agreement nor any rights or obligations hereunder may be
assigned by Buyer or Seller without the express prior written consent of the
other party. Except as provided otherwise herein, this Agreement shall inure to
the benefit of and be binding upon the successors and assigns of the parties.
26. GOVERNING LAW.
This Agreement shall be governed by, construed (both as to validity and
performance) and enforced in accordance with the laws of the State of New York
applicable to agreements made and to be performed wholly within such
jurisdiction.
27. SEVERABILITY.
Any provision of this Agreement which is unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such unenforceability without invalidating the remaining provisions hereof, and
any such unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto hereby waive any provision of law now or
hereafter in effect which renders any provision hereof unenforceable in any
respect.
38. FURTHER ACTIONS.
From time to time before, at and after the Closing, each party, at its
expense and without further consideration, will execute and deliver such
documents to the other party
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as the other party may reasonably request in order more effectively to
consummate the transactions contemplated hereby.
IN WITNESS WHEREOF, this Asset Purchase Agreement has been duly
executed by the parties hereto as of the date first above written.
PORT JERVIS BROADCASTING CO., INC.
By:
------------------------------------
Robert I. Wein, President
NASSAU BROADCASTING PARTNERS, L.P.
BY: NASSAU BROADCASTING PARTNERS, INC., ITS
GENERAL PARTNER
By:
-----------------------------------
Louis F. Mercatanti, Jr., President
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Exhibit 10.2
TIME BROKERAGE AGREEMENT
TIME BROKERAGE AGREEMENT (the "Agreement") dated as of January 21, 1999, by
and between MULTICULTURAL RADIO BROADCASTING, INC. ("Multicultural")
(hereinafter referred to as "Licensee") and NASSAU BROADCASTING PARTNERS, L.P.,
a Delaware Limited Partnership (the "Broker").
WITNESSETH:
WHEREAS, Licensee is authorized to operate Radio Stations WJHR-AM licensed
to Flemington, New Jersey (hereinafter referred to as the "Station") pursuant to
a license issued by the Federal Communications Commission ("FCC");
WHEREAS, Contemporaneously with the execution of this Agreement, Licensee
and Broker have entered into an Asset Purchase Agreement, dated even date
herewtih (the Asset Purchase Agreement) pursuant to which the Licensee has
agreed to sell to Broker all of the Stations' assets, including the License,
subject to the approval of the FCC, at the expiration of this Agreement;
WHEREAS, the parties hereto have carefully considered the FCC's time
brokerage policies and intend that this Agreement in all respects comply with
such policies;
WHEREAS, Licensee desires to enter into this Agreement to provide an interim
source of diverse programming and income to sustain the operations of the
Station until the expiration of the Time Brokerage Agreement;
WHEREAS, Broker desires to provide an over-the-air program service to
Flemington, New Jersey and surrounding areas, using the facilities of the
Station;
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WHEREAS, Licensee agrees to provide time on the Station to Broker on terms
and conditions that conform to the policies of the Station and the FCC for time
brokerage arrangements and as set forth herein; and
WHEREAS, Broker agrees to utilize the facilities of the Station solely to
broadcast programming that conforms with the policies of the Licensee and with
all rules, regulations and policies of the FCC and as set forth herein.
NOW, THEREFORE, for and in consideration of the mutual covenants herein
contained, the parties hereto have agreed and do agree as follows:
1 . FACILITIES. Licensee agrees to make broadcasting transmission
facilities of the Station, including its subcarrier, available to Broker for a
minimum of 158 hours per week (the "Minimum"), which will facilitate the
broadcasting of Broker's programs (the "Programs"), which shall originate either
from Broker's own studios or from Licensee's facilities or from other studios
contracted for by Broker. The Programs are described in ATTACHMENT I hereto.
Broker and Licensee represent to each other that they have, and will have
throughout the term of this Agreement, the capability of transmitting either by
STL or phone lines from their respective broadcast and transmission studios.
2. PAYMENTS. Broker hereby agrees to pay Licensee for the broadcast of
the programs hereunder a fee in the amount of Two Hundred Thousand Dollars
($200,000) per annum, payable $50,000.00 quarterly, in advance, commencing on
the Effective Date of this Agreement as provided in Section 3 below.
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3. TERM. This Agreement shall become effective on the Effective Date
defined herein and shall continue until November 16, 2001, or if earlier, the
date of termination, pursuant to the provisions of Section 18.3 of this
Agreement.
a. EFFECTIVE DATE. This Agreement shall become effective on
February 1, 1999.
4. PROGRAMS. Broker shall furnish or cause to be furnished the artistic
personnel and material for the Programs as provided by this Agreement and all
Programs shall be in good taste and in accordance with the rules, regulations
and policies of the FCC. All Programs shall be prepared and presented in
conformity with the regulations prescribed in ATTACHMENT II hereto. All
advertising spots and promotional material or announcements shall comply with
all applicable federal, state and local regulations and policies.
5. STATION'S FACILITIES.
5.1 OPERATION OF STATION. Licensee represents that the Station now
operates and will continue to operate in accordance with the authorizations
issued by the FCC. Throughout the term of this Agreement, Licensee shall make
the Station available to the Broker for operation with the maximum authorized
facilities twenty-four (24) hours a day, seven (7) days a week, except for: (i)
up to ten (10) hours per week for public affairs, news, information and other
non-entertainment programming intended to address the needs and interests of the
Station's service area; (ii) down-time occasioned by routine maintenance not to
exceed two (2) hours each Sunday morning between the hours of 12 Midnight and
6:00 a.m. Any routine maintenance work affecting the operation of the Stations
at full power shall be scheduled upon, if
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practicable, at least forty-eight (48) hours prior notice to Broker; and (iii)
STL and phone lines as set forth in Paragraph 1 hereof.
5.2 INTERRUPTION OF NORMAL OPERATIONS. If the Station suffers loss
or damage of any nature to their transmission facilities which results in the
interruption of service or the inability of the Station to operate with its
maximum authorized facilities, pursuant to the authorization under which the
Station is then operating, Licensee shall immediately notify Broker and shall
undertake such repairs as necessary to restore the full-time operation of the
Station with its then maximum authorized facilities within thirty (30) days from
the occurrence of such loss or damage. If such repairs are not made within the
allotted period, Broker may give notice to Licensee of Broker's intention to
terminate this Agreement and the Asset Purchase Agreement, in which event this
Agreement and the Asset Purchase Agreement shall terminate on the thirtieth (30)
day following Licensee's receipt of such notice, any other provision of this
Agreement notwithstanding unless the repairs are made prior to the expiration of
said thirty (30) day period.
6. HANDLING OF MAIL. Except as required to comply with the FCC rules
and policies, including those regarding the maintenance of the public inspection
file (which shall at all times remain the responsibility of Licensee), Licensee
shall not be required to receive or handle mail, cables, telegraph or telephone
calls in connection with the Programs broadcast hereunder unless Licensee has
agreed in writing to do so.
7. PROGRAMMING AND OPERATIONS STANDARDS. Broker agrees to abide by the
standards set forth in ATTACHMENT II hereto in its programming and operations.
Broker further agrees that if, in the sole judgment of Licensee, or the
Station's General
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Manager, Broker does not comply with said standards, Licensee may suspend or
cancel any program not in compliance.
8. RESPONSIBILITY FOR EMPLOYEES AND EXPENSES.
8.1 Broker shall employ and be responsible for the salaries, taxes,
insurance and related costs for all personnel used in the production of its
programming (including salespeople, traffic personnel, board operators and
programming staff). Licensee will provide and be responsible for the Station's
personnel necessary for the broadcast transmission of the Programs (including,
without limitation, a full-time Station Manager) and will be responsible for the
salaries, taxes, insurance and related costs for such Station personnel used in
the broadcast transmission of the Programs. Whenever on the Station's premises,
all personnel shall be subject to the supervision and the direction of
Licensees' Station Manager. Broker shall reimburse Licensee for all telephone
calls associated with program production and listener responses, for all fees to
ASCAP, BMI and SESAC, and for any other copyright fees attributable to its
programming broadcast on the Station.
8.2 PROGRAM TRANSMISSION COST AND MAINTENANCE. Broker shall be
solely responsible, and shall directly pay or, if appropriate, reimburse
Licensee for all expenses incurred in the organization and/or delivery of
programming from any remote location and the main studios of the Station,
including electric power at the Station's transmitter sites, and further shall
be responsible for reimbursement of all maintenance, including all expenses
related thereto, of the Station's transmitter antennae, towers, and equipment,
used in conjunction with the broadcasting of programming, and
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otherwise agrees to turn over all of such equipment to Licensee at the
termination of this Agreement in good and working order, normal wear and tear
excepted.
9. TREATMENT OF LICENSEE'S REVENUES. Licensee shall retain all of
Licensee's revenues received on or before the Effective Date and shall be
entitled to all accounts receivable produced on or before the Effective Date,
and Broker shall cooperate with Licensee in the collection of the receivables, a
true and correct list of which is attached hereto and marked ATTACHMENT III.
Licensee shall be responsible for all accounts payable incurred by Licensee up
to the Effective Date.
10. CONTROL OF STATION. Notwithstanding anything to the contrary in
this Agreement, Licensee shall have full authority and power over the operations
of the Station during the period of this Agreement, Licensee shall provide and
pay for the Manager(s) of the Station, who shall report and be accountable
solely to Licensee and who shall direct the day-to-day operation of the Station.
Licensee shall retain control, said control to be reasonably exercised, over the
policies, programming and operations of the Station, including, without
limitation, the right to decide whether to accept or reject any programming or
advertisements, the right to preempt any Programs in order to broadcast a
program deemed by Licensee to be of greater national, regional or local
interest, and the right to take any other actions necessary for compliance with
the laws of the United States, the State of New Jersey, the rules, regulations
and policies of the FCC, and the rules, regulations and policies of other
federal governmental authorities, including the Federal Trade Commission and the
Department of Justice. Licensee and Broker shall cooperate with one another in
meeting all of the FCC's requirements with respect to public service
programming, for maintaining the political and public
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inspection files of each of the Station's logs and for the preparation of
issues/program lists. Broker shall, upon request by Licensee, provide Licensee
with information with respect to such of the Programs which are responsive to
public needs and interest so as to assist Licensee in the preparation of
required programming reports and will provide, upon request, other information
to enable Licensee to prepare other records, reports and logs required by the
FCC or other local, state or federal governmental agencies.
11. SPECIAL EVENTS. Licensee reserves the right, to preempt any of the
broadcasts of the Programs referred to herein and to use part or all of the time
contracted for herein by Broker to broadcast special events of importance. In
all such cases, Licensee will use their best efforts to give Broker reasonable
notice of their intention to preempt such broadcast or broadcasts and, in the
event of such preemption, Broker shall receive a payment credit for the
broadcasts so omitted. In addition, Licensee shall be responsible for insuring
that the Station's identification announcements are broadcast in accordance with
FCC requirements, and Broker shall cooperate with Licensee to facilitate such
broadcasts.
12. FORCE MAJEURE. Any failure or impairment of facilities or any delay
or interruption in broadcasting Programs or failure at any time to furnish
facilities, in whole or in part, for broadcasting due to acts of God, strikes,
or threats thereof, force MAJEURE, or due to causes beyond the control of
Licensee, shall not constitute a breach of this Agreement, and Licensee will not
be liable to Broker.
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13. RIGHT TO USE THE PROGRAMS. The right to use the Programs produced
by Broker and to authorize their use in any manner and in any media whatsoever
shall be and remain vested in Broker.
14. PAYOLA. Broker agrees that neither it nor any of its employees or
agents will accept any compensation or any kind of gift or gratuity of any kind
whatsoever, regardless of its value or form, including, but not limited to, a
commission, discount, bonus, materials, supplies or other merchandise, services
or labor, whether or not pursuant to written contracts or agreements between
them and merchants or advertisers, unless, to the extent required by the FCC,
the payer is identified in the program as having paid -for or furnished such
consideration. Broker agrees annually, or more frequently upon the request of
Licensee, to provide Licensee with Payola Affidavits substantially in the form
attached hereto as ATTACHMENT IV.
15. COMPLIANCE WITH LAW. Broker agrees that, throughout the term of
this Agreement, Broker will materially comply with all laws and regulations
applicable in the conduct of Licensee's business, and Broker acknowledges that
Licensee has not urged, counseled or advised the use of any unfair business
practice.
16. POLITICAL ADVERTISING. Broker shall cooperate with Licensee as
Licensee complies with the political broadcasting requirements of the Federal
Communications Act of 1934, as amended (the "Act") and the FCC's rules and
policies thereunder. Broker shall supply such information promptly to Licensee
as may be necessary to comply with the lowest unit charge requirements of
Section 315 of the Act. To the extent that Licensee believes necessary, in
Licensee's sole discretion, Broker shall release advertising availability's to
Licensee to permit them to comply with its
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reasonable access provisions of Section 312(a)(7) of the Act, the equal
opportunities provision of Section 315 of the Act, and the rules and policies of
the FCC thereunder; PROVIDED, HOWEVER, that all revenues realized by Licensee as
a result of such a release of advertising time shall promptly be remitted to
Broker. In any event, with respect to the Station, Licensee must oversee and
take ultimate responsibility with respect to the provision of equal
opportunities, lowest unit charge, and reasonable access to political
candidates, and compliance with the political broadcast rules and policies of
the FCC.
17. INDEMNIFICATION; WARRANTY. Broker will indemnify and hold Licensee
harmless against all liability for its material breach of representations,
warranties or covenants as well as for libel, slander, illegal competition or
trade practice, infringement of trademarks, trade names or program titles,
violation of rights of privacy, and infringement of copyrights and proprietary
rights resulting from the broadcast of Programs furnished by Broker. Further,
Broker warrants that the broadcasting of the Programs will not violate any
rights of others, and Broker agrees to hold Licensee harmless from any and all
claims, damages, liability, costs and expenses, including reasonable attorneys'
fees, arising from the broadcasting of the Programs. Licensee reserves the right
to refuse to broadcast any Programs containing matter which is or, in the
reasonable opinion of Licensee, may be, or which a third party claims to be,
violative of any right of Licensee or which may constitute a personal attack as
the term is and has been defined by the Commission. Broker's obligation to hold
Licensee harmless against the liabilities specified above shall survive any
termination of this Agreement until the expiration of all applicable statutes of
limitation. Reciprocally, Licensee shall indemnify and hold Broker harmless
against all liability for its material
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breach of representations, warranties or covenants as well as for libel,
slander, illegal competition or trade practices, infringement or trademarks,
trade names or program titles, violations of rights of privacy and infringement
of copyrights and proprietary rights resulting from programming furnished by
Licensees. Further, Licensee warrants that the broadcasting of the Programs will
not violate any rights of others, and Licensee agrees to hold Broker harmless
for any loss, damage or injury or any kind (including reasonable legal fees and
related costs) arising from the broadcast of programming on the Station
furnished by Licensee. Licensee's obligation to hold Broker harmless against the
liabilities specified above shall survive any termination of this Agreement
until the expiration of the applicable statute of limitations.
18. EVENTS OF DEFAULT: CURE PERIODS AND REMEDIES.
18.1 EVENTS OF DEFAULT. The following shall, after the expiration
of the applicable cure periods, constitute Events of Default under the
Agreement:
18.1.1 NON-PAYMENT. Broker's failure to timely pay the
consideration provided for in Paragraph 2 hereof; or
18.1.2 DEFAULT IN COVENANTS OR ADVERSE LEGAL ACTION. The
default by either party hereto in the material observance or performance of any
material covenant, condition or agreement contained herein or in the Asset
Purchase Agreement, or if either party shall (a) make a general assignment for
the benefit of creditors, (b) files or has filed
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against it a petition for bankruptcy, for reorganization or for the appointment
of a receiver, trustee or similar creditors' representative for the property or
assets of such party under any federal or state insolvency law, which, if filed
against such party, has not been dismissed or discharged within sixty (60) days
thereof; or
18.1.3 BREACH OF REPRESENTATION. If any material representation
or warranty herein or in the Asset Purchase Agreement made by either party or in
any certificate or document furnished by either party to the other pursuant to
the provisions thereof shall prove to have been false or misleading in any
material respect as of the time made or furnished; or
18.1.4 SUBSTITUTION OF PROGRAMMING. If, other than the hours
described in Section 5.1(i) hereof, Licensee preempts or substitutes other
programming for that supplied by Broker during five and one-half (5.5%) percent
or more of the total hours of operation of each of the Stations during any
calendar month.
18.2 CURE PERIODS. An Event of Default shall not be deemed to have
occurred until thirty (30) business days, or fifteen (15) days in the event of a
monetary default, after the non-defaulting party has provided the defaulting
party with written notice specifying the event or events that, if not cured,
would constitute an Event of Default and specifying the actions necessary to
cure within such period. This period may be extended for a reasonable period of
time if the defaulting party is acting in good faith to cure and such delay is
not materially adverse to the other party.
18.3 TERMINATION UPON DEFAULT. In the event of the occurrence of an
Event of Default pursuant to this Agreement the non-defaulting party may
terminate this Agreement after any relevant cure period provided herein or
therein if that party is not also in material default pursuant to this Agreement
. If Licensee terminates this Agreement because Broker has defaulted in the
performance of its obligations under
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this Agreement, Licensee shall be underno further obligation to make available
to Broker any further broadcast time or broadcast transmission facilities and
all amounts accrued or payable to Licensee up to the date of termination which
have not been paid, less any payments made on behalf of Licensee by Broker and
any payment credits, shall immediately become due and payable.
18.4 LIABILITIES UPON TERMINATION. Broker shall be responsible for
all liabilities, debts and obligations of Broker accrued from the purchase of
air time and use of transmission facilities, including, without limitation,
Broker's accounts payable, barter agreements and unaired advertisements, but not
for Licensee's federal, state and local tax liabilities associated with Broker's
payments to Licensee as provided herein. With respect to Broker's obligations
for consideration in the form of air time, Broker may propose compensation to
Licensee for meeting these obligations, but Licensee shall be under no duty to
accept such compensation or to perform such obligations.
19. TERMINATION UPON ORDER OF GOVERNMENTAL AUTHORITY. The parties
intend that this Agreement shall comply with all applicable federal, state and
local regulations. In the event that a federal, state or local governmental
authority designates a hearing with respect to the continuation or renewal of
any licenses,permits or authorizations held by Licensee for the operation of
each of the Station or orders the termination of this Agreement and/or the
curtailment in any manner material to the relationship between the parties
hereto of the provision of programming by Broker hereunder, Broker, at its
option, may seek administrative or judicial appeal of or relief from such
order(s) (in which event Licensee shall cooperate with Broker provided that
Broker shall be responsible for legal fees incurred in such proceedings) or
Broker
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shall notify Licensee that they will terminate this Agreement in
accordance with such order(s). If the FCC designates any renewal application of
the Station for a hearing or commences a hearing to consider revocation of any
license or permit for the Station as a consequence of this Agreement or for any
reason other than the fault of Broker, Licensee shall be responsible for
expenses they incur as a consequence of the FCC proceeding; PROVIDED, however,
that Broker shall cooperate and comply with any reasonable request of Licensee
to assemble and provide to the FCC information relating to Broker's performance
under this Agreement. In the event of termination upon such governmental
order(s), Broker shall pay to Licensee any fees due but unpaid as of the date of
termination unless prohibited by such order(s) and Licensee shall reasonably
cooperate with Broker to the extent permitted to enable Broker to fulfill
advertising or other programming contracts then outstanding, in which event
Licensee shall receive as compensation for such advertising or programming that
which otherwise would have been paid to Broker thereunder. Thereafter, neither
party shall have any liability to the other under the Agreement except as may be
provided pursuant to Paragraph 16 hereof.
20. REPRESENTATIONS AND WARRANTIES.
20.1 MUTUAL REPRESENTATIONS AND WARRANTIES. Licensee and Broker
represent that they are legally qualified, empowered and able to enter into this
Agreement, and that the execution, delivery and performance hereof shall not
constitute a breach or violation of any agreement, contract or undertaking to
which any party is subject or by which it is bound. Licensee and Broker warrant,
represent, covenant and certify that Licensee maintains, and shall continue to
maintain, ultimate control over
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each of the Station's facilities during the term of this Agreement, including,
without limitation, control over the Station's finances, personnel and
programming. Licensee and Broker represent and warrant that they have taken all
necessary corporate and other action to make this Agreement legally binding on
such party, and that the individuals signing this Agreement on their behalf have
been fully authorized and empowered to execute this Agreement.
20.2 LICENSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS.
Licensee makes the following further representations, warranties and covenants:
1 . AUTHORIZATIONS. Licensee holds and owns all licenses and
other permits and authorizations necessary for the operation of the Station as
presently conducted (including licenses, permits and authorizations issued by
the FCC), and such licenses, permits and authorizations will be in full force
and effect for the entire term hereof, unimpaired by any acts or omissions of
Licensee or of any of their principals, employees, or agents.
2. LITIGATION. There is not now pending or, to the knowledge
of Licensee, threatened, any action by the FCC or any other party to revoke,
cancel, suspend, refuse to renew or modify adversely, any of the licenses,
permits or authorizations necessary to the operation of the Station (other than
proceedings of general applicability to the radio broadcast industry). Licensee
has no reason to believe that any such license, permit or authorization will not
be renewed in its ordinary course.
20.3 BROKER'S REPRESENTATIONS. WARRANTIES ANDCOVENANTS. The Broker
hereby verifies that the arrangement contemplated by this Agreement complies
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with the ownership limitations set forth in the Telecommunications Act of 1996,
as adopted February 8, 1996.
21. FCC COMPLIANCE. Notwithstanding anything herein contained to the
contrary, this Agreement, any related agreements and the parties' performance
hereunder and thereunder (i) do not and will not constitute, create, or have the
effect of constituting or creating, directly or indirectly, actual or practical
ownership of Licensee or the Station by Broker or control, affirmative or
negative, direct or indirect, by the Broker over the programming, management, or
any other aspect of the operation of the Licensee or the Station, which
ownership and control will remain exclusively and at all times in the Licensee;
and (ii) do not and will not constitute the transfer, assignment, or disposition
in any manner, voluntarily or involuntarily, directly or indirectly, of any
license or permit at any time issued by the FCC to the License or the transfer
of control of the Licensee within the meaning of Section 310(d) of the Act,
without the FCC's necessary prior written consent having been obtained.
22. MODIFICATION AND WAIVER. No modification or waiver of any provision
of this Agreement shall in any event be effected unless the same shall be in
writing and signed by the party adversely affected by the waiver or
modification, and then such waiver and consent shall be effective only in the
specific instance and for the purpose for which given.
23. NO WAIVER - REMEDIES CUMULATIVE. No failure or delay on the part of
Licensees or Broker in exercising any right or power hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any
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<PAGE>
other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of Licensee and Broker herein
provided are cumulative and are not exclusive of any right or remedies which
they may otherwise have.
24. CONSTRUCTION. This Agreement shall be construed in accordance with
the laws of the State of New Jersey, and the obligations of the parties hereto
are subject to all federal, state or municipal laws or regulations now or
hereafter in force and to the regulations of the FCC and all other governmental
bodies or authorities presently or hereafter to be constituted.
25. HEADINGS. The headings contained in this Agreement are included for
convenience only and no such heading shall in any way alter the meaning of any
provision.
26. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including, without limitation, any assignee of the Licensee for the FCC licenses
for the Stations. Licensee and Broker shall not be permitted to assign this
Agreement without obtaining the consent of the other party, which consent may be
withheld for any reason whatsoever.
27. COUNTERPART SIGNATURE. This Agreement may be signed in one or more
counterparts, each of which shall be deemed a duplicate original, binding on the
parties hereto notwithstanding that the parties are not signatory to the
original or the same counterpart.
28. NOTICES. Any notice required hereunder shall be in writing and any
payment, notice or other communications shall be deemed given when delivered
16
<PAGE>
personally or mailed by certified mail or Federal Express, postage prepaid, with
return receipt requested, and addressed In accordance with the listing set forth
in ATTACHMENT V hereto. If mailed, notice shall be deemed given three (3) days
after it is mailed.
29. ENTIRE AGREEMENT. This Agreement, which includes the attached
Exhibits and Schedules and the Asset Purchase Agreement, embodies the entire
agreement between the parties and there are no other agreements,
representations, warranties or understandings, oral or written, between them
with respect to the subject matter hereof. No alterations, modification or
change of this Agreement shall be valid unless by like written instrument.
30. NO PARTNERSHIP OR JOINT VENTURE CREATED. Nothing in this Agreement
shall be construed to make Licensee and Broker partners or joint venturers of
the other. None of the parties hereto shall have the right to bind the others to
transact any business in the other's name or on its behalf, in any form or
manner or to make any promises or representations on behalf of the other except
as expressly provided for herein.
31. SEVERABILITY. In the event that any of the provisions contained in
this Agreement are held to be invalid, illegal or unenforceable it shall not
affect any other provision hereof and this Agreement shall be construed as if
such invalid, illegal or unenforceable provisions had not been contained herein.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
MULTICULTURAL RADIO NASSAU BROADCASTING PARTNERS, L.P.
BROADCASTING, INC. BY NASSAU BROADCASTING PARTNERS,
INC.
17
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ITS GENERAL PARTNER
By: By:
---------------------------- -------------------------------------
Arthur Liu, President Louis F.Mercatanti, Jr., President
18
<PAGE>
TIME BROKERAGE AGREEMENT
ATTACHMENT I
Broker will broadcast the Business News Network and may also provide news
as well as promotions (including on-air giveaways) and contests. Programming
provided by Broker may include commercial matter, including both program and
spot announcement forms, as well as entertainment and public service
programming.
TIME BROKERAGE AGREEMENT
19
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ATTACHMENT II
Broker agrees to cooperate with Licensee in the broadcasting of Programs of
the highest possible standard of excellence and for this purpose to observe the
following regulations in the preparation, writing and broadcasting of its
Programs:
I. RESPECTFUL OF FAITHS. The subject of religion and references to particular
faiths, tenets and customs shall be treated with respect at all times.
II. NO DENOMINATIONAL ATTACKS. Programs shall not be used as a medium for attack
on any faith, denomination or sect or upon any individual or organization.
III. CONTROVERSIAL ISSUES. Any discussion of controversial issues of public
importance shall be reasonably balanced with the presentation of contrasting
viewpoints in the course of overall programming; no attacks on the honesty,
integrity or like personal qualities of any person or group of persons shall be
made during the discussion of controversial issues of public importance; and
during the course of political campaigns, Programs are not to be used as a forum
for editorializing about individual candidates. If such events occur, Licensees
may require that responsive programming be aired.
IV. DONATION SOLICITATION. Requests for donations in the form of a specific
amount, for example, $1.00 to $5.00, shall not be made if there IS any
suggestion that such donation will result In miracles, cures or prosperity.
However, statements generally requesting donations to support the broadcast or
church may be permitted.
V. NO MINISTERIAL SOLICITATIONS. No invitations by a minister or other
individual appearing on the program to have listeners come and visit him or her
for consultation or
20
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the like shall be made if such invitation implies that the listeners will
receive consideration, monetary gain or cures for illness.
VI. NO VENDING OF Miracles. Any exhortation to listeners to bring money to a
church affair or service is prohibited if the exhortation, affair or service
contains any suggestion that miracles, cures or prosperity will result.
VII. SALE OF RELIGIOUS ARTIFACTS. The offering for sale of religious artifacts
or other items for which listeners would send money is prohibited unless such
items are readily available in ordinary commerce or are clearly being sold for
legitimate fundraising purposes.
VIII. NO MIRACLE SOLICITATION. Any invitations to listeners to meet at places
other than the church and/or to attend other than regular services of the church
is prohibited if the invitation, meeting or service contains any claim that
miracles, cures or prosperity will result.
IX. NO CLAIMS OF UNDOCUMENTED MIRACLES. Any claims of miracles or cures not
documented in biblical scripture and quoted in context are prohibited; also.,
this prohibits the minister and/or other individual appearing on the program
from personally claiming any cures or miracles and also prohibits the
presentation of any testimonials regarding such claims, either in person or in
writing.
X. NO PLUGOLA OR PAYOLA. The mention of any business activity or "plug" for any
commercial, professional or other related endeavor, except where contained in an
actual commercial message of a sponsor, is prohibited.
21
<PAGE>
XI. NO LOTTERIES. Announcements giving any information about lotteries or games
prohibited by federal or state law or regulation are prohibited.
XII. NO "DREAM BOOKS". References to "dream books", the "straight line" or other
direct or indirect descriptions or solicitations relative to the "numbers game"
or the policy game" or any other form of gambling are prohibited.
XIII. NO NUMBERS GAMES. References to chapter and verse numbers, paragraph
numbers or song numbers which involve three (3) digits should be avoided and,
when used, must relate to the overall theme of the program.
XIV. ELECTION PROCEDURES. At least ninety (90) days before the start of any
primary or regular election campaign, Broker will clear with Licensee's General
Manager the rate Broker will charge for the time to be sold to candidates for
public office and/or their supporters to make certain that the rate charged
conforms to all applicable laws and Station policy.
XV. SPOT COMMERCIAL LIMITATIONS. with respect to any given segment of air time
hereunder, the amount of spot commercial matter shall not exceed twenty (20)
minutes during any sixty (60) minute segment. Broker will provide, for
attachment to each of the Stations' logs, a list of all commercial announcements
carried during its programming,
XVI. ANNOUNCEMENTS. Broker shall broadcast (i) an announcement in a form
satisfactory to Licensees at the beginning of each hour to identify Station call
letters, (ii) an announcement at the beginning and end of each program and
hourly, as appropriate, to indicate that program time has been purchased by
Broker; and (iii) any other announcement that may be required by law, regulation
or Station policy.
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<PAGE>
XVII. CREDIT TERMS ADVERTISING. Pursuant to rules of the Federal Trade
Commission, no advertising of credit terms shall be made over the Stations
beyond mention of the fact that, if desired, credit terms are available.
XVIII. COMMERCIAL RECORDKEEPING. Broker shall not receive any consideration in
violation of the FCC's sponsorship identification rule and the anti-payola
provisions of the Communications Act. No commercial messages ("plugs") or undue
references shall be made in programming presented over each of the Stations to
any business venture, profit-making activity, or other interest (other than
non-commercial announcements for BONA fide. charities, church activities or
other public service activities) in which Broker (or anyone else) is directly or
indirectly interested without the same having been approved in advance by
Licensee's General Managers and such broadcast being announced and logged and
sponsored.
XIX. NO ILLEGAL ANNOUNCEMENTS. No announcements or promotion prohibited by
federal or state law or regulation of any lottery or game shall be made over
each of the Stations. Any game, contest or promotion relating to or to be
presented over the Stations must be fully stated and explained in advance to
Licensee which reserves the right, in its sole discretion, to reject any game,
contest or promotion.
XX. PROGRAMMING PROHIBITIONS. Broker shall not knowingly broadcast any of the
following Programs or announcements:
A. FALSE CLAIMS. False or unwarranted claims for any product or service.
B. UNFAIR IMITATION. Infringements of another advertiser's rights
23
<PAGE>
through plagiarism or unfair limitation or either program idea or copy, or any
other unfair competition.
C. COMMERCIAL DISPARAGEMENT. Any disparagement of competitors or competitive
goods.
D. PROFANITY. Any Programs or announcements that are slanderous, obscene,
profane, vulgar, repulsive or offensive, either in them or treatment.
E. PRICE DISCLOSURE. Any price mentions except as permitted by Licensees'
policies current at the time.
F. DESCRIPTIONS OF BODILY FUNCTIONS. Any programming which describes in a
repellent manner internal bodily functions or symptomatic results or internal
disturbances.
G. UNAUTHENTICATED TESTIMONIALS. Any testimonials which cannot be
authenticated.
H. CONFLICT ADVERTISING. Any advertising matter or announcement which may,
in the opinion of Licensee, be injurious or prejudicial to the interests of the
public, each of the Stations, or honest advertising and reputable business in
general.
Licensee, may waive any of the foregoing regulations in specific instances
if, in its reasonable opinion, good broadcasting in the public interest will be
served thereby.
In any case where questions of policy or Interpretation arise, Broker shall
submit the same to Licensee for decision before making any commitments in
connection therewith.
24
<PAGE>
TIME BROKERAGE AGREEMENT
ATTACHMENT III
LICENSEE'S ACCOUNTS RECEIVABLE
25
<PAGE>
TIME BROKERAGE AGREEMENT
ATTACHMENT IV
County of
State of New Jersey
ANTI-PAYOLA/PLUGOLA AFFIDAVIT
Louis F. Mercatanti, Jr., being first duly sworn, deposes and says as
follows:
26
<PAGE>
1 . He is the President of the General Partner for NASSAU BROADCASTING
PARTNERS, L.P. ("BROKER").
2. He has acted in the above capacity since (DATE)
3. No matter has been provided for broadcast by Station WJHR-AM (hereinafter
collectively referred to as the "Station"), for which service, money or other
valuable consideration has been directly or indirectly paid, or promised to, or
charged, or accepted, by him from any person, which matter at the time so
broadcast has not been announced or otherwise indicated as paid for or furnished
by such person.
4. So far as he is aware, no matter has been provided for broadcast by the
Station for which service, money or other valuable consideration has been
directly or indirectly paid, or promised to, or charged, or accepted by the
Station by the Broker, or by any independent contractor engaged by the Broker in
furnishing Programs, from any person, which matter at the time so broadcast has
not been announced or otherwise indicated as paid for or furnished by such
person.
5. In the future, he will not pay, promise to pay, request or receive any
service, money or any other valuable consideration, direct or indirect, from a
third-party in exchange for the influencing of, or the attempt to influence, the
preparation or presentation of broadcast matter on the Station.
6. Except as may be reflected in Paragraph 7 hereof, neither he, his spouse
nor any member of his immediate family, has any present, direct or indirect,
ownership interest In any entity engaged in the following business or activities
(other than an investment in a corporation whose stock is publicly held), serves
as an officer or
27
<PAGE>
director of, whether with or without compensation, or serves as
an employee of, any entity engaged in the following business or activities:
a. the publishing of music;
b. the production, distribution (including wholesale and retail sales
outlets), manufacture or exploitation of music, films, tapes, recordings or
electrical transcriptions of any program material intended for radio broadcast
use;
c. the exploitation, promotion or management of persons rendering
artistic, production and/or other services in the entertainment field;
d. the ownership or operation of one or more radio or television
stations;
e. the wholesale or retail sale of records intended for public purchase;
and
f. the sale of advertising time other than on the Station or any other
station owned by the Broker.
7.A full disclosure of any such interest referred to in Paragraph 6 above is
as follows:
Affiant
Subscribed and sworn to before me
this DAY of 199
28
<PAGE>
Notary Public
My commission expires:
TIME BROKERAGE AGREEMENT
ATTACHMENT V
If the notice is to Licensees, to It at:
Multicultural Radio Broadcasting, Inc.
449 Broadway
New York, New York 10013
Attention: Arthur Liu, President
with a copy to:
Mark N. Lipp, Esq.
Shook, Hardy & Bacon, LLP
801 Pennsylvania Avenue, NW
Suite 600
Washington, DC 20004
29
<PAGE>
If the notice is to Broker:
Nassau Broadcasting Partners, L.P.
619 Alexander Road, Third Floor
Princeton, New Jersey 08540
Attention: Louis F. Mercatanti, Jr.
with a copy to:
Mark D. Schorr, Esq.
Sterns & Weinroth
A Professional Corporation
50 West State Street, Suite 1400
P.O. Box 1298
Trenton, New Jersey 08607-1298
30
<PAGE>
TIME BROKERAGE AGREEMENT
ATTACHMENT V
If the notice is to Licensees, to It at:
Multicultural Radio Broadcasting, Inc.
449 Broadway
New York, New York 10013
Attention: Arthur Liu, President
with a copy to:
Mark N. Lipp, Esq.
Shook, Hardy & Bacon, LLP
801 Pennsylvania Avenue, NW
Suite 600
Washington, DC 20004
If the notice is to Broker:
Nassau Broadcasting Partners, L.P.
619 Alexander Road, Third Floor
Princeton, New Jersey 08540
Attention: Louis F. Mercatanti, Jr.
with a copy to:
Mark D. Schorr, Esq.
Sterns & Weinroth
A Professional Corporation
50 West State Street, Suite 1400
P.O. Box 1298
Trenton, New Jersey 08607-1298
31
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
Following are the subsidiaries of Nassau Broadcasting Corporation:
1. Nassau Broadcasting I, LLC
2. Nassau Broadcasting II, LLC
<PAGE>
EXHIBIT 23.1
We have issued our reports dated March 1, 2000, accompanying the financial
statements and schedule of Nassau Broadcasting Partners, L.P. contained in the
Registration Statement and Prospectus. We consent to the use of the
aforementioned reports in the Registration Statement and Prospectus, and to the
use of our name as it appears under the caption "Experts."
/s/ Grant Thornton
- -----------------
Grant Thornton LLP
Edison, NJ
May 8, 2000
<PAGE>
Exhibit 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 25, 2000, with respect to the financial
statements of Aurora Communications, LLC included in the Registration Statement
(Form S-1) and related Prospectus of Nassau Broadcasting Corporation for the
registration of $190 million of class A common stock.
/s/ Ernst & Young LLP
New York, New York
May 8, 2000
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Nassau Broadcasting
Corporation on Form S-1 of our report dated August 27, 1999, appearing in the
Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
New York, New York
May 8, 2000
<PAGE>
EXHIBIT 23.4
CONSENT OF WEEKS HOLDERBAUM HUBER & DEGRAW, LLP
We consent to the use in this Registration Statement of Nassau Broadcasting
Corporation on Form S-1 of our reports with respect to the financial statements
appearing in the Prospectus, which is part of this Registration Statement as
listed below.
We also consent to the reference to us under the heading "Experts" in the
Prospectus.
Financial Statements included in the prospectus for which consent has been
granted:
Westchester Radio, LLC
- ----------------------
For the Period of January 1, 1999 Report dated January 4, 2000
to October 26, 1999
For the Period of April 2, 1998 Report dated February 19, 1999 &
to December 31, 1998 October 27, 1999
Commodore Media of Westchester, Inc.
- ------------------------------------
For the Period of January 1, 1998 Report dated July 29, 1999
to April 1, 1998
For the Year Ended December 31, 1997 Report dated July 29, 1999
For the Year Ended December 31, 1996 Report dated July 29, 1999
Capstar Trust
- -------------
For the Period of January 1, 1999 to Report dated January 21, 2000
October 26, 1999
For the Period of May 29, 1998 to Report dated February 11, 1999 &
December 31, 1998 October 27, 1999
WRKI/WAXB/WPUT/WINE
- -------------------
For the Period of January 1, 1998 Report dated August 11, 1999 &
to May 29, 1998 October 27, 1999
For the Year Ended December 31, 1997 Report dated August 11, 1999 &
October 27, 1999
For the Year Ended December 31, 1996 Report dated August 11, 1999 &
October 27, 1999
/s/ Weeks Holderbaum Huber & Degraw, LLP
- ------------------------------------------
Weeks Holderbaum Huber & Degraw, LLP
Bridgewater, New Jersey
May 8, 2000
