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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended
December 31, 1995
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______________________ to _______________________
COMMISSION FILE NUMBER 0-3851
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SUNGROUP, INC.
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(Name of small business issuer in its charter)
Tennessee 62-0790469
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
9102 N. Meridian St., Suite 545, Indianapolis, IN 46260
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number 317/844-7425
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Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Exchange Act:
COMMON STOCK, NO PAR VALUE
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(Title of class)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
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Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. $8,996,654
As of March 15, 1996, the aggregate market value of the Common Shares (based on
the average bid and asked price of $.165 per share in the over-the-counter
Market) held by non-affiliates was approximately three hundred thousand dollars
($300,000).
As of March 15, 1996, there were 6,442,099 Common Shares outstanding.
Transitional Small Business Disclosure Format. (Check One): Yes No X
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Page 1 of 89 Exhibit Index on Page 20
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TABLE OF CONTENTS
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ITEM PAGE
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<S> <C>
PART I
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1 Description of Business 3
2 Description of Property 9
3 Legal Proceedings 10
4 Submission of Matters to a Vote of Security Holders 11
PART II
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5 Market for Common Equity and Related
Stockholder Matters 11
6 Management's Discussion and Analysis 11
7 Financial Statements 14
8 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 14
PART III
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9 Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act 14
10 Executive Compensation 16
11 Security Ownership of Certain Beneficial Owners and Management 17
12 Certain Relationships and Related Transactions 19
13 Exhibits and Reports on Form 8-K 20
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PART I
Item 1. Description of Business
General
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SunGroup, Inc. (referred to as the "Corporation") was incorporated in 1967
in the State of Tennessee. The Corporation's original name was Mooney
Broadcasting Corporation. At a special stockholders meeting in 1984, a new Board
of Directors and Corporate Officers were elected and the Corporation's name was
changed to SunGroup, Inc.
For the past three years, the Corporation has been unsuccessful in
generating sufficient cash flow to service its operating obligations, capital
expenditures, and interest and debt obligations as presently structured. Since
mid-1991, the Corporation has attempted to deal with its liquidity needs. There
has been significant efforts to restructure or pay down debts through
negotiations and asset sales. The Corporation continues to negotiate with its
secured lenders in order to restructure its debt obligations in such a way that
they can be paid out of the net cash now being generated by the Corporation's
broadcast properties. Failure to renegotiate successfully with these lenders
will severely hamper the Corporation's ability to continue as a going concern,
See "Item 6. Management's Discussion and Analysis".
Change in Equity
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In 1993, the equity structure of the Corporation was changed significantly.
The Corporation had 2,750,864 shares of outstanding common stock as of December
31, 1992. In 1993, 1,977,525 shares of common stock were issued to John W.
Biddinger, President, as part of his compensation package (see "Item 10.
Executive Compensation"), 1,713,710 shares were issued to Radio USA in exchange
for debt (see "Item 6. Management's Discussion and Analysis"), and warrants
totaling 6,721,463 shares were issued to creditors as part of a major debt
restructuring in February 1993. These warrants are exercisable for a total
price of $1.44. These transactions reduced the equity ownership, on a fully
diluted basis, of all shareholders as of December 31, 1992 to 21% of the
Corporation.
Bankruptcy
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On May 1, 1991, two of the Corporation's subsidiaries, SunGroup
Broadcasting of Alabama, Inc., and SunGroup Broadcasting of Nebraska, Inc.,
filed a petition for relief under Chapter 11 of Title 11, US Code, in the U.S.
Bankruptcy Court for the Middle District of Tennessee in Nashville, Tennessee.
The subsidiaries filed an original disclosure statement and plan of
reorganization with the court on August 29, 1991. Subsequently, a first amended
and restated plan was filed on October 15, 1991, and a second amended and
restated plan was filed on March 16, 1992.
On August 12, 1992, Barclays Business Credit of America filed for Relief of
Stay with regards to the assets of SunGroup Broadcasting of Alabama, Inc.. On
September 3, 1992, Barclays was granted a Relief of Stay in the Bankruptcy
Court. Subsequently, Barclays filed for Appointment of Receiver in the State
Court of Alabama. On September 28, 1992, Charles
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E. Giddens was appointed Receiver of the Corporation's assets held in SunGroup
Broadcasting of Alabama, Inc. The Corporation no longer has any ownership
rights in the property of this subsidiary.
On November 10, 1992, SunGroup Broadcasting of Nebraska, Inc. ("Nebraska")
had a hearing on its Fifth Amended and Restated Plan for Reorganization under
Chapter 11 of Title 11 of the U.S. Code. The bankruptcy court approved the
order for acceptance of the plan. Under the Plan of Reorganization, the
Corporation's Nebraska was re-capitalized as a new company through a rights
offering to existing shareholders and the Board of Directors of the acquiring
company. The new company, OMA, Inc., will not be operated by the Corporation.
The capitalization of OMA under the Plan was achieved on January 31, 1993. On
February 1, 1993, the Court approved the transfer of the assets of Nebraska to
OMA, Inc.
Sale of Assets
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In addition to the disposition of assets through Bankruptcy, as described
above, the Corporation signed an agreement on January 26, 1996, to sell its FM
radio station in Pensacola, Florida. See "Item 13 (b). Reports on Form 8-K."
The radio station constitutes all of the operating assets of the Corporation's
subsidiary in Florida. The assets are being sold exclusive of certain retained
assets, including, without limitation, accounts receivable. The sale price of
the assets of the radio station is $2.3 million in cash, plus certain closing
costs up to $175,000. The sale is contingent upon, among other conditions,
consent by the Federal Communications Commission to the assignment of the radio
station's broadcast license.
In conjunction with the sale of the assets of the Pensacola radio station,
the Corporation has entered into an agreement with the Federal Deposit Insurance
Corporation ("FDIC"), the first lien holder of the assets, on the disposition of
the sale proceeds and release of its lien thereof. Once the FDIC has received
approximately $2.25 million from the Radio Station sale proceeds and other
required documentation then, the Corporation will be discharged of indebtedness
to the FDIC with a current book balance of approximately $5 million.
Acquisition of Assets
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In November of 1994, the Corporation entered an agreement with Service
Broadcasting Company regarding the relocation of the Corporation's radio
broadcasting tower site of radio station KYKX-FM in Longview, Texas. Service
Broadcasting Corporation desired that the location of the broadcasting signal
for radio station KYKX-FM be moved approximately three miles east from its
present location. For consideration of such move, Service Broadcasting agreed
to provide the Corporation's Longview radio station with a new broadcasting
tower and related equipment. During 1995, Federal Communication approval for
this move was received. Land for the broadcasting tower was acquired and the
new tower is presently under construction. The Corporation anticipates that
this transaction will close and it will receive clear title to the property
sometime during the second quarter of 1996.
Principal Services
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The Corporation itself and through subsidiary corporations is principally
engaged in
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the ownership, operation and management of commercial radio stations in the
United States. As of December 31, 1995, the Corporation owned and operated seven
radio stations located in Pensacola, Florida (WOWW-FM); Albuquerque/Santa Fe,
New Mexico (KKSS-FM); Shreveport, Louisiana (KMJJ-FM); Bryan/College Station,
Texas (KKYS-FM); Abilene, Texas (KEAN-AM and FM); and Longview, Texas (KYKX-FM).
A summary of information in chart form regarding each of the Corporation's owned
stations is set forth under "Item 2. Properties".
Company Strategy
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Because of the Corporation's financial difficulty over the past three
years, it has decided to focus its operations in the markets where it is now
positioned. The Corporation desires to develop a strong profit base with its
current stations and continue its efforts to restructure the Corporation's debt
in order to enhance the financial stability of the Corporation.
In developing its stations, the Corporation has taken a variety of actions
to improve its stations' broadcast cash flow. These actions include cost
control programs, implementation of numerous promotional activities, performing
internal and external programming reviews to improve the stations' products with
their respective targeted audiences, and enhancing total station revenues
through the development of alternative revenue sources such as marketing the
radio station's current database of listeners. The Corporation has had each
station implement a five year strategic business plan and has developed a new
internal control policy to implement within the Corporation. The Corporation
has set up a structure in which the general managers meet twice a year to focus
on matters affecting the industry and exchange ideas in hopes of developing new
ideas to increase revenues in each of the six local markets. The Corporation has
also implemented an annual meeting for the sales managers to exchange sales
ideas and receive management training. The Corporation has implemented a
company-wide interview process on sales recruiting. It has also started to
focus on non-traditional revenue sources for its radio stations (database,
telemarketing, etc.).
In operating its radio stations, the Corporation concentrates on the
development of strong decentralized local management at the station level, which
is responsible for the day to day operations of that station and is compensated
based upon the stations' financial performance. Local management consists of a
general manager, sales manager, operations/program director, engineer, and
business manager. Local management, in cooperation with the Corporation's
management, is responsible for programming and sales. Corporate management is
responsible for long-range planning, establishing policies and procedures,
allocating resources and maintaining overall control of the stations.
Programming Formats and Structure
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Each of the Corporation's radio stations has adopted a programming format
designed to competitively fulfill the needs and tastes of its community and to
provide a public service. In order to compete effectively, each station seeks to
develop a defined group, or target audience, within the total potential
listenership. The format and target audience create each station's identity and
are the determinants of program selection, promotional campaigns, on-
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air personnel, and other programming factors. See "Item 2. Properties" for more
information on station programming formats.
Some of the Corporation's radio stations are affiliated with one of the
national networks. Each such affiliation provides non-local news, feature
segments and programming services. Network affiliation is significantly less
important in the radio segment of the broadcasting industry (as opposed to the
television segment). Therefore, radio network affiliations and revenues are not
of major significance to the Corporation.
At most of the Corporation's radio stations, with the exception of network
news and other network programming, the staff of each station originates,
prepares and presents substantially all the station's non-music programming.
Each station has one or more studios for production and recording of material
for later airing or from which live programming can be broadcast.
Revenues and Competition
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The Corporation's radio stations principally derive their revenues from
local advertising, national advertising, and activities tied to the radio
station. The local sales staff of each station is responsible for servicing the
needs of advertising clients located in the community. Sales to national
advertisers are arranged primarily by a sales representation firm. Using a
network of offices in important cities, this national firm employs its best
efforts to exclusively secure national advertising for the station under a
contractual agreement. The representation firm receives compensation in the
form of commissions on net revenue produced for each station from advertising
solicited nationally.
Advertising rates charged by a radio station are based upon market analysis
of radio advertising results, competitive factors, added value promotions, and
competitive pricing in the marketplace. Success in developing programming with
broad popular appeal, particularly among those segments of the listening
audience most sought after by advertisers, and the ability of a sales staff to
communicate the advantages of their radio station's product, are the major
competitive variables of revenues. The future performance of each of the
Corporation's radio stations will also depend on a number of exogenous factors,
including the general strength of the local and national economy, population
growth, overall advertising revenues, retail sales trends, relative efficiency
compared to other media and future governmental regulations and policies.
The Corporation's radio stations compete for revenues with other media
outlets in their respective areas. In addition to rival radio stations, in all
of the Corporation's markets duopolies have been formed which create a new and
more formidable type of competitor. Recently, FCC regulations regarding local
station ownership have become more flexible (see "FCC Regulations"). This
change will have a significant impact on both the Corporation and its
competitors. Other sources of competition for advertising expenditures include
television and cable television, newspapers, magazines, billboards, direct mail,
and many local creative advertising sources.
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Management believes that the Corporation's radio stations are generally
focused on achieving their competitive goals as measured by overall ratings and
target audience performance, advertiser appeal and establishment of clear,
positive local market identity. Because of the volatile nature of radio
competition and ever-changing listening audience tastes, maintenance of the
Corporation's current market standings entails risk and is subject to
competitive pressures. Because of a lack of funds, the Corporation does not
have the same ability as better financed stations to protect its format and
market position or to acquire additional stations within the market to enhance
its position.
Seasonality
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Advertising expenditures in the radio industry generally tend to follow
overall retail sales patterns, but this will vary by programming format.
Typically, sales are strongest during the fourth quarter and weakest in the
first quarter of the calendar year. The Corporation continues to work on ways
to eliminate the seasonal variations of its revenue.
FCC Regulations
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The Corporation's radio broadcasting operations are subject to the
jurisdiction of the Federal Communications Commission ("FCC") under the
Communications Act of 1934, as amended. FCC regulations govern issuance, term,
renewal and transfer of licenses necessary for operation of radio stations.
Upon application, and in the absence of conflicting applications (which would
require the FCC to hold a hearing) or adverse findings as to the licensee's
qualifications, existing radio licenses will be renewed without hearing for
additional seven year terms. All of the Corporation's radio stations are
currently licensed under regular renewal authorizations with the exception of
KYKX-FM in Longview and KMJJ-FM in Shreveport. Longview's license renewal
application was granted under a short term renewal by the FCC. On April 1,
1995, the Corporation filed a renewal application to extend KYKX's license
through August 1, 1997. On February 1, 1996, the Corporation filed under normal
circumstances a license renewal application for radio station KMJJ-FM. KMJJ's
license expires on June 1, 1996. Although some of the applications have been
outstanding for sometime, there is no indication at the present time that the
FCC will not grant the requested license extensions.
On February 8, 1996, President Clinton signed into law the
Telecommunications Act of 1996. This law will have a significant impact on the
radio industry. First, the law eliminates the number of AM and FM stations
which may be owned or controlled by one entity nationally. Previously, the law
restricted ownership or control by one entity to no more than 20 AM and 20 FM
stations nationally. Second, the local radio station ownership rules were
changed to be based on the number of stations controlled by an entity not its
market share. The number of stations an entity can control in a market depends
on the number of signals in the market, but the number which can now be owned by
one entity is significantly greater than in the past.
The statements above do not purport to be a complete summary of the
Communications Act of 1934, as amended and the rules and regulations of the FCC
or of pending proposals. For a complete statement, reference is made to the
Telecommunications Act and to any related rules, regulations and proposals.
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Below is a table of the Corporation's radio stations and the current
expiration date of each stations FCC authorization:
<TABLE>
<CAPTION>
STATION EXPIRATION DATE
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<S> <C>
KEAN-AM/FM October 1, 1997
KKYS-FM October 1, 1997
KMJJ-FM June 1, 1996
KKSS-FM August 1, 1997
WOWW-FM February 1, 2002
KYKX-FM August 1, 1995*
</TABLE>
*KYKX-FM originally had its renewal application challenged. On January 31,
1994, the FCC granted KYKX a short-term renewal expiring August 1, 1995. In
addition to this short term renewal, the Commission found KYKX efforts in
recruiting, hiring, and promoting minorities and women to be insufficient. The
FCC placed specific reporting conditions on KYKX and fined it the sum of
$31,250.
The problems arising from KYKX's insufficient affirmative action program
arose prior to its original license renewal filed in 1989, and prior to the
hiring of the station's current management. Management believes it now has
sufficient affirmative action programs in place to satisfy the FCC's current
requirements.
Employees
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The Corporation had 106 full-time and 135 total employees as of December
31, 1995. Each station normally employs an average of fifteen to twenty-five
people. The corporate staff consists of three employees. The Corporation
considers relations with its employees to be good.
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ITEM 2: DESCRIPTION OF PROPERTY
<TABLE>
<CAPTION>
TOWER LEASE OFFICE LEASE
STATION/LOCATION DATE ACQUIRED FREQUENCY LICENSED POWER FORMAT EXPIRATION EXPIRATION
- ---------------- ------------- --------- -------------- ------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
KKSS-FM 1986 97.3 MHz 100,000 watts Contemporary 2002 1999
Albuquerque/
Santa Fe, New Mexico
WOWW-FM 1989 107.3 MHz 100,000 watts Alternative Own 1996
Pensacola, Florida
KEAN-AM 1985 1280 KHz 500 watts Country Own 2000
Abilene, Texas
KEAN-FM 1985 105.1 MHz 100,000 watts Country 1999 2000
Abilene, Texas
KYKX-FM 1985 105.7 MHz 100,000 watts Country 2017 Own
Longview, Texas
KKYS-FM 1989 104.9 MHz 50,000 watts Contemporary Own 1996
Bryan/College
Station, Texas
KMJJ-FM 1989 99.7 MHz 50,000 watts Urban 2013 Own
Shreveport, Louisiana
</TABLE>
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Item 2. Description of Property
None of the Corporation's real property amounts to ten percent or more
of its total assets. All of the real estate owned by the Corporation is subject
to several mortgages.
The Corporation's subsidiaries typically operate in approximately
3,000-4,000 square feet of office space. The Corporation leases office
headquarters of approximately 1,000 square feet in Indianapolis, Indiana.
It should be noted that the Corporation has two offices whose leases
expire in 1996. All of these leases are expected to be renewed under similar
terms as those currently existing, and are adequate for the Corporation's
current needs.
The ownership or leasing of tower space by which the Corporation
broadcasts its radio signal, is most critical to the Corporation. The
Corporation's management believes that its current tower leases are adequate for
existing operations.
The Corporation does not invest in real estate other than to own or
lease office space or towers for radio operating purposes. The Corporation does
not own securities in any company involved in real estate activities.
Management believes that there is adequate insurance coverage on its
property and equipment.
Item 3. Legal Proceedings
On April 17, 1995, the Federal Deposit Insurance Corporation, as
Receiver for the National Bank of Washington ("FDIC"), the senior creditor for
the Corporation's Pensacola, Florida property ("Pensacola Property"), filed an
application seeking a receiver for the Pensacola Property and a temporary
restraining order against the Corporation, the Corporation's subsidiary,
SunMedia, Inc., and Colonial Broadcasting Company, Inc. in the United States
District Court for the Northern District of Florida, Pensacola Division. The
Corporation owes $5,054,000 in principal and interest to the FDIC, and has been
delinquent in payments on this debt since June 30, 1990. Subsequent to the FDIC
filing the receiver application, the Corporation reached an agreement with the
FDIC to sell the Pensacola Property and use the proceeds to retire the
Corporation's debt to the FDIC. On January 26, 1996, the Corporation entered
into an agreement to sell its Pensacola Property (See "Item 13 (b). Reports on
Form 8-K").
In addition, some of the Corporation's loan agreements are in
technical default and may result in litigation in 1996 or thereafter.
Additionally, the Corporation in the normal course of business is a defendant in
a small number of routine lawsuits. Management believes that the results of
such litigation will not have an adverse material effect upon the conduct of the
Corporation's business or its financial position.
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Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Corporation's security
holders during the fourth quarter of 1995.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
There is no public trading market for the Corporation's stock.
As of December 31, 1995, the Corporation had 498 shareholders of
record.
The Corporation has not paid any cash dividends on its common shares
in the last five years and does not expect to pay dividends in the foreseeable
future. Three of the Corporation's subsidiaries are prohibited, pursuant to
loan agreements, from making distributions to the parent and most of the
Corporation's restructured debt payments are tied to the cash flow of specific
subsidiaries or the cash flow of the consolidated entity. Lack of distributions
to the Corporation as the parent company and debt service payment requirements
leave the Corporation with inadequate cash to pay any cash dividends in the
foreseeable future.
Item 6. Management's Discussion and Analysis
Results of Operations: 1995 vs. 1994
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For the years ended December 31, 1995 and 1994, the Corporation
operated the same properties. Gross revenues for 1995 were up $226,000 or 2.6%
from 1994. This increase is attributable to a small increase in local sales at
most of the Corporation's stations. National, political, and network income was
flat for the year.
Agency commissions as a percentage of gross sales were approximately
10.6% in 1995 versus 10.4% in 1994. This increase is attributable to a larger
percentage of local advertising sales originating through agencies. A
substantial portion of the local economic growth in the Corporation's markets
can be attributable to regional and national retail stores. These businesses
generally have their advertising placed by corporate offices through agencies.
Agencies historically charge a radio station a 15% commission.
Technical and programming expenses increased 1% in 1995 from the
previous year. This increase is a result of higher music licensing fees. The
Corporation had a small increase in the percentage royalty it must pay to
various music licensing agencies during 1995 and this percentage is applied
directly to the Corporation's level of sales. Therefore, an increase in sales
will increase this expense commensurately.
Selling, general and administrative expenses, which includes
depreciation and amortization, increased $18,000 in 1995. Depreciation expense
decreased $125,000 as a result of a substantial portion of the Corporation's
assets becoming fully depreciated in 1995. This decrease was offset by an
increase in managers compensation (through a series of new employment contracts
issued in November 1994), higher professional fees (through the FDIC
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litigation: See "Item 3. Legal Proceedings"), and higher barter expenses.
Loss on the disposal of assets generally reflects the minor
disposition of assets during the ordinary course of business. The Corporation
had no significant retirement of assets in 1995.
Interest expense decreased 18.5% in 1995. The Corporation ceased
accruing interest in 1994 on certain notes that the Corporation believed were no
longer due. The amount of notes not accruing interest at the election of the
Corporation was approximately $2.9 million as of December 31, 1995. The
interest difference between these notes in 1995 and 1994 was $239,000. This
decrease was offset by expense associated with an increase in general interest
rates between 1994 and 1995. The Corporation has $5.7 million in debt tied to
the prime interest rate. The average prime rate in 1994 was approximately 7%,
versus 8.75% in 1995. This change in the prime rate increased the Corporation's
borrowing costs by $100,000 in 1995.
In 1995, other income (expense) consisted of interest income and other
miscellaneous items. In 1994, the Corporation recorded $25,000 in miscellaneous
income primarily because of the settlement of previously expensed legal fees of
$52,000. This miscellaneous income was partially offset by FCC fines paid by
the Corporation's Longview, Texas station in the amount of $31,000.
The Corporation recorded a net tax benefit of $1,222,884 in 1995.
$65,737 in state tax expense was offset by $1,288,621 in Federal/State NOL tax
benefits. Historically the Corporation has not assigned a value to its tax
NOL's because of the uncertainty of their future use. In 1995, the Corporation
booked a deferred tax asset to realize the future tax benefits to be realized
from the anticipated debt forgiveness as a result of the sale of the
Corporation's Pensacola, Florida radio station. See "Item 13 (b). Reports on
Form 8-K." In 1994, the Corporation had state tax expense of $78,216.
The Corporation recorded approximately $180,000 in gains from debt
extinguishment during 1995. This gain was attributable to the Corporation
writing off a note with a principal balance of $128,749 and accrued interest of
$51,535. Payments on this note became due in February, 1991. Later in 1991,
the Corporation was notified of its default for nonpayment and demand for
payment was made. The holder of the note made no additional collection efforts
and the state statute of limitations with respect to the collection of this note
expired in 1995. In 1994, the Corporation recorded no gains from debt
extinguishment.
Liquidity and Capital Resources
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The Corporation's principal source of funds is cash flow provided by
the operation of its radio stations. Its primary needs include working capital,
capital expenditures to maintain property, plant, and equipment, and repayment
of debt. During 1994 and 1995, the Corporation did not generate sufficient
funds for working capital, scheduled debt repayment, and capital expenditures.
In 1995, the Corporation generated approximately $899,000 in cash before debt
service and capital expenditures. This compares to $912,000 in 1994. The cash
flow from operating activities for 1995 was generated from the operating income
of the
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Corporation less its non-cash expenses plus the deferral on interest payments on
certain notes on which the Corporation is in default.
In 1996, the Corporation expects to spend $150,000 on capital
expenditures and currently has debt payments of approximately $3,048,000 on its
current restructured notes. In addition, the Corporation continues to be in
violation of certain provisions of its long term borrowings. $6,418,000 of
current maturities of long term debt had a scheduled maturity prior to 1996.
On December 15, 1995, the Corporation reached agreement with National
Loan Investors, L.P. ("NLI") on the restructuring of one of the Corporation's
notes which had matured on September 30, 1995. The note has a principal balance
of $2,184,321.57. The maturity of the note has been extended to December 15,
1996. The note calls for monthly interest payments of $21,800. The Corporation
has the right to prepay the note at certain dates throughout 1996. The
discounts begin at 20% and decline to 5%. If the Corporation exercises its
prepayment option, NLI has the right to exercise a warrant for common shares of
the Corporation. The warrant was issued concurrently with the debt
restructuring. The warrant is exercisable for a total sum of $1 and represents
a declining number of shares associated with the Corporation's prepayment
discount. The warrant initially represents 250,000 common shares of the
Corporation and declines to a minimum of 50,000. The warrant expires on
September 15, 1996.
The Corporation is in default on certain debt primarily because of
non-payment of principal and interest. Some lenders have received no payments
from the Corporation in over six years. The Corporation has attempted to
contact all of the holders of these notes in order to restructure the debt. The
holders of these notes have either preferred not to negotiate with the
Corporation or they will not acknowledge that they hold the debt. Therefore,
the Corporation has decided to rely upon the statute of limitations under
applicable state law with regard to the collection of these notes.
Under applicable state law, scheduled debt payments which are not made
after a specified period of time (statute of limitations) are not collectible by
the creditor. The Corporation believes that it has a justifiable legal position
to treat these debts as canceled once the statute of limitations has run.
The Corporation believes that the statute of limitations on the
collection of certain of the above referenced notes has run. The Corporation has
stopped accruing interest on these notes on which it expects the statute of
limitations to run. In May, 1994, the Corporation stopped accruing interest on a
$2.2 million note and stopped accruing interest on an additional $755,000 in
notes in January, 1995. The Corporation has recognized income from the running
of the statute of limitations on debt in 1995 and will continue to do so in
1996.
The Corporation plans to spend sufficient funds to maintain its
capital equipment in a competitive working condition. However, these
expenditures are limited by the Corporation's lenders. Such expenditures are
not anticipated to exceed average expenditures in previous years. The
Corporation is committed to make its radio stations as technologically
competitive as possible in their markets, within the limits set by its lenders.
Capital needs are expected to be paid from operating revenues as they become
available.
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The Corporation plans to deal with its weak financial condition by
continuing to develop a strong profit base with its current stations and
focusing on the restructuring of secured and unsecured debts. The Corporation
continues to negotiate with its secured lenders in order to restructure its debt
obligations in such a way that they can be paid out of the net cash now being
generated by the Corporation's broadcast properties.
The Corporation has had success in the past in renegotiating with
creditors on extended payment pay-outs. The Corporation was successful in
renegotiating one note which matured in 1995. However, there is no certainty
that additional creditors to whom the Corporation is now in default will accept
renegotiated terms in the future. Failure to renegotiate successfully with
these lenders will severely hamper the Corporation's ability to continue as a
going concern. The Corporation will not generate sufficient funds in 1996 to
service its current operating expenses, capital needs, and debt obligations as
they are currently structured.
Item 7. Financial Statements
The information called for by this Item is included on pages 24
through 41 inclusive of this report on Form 10-KSB.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
No response to this item is required.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16 (a). of the Exchange Act
Listed below are the Directors of the Corporation as of March 15, 1996,
their years of service as a Director, and ages:
<TABLE>
<CAPTION>
Director Age Service as Director Term Expires
-------- --- ------------------- ------------
<S> <C> <C> <C>
John W. Biddinger 55 August 1984 - Present 1996
James M. Elliott 53 November 1984 - Present 1996
Dan E. Young 66 December 1985 - Present 1996
</TABLE>
Biographical information concerning Mr. Biddinger is set forth below
under the caption "Executive Officers".
James M. Elliott has been President of Elliott and Associates, an
investment advisor and investment manager since 1991. Prior thereto, he was
Vice President and Chief Financial Officer of the Indiana University Foundation.
14
<PAGE>
Dan E. Young has been President of Young Investments, Inc. since 1979.
He has been active in the ownership and management of automobile franchise
operations and is a multi-dealership owner.
Executive Officers
- ------------------
Listed below are the Executive Officers of the Corporation as of
March 15, 1996, their positions, offices and ages:
<TABLE>
<CAPTION>
Officer Age Position
------- --- --------
<S> <C> <C>
John W. Biddinger 55 President
John E. Southwood, Jr. 38 Vice President, Treasurer and Secretary
</TABLE>
John W. Biddinger was elected President on May 24, 1991 and had been
Chairman of the Executive Committee of the Corporation since 1984. Mr.
Biddinger is also President and a Director of Biddinger Investment Capital
Corporation, a leverage buy-out and workout specialist firm.
John E. Southwood, Jr. became Vice President/Finance and Chief
Financial Officer of the Corporation in February, 1990. Mr. Southwood is a
certified public accountant.
Term of Office
- --------------
The Executive Officers and Directors of the Corporation serve annual
terms or until their successors are duly elected.
Indemnification
- ---------------
The Corporation's By-Laws provides for the indemnification of any and
all of its directors and/or officers. The By-Laws require the Corporation to
indemnify the covered individuals for liabilities incurred by them because of
any act or omission, or neglect or breach of duty, committed while acting in the
capacity as an officer or director of the Corporation to the fullest extent
permitted by law. Certain actions, including acts for which indemnification is
found by a court to be illegal or contrary to public policy are excluded from
such coverage.
Compliance With Section 16(a) of the Exchange Act
- -------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Corporation's directors, executive officers and persons who own
more than ten percent of the Corporation's common stock, to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of common stock of the Corporation. Officers, directors
and greater than ten percent shareholders are required by the Securities and
Exchange Commission regulations to furnish the Corporation with copies of all
Section 16(a) forms they file.
15
<PAGE>
Specific due dates for these reports have been established, and the
Corporation is required to disclose in this report any failure to file by these
dates during 1995. To the Corporation's knowledge, based solely on review of
the copies of such reports furnished to the Corporation and written
representations that no other reports were required, with respect to the fiscal
year ended December 31, 1995, all Section 16(a) filing requirements applicable
to the Company's officers, directors and greater than ten percent shareholders
were complied with.
Item 10. Executive Compensation
The following table summarizes the compensation paid by the Corporation to
its current Chief Executive Officer, as of December 31, 1995, for the past three
fiscal years. The Corporation had no other Executive Officers at December 31,
1995 whose total annual salary and bonus from the Corporation exceeded $100,000
during the past fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation Payouts
------------------- ------------------------------
Name and
Principal Salary Bonus Other Annual LTIP All Other
Position Year ($) ($) Compensation ($) Payouts ($) Compensation($)
- --------- ------ ------ ----- ---------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
John W. Biddinger 1995 132,200 0 0 0 0
CEO 1994 132,200 0 0 0 0
1993 132,200 0 0 19,775 (1) 0
</TABLE>
(1) Pursuant to his employment agreement, Mr. Biddinger received 1,977,525
shares of the Corporation's common stock in September, 1993. The fair
market value of these shares at the date of issuance was $0.01 per share.
Compensation of Directors
- -------------------------
Members of the Board of Directors who are not Officers of the Corporation
receive $1,000 for their attendance at regularly scheduled Board Meetings.
There were five such meetings in 1995. Messrs. Elliott and Young attended all
such meetings.
Board Committees
- ----------------
The Corporation's Compensation Committee consists of Mr. Elliott. The
duties of this Committee are to review the compensation of the Corporation's
Executive Officers. The Corporation has no audit or nominating committee.
Employment Agreements
- ---------------------
The Corporation entered into a three year employment agreement with John W.
Biddinger effective in 1991. This agreement has been extended through May 31,
2000. The
16
<PAGE>
agreement calls for a minimum annual compensation of $125,000 and annual bonuses
of up to 50% of annual salary. The agreement calls for Mr. Biddinger to receive
24 months of annual compensation should he be dismissed without cause or there
is a change in control of the Corporation (as defined in the agreement).
The agreement provides for a death benefit to Mr. Biddinger's estate of two
and one half times the current annual base salary and a lump sum payment equal
to two times the current annual base salary if he should become permanently
disabled (as defined in the agreement). The Corporation is not insured against
either of these events. The agreement also grants Mr. Biddinger the option to
"put" all of his stock back to the Corporation at a mutually agreed upon fair
market value (as defined in the agreement).
Mr. Biddinger has agreed in restructuring part of the Corporation's debt to
hold his compensation at $132,200 per year.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following tables set forth information as of March 15, 1996, as to the
beneficial ownership, direct or indirect, of the Corporation's common stock by
all Directors, all current Directors and Officers as a group, and all persons
known by the Corporation to own beneficially more than 5% of the Corporation's
common stock.
The aggregate percentage of ownership is based on 6,442,099 shares of
common stock outstanding and all exercisable options and warrants related to
individuals listed in the tables.
17
<PAGE>
OWNERSHIP BY MANAGEMENT
OF THE CORPORATION'S COMMON STOCK
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of Beneficial Ownership (1) Percent of Class (2)
- ---------------- --------------------------- --------------------
<S> <C> <C>
John W. Biddinger (3) 2,420,056 36.7%
7491 Albert Tillinghast Dr.
Sarasota, FL 34240
James M. Elliott 20,000 .3%
230 Fountain Square
Bloomington, IN 47404
John E. Southwood, Jr. 50,000 .8%
9102 N. Meridian St., Suite 545
Indianapolis, IN 46260
Dan E. Young (3) 626,179 9.3%
3210 E. 96/th/ Street
Indianapolis, IN 46240
All Present Directors and 3,116,435 45.5%
Executive Officers as a Group
(5 persons)
</TABLE>
FIVE PERCENT SHAREHOLDERS
OF THE CORPORATION'S COMMON STOCK
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of Beneficial Ownership (1) Percent of Class (2)
- ---------------- --------------------------- --------------------
<S> <C> <C>
John W. Biddinger (3) 2,420,056 36.7%
7491 Albert Tillinghast Dr.
Sarasota, FL 34240
Conseco, Inc. (3) 5,972,060 48.1%
11825 N. Pennsylvania Street
Carmel, Indiana 46032
Radio USA, Ltd. 1,913,007 29.7%
601 Jefferson Street
Houston, Texas 77002
Dan E. Young (3) 626,179 9.3%
3210 East 96th Street
Indianapolis, Indiana
</TABLE>
(Footnotes on Following Pages)
18
<PAGE>
FOOTNOTES
All shares are held directly unless otherwise noted.
(2) Pursuant to applicable Securities and Exchange Commission Rules, a person
is deemed beneficial owner of those shares not outstanding which are
subject to options, warrants, rights or conversion privileges if that
person can exercise such options, warrants, rights or privileges within 60
days. Any such shares are deemed to be outstanding for the purpose of
computing the percentage of outstanding common stock owned by such person
individually, but are not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person.
(3) The Corporation has issued the following warrants to purchase shares of its
common stock:
<TABLE>
<S> <C>
John W. Biddinger 101,601
Conseco, Inc. 5,972,060
Dan Young, IRA 304,803
</TABLE>
Each of these warrants is exercisable for $.11 (in total not per share),
except Conseco which is $1.00, are presently exercisable and terminate if not
previously exercised on February 15, 2003.
Potential Change in Control
- ---------------------------
As outlined above in Footnote 2, Conseco, Inc. holds exercisable
warrants for 5,972,060 shares at $1.00. If these warrants were exercised,
Conseco would control 45.9% of the Corporation's common stock on a fully diluted
basis. The warrants expire on February 15, 2003 and are nontransferable until
February 15, 1997. If by February 15, 1998, a certain restructured notes owed
to Conseco are not repaid, it will receive additional warrants for 10% of the
Corporation on a fully diluted basis.
Item 12. Certain Relationships and Related Transactions
There are no reportable events under this item.
19
<PAGE>
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits:
--------
Exhibit No. Description of Exhibit
- ----------- ----------------------
3 (a) Articles of Incorporation as presently in effect/3/
(b) By-Laws as presently in effect/1/
10 Material Contracts
(a) Reinstatement, modification, renewal and extension agreement
between SunGroup, Inc. and Kenneth R. Reynolds in the amount of
$2,500,000./2/
(b) Reinstatement, modification, renewal and extension agreement
between SunGroup, Inc. and Arden Wilson Osburn in the amount of
$1,250,000./2/
(c) Reinstatement, modification, renewal and extension agreement
between SunGroup, Inc. and John D. Osburn in the amount of
$1,250,000./2/
(d) Promissory Note for $880,000 between SunGroup, Inc. and Bankers
National Life Insurance Company with related warrant A-1 for
592,875 shares./2/
(e) Promissory Note for $4,000,000 between SunGroup, Inc. and
Western National Life Insurance Company with related warrant A-2
for 2,892,000 shares./2/
(f) Promissory Note for $93,333.06 between SunGroup, Inc. and John
W. Biddinger with a related warrant A-3 for 59,287 shares./2/
(g) Promissory Note for $124,469.18 between SunGroup, Inc. and
Robert A. Davies and related warrant A-4 for 81,575 shares./2/
(h) Promissory Note for $176,800 between SunGroup, Inc. and Indiana
University Foundation with related warrant A-5 for 118,575
shares./2/
- ---------------
/1/ Incorporated by reference to the Corporation's Annual Report on Form 10-K
for the year ended December 31, 1984.
/2/ Incorporated by reference to the Corporation's Annual Report on Form 10-KSB
for the year ended December 31, 1992.
20
<PAGE>
(i) Promissory Note for $265,200 between SunGroup, Inc. and Dan E.
Young - IRA Trust with related warrant A-6 for 177,862 shares./2/
(j) Bond for $1,535,000 between SunMedia, Inc., a wholly owned
subsidiary of the Corporation and Colonial Broadcasting Company,
Inc. and agreement to issue stock in warrant to purchase between
SunMedia, Inc. and Colonial Broadcasting Company, Inc./2/
(k) Agreement by and among RadioSunGroup of Bryan/College Station,
Inc., SunGroup Broadcasting of Louisiana, Inc., SunGroup, Inc. and
Radio USA, Ltd. regarding exchange of common stock for debt./3/
(l) Second Amended and Restate Promissory Note dated September 30,
1993 executed by RadioSunGroup of Bryan/College Station, Inc.
("RSG") and SunGroup Broadcasting of Louisiana, Inc. ("SGBL"),
payable to the order of the Federal Deposit Insurance Corporation
("FDIC") in the original principal amount of $2,205,509.02 and its
related First Amendment to Assumption Agreement and Amended and
Restated Loan Agreement dated September 30, 1993./3/
(m) Adjustment letter related to warrant A-1 issued to Bankers
National Life Insurance Company in the original amount of 592,875
shares amended to 1,016,010 shares./3/
(n) Adjustment letter related to warrant A-2 issued to Western
National Lie Insurance Company in the original amount of 2,892,000
shares amended to 4,956,050 shares./3/
(o) Adjustment letter related to warrant A-3 issued to John W.
Biddinger in the original amount of 59,287 shares amended to
101,601 shares./3/
(p) Adjustment letter related to warrant A-4 issued to Robert N.
Davies in the original amount of 81,575 shares amended to 139,797
shares./3/
(q) Adjustment letter related to warrant A-5 issued to IU
Foundation in the original amount of 118,575 shares amended to
203,202 shares./3/
(r) Adjustment letter related to warrant A-6 issued to Dan Young
IRA in the original amount of 177,862 shares amended to 304,803./3/
(s) Employment agreement with John W. Biddinger, President./3/
- ---------------
/3/ Incorporated by reference to the Corporation's Annual Report on Form 10-KSB
for the year ended December 31, 1993.
21
<PAGE>
(t) Amendment number one to the John W. Biddinger Employment
Agreement./3/
(u) Amendment number two to the John W. Biddinger Employment
Agreement.
(v) Contract between RadioSunGroup of Texas, Inc. and Service
Broadcasting Corporation.
(w) Key Employee Incentive Stock Plan of 1986./4/
(x) Act of Loan Modification and Acknowledgment by RadioSunGroup of
Bryan/College Station, Inc., SunGroup Broadcasting of Louisiana,
Inc. and SunGroup, Inc. in favor of National Loan Investors, L.P.
with related warrant W-1.
(y) Settlement Agreement dated December 29, 1995, among SunMedia,
Inc., SunGroup, Inc., and the Federal Deposit Insurance Corporation
as Receiver of the National Bank of Washington.
21 Subsidiaries of the Registrant./3/
27 Financial Data Schedule
(b) Reports on Form 8-K.
The Corporation filed a report on Form 8-K with the Securities and
Exchange Commission on February 21, 1996, regarding the sale of
radio station WOWW-FM in Pensacola, Florida./5/
- ---------------
/4/ Incorporated by reference to the Corporation's Annual Report on Form 10-K
for the year ended December 31, 1986.
/5/ Incorporated by reference to the Corporation's report on Form 8-K filed
February 21, 1996.
22
<PAGE>
SIGNATURE
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SUNGROUP, INC.
DATED: March 27, 1996 By: /s/ John W. Biddinger
Indianapolis, Indiana -----------------------------------
John W. Biddinger, President
(Principal Executive Officer)
In accordance of the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.
DATED: March 27, 1996 /s/ John W. Biddinger
-----------------------------------
John W. Biddinger, Director (and
Principal Executive Officer)
DATED: March 27, 1996 /s/ James M. Elliott
-----------------------------------
James M. Elliott, Director
DATED: March 27, 1996 /s/ John E. Southwood, Jr.
-----------------------------------
John E. Southwood, Jr.,Treasurer,
Secretary and Vice President
(Principal Accounting and
Financial Officer)
DATED: March 27, 1996 /s/ Dan E. Young
-----------------------------------
Dan E. Young, Director
23
<PAGE>
SunGroup, Inc. and Subsidiaries
Consolidated Financial Statements
December 31, 1995 and 1994
24
<PAGE>
<TABLE>
<CAPTION>
SunGroup, Inc. and Subsidiaries
TABLE OF CONTENTS
PAGE
- ------------------------------------------------------------------
<S> <C>
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Consolidated statement of operations 2
Consolidated balance sheet 3
Consolidated statement of changes in stockholders' deficit 4
Consolidated statement of cash flows 5
Notes to consolidated financial statements 6
</TABLE>
25
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
SunGroup, Inc. and Subsidiaries
Indianapolis, Indiana
We have audited the accompanying consolidated balance sheet of SunGroup, Inc.
and subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of operations, changes in stockholders' deficit and cash flows for
the years then ended. These financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of SunGroup, Inc. and
subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Corporation will continue as a going concern. As described in notes to the
financial statements, the Corporation has debt of approximately $6,417,703 that
is in default at December 31, 1995. Even though some of the debt has interest
rate escalation clauses which are substantial once it is in default, management
has continued to accrue interest at the note rate on this debt since it does
not consider it probable that the increased interest amount will be paid. The
Corporation also has had continuing losses before income taxes and has
substantial deficit equity and negative working capital at December 31, 1995
and 1994. Management's plans in regard to these matters are described in the
notes to the financial statements. However, the actual outcome of these plans
or alternative sources of financing cannot presently be determined.
Accordingly, there is substantial doubt about the Company's ability to continue
as a going concern. The financial statements do not include any adjustments
that might result from the outcome of these uncertainties.
Indianapolis, Indiana
March 14, 1996
26
<PAGE>
<TABLE>
<CAPTION>
SunGroup, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
Gross Revenues $ 8,996,654 $ 8,770,820
Agency commissions (954,552) (911,568)
---------------------------
8,042,102 7,859,252
---------------------------
Expenses
Technical and programming 2,030,830 2,008,294
Selling, general and administrative 5,464,741 5,446,661
---------------------------
7,495,571 7,454,955
---------------------------
Income From Operations 546,531 404,297
---------------------------
Other Income (Expense)
Loss on disposal of assets (15,026) (5,005)
Interest expense (611,384) (750,093)
Other 7,907 25,495
---------------------------
(618,503) (729,603)
---------------------------
Loss Before Income Taxes and Extraordinary It (71,972) (325,306)
Income Taxes (Benefit) (1,222,884) 78,216
---------------------------
Income (Loss) Before Extraordinary Item 1,150,912 (403,522)
Extraordinary Gain From Debt Extinguishment 180,285
NET INCOME (LOSS) $ 1,331,197 $ (403,522)
===========================
Income (Loss) Per Common Share
Income (loss) before extraordinary item $.09 $(.06)
Extraordinary item .01
---------------------------
Net income (loss) $.10 $(.06)
===========================
Weighted average number of common shares 13,173,821 6,442,099
outstanding
</TABLE>
See notes to consolidated financial statements.
27
<PAGE>
SunGroup, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 334,674 $ 363,389
Accounts receivable, less allowances of $38,888
and $33,308 1,329,392 1,235,625
Prepaid expenses and other current assets 93,385 167,918
Deferred income taxes 1,288,621
---------------------------
Total current assets 3,046,072 1,766,932
---------------------------
PROPERTY, PLANT AND EQUIPMENT, net 1,733,138 1,874,593
---------------------------
OTHER ASSETS
Intangible assets 7,413,222 7,879,628
Other assets 16,768 20,124
---------------------------
7,429,990 7,899,752
---------------------------
$ 12,209,200 $ 11,541,277
===========================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Current maturities of long-term debt $ 9,466,026 $ 9,510,630
Accounts payable and accrued expenses 473,468 420,441
Accrued interest payable 3,214,510 3,014,348
---------------------------
Total current liabilities 13,154,004 12,945,419
---------------------------
LONG-TERM DEBT 9,968,317 10,854,308
---------------------------
DEFERRED INCOME TAXES 92,348 78,216
---------------------------
STOCKHOLDERS' DEFICIT
Common stock--no par value
Authorized--30,000,000 shares
Issued and outstanding--6,442,099 shares 3,770,639 3,770,639
Additional paid-in capital 5,969,195 5,969,195
Retained deficit (20,745,303) (22,076,500)
---------------------------
(11,005,469) (12,336,666)
---------------------------
$ 12,209,200 $ 11,541,277
===========================
</TABLE>
See notes to consolidated financial statements.
28
<PAGE>
<TABLE>
<CAPTION>
SunGroup, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
COMMON STOCK ADDITIONAL
--------------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT DEFICIT
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 6,442,099 $3,770,639 $5,969,195 $(21,672,978) $(11,933,144)
Net loss (403,522) (403,522)
--------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 6,442,099 3,770,639 5,969,195 (22,076,500) (12,336,666)
Net income 1,331,197 1,331,197
--------------------------------------------------------------
BALANCE, DECEMBER 31, 1995 6,442,099 $3,770,639 $5,969,195 $(20,745,303) $(11,005,469)
==============================================================
</TABLE>
See notes to consolidated financial statements.
29
<PAGE>
<TABLE>
<CAPTION>
SunGroup, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 1,331,197 $(403,522)
Reconciliation of net income (loss) to net cash
provided by operating activities
Depreciation and amortization 747,808 966,863
Loss on disposal of assets 34,458 5,005
Net (income) expense from barter transactions 40,478 (105,789)
Extraordinary gain from debt extinguishment (180,285)
Deferred income taxes (1,274,489) 78,216
Changes in
Accounts receivable (93,767) (153,894)
Prepaid expenses and other current assets (6,419) 43,630
Accounts payable and accrued expenses 53,027 (26,731)
Interest payable 262,861 508,710
Other assets 3,356
----------------------
Net cash provided by operating activities 918,225 912,488
----------------------
INVESTING ACTIVITIES
Purchase of property and equipment (135,181) (123,641)
Proceeds from sale of assets 1,250 8,140
Received on notes receivable 39,760
Other 2,673
----------------------
Net cash used by investing activities (133,931) (73,068)
----------------------
FINANCING ACTIVITY--repayments of long-term debt (813,009) (777,573)
----------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (28,715) 61,847
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 363,389 301,542
----------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 334,674 $ 363,389
======================
SUPPLEMENTAL CASH FLOWS INFORMATION
Interest paid $ 344,361 $ 240,798
Income taxes paid 11,605 6,980
NON-CASH TRANSACTIONS
Property and equipment acquired in barter transactions 40,474 44,583
Property and equipment acquired with long-term debt 5,782
Accrued interest added to note 11,164 10,862
</TABLE>
See notes to consolidated financial statements.
30
<PAGE>
SunGroup, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
The Corporation's business is the operation of commercial radio stations. At
December 31, 1995, the Corporation owned and operated seven radio stations, AM
and FM, in Florida, Louisiana, Texas, and New Mexico. Each radio station is
licensed with the Federal Communications Commission, with each license required
to be renewed every 7 years. The Corporation grants credit to customers,
substantially all of whom are located in the same area as the radio stations.
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. Estimates are used when
accounting for allowance for doubtful accounts, depreciation and amortization,
taxes and contingencies.
CONSOLIDATION
The consolidated financial statements include the accounts of SunGroup, Inc. and
its wholly-owned subsidiaries (collectively, the "Corporation"). All
significant intercompany transactions and balances have been eliminated.
CASH EQUIVALENTS
The Corporation considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. From time to time during
the year, the Corporation's cash accounts exceeded federally insured limits.
INTANGIBLE ASSETS
Intangible assets represent the excess of the cost to acquire radio station
assets over the sum of the fair values of the net tangible assets acquired. The
excess of the cost over the fair values of assets acquired is allocated to
goodwill and the broadcast license and is amortized over twenty-five years using
the straight-line method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, and depreciation is computed on a
straight line basis using estimated lives as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------
<S> <C>
Buildings 20 years
Broadcast equipment 5-10 years
Furniture and fixtures 10 years
Transportation equipment 3 years
Leasehold improvements Life of lease
</TABLE>
31
<PAGE>
SunGroup, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expenditures for maintenance and repairs are charged to operations. Renewals
and improvements are capitalized. The cost and the accumulated depreciation for
property and equipment retired or sold are removed from the accounts and the
resulting gain or loss is included in operations.
INCOME TAXES
Income taxes in the consolidated statement of operations include deferred income
tax provisions for all significant temporary differences in recognizing income
and expenses for financial reporting and income tax purposes. The Corporation
files a consolidated federal income tax return.
REVENUE RECOGNITION
Revenue is recognized as advertising time is aired by the Corporation's radio
stations. Barter transactions are recorded at the estimated fair value of the
product or service received.
ADVERTISING COSTS
The Corporation expenses advertising costs as incurred. Advertising costs were
$151,796 and $233,088 for the years ended December 31, 1995 and 1994.
NET INCOME OR LOSS PER SHARE
For 1995, earnings per common and common equivalent share were computed by
dividing net income by the weighted average number of common stock and common
stock equivalents outstanding during the year. The warrants have been
considered to be the equivalent of common stock, and as such, increased the
number of common shares. The stock options, however, have not been added to the
number of common shares because the market price of the common stock does not
exceed the exercise price of the options. The increase in the number of common
shares was reduced by the number of common shares that are assumed to have been
purchased with the proceeds from the exercise of the warrants; those purchases
were assumed to have been made at the average price of the common stock. Due to
the limited number of transactions involving the Corporation's stock, the
average price has been determined to be $.165, the same as the year end price.
For 1994, earnings per common share were determined by using the weighted
average number of shares of common stock outstanding during the year. No effect
was given to common stock equivalents outstanding during the year as their
effect would be anti-dilutive.
. MANAGEMENT'S PLANS
There is doubt about the Corporation's ability to maintain adequate liquidity.
Although cash flows from operating activities have been positive for the past
four years, the Corporation was unable to generate sufficient cash flows to
service its capital expenditures and debt obligations. Management has
implemented a program to reduce expenditures and increase operating profit.
Management has also undertaken significant efforts to restructure or reduce
debts through negotiations, asset sales and bankruptcy. Over the past four
years, the Corporation has been able to eliminate substantial amounts of debt
and accrued interest. Additionally, it has been successful in renegotiating
several obligations into terms which it believes can be fulfilled.
Management plans to deal with the Corporation's weak financial condition going
forward by continuing to develop a strong profit base with its current stations
and focusing on the continued restructuring of its debts so they can be paid
from the net cash flow expected to be generated.
32
<PAGE>
Sungroup, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31 1995 1994
- ------------------------------------------------------
<S> <C> <C>
Land $ 155,307 $ 155,307
Buildings 1,022,277 1,024,489
Leasehold improvements 80,003 78,528
Equipment and furnishings 3,225,402 3,200,268
Vehicles 180,359 165,613
----------- -----------
4,663,348 4,624,205
Accumulated depreciation (2,931,010) (2,756,032)
----------- -----------
1,732,338 1,868,173
Construction in progress 800 6,420
----------- -----------
$ 1,733,138 $ 1,874,593
=========== ===========
</TABLE>
. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31 1995 1994
- ------------------------------------------------------
<S> <C> <C>
Goodwill $ 4,243,678 $ 4,243,678
Broadcast license 6,381,505 6,381,505
----------- -----------
10,625,183 10,625,183
Accumulated amortization (3,211,961) (2,745,555)
----------- -----------
$ 7,413,222 $ 7,879,628
=========== ===========
</TABLE>
33
<PAGE>
SunGroup, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31 1995 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Notes payable, individual, interest at 12%; semi-annual principal
payments of $37,500 due January, 1990 through July, 1996; currently in
default (default rate same as note rate) $ 525,000 $ 525,000
Notes payable, three individuals, interest at 0%(a); total principal
payments of $50,000 due monthly with balloon of $1,640,000 due
January, 1998 2,790,000 3,390,000
Note payable, financial institution, interest at prime plus 2%; balance was
due April 28, 1990; currently in default (default rate of 14.75%) 2,162,820 2,162,820
Note payable, FDIC, interest at prime plus 1.5%; balance was due
November, 1994; currently in default (default rate of prime plus 4.5%) 3,500,000 3,500,000
Note payable, Partnership, interest only of $21,800 paid monthly;
balance due December 15, 1996 2,184,910 2,185,531
Note payable, broadcasting company, interest at 8%; monthly
payments of $965 including interest; balance due February, 1997 12,046 22,154
Note payable, an individual, interest at 9%; quarterly payments of
$11,453 including interest; balance was due August, 1994; currently in
default (default rate same as note rate) 229,883 229,883
Note payable, an individual, interest at 0%(a); monthly principal
payments based on cash flow of subsidiary; balance due August, 2002 369,865 455,859
Bond payable, broadcasting company, interest at 0%(a); principal
and all accrued interest due March, 2000 1,780,600 1,780,600
Note payable, a related party, interest at 2.7%; $500,000 face
amount; due January, 2003 412,661 401,497
Note payable, individual, interest at 10%; monthly payments of
$3,650 including interest; balance was due July 1, 1994; the statute of
limitations expired during 1995. The Corporation wrote off the principal
and accrued interest on the note. Income was recognized as
forgiveness of debt 128,750
Note payable, individual, interest at 0%(a); monthly payments of
$126; balance due February, 1998 3,154 4,669
Note payable, individual, interest at 9%; monthly payments of $2,719
including interest; balance due March, 1997 35,985 64,001
Notes payable, two individuals, interest at prime plus 1%; monthly
payments of $500 including interest; balance due June, 1998 13,816 18,255
Note payable, bank, interest at prime plus 1%; monthly payments of
$1,520 including interest; balance due September, 2000 72,522 82,382
</TABLE>
34
<PAGE>
SunGroup, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
DECEMBER 31 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Note payable, institution that is a warrant holder, interest at 0% (a);
annual principal payments commenced March 1, 1995 based on
Corporation's cash flow as defined; balance due February 15, 1998;
if not paid in full by that date, interest accrues after that date at 4%
above the 10-year treasury bond equivalent rate and the number of
shares purchasable under its warrants will increase by an amount
equal to 8% of the then outstanding common stock of the
Corporation assuming that all warrants outstanding are exercised
$ 3,873,592 $ 3,929,508
Note payable, institution that is a warrant holder, interest at 0% (a);
annual principal payments commenced March 1, 1995 based on
Corporation's cash flow as defined; balance due February 15, 1998;
if not paid in full by that date, interest accrues after that date at 4%
above the 10-year treasury bond equivalent rate and the number of
shares purchasable under its warrants will increase by an amount
equal to 2% of the then outstanding common stock of the
Corporation assuming that all warrants outstanding are exercised 811,023 823,323
Note payable, a foundation that is also a stock and warrant holder,
interest at 0% (a); annual principal payments commenced March 1,
1995 based on the Corporation's cash flow as defined; balance due
February 15, 1998; if not paid in full by that date, interest accrues
after that date at 4% above the 10-year treasury bond equivalent
rate and the number of shares purchasable under its warrant will
increase by an amount equal to .35% of the then outstanding
common stock of the Corporation assuming that all warrants
outstanding are exercised 169,714 172,188
Notes payable, three individuals, all of whom are stock and warrant
holders (one is an officer and director and one is a director), interest
at 0% (a); balance is due February 15, 1998; if not paid in full by
that date, interest accrues after that date at 4% above the 10-year
treasury bond equivalent rate and the number of shares
purchasable under the warrants increase by an amount equal to
.966% of the then outstanding common stock of the Corporation
assuming that all warrants outstanding are exercised; subordinated
to the notes payable to institution and to the foundation 483,002 483,002
Note payable, financial institution, interest at 17.5%; monthly
payments of $217 including interest; balance due October, 1997 3,750 5,516
------------------------
19,434,343 20,364,938
Current maturities (9,466,026) (9,510,630)
------------------------
$ 9,968,317 $10,854,308
========================
</TABLE>
(a) The Corporation has restructured the terms of this note. The restructuring
was accounted for under FASB Statement No. 15 and the effective rate of
this note will be the restructured rate throughout its remaining term.
35
<PAGE>
SunGroup, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Substantially all assets of the Corporation and its subsidiaries as well as the
stock of the subsidiaries are pledged as collateral for the above obligations.
During 1995, the Corporation entered in a Loan Modification Agreement to
restructure a certain note. The Modification Agreement calls for monthly
interest payments with the principal and outstanding interest due on December
15, 1996. At various dates prior to maturity, the Company may prepay the entire
obligation and receive a discount of up to 20%. The discount amount reduces as
the Company approaches the maturity date. In conjunction with negotiating the
loan modification, the Company issued a warrant for 250,000 shares to the
creditor, exercisable at a total price of $1.00. At each discount date, the
number of warrants exercisable automatically reduces if the Company does not
prepay the obligation. If the Corporation does not prepay the loan, the warrant
expires September 15, 1996.
At December 31, 1995, the Corporation was in violation of certain provisions of
certain long-term borrowings. All debt in default has been classified as a
current liability in the balance sheet. For notes that are in default, interest
is not being accrued or is being accrued at the note rate and not at the default
interest rate, which is substantially higher. Management feels it is improbable
that the increased interest will be paid when these notes are settled or
restructured.
The Corporation has several notes payable which have been in default for a
number of years and the creditors have not sought collection on these notes.
Many of these notes have principal and interest payments which have been due for
over six years. The Corporation has attempted to contact all of the holders of
these notes in order to restructure the debt. The holders of these notes have
either preferred not to negotiate with the Corporation or they will not
acknowledge that they hold the debt.
Under state law of the various states where the notes are held, scheduled debt
payments which are not made after a specified period of time (statute of
limitations) are not collectible by the creditor.
It is not practicable to estimate the fair value of long-term debt because the
Corporation is unable to estimate the timing and amount of ultimate settlement
of such debt. Additionally, there are no readily available market terms for
debt with similar characteristics and held by a company with operating
uncertainties such as the Corporation.
36
<PAGE>
SunGroup, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Future maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31
- -------------------------------------------------------------------
<S> <C>
1996 $ 9,466,026
1997 829,156
1998 6,844,852
1999 81,320
2000 1,800,329
Thereafter 412,660
-----------
$19,434,343
===========
</TABLE>
. STOCKHOLDERS' EQUITY
During 1994, the Corporation's common stock was converted to no-par value with
no stated value and authorized shares were increased to 30,000,000.
No dividends can be paid by the Corporation or any of its subsidiaries due to
restrictions of certain debt agreements and by function of state law.
. EXTRAORDINARY ITEM
Total debt with a carrying value of $180,285 (including $128,750 of principal
and $51,535 in accrued interest) was written off during 1995 resulting in an
extraordinary gain of $180,285. The debt holder did not initiate collection
procedures within the prescribed time period of the statute of limitations as
specified under state law of the state in which the debt was held.
. INCOME TAXES
The reconciliation of income tax to the tax at the federal statutory income tax
rate is as follows:
<TABLE>
<CAPTION>
DECEMBER 31 1995 1994
- --------------------------------------------------------------------------
<S> <C> <C>
Loss before income taxes and extraordinary item $ (71,972) $(325,306)
-----------------------
Tax benefit at statutory rate of 34% $ (24,470) $(110,604)
Tax effect of
State income tax (net of federal effect) 43,386 51,623
Nondeductible expenses 80,725 93,555
Other 72,048 (24,615)
Increase (decrease) in valuation allowance (1,394,573) 68,257
-----------------------
$(1,222,884) $ 78,216
=======================
</TABLE>
37
<PAGE>
SunGroup, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income tax (benefit) expense consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31 1995 1994
- ----------------------------------------------------------------------
<S> <C> <C>
Current state expense $ 51,605
---------------------
Deferred
State 14,132
Federal (1,288,621) $78,216
---------------------
(1,274,489) 78,216
---------------------
$(1,222,884) $78,216
=====================
</TABLE>
A net cumulative deferred tax asset of $1,196,273 is included in the balance
sheet. The components of the net deferred tax asset are as follows:
<TABLE>
<CAPTION>
DECEMBER 31 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Difference in depreciation methods of property and equipment $ 41,041 $ 21,456
Difference in amortization method of broadcast licenses (1,246,930) (1,145,234)
Allowance for doubtful accounts 13,222 11,324
Write down of land value 97,353 97,353
Imputed interest on zero percent notes 414,560 577,666
State deferred taxes 277,590 271,076
Other 2,007 4,748
Net operating loss carryforwards 4,410,230 4,290,768
-------------------------
4,009,073 4,129,157
Valuation allowance (2,812,800) (4,207,373)
-------------------------
$ 1,196,273 $ (78,216)
=========================
Assets $ 5,256,003 $ 5,274,390
Liabilities (1,246,930) (1,145,234)
Valuation allowance (2,812,800) (4,207,373)
-------------------------
$ 1,196,273 $ (78,217)
=========================
</TABLE>
38
<PAGE>
SunGroup, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The valuation allowance at December 31, 1995 is $2,812,800 and was decreased by
$1,394,573 during the current year due to the anticipated gain and income
resulting from debt forgiveness upon the sale of the Pensacola Florida radio
station in 1996.
At December 31, 1995, the Corporation has approximately $12,960,000 of net
operating loss carryforwards, which expire in the years 2002 through 2010.
. INCENTIVE COMPENSATION PLANS
In 1986, the Corporation initiated the Key Employee Incentive Bonus Stock Option
Plan for the purpose of granting options to key employees. Options granted each
year are exercisable after two years and expire after ten years or upon
dissolution or liquidation of the Corporation, or merger if the Corporation is
not the surviving entity and there is not an express assumption by the surviving
entity. Each option enables the holder to purchase one share of common stock.
There were 5,700 options exercisable under the above Plan at December 31, 1995
and 1994, but no options had been exercised as of those dates. A summary of
changes in the stock options follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
----------------
DECEMBER 31 1995 1994
- -------------------------------------------------------
<S> <C> <C>
Qualified
Outstanding at beginning of year 5,700 5,900
Canceled 200
--------------
Outstanding at end of year 5,700 5,700
==============
Option price range at December 31 $ 3.00 $ 3.00
TO to
$ 4.00 $ 4.00
</TABLE>
In addition, in 1987, a non-qualified Plan was established to grant options to
certain other key organizational personnel. Each option enables the holder to
purchase one share of common stock. All shares are exercisable over a ten year
period. There were 4,000 options exercisable at a price of $4.00 per share
under this Plan at December 31, 1995 and 1994, but no options had been exercised
as of those dates.
In 1989, another member of the executive committee was granted a stock option
for 10,000 shares under the same terms as the non-qualified plan at a price of
$3.00 per share. The option is exercisable over a ten-year period, but had not
been exercised as of December 31, 1995.
39
<PAGE>
SunGroup, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
. STOCK WARRANTS
The Corporation has outstanding 4,956,050 warrants exercisable for a total price
of $.89. In addition, there are an additional 1,765,413 warrants which are
exercisable at a total price of $.55. All of the warrants include an anti-
dilutive provision. These warrants are generally exercisable immediately upon
issuance.
One lender, which is owed $4,684,615, holds 5,972,060 of these warrants, which
represent approximately 45% of the Corporation's outstanding stock on a
converted basis.
In 1995, 250,000 additional warrants were issued which are exercisable at a
total price $1.00 based on the Loan Modification Agreement.
. COMMITMENTS AND CONTINGENCIES
The Corporation has an employment agreement with its president through May 31,
2000 which includes a provision for a annual base salary of $125,000 and annual
bonuses of up to 50% of his annual salary. As part of restructuring the
Corporation's debt, the president has agreed to a maximum compensation of
$132,200 per year. Upon termination of the president "without cause" or if the
president terminates his employment for "good reason", his salary will be
continued for 24 months. The agreement provides for a death benefit to the
president's estate of two and one half times the current annual base salary and
a lump sum payment equal to two times the current annual base salary if he
should become permanently disabled. The Corporation is not insured against
either of these events. The president is also granted the option to put his
stock back to the Corporation at a mutually agreed-upon fair market value.
The Corporation and certain of its subsidiaries rent equipment and facilities
under operating leases. Generally, the lease agreements require the Corporation
to pay utilities, insurance and maintenance. Total rental expense for all
operating leases, including short-term leases of less than one year, amounted to
$201,176 in 1995 and $206,200 in 1994.
Minimum rental commitments under non-cancelable leases are as follows:
<TABLE>
<CAPTION>
OPERATING
YEARS ENDING DECEMBER 31 LEASE
- -------------------------------------
<S> <C>
1996 $158,296
1997 158,407
1998 110,673
1999 88,214
2000 30,015
Thereafter 195,870
--------
$741,475
========
</TABLE>
40
<PAGE>
SunGroup, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On April 17, 1995, the Federal Deposit Insurance Corporation, as Receiver for
the National Bank of Washington ("FDIC"), the senior creditor for the
Corporation's Pensacola, Florida property ("Pensacola Property"), filed an
application seeking a receiver for the Pensacola Property and a temporary
restraining order against the Corporation, the Corporation's subsidiary,
SunMedia, Inc., and Colonial Broadcasting Company, Inc. in the United States
District Court for the Northern District of Florida, Pensacola Division. The
Corporation owes approximately $5,054,000 in principal and interest to the FDIC,
and has been delinquent in payments on this debt since June 30, 1990.
Subsequent to the FDIC filing the receiver application, the Corporation reached
an agreement with the FDIC to sell the Pensacola Property and use the proceeds
to retire the Corporation's debt to the FDIC. See the subsequent event note.
The Corporation, in the normal course of business, is a defendant in a small
number of lawsuits. Management believes that the results of such litigation
will not have a materially adverse effect upon the Corporation's conduct of its
business or its financial position.
Many of the Corporation's loan agreements have or might have technical default
issues, material default issues, or restructuring factors which could result in
litigation. Management is unable to predict the outcome of these matters.
. SUBSEQUENT EVENT
On January 26, 1996, the Corporation entered into an agreement to sell
substantially all of the assets of the Pensacola Property. The sale price of
the Pensacola Property assets is $2.3 million in cash, plus certain closing
costs up to $175,000. The sale is contingent upon, among other conditions,
consent by the Federal Communications Commission to the assignment of the
Corporation's broadcast license for the Pensacola Property to the buyer. The
Corporation does not anticipate any difficulty with the assignment to the buyer.
There exists no material relationship between the buyer and the Corporation, or
any of its officers, directors of affiliates.
In conjunction with the sale of the assets of the Pensacola Property, the
Corporation entered into an agreement with the FDIC, the first lien holder of
the assets, on the disposition of the sale proceeds and release of its lien
thereof. Once the FDIC has received approximately $2.25 million from the
Pensacola Property sale proceeds and other required documentation, the
Corporation will be discharged from indebtedness to the FDIC.
41
<PAGE>
EXHIBIT 10(u)
AMENDMENT NUMBER TWO TO THE
JOHN W. BIDDINGER EMPLOYMENT AGREEMENT
This Agreement amends by adding a longer term to the existing
Amendment Number one of the Employment Agreement (the "Agreement") dated April
28, 1993, between SunGroup, Inc. (the "Company"), and John W. Biddinger (the
"Employee").
Amendment Number One dated April 28, 1993, will be amended by
substituting a new Amendment as follows:
1. Employment and Term. Company does hereby employ Employee and
Employee does hereby agree to enter into the employment of the
Company for the compensation provided under the terms and
conditions hereinafter set forth. The term of this Agreement
shall commence on April 7, 1995, (the "Commencement Date") and
shall continue for a term ending on the first to occur of the
death of the Employee, or May 31, 2000, unless continued by
written agreement of both parties or terminated as set forth
herein. Company and Employee both concur that this contract
should be extended by January 31, 1999, if both parties want to
continue the employment relationship. Employee should take the
responsibility to initiate contract extension discussions in late
1998.
Dated: April 7, 1995
SUNGROUP, INC.
By: /s/ James M. Elliott
-------------------------------
James M. Elliott, Director
By: /s/ Dan E. Young
-------------------------------
Dan E. Young, Director
EMPLOYEE
By: /s/ John W. Biddinger
-------------------------------
John W. Biddinger
42
<PAGE>
EXHIBIT 10(v)
November 3, 1994
Radio SunGroup of Texas, Inc.
c/o SunGroup, Inc.
9102 N. Meridian, Suite 545
Indianapolis, IN 46260
Dear Sirs:
The purpose of this letter is to set forth the Agreement between Service
Broadcasting Corporation ("Service") and Radio SunGroup of Texas, Inc.
("SunGroup") regarding the modification of facilities of radio station KSTV(FM),
Decatur, Texas ("KSTV"), and KYKX(FM), Longview, Texas ("KYKX").
1. Service shall enter into an agreement, substantially in the form of
the attachment, with KVVP-FM ("KVVP") which contemplates the
relocation of KVVP-FM, Leesburg, LA. Once accomplished, this
relocation will enable SunGroup to relocate KYKX to the site described
more fully in (3) below.
2. Service will prepare for filing, and SunGroup will promptly file, an
application on FCC Form 302 to modify the licenses of KYKX to that of
a station authorized by and subject to section 73.215 of the
Commission's rules. This step provides contour protection to the
present licensed facility. Upon filing the 302, Service Broadcasting
will pay $10,000 into an escrow account for SunGroup to draw on for
its expenses in conjunction with this project.
3. Service, in concert with SunGroup, will find and obtain an option to
purchase a parcel of land on which to construct a new tower for KYKX
approximately 2.1 miles East of the current KYKX-FM transmitter site,
and will file an FAA Form 7460-I, Notice of Proposed Construction,
with the FAA field Office in Forth Worth, Texas. Service will
reimburse SunGroup for any costs associated with delivering required
three-phase Delta power and any other required power to the site. The
site selected shall be so located that SunGroup's monthly power
charges will not escalate unduly because of minimum usage
requirements.
4. As soon as possible following grant of the 302 application described
in (2) above, Service will prepare for filing an application on FCC
Form 301 to construct a new tower for KYKX on the new site, and
SunGroup will file such application. The filing of this application
may have to be deferred pending FCC action on the application
proposing relocation of KVVP, or the licensing thereof.
5. Service will agree to reimburse SunGroup for the filing fees as each
of Item 2, 3 and 4 are placed on file with the FCC and the FAA.
Service will also reimburse SunGroup for all legal and engineering
fees associated with this project.
6. Following (i) grant of the 301 application described in (4) above;
(ii) grant of the 301 and
43
<PAGE>
314 application described in (8) below; and (iii) the acquisition of
KSTV by Service, SunGroup will receive the following:
a. Service will complete the purchase of the tower site property and
present SunGroup with a fee simple title free and clear of any
liens or encumbrances except for liens for real estate taxes not
yet due and payable, and existing easements or restrictions of
record.
b. Service, in concert with SunGroup, will have Rick Estes of ESCO
Communications design, manufacture and erect a tower on the
property of 60" cross-sectional dimension over the uniform height
of the tower, delivered free and clear to SunGroup upon
completion. Said tower shall be of sufficient height above ground
level to provide for a center of radiation for the antenna of not
less than 1200 feet above average terrain.
c. Service, in concert with SunGroup, will have a building designed
and constructed to meet the needs of the transmitter and
associated equipment, constructed as a concrete slab, block
walls, and reinforced roof capable of stopping ice penetration.
d. Service will provide for the construction of an all weather
access road being of crushed stone over a prepared earthen
surface from the nearest public access road to the building site.
e. Service will purchase and have installed on the new tower an ERI
Model G5CPS-10AC-3 Antenna and four (4") inch transmission line,
bonded to the tower. Service will have SunGroup's old KYKX
antenna moved and installed as a backup on the new tower.
f. Service will purchase and install a new 70 KW generator with
automatic transfer switch in a building constructed to SunGroup's
specification by Service adjacent to the new transmitter
building.
g. Service will purchase and install a studio-transmitter link
system and the remote pick-up system coaxial lines and antennas
for use by KYKX. During the move, Service will provide as a
temporary service a compatible STL receiver for use at the new
site during the move.
h. Service will negotiate a satisfactory termination of the present
KYKX tower lease agreement.
7. Upon completion of the necessary construction of the new KYKX
facilities, Service will prepare for filing, and SunGroup will
promptly file, an application for license to cover construction permit
on FCC Form 302.
8. Upon grant of the 302 application described in (2) above, Service will
cause to be filed an amendment to the pending Form 301 application for
KSTV to specify a Class C1 Station and an 1800' tower at the proposed
new KSTV tower site with power equal to the maximum permitted for a C1
Station; and will also file (unless previously filed) an application
on FCC Form 314 for consent to Service's purchase of KSTV conditioned
on
44
<PAGE>
grant of the 302 application specified in this paragraph (8).
9. Upon filing of the 302 application described in (7) above, Service
would cause to be filed an amendment to the KSTV application asking
for Class C status and to increase KSTV's power to the maximum
permitted for a Class C station.
10. Service and SunGroup would both use reasonable efforts to support the
prompt grant of all applications and amendments described above.
11. Upon filing of the application for the new license of KYKX, described
in (7) above, Service will pay SunGroup a $200,000 fee, and will pay
William R. Rice Co. a fee of $20,000 for negotiating this agreement.
Further, Service will reimburse SunGroup for the final 302 filing
fees.
12. At no time will Service express or imply any warranties on the
equipment, tower and property other than those expressed by the
manufacturer of said equipment. Upon completion, SunGroup will be
responsible for the maintenance and operation of the equipment.
This letter constitutes a binding agreement and supersedes the letter of
intent dated September 14, 1994 between Service and SunGroup with respect to
KSTV and KYKX.
If the foregoing is in accordance with your understanding of the agreement
and constitutes a mutually satisfactory agreement, please so indicate by signing
a copy of this letter in the place indicated and returning it to the
undersigned.
Sincerely,
/S/ HYMEN CHILDS
--------------------------------
SERVICE BROADCASTING CORP.
ACCEPTED AND AGREED TO:
SUNGROUP OF TEXAS, INC.
/S/ JOHN W. BIDDINGER NAME
---------------------
11/03/94 DATE
- ------------------------
45
<PAGE>
EXHIBIT 10(x)
ACT OF LOAN MODIFICATION AND UNITED STATES OF AMERICA
ACKNOWLEDGEMENT
BY
RADIOSUNGROUP OF
BRYAN/COLLEGE STATION, INC.,
Texas corporation
SUNGROUP BROADCASTING OF
LOUISIANA, INC., a Louisiana
corporation
AND
SUNGROUP, INC., a Tennessee
corporation
IN FAVOR OF
NATIONAL LOAN INVESTORS, L.P.,
Delaware limited partnership
BE IT KNOWN, that effective on the l5th day of December, 1995;
BEFORE US, the undersigned duly qualified notaries public in and for the
states and parishes/counties described below and in the presence of the
undersigned competent witnesses:
PERSONALLY CAME AND APPEARED:
RADIOSUNGROUP OF BRYAN/COLLEGE STATION, INC., a corporation organized under
the laws of the State of Texas, whose taxpayer identification number is 62-
1406505, and whose registered office in Texas is #26 Manor East Mall, 701 Villa
Marie, Bryan, Texas 77805, appearing herein by and through John W. Biddinger its
President and duly authorized representative pursuant to a resolution of its
Board of Directors, a certified extract of which is attached hereto ("RSG"):
SUNGROUP BROADCASTING OF LOUISIANA, INC., a corporation organized under the
laws of the State of Louisiana, whose taxpayer identification number is 72-
1151881, and whose registered office in Louisiana is 725 Austin Place,
Shreveport, Louisiana 71101, appearing herein by and through John W. Biddinger
its President and duly authorized representative pursuant to a resolution of its
Board of Directors, a certified extract of which is attached hereto ("SGBL"):
SUNGROUP, INC., a corporation organized under the laws of the State of
Tennessee, whose
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taxpayer identification number is 62-0790469, and whose principal place of
business is 9102 North Meridian Street, Suite 545, Indianapolis, Indiana 46260,
appearing herein by and through John W. Biddinger, its President and duly
authorized representative pursuant to a resolution of its Board of Directors, a
certified extract of which is attached hereto ("Guarantor"):
AND
NATIONAL LOAN INVESTORS, L.P., a limited partnership, organized under the
laws of the State of Delaware, whose taxpayer identification number is
731334743, and whose principal place of business in Oklahoma as indicated on the
records of the Louisiana Secretary of State is 3030 N.W. Expressway, Oklahoma
City, Oklahoma 73112, appearing herein by and through its general partner, Paul
G. Heafy, its Managing General Partner and duly authorized pursuant to its
partnership agreement ("Lender")
WHO DECLARED THAT:
RECITALS:
---------
WHEREAS, RSG and SGBL, or their predecessors in title, (collectively
hereinafter "Borrower") and Guarantor executed those certain promissory notes
listed on Exhibit A attached hereto and make a part hereof (collectively
hereinafter, the "Note");
WHEREAS, in order to secure the Notes, Borrower and Guarantor granted various
liens, mortgages, security interests, assignments, collateral assignments,
pledges and otherwise in various items corporeal (tangible), incorporeal
(intangible), movable (personal), and immovable (real) property pursuant to
various instruments and otherwise, including without limitation, the instruments
listed on Exhibit B attached hereto and made a part hereof (collectively, the
Security Documents), affecting, among other property, the real and personal
property described on Exhibit C attached hereto and made a part hereof (the
"Property"). The Notes and the Security Documents are collectively hereinafter
the "Loan Documents."
WHEREAS, Federal Deposit Insurance Corporation (the "FDIC") succeeded to all
of the right, title and interest of NCNB Texas National Bank, as successor to
First Rebublicbank Dallas, N.A. in, to and under the Loan Documents pursuant to
the operation of law and certain orders and powers of agencies of the United
States government.
WHEREAS, Lender is the current holder of the Note and is the mortgagee,
pledgee, assignee and/or security interest holder under the Security Documents.
The Security Documents were assigned to Lender by an Assignment and or
Assignments listed on Exhibit D, attached hereto and made a part hereof;
WHEREAS, Borrower and Guarantor have requested that Lender enter into this
Agreement, and Lender has agreed to enter into this Agreement pursuant to the
terms and conditions set forth herein.
WHEREAS, Borrower and Guarantor own and operate radio stations in the States
of Louisiana and Texas (the "Business").
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual covenants, agreements and
conditions contained herein and in the Note and the Security Documents, for
other good and valuable consideration and for good cause, the receipt and
sufficiency of which are hereby acknowledged Borrower, Guarantor
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and Lender hereby agree as follows:
ARTICLE I
RECITALS INCORPORATED
The Recitals set forth above are hereby incorporated herein and expressly
made a part of this Agreement.
ARTICLE II
DEFINITIONS
Capitalized terms used herein shall have the meanings set forth below:
2.1 "AGREEMENT" shall mean this Loan Modification Agreement by and between
Lender and Borrower.
2.2 "ENVIRONMENTAL LAWS" shall mean any federal, state or local law,
statute, ordinance, regulation, plan, decree, demand letter, order or otherwise
pertaining to health, industrial hygiene, pollution, waste disposal, hazardous
waste or the environmental conditions on, under, from or about the Property,
including, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended ("CERCLA"), 42 U.S.C.
Sections 9601 et seq., and the Resource Conservation and Recovery Act of 1976
("RCRA"), 42 U.S.C. Sections 6901 et seq.. as amended.
2.3 "FINANCING STATEMENT" shall mean a Uniform Commercial Code financing
statement or statements, in form and substance satisfactory to Lender,
perfecting a first priority security interest in personal property collateral in
favor of Lender.
2.4 "HAZARDOUS SUBSTANCE" shall mean any substance that is now or may become
regulated or governed by any Environmental Laws, or the presence of which
requires investigation under any Environmental Laws, or any flammable,
explosive, corrosive, reactive, carcinogenic, radioactive material, hazardous
waste, toxic substance or related material and any other substance or material
defined or designated as a hazardous or toxic substance, material or waste by
any Environmental Laws and shall include, without limitation:
2.4.1 Those substances included within the definitions of "hazardous
substances," "hazardous materials," "toxic substances" or "solid waste"
in CERCLA, RCRA, and the Hazardous Materials Transportation Act, 42
U.S.C. Sections 1801 _ ., and in the regulations promulgated pursuant to
said laws;
2.4.2 Those substances listed in the United States Department of
Transportation Table (49 CFR 172.101 and amendments thereto) or by the
Environmental Protection Agency (or any successor agency) as hazardous
substances (40 CFR Part 302 and amendments thereto); and
2.4.3 Any material, waste or substance which is or contains (A)
petroleum hydrocarbons, (B) asbestos, (C) polychlorinated biphenyls or
(D) designated as a "hazardous substance" pursuant to Section 311 of the
Clean Water Act, 33 U.S.C. Section 1251 _ seq. (33 U.S.C. (S) 1321) or
listed pursuant to Section 307 of the Clean Water Act (33 U.S.C. (S)
1317).
2.5 "PERSON" shall mean any individual, partnership, corporation
and/or other entity.
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2.6 Terms defined in the recitals hereto shall have the meaning ascribed to
such terms in the recitals.
ARTICLE III
MODIFICATION OF LOAN DOCUMENTS
Effective as of December 15, 1995, the Loan Documents are modified as
Provided herein.
3.1 Borrower, Guarantor and Lender hereby acknowledge and agree that the
outstanding principal balance of the Note as of January 4, 1996 is TWO MILLION
ONE HUNDRED AND EIGHTY FOUR THOUSAND THREE HUNDRED TWENTY ONE AND 57/100
($2,184,321.57) DOLLARS (the "Principal Balance"), and Borrower expressly
acknowledges an indebtedness to Lender of the Principal Balance, plus interest
and other costs and fees and provided herein and the Loan Documents.
3.2 PAYMENT SCHEDULE. The Note is hereby modified effective as of December
15, 1995 by modifying the payment schedule as follows:
3.3 Borrower shall pay on the 15th of every month, interest only, in the
amount of TWENTY-ONE THOUSAND EIGHT HUNDRED AND NO/100 ($21,800.00) DOLLARS;
3.4 Borrower shall pay all outstanding principal and interest on, and the
loan represented by the Notes shall mature on December 15, 1996 (the "Maturity
Date")
3.5 PRE-PAYMENT OPTIONS. Borrower shall have the following options to prepay
the amounts due under the Note as modified herein:
3.5.1 On March 15, 1996, Borrower shall have the option to pre-pay
the total amounts outstanding, in principal and interest, under the Note
as modified herein at a twenty percent (20%) discount, provided that
Borrower and/or Guarantor delivers to Lender: (i) the discounted pay-off
as provided in this section and (ii) a legal opinion acceptable to
Lender opining that the delivery of the 250,000 shares in Guarantor is
duly authorized by requisite entity action and that such delivery,
transfer and/or issuance does not violate any state or federal
securities laws. Contemporaneously with this Agreement, Borrower and
Guarantor shall execute a warrant for 250,000 shares in Guarantor
exercisable at a total price of $1.00 in the form attached as Exhibit E.
Upon prepayment and satisfaction of the conditions in this section,
Borrower's and Guarantor's obligations under the Loan Documents shall he
satisfied
3.5.2 If and to the extent the number of shares of the Guarantor's
stock shall be increased or reduced by a split, reverse split,
reclassification, dividend payable in stock or the like, the number of
shares subject to the above warrant or the price of the shares subject
to the above warrant shall be proportionately adjusted by the
Guarantor's Board of Directors. In the event of the sale by the
Guarantor of substantially all its assets and the consequent
discontinuance of business, or in the event of a merger, consolidation,
exchange, reorganization, reclassification, extraordinary dividend,
divestiture (including spin-off), recapitulation or liquidation of
Guarantor (collectively referred to as a "Transaction"), the Board of
Directors of Guarantor shall, in connection with the Board's adoption of
the plan and/or terms of such Transaction, provide that Lender as the
holder of the above warrant, may receive in lieu of the stock otherwise
issuable to Lender, the same kind and amount of securities or assets as
may be distributable upon the Transaction.
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3.5.3 On May 15, 1996, Borrower shall have the option to pre-pay the
total amounts outstanding, in principal and interest, under the Note as
modified herein at a twelve and one-half percent (12 1/2%) discount,
provided that Borrower and/or Guarantor delivers to Lender: (i) the
discounted pay-off as provided in this section and (ii) a legal opinion
acceptable to Lender opining that the delivery of the 175,000 shares in
Guarantor is duly authorized by requisite entity action and that such
delivery, transfer and/or issuance does not violate any state or federal
securities laws. Contemporaneously with this Agreement, Borrower and
Guarantor shall execute a warrant for 175,000 shares in Guarantor
exercisable at a total price of $1.00 in the form attached as Exhibit E.
Upon prepayment and satisfaction of the conditions in this section,
Borrower's and Guarantor's obligations under the Loan Documents shall be
satisfied.
3.5.4 If and to the extent the number of shares of the Guarantor's
stock shall be increased or reduced by a split, reverse split,
reclassification, dividend payable in stock or the like, the number of
shares subject to the above warrant or the price of the shares subject
to the above warrant shall be proportionately adjusted by the
Guarantor's Board of Directors. In the event of the sale by the
Guarantor of substantially all its assets and the consequent
discontinuance of business, or in the event of a merger, consolidation,
exchange, reorganization, reclassification, extraordinary dividend,
divestiture (including spin-off), recapitulation or liquidation of
Guarantor (collectively referred to as a "Transaction"), the Board of
Directors of Guarantor shall, in connection with the Board's adoption of
the plan and/or terms of such Transaction, provide that Lender as the
holder of the above warrant, may receive in lieu of the stock otherwise
issuable to Lender, the same kind and amount of securities or assets as
may be distributable upon the Transaction.
3.5.5 On June 15, 1996, Borrower shall have the option to pre-pay the
total amounts outstanding, in principal and interest, under the Note as
modified herein at a ten percent (10%) discount, provided that Borrower
and/or Guarantor delivers to Lender: (i) the discounted pay-off as
provided in this section; (ii) a legal opinion acceptable to Lender
opining that the delivery of the 125,000 shares in Guarantor is duly
authorized by requisite entity action and that such delivery, transfer
and/or issuance does not violate any state or federal securities laws.
Contemporaneously with this Agreement, Borrower and Guarantor shall
execute a warrant for 125,000 shares in Guarantor exercisable at a total
price of $1.00 in the form attached as Exhibit E. Upon prepayment and
satisfaction of the conditions in this section, Borrower's and
Guarantor's obligations under the Loan Documents shall be satisfied.
3.5.6 If and to the extent the number of shares of the Guarantor's
stock shall be increased or reduced by a split, reverse split,
reclassification, dividend payable in stock or the like, the number of
shares subject to the above warrant or the price of the shares subject
to the above warrant shall be proportionately adjusted by the
Guarantor's Board of Directors. In the event of the sale by the
Guarantor of substantially all its assets and the consequent
discontinuance of business, or in the event of a merger, consolidation,
exchange, reorganization, reclassification, extraordinary dividend,
divestiture (including spin-off), recapitulation or liquidation of
Guarantor (collectively referred to as a "Transaction"), the Board of
Directors of Guarantor shall, in connection with the Board's adoption of
the plan and/or terms of such Transaction, provide that Lender as the
holder of the above warrant, may receive in lieu of the stock otherwise
issuable to Lender, the same kind and amount of securities or assets as
may be distributable upon the Transaction.
3.5.7 On September 15, 1996, Borrower shall have the option to pre-
pay the total
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amounts outstanding, in principal and interest, under the Note as
modified herein at a five percent (5 % ) discount, provided that
Borrower and/or Guarantor delivers to Lender: (i) the discounted pay-off
as provided in this section; (ii) a legal opinion acceptable to Lender
opining that the delivery of the 50,000 shares in Guarantor is duly
authorized by requisite entity action and that such delivery, transfer
and/or issuance does not violate any state or federal securities laws.
Contemporaneously with this Agreement, Borrower and Guarantor shall
execute a warrant for 50,000 shares in Guarantor exercisable at total
price of $1.00 in the form attached as Exhibit E. Upon prepayment and
satisfaction of the conditions in this section, Borrower's and
Guarantor's obligations under the Loan Documents shall be satisfied.
3.5.8 If and to the extent the number of shares of the Guarantor's
stock shall be increased or reduced by a split, reverse split,
reclassification, dividend payable in stock or the like, the number of
shares subject to the above warrant or the price of the shares subject
to the above warrant shall be proportionately adjusted by the
Guarantor's Board of Directors. In the event of the sale by the
Guarantor of substantially all its assets and the consequent
discontinuance of business, or in the event of a merger, consolidation,
exchange, reorganization, reclassification, extraordinary dividend,
divestiture (including spin-off), recapitulation or liquidation of
Guarantor (collectively referred to as a "Transaction"), the Board of
Directors of Guarantor shall, in connection with the Board's adoption of
the plan and/or terms of such Transaction, provide that Lender as the
holder of the above warrant, may receive in lieu of the stock otherwise
issuable to Lender, the same kind and amount of securities or assets as
may be distributable upon the Transaction.
3.6 APPLICATION OF PAYMENTS. Payments received by Lender pursuant to the
terms of the Note, as amended hereby, shall be applied in the following manner:
first, to the payment of all expenses, charges, costs and fees incurred by or
payable to Lender and for which Borrower is obligated pursuant to the terms of
the Loan Documents; second, to the payment of all interest accrued to the date
of such payment; and third, to the payment of principal. Notwithstanding
anything to the contrary contained herein, after the occurrence and during the
continuation of an event of default under any of the Loan Documents, as amended
hereby, all amounts received by Lender from any party shall be applied in such
order as Lender, in its sole discretion, may elect.
ARTICLE IV
DEFAULT: WAIVER OF CLAIMS
Borrower hereby acknowledges and agrees that, at the date hereof:
4.1 Borrower is in default under the Loan Documents, provided, that such
default will be waived upon execution of this Agreement;
4.2 Lender has properly perfected its lien, mortgage, assignments, security
interest and other interests in and to the Property;
4.3 Borrower hereby waives and releases any and all notices, cure periods,
defenses, setoffs and claims which Borrower may be entitled to or may raise
against Lender or any other party arising out of the Loan Documents, the
administration of the Loan Documents, or any oral or written correspondence or
transactions in connection with the Loan Documents prior to the execution of
this Agreement.
ARTICLE V
CONDITIONS PRECEDENT TO THE MODIFICATION
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This Agreement is subject to Borrower's and Guarantor's satisfaction of the
following conditions precedent. or Lender's written waiver thereof:
5.1 At Lender's request, Borrower shall, at Borrower's sole cost and
expense, cause the Title Company, which shall be acceptable to Lender, in its
sole discretion, to issue an endorsement to Lender's prior title insurance
policy insuring Lender's first lien on any immovable (real) property
constituting the Property, subject only to such exceptions to title as Lender
may approve ("PERMITTED EXCEPTIONS");:
5.2 Borrower shall, at Borrower's sole cost and expense, cause a search and
update of the relevant Uniform Commercial Code records to be conducted, which
search shall show that the Lender holds a first priority security interest in
the movable (personal) property constituting the Property, and Borrower shall
execute any and all Financing Statements required by Lender in connection with
this Agreement and the modification of the Loan Documents;
5.3 Upon Lender's request, Borrower and Guarantor shall provide Lender with
financial statements for Borrower, Guarantor and for the Business, prepared
according to past practice internally or by an independent certified public
accountant, for the last three calendar years;
5.4 Upon Lender's request, Borrower shall provide Lender with a pro forma
projection of income and expenses for the Business for the time period between
the date of this Agreement and the Maturity Date set forth herein;
5.5 Borrower shall pay Lender its costs and expenses in connection with this
agreement including, without limitation, reasonable attorneys' fees;
5.6 Borrower and Guarantor shall execute, acknowledge and deliver to Lender
this Agreement, any letter instructions to the Title Company and any other
documents or instruments required by the Lender in connection with the loan
modification contemplated hereby;
5.7 Lender shall have received any opinion of counsel required by Lender, in
its sole discretion;
5.8 Borrower shall, in accordance with all applicable state, federal and
local regulations, properly maintain all asbestos-containing material at, in or
on the Property and shall implement an appropriate operation and maintenance
program for such asbestos-containing material in order to prevent any portion of
such asbestos-containing material from becoming friable or airborne: and
5.9 Borrower and Guarantor shall provide Lender with such other information
as Lender may reasonably request relating to the Business.
ARTICLE VI
REPRESENTATION, WARRANTIES AND COVENANTS OF BORROWER AND
GUARANTOR
Borrower and Guarantor hereby represent, warrant and covenant to Lender that:
6.1 Borrower and Guarantor: (i) are duly formed and validly existing and in
good standing under the laws of the State of Louisiana, Texas and Tennessee, as
applicable; and (ii) have all requisite power, authority, and capacity to enter
into this Agreement and to perform their obligations under this Agreement and
the Loan Documents, as modified hereby. As of the date hereof, this Agreement
and any
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other documents executed in connection herewith have been duly executed,
acknowledged (where necessary) and delivered to Lender by Borrower and
Guarantor. Borrower and Guarantor have delivered to Lender a Certificate of Good
Standing in the state where Borrower and Guarantor are incorporated, and a
certified copy of their bylaws, articles of incorporation and incumbency
certificate;
6.2 This Agreement and all of the obligations of Borrower and Guarantor
hereunder are the legal, valid and binding obligations of Borrower and
Guarantor, enforceable in accordance with the terms of this Agreement;
6.3 The execution and delivery of this Agreement and the performance of its
obligations hereunder by Borrower and Guarantor will not conflict with any
provision of any law or regulation to which Borrower or Guarantor is subject, or
conflict with, result in a breach of or constitute a default under any of the
terms, conditions or provisions of any agreement or instrument to which Borrower
or Guarantor is a party or by which they are bound, or any order or decree
applicable to Borrower or Guarantor, or result in the creation or imposition of
any lien on any of Borrower's or Guarantor's assets or property, which would
materially and adversely affect the ability of Borrower or Guarantor to carry
out their obligations under this Agreement and the Loan Documents, as modified
herein;
6.4 There is no action, suit or proceeding pending or threatened against
Borrower, Guarantor or the Property in any court or by or before any other
government agency or instrumentality which would materially and adversely affect
the ability of Borrower or Guarantor to carry out its obligations under this
Agreement and the Loan Documents, as modified herein. The execution and delivery
of this Agreement will not result in a conflict with or violation of any law,
rule, regulation, judgment, or court order affecting Borrower, Guarantor or the
Property;
6.5 Borrower and/or Guarantor hold fee simple title to the Property free and
clear of all encumbrances, liens, claims, leases or tenancies, except the
Permitted Exceptions and the Leases;
6.6 The information and documents to be furnished pursuant to Article V
hereof will be true, correct, accurate and complete in all material respects;
6.7 Borrower and/or Guarantor have not received and do not know of any
notice or demand with respect to any claim, liability or CAUSE OF ACTION ARISING
out of any facts or circumstances connected with the Property, which is not
fully covered under its insurance policies;
6.8 Borrower and/or Guarantor have not received any notice: (i) of any
violation of any zoning, building, health or similar laws, ordinances, rules or
regulations affecting the Business; or (ii) from any insurance company or
governmental agency of any defects or inadequacies in the Business which would
adversely affect the insurability of the Business or materially increase the
cost of insuring the Business beyond that which is customarily charged for
similar businesses in the vicinity of the Business used for a similar purpose;
6.9 All real estate taxes and all tax reports of Borrower and/or Guarantor
required by law to be filed have been duly filed and all taxes, assessments,
fees and other governmental charges relating to the Property or any of
Borrower's and/or Guarantor's properties, assets, income or franchises which are
due and payable have been paid;
6.10 (i) To the best of Borrower's and Guarantor's knowledge, the Property
does not contain any Hazardous Substance; (ii) to the best of Borrower's and
Guarantor's knowledge, Borrower and/or Guarantor have not conducted or
authorized the generation, transportation, storage, treatment, or disposal at
the Property, of any Hazardous Substance; (iii) Borrower and/or Guarantor are
not aware of any
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pending or threatened litigation or proceedings before any administrative agency
in which any person or entity alleges the presence, release, threat of release,
or placement on or in the Property of any Hazardous Substances; (iv) Borrower
and/or Guarantor have not received any notice of and has no actual or
constructive knowledge that any governmental authority or any employee or agent
thereof is investigating whether there is, or has determined that there has been
(1) a presence, release, threat of release, or placement on or in the Property
of any Hazardous Substance, or (2) any generation, transportation, storage,
treatment or disposal at the Property of any Hazardous Substance; and (v) there
have been no communications or agreements between Borrower and/or Guarantor and
any governmental authority or agency (federal, state or local) or any private
entity, including, but not limited to, any prior owners of the Property,
relating in any way to (1) the presence, release, threat of release, or
placement on or in the Property of any Hazardous Substance, or (2) any
generation, transportation, storage, treatment, or disposal at the Property of
any Hazardous Substance:
6.11 Borrower and Guarantor: (i) have no intention of filing any voluntary
petition or initiating any voluntary proceedings under the Federal Bankruptcy
Code or similar state legislation or otherwise to obtain relief from creditors
in any reorganization, insolvency, receivership or similar proceedings, and (ii)
have no knowledge of any threatened involuntary bankruptcy proceedings affecting
Borrower and/or Guarantor:
6.12 This Agreement and the transactions contemplated thereby do not
constitute a "fraudulent consequence" or "fraudulent transfer" as defined by the
laws of the United States, Louisiana, Texas or Tennessee.
6.13 The security interests, liens and other encumbrances created by the
Loan Documents and the lien of the any mortgages or deeds of trust listed as a
Security Document are valid and subsisting and shall remain an enforceable and
valid lien against the Property;
6.14 The condition (financial or otherwise) of the Business or any part
thereof, whether or not insured against, has not been materially adversely
affected in any manner since December 31, 1995, as shown on the income and
expense statement of such date for the Property, which statement was true and
correct as of the date thereof:
6.15 Except for the defaults of Borrower and/or Guarantor which will be
cured by this Agreement, no event has occurred or is continuing and no condition
exists which constitutes or which after notice or lapse of time, or both, would
constitute an event of default by Borrower, Guarantor or Lender under the Loan
Documents, as modified hereby;
6.16 The fee paid to any Guarantor for management of the Business in any
year does not exceed $60,000.00 for the Business of RSG or $75,000.00 for the
Business of SGBL;
6.17 Borrower and/or Guarantor currently have in force insurance policies
covering the Property which comply with the property insurance requirements set
forth in the Loan Documents;
6.18 Borrower and/or Guarantor do not have the right to disbursement of
additional loan proceeds or future advances with respect to the loan represented
by the Loan Documents;
6.19 As of the date hereof, the Loan Documents, as amended hereby and any
other documents executed in connection herewith constitute all of the documents
and agreements evidencing, securing, governing or otherwise relating to the loan
represented by the Loan Documents prior to the date hereof. Without limitation
on the foregoing, there has been no modification, extension, release, waiver,
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assumption, or supplement to or of the Loan Documents, with the exception of the
amendments and the provisions being effected by this Agreement;
6.20 The loan represented by the Loan Documents is not cross-collateralized
or cross-defaulted with any other loan; and
6.21 Borrower shall provide to Lender on or before the 20th of each month
during the term of the loan represented by the Loan Documents a true and correct
income and expense statement for the Property for the calendar year ended
immediately prior to such date, in form and substance satisfactory to Lender and
certified to be true and correct by Borrower.
6.22 All representations and warranties contained in this Article VI or
elsewhere in this Agreement shall survive the closing of the restructuring
transactions contemplated herein.
6.23 Guarantor represents and warrants that it has pledged and granted (and
does hereby grant) a continuing security interest to Lender, its successors and
assigns, in all the outstanding shares of stock in RSG and SGBL to secure the
loan represented by the Loan Documents and all other obligations to Lender, its
successors and assigns. All outstanding shares of stock in RSG & SGBL have been
delivered to Lender, and the pledge is noted on the books and records of RSG &
SGBL.
ARTICLE VII
RELEASE
7.1 Borrower, Guarantor and their successors and assigns each hereby forever
release, discharge and acquit the Lender, its parents, subsidiary and affiliate
corporations of each of the foregoing, and each of the respective officers,
directors, shareholders, agents, employees, representatives, consultants,
attorneys, fiduciaries, servants, predecessors, successors, heirs, and assigns
of each of the foregoing (collectively, the "RELEASED PARTIES"), of and from any
and all claims, demands, obligations, liabilities, indebtedness, breaches of
contract, breaches of duty or any relationship, acts, omissions, misfeasance,
malfeasance, cause or causes of action, debts, sums of money, accounts,
compensations, contracts, controversies, promises, damages, costs, losses and
expenses, of every type, kind, nature, description or character, and
irrespective of how, why, or by reason of what facts, arising heretofore or now
existing, of whatever kind or nature, whether known or unknown, suspected or
unsuspected, liquidated or unliquidated, each as though fully set forth herein
at length, which in any way arise out of, are connected with or relate to (i)
the loan represented by the Loan Documents; (ii) the Loan Documents; (iii) this
Agreement; (iv) the Financing Statement; or (v) any action or inaction of any
Person or entity released hereunder with respect to the loan represented by the
Loan Documents, the Loan Documents or this Agreement.
7.2 In connection with the foregoing release, Borrower and Guarantor hereby
agree, represent and warrant that they realize and acknowledge that factual
matters now unknown to it may have given or may hereafter give rise to causes of
action, claims, demands, debts, controversies, damages, costs, losses and
expenses which are presently unknown, unanticipated and unsuspected, and it
further agrees, represents and warrants that this release has been negotiated
and agreed upon in light of that realization and that it nevertheless hereby
intends to release, discharge and acquit the parties set forth hereinabove from
any such unknown causes of action, claims, demands, debts, controversies,
damages, costs, losses and expenses which are in any way related to: (i) the
loan represented by the Loan Documents; (ii) the Loan Documents; (iii) this
Agreement; (iv) the Financing Statement; and (v) any action or inaction of any
Person or entity released hereunder with respect to the loan represented by the
Loan Documents, the Loan Documents or this Agreement.
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ARTICLE VIII
NO TRANSFER OF CLAIMS
Borrower and Guarantor represent and warrant that neither Borrower nor
Guarantor has heretofore assigned or transferred, or purported to assign or to
transfer, to any Person any matter released hereunder or any portion thereof or
interest therein, and Borrower and Guarantor agree to indemnify, defend and hold
the Released Parties harmless from and against any and all claims based on or
arising out of any such assignment or transfer or purported assignment or
transfer.
ARTICLE IX
CONSENT OF GUARANTOR
Guarantor hereby consents to the modifications contained in this
Agreement and acknowledges that the Guaranty dated December 14, 1989, between
Guarantor and NCNB Texas National Bank, N.A., is not affected by or modified by
this Agreement, and remains in full force and effect, enforceable in favor of
Lender, its successors and assigns, in accordance with its terms.
ARTICLE X
RATIFICATION OF PLEDGE
10.1 Borrower acknowledges, represents and warrants that pledge of
that certain Collateral Mortgage Note dated December 14, 1989 by Borrower in the
original principal amount of $2,000,000.00 ("NCNB Collateral Note") on December
14, 1989, pursuant to that certain Act of Pledge of Collateral Mortgage Note
dated December 14, 1989, as restated and amended pursuant to that certain
Amended and Restated Act of Pledge of Collateral Mortgage Note dated in January,
1990 as amended by that certain First Amendment to Amended and Restated Act of
Pledge of Collateral Mortgage Note dated effective as of September 30, 1995
(collectively the "NCNB Pledge Agreement") was a pledge granted in favor of NCNB
Texas National Bank, its successor and assigns, including Lender and that such
pledge was granted to secure not only all present and future obligations of
Borrower, its successors or assigns in favor of and/or advances to Borrower, its
successors or assigns by NCNB Texas national Bank, but also all present and
future obligations of Borrower its successors or assigns in favor of, and/or
advances to Borrower, its successors or assigns, by the successors and assigns
of NCNB Texas National Rank
10.2 Borrower acknowledges, represents and warrants that the security
interest granted in that certain Collateral Mortgage Note dated November 4, 1993
by Borrower in the original principal amount of $500,000.00 (the "FDIC
Collateral Note"), pursuant to that certain Act of Pledge of Collateral Mortgage
Note (Security Agreement) dated in November, 1993, (the "FDIC Pledge Agreement")
was a security interest granted in favor of the Federal Deposit Insurance
Corporation (the "FDIC"), its successors and assigns, including Lender and that
such security interest was granted to secure not only all present and future
obligations of Borrower, its successors or assigns in favor of and/or advances
to Borrower, its successors or assigns, by the FDIC, but also all present and
future obligations of Borrower, its successors or assigns in favor of, and/or
advances made to Borrower, its successors or assigns, by the successors or
assigns of the FDIC.
10.3 Borrower acknowledges that: (i) Lender and its predecessors in
title have held the NCNB Collateral Note and the FDIC Collateral Note
(collectively the "Collateral Notes"); (ii) the Collateral Notes have been
continuously held and remain in possession of Lender and its predecessors; (iii)
pursuant to applicable Louisiana law, including without limitation, Louisiana
Civil Code Article 3158, the
56
<PAGE>
obligations of Borrower, its successor or assigns under the pledge of the NCNB
Collateral Note are entitled to retroactive ranking back to the date of the
original pledge, December 14, 1989, (iv) pursuant to applicable Louisiana law,
including without limitation, Chapter 9 of the Louisiana Commercial laws (La.
R.S. (S)(S)10:9-101 et seq.), the obligations of Borrower, its successors or
assigns, secured by the security interest granted in the FDIC Collateral Note
are entitled to retroactive ranking back to the date of the granting of the
original security interests November 4. 1993.
10.4 Borrower hereby ratifies, confirms and acknowledges the pledge
of the NCNB Collateral Note and the security interest granted in the FDIC
Collateral Note, and, in addition to, but not in lieu of the foregoing, hereby
grants a continuing security interest in the Collateral Notes in favor of
Lender, its successors and assigns, in order to secure any and all present or
future obligations of Borrower and/or Guarantor, their successors or assigns in
favor of Lender its successors or assigns.
10.5 Borrower further acknowledges the rights of Lender and the
rights of Lender's successors and assigns to enforce the Collateral Notes and
all accessories or accessory obligations thereto.
ARTICLE XI
MISCELLANEOUS
11.1 LENDER'S REPRESENTATIONS AND WARRANTIES. Lender represents and
warrants that it is the holder and owner of the Note
11.2 LEGAL OPINION. Simultaneously with the execution of this Agreement, if
requested by Lender, Lender shall have received from legal counsel retained by
Borrower and acceptable to Lender an opinion of counsel ("LEGAL OPINION")
covering the following matters: (a) the due authorization of this Agreement and
any other documents executed in connection herewith in accordance with their
respective terms; (b) the validity and enforceability of this Agreement; (c)
compliance with applicable usury laws; (d) the due organization and valid legal
existence of Borrower and Guarantor; (e) the existence of, or the nonexistence
of, any requirement for any consent of any governmental authority in connection
with the execution, delivery or performance of this Agreement and any other
documents executed in connection herewith, (f) the execution of this Agreement
will not materially impair the security for the loan represented by the Loan
Documents (including, but not limited to, the continued validity and
enforceability of any guaranty given as security for the loan represented by the
Loan Documents) and (g) such other matters incident to the transaction
contemplated herein as Lender may reasonably request.
11.3 USURY SAVINGS CLAUSE. Notwithstanding anything to the contrary
contained elsewhere in this Agreement, Borrower, Guarantor and Lender hereby
agree that all agreements between them under this Agreement and with respect to
the loan represented by the Loan Documents, whether now existing or hereafter
arising and whether written or oral, are expressly limited so that in no
contingency or event whatsoever shall the amount paid, or agreed to be paid, to
Lender for the use, forbearance, or detention of the money loaned to Borrower,
or for the performance or payment of any covenant or obligation contained herein
or therein, exceed the maximum rate of interest under applicable law ("Maximum
Rate"). If from any circumstance whatsoever, fulfillment of any provisions of
this Agreement at the time performance of such provisions shall be due shall
involve transcending the limit of validity prescribed by law, then,
automatically, the obligation to be fulfilled shall be reduced to the limit of
such validity, and if from any such circumstance Lender should ever receive
anything of value deemed interest by applicable law which would exceed the
Maximum Rate, such excessive interest shall be applied to the reduction of the
principal amount owing with respect to the loan represented by the Loan
Documents or on account of the other indebtedness secured by the Loan Documents
and not to the payment of interest, or if such excessive interest exceeds the
unpaid principal balance of the loan represented by the Loan Documents
57
<PAGE>
and such other indebtedness, such excess shall be refunded to Borrower. All sums
paid or agreed to be paid to Lender for the use, forbearance, or detention of
the loan represented by the Loan Documents and other indebtedness of Borrower to
Lender shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such indebtedness until payment
in full so that the actual rate of interest on account of all such indebtedness
is uniform throughout the actual term of the loan represented by the Loan
Documents or does not exceed the Maximum Rate throughout the entire term of the
loan represented by the Loan Documents, as appropriate. By execution of this
Agreement, Borrower acknowledges that it believes the loan represented by the
Loan Documents to be non-usurious and agrees that, if at any time Borrower
should have reason to believe that the loan represented by the Loan Documents is
in fact usurious, Borrower will give Lender notice of such condition, and
Borrower agrees that Lender shall have ninety (90) days after receipt of such
notice in which to make appropriate refund or other adjustment in order to
correct such condition if in fact such condition exists. The terms and
provisions of this Section 11.2 shall control every other provision of this
Agreement and all other agreements between Borrower. Guarantor and Lender.
11.4 FURTHER ASSURANCES. Borrower and Guarantor further assure the
Lender that Borrower and/or Guarantor will execute such other documents as may
be required by Lender, in its sole discretion, to complete this Agreement or to
accomplish the intended purpose of this Agreement.
11.5 NO WAIVER. Borrower and Guarantor acknowledge that by accepting
payment of any sums set forth herein to be paid by Borrower, Lender does not
waive in any manner Lender's right to require prompt payment when due of all
other sums evidenced by the Note and secured by the Loan Documents, as modified
herein, and to declare a default for failure of Borrower to comply fully with
the terms and conditions of the Note and the Loan Documents. A waiver of any
default of Borrower under the Note or the Loan Documents, as modified, shall not
be or be deemed to be a waiver of any other or similar default by Borrower after
such waiver.
11.6 NOTICES. Any notice, demand, request or other communication
which any party hereto may be required or may desire to give under this
Agreement shall be in writing and shall be deemed to have been properly given
(a) if hand delivered (effective upon delivery), (b) if mailed (effective three
(3) days after mailing) by United States registered or certified mail, postage
prepaid, return receipt requested, (c) if sent by a nationally recognized
overnight delivery service (effective one (1) day after delivery to such
courier), or (d) if sent by facsimile (effective upon confirmation of
transmission); provided that the notice is also sent and received by U.S. Mail,
in each case addressed as follows:
If to Lender:
NATIONAL LOAN INVESTORS, L.P.
3030 N.W. Expressway Suite 1322
Oklahoma City OK 73112
Attention: Patrick P. Morrissey
Facsimile: (405) 947-4403
If to Borrower:
RADIOSUNGROUP OF BRYAN/COLLEGE STATION, INC.
#26 Manor East Mall 701 Villa Marie
Bryan, Texas 77805
Attention: John W. Biddinger
58
<PAGE>
Facsimile: 409-823-5597
SUNGROUP BROADCASTING OF LOUISIANA, INC.
725 Austin Place
Shreveport, Louisiana 71101
Attention: John W. Biddinger
Facsimile: 318-227-8020
If to Guarantor:
SUNGROUP, INC.
9102 North Meridian Street, Suite 545
Indianapolis, Indiana 46260
Attention: John W. Biddinger
Facsimile: 317-844-7425
or such other address which any party entitled to receive notice hereunder
designates by notice to the others.
11.7 SUCCESSORS AND ASSIGNS. This Agreement and all provisions hereof,
including but not limited to all representations and warranties made herein,
shall extend to and be binding upon and inure to the benefit of the respective
heirs, legatees, legal representatives, successors and assigns of the parties
hereto.
11.8 WAIVER OF JURY TRIAL. LENDER, GUARANTOR AND BORROWER HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS EACH MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF LENDER,
GUARANTOR OR BORROWER WITH RESPECT THERETO. THIS PROVISION SETS FORTH THE MUTUAL
DESIRE OF LENDER, GUARANTOR AND BORROWER TO AVOID DELAYS IN THE RESOLUTION OF
DISPUTES INVOLVING THIS AGREEMENT. BORROWER AND GUARANTOR ACKNOWLEDGE THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR LENDER TO ENTER INTO THIS AGREEMENT
11.9 MODIFICATION OF OTHER LOAN DOCUMENTS. The Loan Documents are hereby
modified in accordance with this Agreement. All references to A PARTICULAR LOAN
Document in the Loan Documents shall be deemed to refer to said Loan Document as
amended by this Agreement.
11.10 ATTORNEYS' FEES. Borrower and/or Guarantor shall reimburse Lender for
all reasonable attorneys' fees and expenses, arising from and after the date
hereof, incurred by Lender in connection with the enforcement of Lender's rights
under this Agreement and each of the other Loan Documents, as modified hereby
including, without limitation, reasonable attorneys' fees and disbursements for
trial, appellate proceedings, out-of-court workouts and settlements or for
enforcement of rights under any state or federal statute, including, without
limitation, reasonable attorneys' fees incurred in bankruptcy and insolvency
proceedings such as in connection with seeking relief from stay in a bankruptcy
proceeding. Borrower's and Guarantor's reimbursement obligation shall be part of
the indebtedness secured by the Loan Documents.
59
<PAGE>
11.11 DISCLAIMER OF NOVATION, EXTINGUISHMENT AND DISCHARGE. Except as
expressly set forth herein, the parties hereto expressly disclaim any intent to
effect a novation or an extinguishment or discharge of any of the Borrower's
obligations under the Loan Documents. Except as expressly modified hereby, each
Loan Document remains in full force and effect and is hereby confirmed and
ratified in all respects.
11.12 ENTIRE AGREEMENT. This Agreement contains the entire agreement between
the parties relating to the transactions contemplated hereby, and all prior or
contemporaneous agreements, understandings, representations and statements, oral
or written, are merged herein. No modification or amendment of this Agreement or
any waiver of any provision hereof shall be effective, unless the same is in
writing signed by the party against whom enforcement of such modification,
amendment or waiver is sought.
11.13 SEVERABILITV. If any of the provisions of this Agreement or the
application thereof to any persons or circumstances shall, to any extent, be
deemed invalid or unenforceable, the remainder of this Agreement and the
application of such provisions to persons or circumstances other than those as
to whom or which it is held invalid or unenforceable shall not be affected
thereby, and every provision of this Agreement shall be valid and enforceable to
the fullest extent permitted by law.
11.14 VOLUNTARY EXECUTION. Borrower and Guarantor have thoroughly read and
reviewed the terms and provisions of this Agreement and is familiar with the
same, have executed this Agreement voluntarily, in the absence of coercion or
duress, have been represented by counsel in the negotiation and delivery of this
Agreement, and understands the terms hereof and intends to be legally bound by
the same. Borrower and Lender have negotiated this Agreement at arms-length and
no provision is to be construed more strictly against one party than the other.
11.15 NO JOINT VENTURE. Nothing in this Agreement shall be construed as
creating a partnership, joint venture or any other relationship between
Borrowers Guarantor or the Lender.
11.16 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Louisiana, without reference to any
principles of choice of laws or conflicts of laws.
11.17 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be an original, but all of which together
shall constitute one original instrument.
THUS DONE AND PASSED, ON THE 19/TH/ OF MARCH, 1996, IN THE STATE OF INDIANA
PARISH/COUNTY OF MARION, CITY OF INDIANAPOLIS IN PRESENCE OF THE UNDERSIGNED
NOTARY AND THE UNDERSIGNED COMPETENT WITNESSES, WHO HEREUNTO SIGN THEIR NAMES
WITH RSG AND ME AFTER READING OF THE WHOLE.
WITNESS:
X /S/ MARILYN HINKLE 3-19-96
---------------------------
X /S/ JOHN E. SOUTHWOOD, JR. 3/19/96
-----------------------------------
RADIOSUNGROUP OF BRYAN/COLLEGE
STATION, INC., A TEXAS CORPORATION
60
<PAGE>
BY: /S/ JOHN W. BIDDINGER 3/19/96
------------------------------
NAME: JOHN W. BIDDINGER
TITLE: PRESIDENT
/S/ LINDA L. MCCLARA
- -----------------------
NAME
NOTARY PUBLIC
MY COMMISSION EXPIRES: 3-12-2000
---------
(SEAL)
61
<PAGE>
THUS DONE AND PASSED, ON THE 19/TH/ OF MARCH, 1996, IN THE STATE OF INDIANA
PARISH/COUNTY OF MARION, CITY OF INDIANAPOLIS IN PRESENCE OF THE UNDERSIGNED
NOTARY AND THE UNDERSIGNED COMPETENT WITNESSES, WHO HEREUNTO SIGN THEIR NAMES
WITH RSG AND ME AFTER READING OF THE WHOLE.
WITNESS:
X /S/ MARILYN HINKLE 3-19-96
---------------------------
X /S/ JOHN E. SOUTHWOOD, JR. 3/19/96
-----------------------------------
RADIOSUNGROUP OF BRYAN/COLLEGE
STATION, INC., A TEXAS CORPORATION
BY: /S/ JOHN W. BIDDINGER 3/19/96
------------------------------
NAME: JOHN W. BIDDINGER
TITLE: PRESIDENT
/S/ LINDA L. MCCLARA
- ---------------------
NAME
NOTARY PUBLIC
MY COMMISSION EXPIRES: 3-12-2000
---------
(SEAL)
62
<PAGE>
THUS DONE AND PASSED, ON THE 19/TH/ OF MARCH, 1996, IN THE STATE OF INDIANA
PARISH/COUNTY OF MARION, CITY OF INDIANAPOLIS IN PRESENCE OF THE UNDERSIGNED
NOTARY AND THE UNDERSIGNED COMPETENT WITNESSES, WHO HEREUNTO SIGN THEIR NAMES
WITH RSG AND ME AFTER READING OF THE WHOLE.
WITNESS:
X /S/ MARILYN HINKLE 3-19-96
---------------------------
X /S/ JOHN E. SOUTHWOOD, JR. 3/19/96
-----------------------------------
RADIOSUNGROUP OF BRYAN/COLLEGE
STATION, INC., A TEXAS CORPORATION
BY: /S/ JOHN W. BIDDINGER 3/19/96
------------------------------
NAME: JOHN W. BIDDINGER
TITLE: PRESIDENT
/S/ LINDA L. MCCLARA
- ----------------------
NAME
NOTARY PUBLIC
MY COMMISSION EXPIRES: 3-12-2000
---------
(SEAL)
63
<PAGE>
THUS DONE AND PASSED, ON THE ____________ DAY, OF ____________, 1996,
IN THE STATE OF _____________, PARISH/COUNTY OF _____________, CITY OF
______________IN PRESENCE OF THE UNDERSIGNED NOTARY AND THE UNDERSIGNED
COMPETENT WITNESSES, WHO HEREUNTO SIGN THEIR NAMES WITH GUARANTOR AND ME AFTER
READING OF THE WHOLE.
WITNESSES:
X
-----------------------------
X
-----------------------------
NATIONAL LOAN INVESTORS, L.P.,
A DELAWARE LIMITED PARTNERSHIP
BY:
------------------------------
NAME: PAUL G. HEAFY
TITLE: MANAGING GENERAL PARTNER
64
<PAGE>
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED EXCEPT (i)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (ii)
UPON FIRST FURNISHING TO THE COMPANY AN OPINION OF COUNSEL SATISFACTORY
TO IT THAT SUCH TRANSFER IS NOT IN VIOLATION OF THE REGISTRATION
REQUIREMENTS OF THE ACT OR ANY SECURITIES?IJRTTTF..S LAW.
Warrant No W-1
COMMON STOCK PURCHASE WARRANT
To Subscribe for Shares of
Common Stock
of
SunGroup, Inc.
a Tennessee corporation
THIS CERTIFIES THAT, for value received, National Loan Investors, L.P. (the
"Holder") is entitled to subscribe for and purchase from SunGroup, Inc., a
Tennessee corporation (the "Company") the number of shares of the Company's
Common Stock, $0.00 par value set forth below (the "Shares") at a price of $1.00
(the "Warrant Price") at the times specified below, but in no event later than
5:00 p.m. (CDT) on September 15, 1996 (or the next following business day if
such day is not a business day), subject to the terms and conditions stated in
this Warrant. At the time of issuance of this Warrant and excluding the shares
issuable under this Warrant, the Company has outstanding on a fully diluted and
converted basis 13,183,462 shares of Common Stock.
1. Exercise of Warrant.
---------------------
The rights represented by this Warrant may be exercised by the Holder hereof
in whole or in part (provided that this Warrant may not be exercised for
fractional shares) by the surrender to the Company of this Warrant and delivery
of an executed Subscription Notice in the form attached hereto to the Company at
its principal office at any time or times within the periods specified in
Paragraph 2 below, accompanied by payment for the Shares so subscribed for by
(a) delivery of cash or certified or bank checks in lawful money of the United
States; and (b) written cancellation of all of the principal, interest and
expenses due Holder under that certain Second Amended and Restated Promissory
Note dated September 30, 1993, in the original principal amount of $2,205,509.02
made by SunGroup Broadcasting of Louisiana, Inc. (SGBL) and RadioSunGroup of
Bryan College Station, Inc. (RSG).
2. Number of Shares Subject to Warrant.
-----------------------------------
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<PAGE>
The number of Shares that may be purchased by the Holder of this Warrant upon
exercise shall be 250,000, 175,000, 125,000 or 50,000. This Warrant shall only
be executed on the terms and conditions set forth in Paragraphs 3.5.1, 3.5.3,
3.5.5, or 3.5.7 of that certain Act of Loan Modification and Acknowledgment
dated effective as of December 15, 1995, between and among RadioSunGroup of
Bryan/College Station, Inc., SunGroup Broadcasting of Louisiana, Inc., the
Company and Holder. If this Warrant is not exercised on or before the date
specified in Paragraph 3.5.1, 3.5.3, 3.5.5, or 3.5.7 of such Act of Loan
Modification and Acknowledgment, then this Warrant shall be void and of no
further force and effect.
Provided, that the number of shares that the Holder of this Warrant may
purchase shall be reduced from 250,000 shares to 175,000 if not exercised on or
before March 15, 1996. Provided, further, that the number of shares that the
Holder of this Warrant may purchase shall be reduced from 175,000 shares to
125,000 if not exercised on or before May 15, 1996. Provided, further, that the
number of shares that the Holder of this Warrant may purchase shall be reduced
from 125,000 shares to 50,000 if not exercised on or before June 15, 1996. All
rights hereunder terminate if this Warrant is not exercised on or before
September 15, 1996. Once exercised, this Warrant shall terminate and be null and
void.
3. Validity of Issue.
-----------------
The Company warrants and agrees that all Shares of Common Stock which may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance, be fully paid and non-assessable and free from all taxes, liens and
charges with respect to the issue thereof. The Company further warrants and
agrees that during the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved a sufficient number of shares of Common Stock to provide for the
exercise of the rights represented by this Warrant.
4. INVESTMENT REPRESENTATION.
-------------------------
THE HOLDER BY ACCEPTING THIS WARRANT REPRESENTS THAT THIS WARRANT IS ACQUIRED
FOR THE HOLDER'S OWN ACCOUNT FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO ANY
OFFERING OR DISTRIBUTION AND THAT THE HOLDER HAS NO PRESENT INTENTION OF SELLING
OR OTHERWISE DISPOSING OF THIS WARRANT OR THE UNDERLYING SHARES. UPON EXERCISE,
THE HOLDER WILL CONFIRM IN RESPECT OF SECURITIES OBTAINED UPON SUCH EXERCISE,
THAT IT IS ACQUIRING SUCH SECURITIES FOR ITS OWN ACCOUNT AND NOT WITH A VIEW TO
ANY OFFERING OR DISTRIBUTION IN VIOLATION OF APPLICABLE SECURITIES LAWS.
5. Adjustments to the Number of Shares and Warrant Price.
-----------------------------------------------------
The kind of securities purchasable upon the exercise of this Warrant, the
Warrant Price and the number of shares purchasable upon exercise of this Warrant
shall be subject to adjustment from time to time upon the occurrence of certain
events as specified in Paragraph 3.5.2, 3.5.4, 3.5.6 and 3.5.8 of that certain
Act of Loan Modification and Acknowledgment dated as of December 15, 1995
6. Issuance of Additional Capital Stock
-------------------------------------
The Company shall give to the Holder at least 10 days' prior written notice,
by first class mail, postage prepaid, addressed to the Holder at its address
registered on the books of the
66
<PAGE>
Company, of the record date for determining the Holders of Shares who shall be
granted rights for or to purchase, or any Options for the purchase of, any
capital stock of the Company or evidences of indebtedness, or other securities
directly or indirectly convertible into or exchangeable for Common Stock, to the
end that the Holder may exercise its rights to acquire Common Stock under this
Warrant, by delivery of an executed Subscription Notice in accordance with
Section 1 prior to said record date, and may thereby receive the same rights as
other holders of Common Stock on said record date
7. Rights and Benefits of Other Agreements
----------------------------------------
The Shares purchasable or purchased upon exercise of this Warrant shall only
be issued on the terms and conditions set forth in that certain Act of Loan
Modification and Acknowledgment dated as of December 15, 1995.]
8. Miscellaneous
--------------
8.1. Definition. As used herein the term "Common Stock" shall mean and
include the Company's presently authorized Common Stock, $0.00 par value, and
stock of any other class into which such presently authorized Common Stock may
hereafter be changed.
8.2. No Rights as Stockholder. This Warrant shall not entitle the Holder
hereof to any voting rights or other rights as a stockholder of the Company,
or to any other rights whatsoever except the rights herein expressed, and no
cash dividend paid out of earnings or surplus or interest shall be payable or
accrue in respect of this Warrant or the interest represented hereby or the
Shares which may be subscribed for and purchased hereunder until and unless
and except to the extent that the rights represented by this Warrant shall be
exercised.
8.3. Replacement Warrants. This Warrant is exchangeable, upon the
surrender hereof at the office or agency of the Company, for new Warrants of
like tenor representing in the aggregate the right to subscribe for and
purchase the number of shares which may be subscribed for and purchased
hereunder, each of such new Warrants to represent the right to subscribe for
and purchase such number of shares as shall be designated by said Holder
hereof at the time of such surrender.
9. Transfer and Registration
--------------------------
9.1. Compliance with Securities Laws. Without limiting any of the
Company's rights under Paragraph 9.2 below, if any proposed transfer of this
Warrant, in whole or in part, or the Shares issuable upon exercise of this
Warrant might reasonably involve a public offering of the same contrary to the
investment representations in Section 4, the Company may require, as a
condition precedent to such transfer, an opinion of counsel, satisfactory to
it, that the proposed transfer will not involve a public offering which is
required to be registered under the Securities Act of 1933. However no such
requirement shall be imposed during such time as a new registration statement
or a post-effective amendment thereof covering the Shares or part thereof
being transferred is in effect.
9.2. Transfer. Without limiting any rights of the Company under Section
9.1 hereof, this Warrant and all rights hereunder are non-transferable without
the prior written consent of the Company. Without limiting the foregoing, this
Warrant shall not be detached
67
<PAGE>
(and no rights arise independent) from that certain Act of Loan Modification
and Acknowledgment dated December 15, 1995.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
President and its corporate seal to be hereunto affixed, and attested by its
Secretary as of the 15th day of December, 1995.
SUNGROUP, INC.
By: /s/ John W. Biddinger
-------------------------------
Title: President
-------------------------------
(SEAL)
Attest:
/s/ John E. Southwood, Jr.
- -----------------------------
Secretary
68
<PAGE>
FORM OF SUBSCRIPTION NOTICE
(To be signed only on exercise of Warrant)
TO: _______________________________
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder, _______________
shares of Common Stock of ______________________ and herewith makes payment of
$_____________ therefor in cash and requests that the certificates for such
shares be issued in the name of, and delivered to ___________________ whose
address is ________________________ and whose taxpayer identification number is
________________________.
Dated:
_________ _____________________________
(Signature must conform to name of
holder as specified on the face of this Warrant)
_________ _____________________________
_________ _____________________________
(Address)
_________________________
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto _________________ the right represented by the within Warrant to
purchase _______________ shares of Common Stock of ___________________ to which
the within Warrant relates, and appoints __________________ as its Attorney to
transfer such right on the books of __________________ with full power of
substitution in the premises.
Dated:
______________________________________
(Signature must conform to name of
holder as specified on the face of this Warrant)
Signed in the presence of:
___________________________
69
<PAGE>
EXHIBIT 10(y)
SETTLEMENT AGREEMENT
THIS AGREEMENT is made as of December 29, 1995, among SUNMEDIA, INC., a Florida
corporation, whose mailing address is 9102 N. Meridian Street, Suite 545,
Indianapolis, Indiana 46260 ("Borrower"), SUNGROUP, INC., an Indiana
corporation, whose mailing address is 9102 N. Meridian Street, Suite 545,
Indianapolis, Indiana 46260 ("Guarantor" and, collectively with Borrower, the
"Obligors") and FEDERAL DEPOSIT INSURANCE CORPORATION AS RECEIVER OF THE
NATIONAL BANK OF WASHINGTON, with an office at 500 West Monroe Street, Suite
3200, Chicago, Illinois 60661 ("FDIC").
WHEREAS:
Borrower is indebted to FDIC in the amount of Five Million Two Hundred Eighty
Seven Thousand Eight Hundred Ninety two Dollars and 35/100 ($5,287,892.35) as of
December 29, 1995, which is comprised of the following (the "Indebtedness"):
LOAN OR
ASSET NO. PRINCIPAL + INTEREST = TOTAL
4257501291801 3,500,000 1,787,892.35 5,287,892.35
0.00
TOTAL $5,287,892.35
The Indebtedness is evidenced and secured by the documents collectively attached
as Exhibit "A"; and
In order to provide for the settlement of this matter and the payment of a
certain portion of said Indebtedness, FDIC and Obligors have entered into this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt and sufficiency of which
hereby are acknowledged, Obligors jointly and severally and FDIC, each for
themselves and their respective successors and assigns, agree as follows:
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1. Payment.
(a) Obligors, and each of them, shall resolve the Indebtedness in the
following manner:
(i) Obligors shall execute and deliver this Agreement to the FDIC on
or before December 29, 1995.
(ii) Obligors shall sell all of the assets tangible, real, personal,
or mixed, used and/or useful in the operation of Radio Station
WOWW, licensed to Pensacola, Florida, including all land,
buildings, tower and equipment to a nonaffiliated third party
(the "Purchaser") for a cash price of not less than $2,300,000
(the "Sale").
(iii) FDIC is to receive all sales proceeds from the Sale less
customary closing costs of no more than 10% of the sale price of
the Sale with a minimum settlement amount to be no less than
$2,070,000.00. If the customary closing costs exceed 10% of the
sales price of the Sale, then, the Obligors jointly and
severally shall pay all such excess closing costs, which excess
closing costs are not to be deducted from the sales proceeds
from the Sale. If the net sales proceeds from the Sale exceed
$2,100,000, then, the Guarantor shall be entitled to retain 50%
of such excess net sales proceeds. The remaining 50% of such
excess net sales proceeds will be delivered to the FDIC. All
sales proceeds due the FDIC from the Sale are designated as the
"Settlement Amount". The Obligors agree to delivery to the FDIC
a closing statement for the Sale which statement shall be
approved by the FDIC prior to closing of the Sale.
(iv) Concurrently with the execution of this Agreement, Obligors
shall jointly and severally execute a stipulation for an agreed
judgment to be entered in favor of the FDIC for all of the
principal and accrued interest, including incurred attorneys'
fees and expenses, owed to the FDIC based upon Count III and
Count IV of the action entitled Federal Deposit Insurance
Corporation as Receiver of The National Bank of Washington vs.
SunMedia, Inc., et al. , currently pending in the United States
District Court for the Northern District of Florida, Pensacola
Division, Case No. 9530178RV (the "Judgment"). Obligors and FDIC
agree that after the Judgment is approved by the United States
District Court Judge, through the issuance of any appropriate
orders, and entered of record (collectively, the "Judgment
Documents"), the Judgment Documents shall be held by the FDIC's
outside counsel, William B. McEachern, Jr., Carlton, Fields,
Ward, Emmanuel, Smith & Cutler, P.A., Harborview Building, P.O.
Box 12426, Pensacola, Florida 32582.
(v) Concurrently with the execution of this Agreement, Obligors
shall jointly and severally file an answer with the United
States District Court of Florida, Pensacola Division, admitting
the allegations of the FDIC in Count I, Count II and Count V of
the action described in subparagraph l(a)(iv) (the "Answer").
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(vi) Concurrently with the execution of this Agreement, Obligors and
FDIC will enter into a covenant not to execute (the "Covenant"),
attached hereto as Exhibit "B". Pursuant to the Covenant, the
FDIC will take no actions to record or otherwise execute on the
Judgment or prosecute the action described in subparagraph
l(a)(iv) for so long as the Obligors jointly and severally
comply with the terms of this Agreement.
(vii) Concurrently with the execution of this Agreement, Obligors will
pay to the FDIC Seventy Five Thousand Dollars ($75,000) in
certified funds. This $75,000 payment is a non-refundable
Indebtedness payment. In the event the Sale is consummated, this
Indebtedness payment will be credited against the net sales
proceeds from the Sale to be received by the FDIC.
(viii) Obligors shall be allowed 180 days after the execution of this
Agreement to consummate the Sale and pay the Settlement Amount
to the FDIC. As part of this Agreement, the FDIC will allow a
longer period for closing the Sale, if the only cause for delay
is final Federal Communications Commission ("FCC") approval for
the renewal of the radio broadcasting license(s) for WOWW or the
transfer of such license(s), provided, however, that such delay
is beyond the power or ability of the Obligors or the Purchaser,
to prevent, in the exercise by each party of good faith to
consummate the Sale.
(ix) Within 20 days after the execution of this Agreement, Obligors
will pay to the FDIC Twenty Five Thousand Dollars ($25,000) in
certified funds. This $25,000 payment is a non-refundable
Indebtedness payment. In the event the Sale is consummated, this
Indebtedness payment will be credited against the net sales
proceeds from the Sale to be received by the FDIC.
(x) Within 30 days from , Obligors shall deliver to the FDIC a fully
executed and binding Purchase And Sale Agreement between
Guarantor and/or Borrower and the Purchaser for the Sale
(xi) Obligors warrant that the Purchaser for the Sale, shall,
concurrently with the execution of the Purchase And Sale
Agreement for the Sale, place at least 10% of the purchase price
for the Sale in escrow (the "Down Payment") to insure the
Purchaser's good faith and performance.
(xii) Obligors warrant that the Down Payment is nonrefundable to the
Purchaser unless Obligors breach the Purchase And Sale Agreement
for the Sale or the FCC's approval for the Sale is not obtained.
Obligors agree immediately upon the Purchaser's deposit of the
Down Payment into escrow, to assign their rights and interests
in the Down Payment to the FDIC and so notify the escrow agent
and the Purchaser of such assignment.
(xiii) Within 10 days after the execution of the Purchase And Sale
Agreement for the Sale by Obligors and the Purchaser, Obligors
and the Purchaser will file a request for the transfer of Radio
Station WOWW's broadcasting license(s) with the FCC (the
"Request"). Obligors shall provide a copy of the Request,
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which copy evidences the Request having been filed with the FCC,
to the FDIC within 5 days after filing the Request with the FCC.
(xiv) Obligors shall execute such additional documents as FDIC may
require to facilitate and evidence the settlement hereunder.
(xv) Obligors jointly and severally acknowledge and agree that once
the Judgment is entered of record pursuant to sub-paragraph
l(a)(iv) of this paragraph, 1) the Indebtedness, by operation of
law, will be merged into the Judgment; and 2) the security for
the Indebtedness as described in Exhibit "A" will remain as
security for the Judgment.
(b) Time is of the essence of all obligations of Obligors hereunder. If for
any reason Obligors fail to perform all their obligations hereunder by the
respective dates required for such performance, then this Agreement shall
be null and void and any payments shall be applied to the Indebtedness
2. Release of FDIC. Obligors and each of them waive, and release and forever
discharge FDIC, the Federal Deposit Insurance Corporation in its corporate and
other capacities, and their respective officers, directors, employees, agents,
servants, affiliates, representatives and attorneys, their successors and
assigns, (collectively, "Released Parties") from, any and all rights, claims,
suits, debts, covenants, contracts, controversies, agreements, liabilities,
costs, expenses, losses, damages, demands, judgments, levies, executions, and/or
causes of action of whatsoever kind or nature, whether known or unknown
(collectively, "Claims") that any of the Obligors jointly or severally may have
against any of the Released Parties, including without limitation Claims (i)
arising out of any of the Released Parties' actions or inaction with respect to
the Indebtedness or any security interest, lien or collateral in connection
therewith as well as any and all Claims in the nature of rights of set-off,
defenses, counterclaims and causes of action, including without limitation any
defenses of waiver, laches and statutes of limitation or repose; (ii) all
receivership and other Claims filed against FDIC, its predecessors (including
The National Bank of Washington), its successors and assigns; and (iii) arising
out of the litigation entitled Federal Deposit Insurance Corporation as Receiver
of The National Bank of Washington vs. SunMedia Inc.. et al., currently pending
in the United States District Court for the Northern District of Florida,
Pensacola Division, Case No. 95-30178RV (the "Litigation"). Further, Obligors
waive the defensive effect of, and shall not assert or raise as a defense to or
in any action, the substance of any factual circumstances supporting any Claim
waived and released herein. .
3. Covenant Not to Sue. Subject to all terms and conditions of this Agreement,
and only so long as Obligors are in full compliance with this Agreement, FDIC
shall not assert, commence or proceed against any Obligor with any claim or
cause of action (i) to enforce or collect any of the Judgment or (ii) arising
from any responsibilities, obligations, claims, demands, causes of action,
costs, expenses, damages and/or liabilities directly related to the Judgment or
the Litigation; provided, however, that the foregoing shall not apply to any
knowing participation by any Obligor in any (i) violation of federal or state
banking regulations, or (ii) breach of fiduciary duty by bank directors or
officers.
4. Instruments. As soon as practical after receipt by FDIC of a) this
Agreement executed by the Obligors; b) a file stamped copy of the Judgment
Documents evidencing entry of record by the United States District Court; c) a
file stamped copy of the Answer evidencing entry of record by
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the United States District Court; d) the Covenant executed by the Obligors; e)
the $75,000 payment required by paragraph l(a)(vii); f) the $25,000 payment
required by paragraph l(a)(ix); g) the Purchase And Sale Agreement required by
paragraph l(a)(x); h) the assignment of the Down Payment required by paragraph
l(a)(xii); i) the Request required by paragraph l(a)(xiii); and j) the
Settlement Amount, FDIC shall return to Borrower all instruments in FDIC's
possession evidencing the Indebtedness, which instruments shall be marked as
subject to this Agreement.
5. Lien Releases. As soon as practical after receipt by FDIC of a) this
Agreement executed by the Obligors; b) a file stamped copy of the Judgment
Documents evidencing entry of record by the United States District Court; c) a
file stamped copy of the Answer evidencing entry of record by the United States
District Court; d) the Covenant executed by the Obligors; e) the $75,000 payment
required by paragraph l(a)(vii); f) the $25,000 payment required by paragraph
l(a)(ix); g) the Purchase And Sale Agreement required by paragraph l(a)(x); h)
the assignment of the Down Payment required by paragraph l(a)(xii); i) the
Request required by paragraph l(a)(xiii); and j) the Settlement Amount, FDIC
shall deliver to Borrower documents prepared in accordance with paragraph 7, to
discharge of record any liens, mortgages, security interests or encumbrances
FDIC holds in or against any property belonging to Obligors or any of them,
securing only the Indebtedness and now the Judgment (and no other obligations to
FDIC).
6. Dismissal of Litigation. Subject to paragraph 3, FDIC shall, as soon as
practical after receipt by FDIC of a) this Agreement executed by the Obligors;
b) a file stamped copy of the Judgment Documents evidencing entry of record by
the United States District Court; c) a file stamped copy of the Answer
evidencing entry of record by the United States District Court; d) the Covenant
executed by the Obligors; e) the $75,000 payment required by paragraph
l(a)(vii); f) the $25,000 payment required by paragraph l(a)(ix); g) the
Purchase And Sale Agreement required by paragraph l(a)(x); h) the assignment of
the Down Payment required by paragraph l(a)(xii); i) the Request required by
paragraph l (a) (xiii); and (j) the Settlement Amount, cancel the Judgment, and
dismiss (with prejudice) the Litigation. Upon cancellation of the Judgment and
dismissal (with prejudice) of the Litigation, FDIC shall not assert, commence or
proceed against any Obligor or any director, officer, employee or attorney of
any Obligor, with any claim or cause of action (i) to enforce or collect any of
the Judgment or (ii) arising from any responsibilities, obligations, claims,
demands, causes of action, cost, expenses, damages and/or liabilities directly
related to the Judgment or the Litigation; provided, however, that the forgoing
shall not apply to any knowing participation by any Obligor, or any director,
officer, employee or attorney of any Obligor, in any (i) violation of federal or
state banking regulations, or (ii) breach of fiduciary duty by bank directors or
officers, or (iii) fraudulent conduct.
7. Preparation of Documents. Obligors shall prepare and submit to FDIC all
documents, filings and pleadings necessary to accomplish the releases and
dismissals of record described in paragraphs 5 and 6. FDIC shall approve those
documents that are in form and substance satisfactory to FDIC, in its sole
discretion. FDIC shall be obligated to execute no such documents, filings or
pleadings that may create any potential liability of FDIC. Obligors shall be
responsible for any filing or recordation of any such documents, filings and
pleadings, and for all related filing and recording taxes, fees and expenses.
8. Obligors' Representations and Warranties. Obligors jointly and severally
represent and warrant to FDIC that:
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(a) None of Obligors nor any of their associates, affiliates or relatives
(i) is or was an employee of FDIC, the Federal Deposit Insurance Corporation in
its corporate or any other capacity ("Corporation"), the Federal Savings and
Loan Insurance Corporation in its corporate or any other capacity ("FSLIC") or
Resolution Trust Corporation in its corporate or any other capacity ("RTC") or a
family member of any employee of FDIC, the Corporation, FSLIC or RTC; (ii) is or
was an obligor under the terms of any indebtedness to FDIC. the Corporation,
FSLIC or RTC (other than the Indebtedness), or a family member or agent of any
such obligor; (iii) is or was an officer, director, employee of, or otherwise
affiliated with or interested in The National Bank of Washington; (iv) is now an
obligor in default on any obligation (other than the Indebtedness) to FDIC, the
Corporation, FSLIC or RTC or a family member or agent of any such defaulting
obligor; or (v) is involved in any litigation with FDIC, the Corporation, FSLIC
or RTC other then the subject Litigation.
(b) None of Obligors nor any of their affiliates (i) has been convicted of
a felony; (ii) is under investigation by a grand jury or similar body;
(iii) has been removed from or prohibited from participating in the affairs
of any insured depository institution; (iv) has demonstrated a pattern or
practice of defalcation; or (v) has caused a substantial loss to federal
deposit insurance funds (other than in connection with the Indebtedness).
(c) Obligors have obtained their own independent tax advice regarding this
Agreement and FDIC has made no representation regarding the tax or other
consequences of this transaction. Obligors warrant that the numbers shown
on the signature page hereof are the correct taxpayer identification
numbers of the respective Obligors. Obligors acknowledge that FDIC may rely
upon tax identification numbers to satisfy credit verification and legal
reporting obligations.
(d) Obligors acknowledge that persons who induce FDIC, RTC or the
Corporation to enter into agreements based upon statements, documents or
things known by such persons to be false, forged or counterfeit are subject
under federal law to criminal penalties including fines and/or
imprisonment.
(e) All written financial information, including but not limited to that
described in Exhibit C, provided to FDIC by any Obligor or any of their
agents was, as of the stated date of such information, accurate and not
materially misleading, and Obligors acknowledge that FDIC has specifically
relied upon such information in reaching its decision to execute this
Agreement.
(f) Obligors have not, within five (5) years prior to the date hereof,
transferred or disposed of any assets to avoid, elude, delay, hinder or
frustrate the claims of FDIC. Further, during the 24 months before the date
hereof, Obligors have not gratuitously nor for less than fair market value
transferred or conveyed property (other than gifts having an aggregate
value not in excess of One Thousand Dollars ($1,000), to family members).
Obligors have disclosed to FDIC fully and accurately in writing any
transaction during the last 24 months in which any Obligor has gratuitously
or otherwise transferred or conveyed property with an aggregate appraised
or book value of One Thousand Dollars ($1,000) or more at less than such
appraised or book value.
9. Breach by Obligors. All covenants, restrictions and releases of record in
favor of Obligors
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contemplated by this Agreement were induced by and are subject to the foregoing
representations and warranties. In the event of any breach by any Obligor of any
such representations and warranties or any other covenants herein (including
payment obligations), then all restrictions upon enforcement of, and releases
and dismissals in connection with, the Judgment, the Litigation and related
liens otherwise herein set forth shall be void as if never granted, and FDIC is
free to exercise any and all of its remedies in relation to the Judgment, the
Litigation and its liens.
10. Power of Attorney. Obligors hereby grant an irrevocable power of attorney
(acknowledged to be coupled with an interest) to FDIC to refile in the name and
on behalf of any Obligor all lien filings, judgments and pleadings to the extent
not expressly prohibited by this Agreement, granting to FDIC full authority to
do every act whatsoever necessary or desirable to be done in order to effectuate
this Agreement, as fully as Obligors could do, with full power of substitution
and revocation, hereby ratifying and confirming all that FDIC shall lawfully do,
or cause to be done, by virtue hereof.
11. Condition. If:
(a) (reserved)
(b) any portion or the Settlement Amount is required (i) by law, (ii) by
court order, or (iii) by any settlement agreement executed by FDIC in
connection with any litigation or asserted claims, to be repaid by FDIC to
any Obligor, or any successor or trustee representing any Obligor or its
property, or
(c) FDIC for any reason (whether due to hereafter-arising legal proceedings
or restraints or otherwise) is unable to retain and enjoy the full benefit
of the Settlement Amount and every other covenant, agreement,
representation and warranty set forth herein. then
all restrictions upon enforcement, releases and dismissals of the
Indebtedness, the Judgment, the Litigation and liens otherwise set forth
herein shall be void as if never granted (other than crediting Settlement
Amount payments retained).
12. Limitations. Obligors release and waive any statutes of limitation or
similar defenses (and periods of accrual not yet ripened into a defense) with
respect to the Indebtedness, the Judgment and the Litigation. To the extent
permitted by law, Obligors hereby agree to waive and not to assert any hereafter
arising statute of limitations or similar defense. If the foregoing waiver and
agreement not to assert is unenforceable, and if any prohibition upon FDIC, or
release or discharge of Obligors from any of the Indebtedness or the Judgment or
the Litigation lapses or is void pursuant to any provision of this Agreement,
then any statutes of limitation in respect of such Indebtedness or Judgment or
Litigation shall be tolled for the period commencing on the date hereof through
the date on which the lapsed or void status of the prohibition, release or
discharge is discovered by FDIC.
13. Indemnification. Obligors shall jointly and severally defend, indemnify,
and hold the Released Parties harmless from and against any and all claims and
damages, fines, costs, forfeitures, amounts paid in settlement, judgments,
expenses, charges, liabilities, penalties and losses of any nature whatsoever,
now existing or hereafter arising, including attorneys' fees and
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expenses, in any way arising out of or connected with (i) any breach of
Obligors' representations, warranties, covenants and agreements set forth
herein; (ii) the Indebtedness or any collateral or other property securing the
Indebtedness and now the Judgment or released to any Obligor hereunder; (iii)
the Judgment; and (iv) the Litigation.
14. Guaranties. Guarantor acknowledges the effectiveness of its guaranty of the
Indebtedness.
15. Full Accord. Obligors acknowledge that the restrictions on enforcement of
the Indebtedness and the Judgment and the Litigation (including interest and
other amounts hereafter accruing upon or in respect thereof) contained herein
are conditioned upon FDIC's timely receipt of a) this Agreement executed by the
Obligors; b) a file stamped copy of the Judgment Documents evidencing entry of
record by the United States District Court; c) a file stamped copy of the Answer
evidencing entry of record by the United States District Court; d) the Covenant
executed by the Obligors; e) the $75,000 payment required by paragraph
l(a)(vii); f) the $25,000 payment required by paragraph l(a)(ix); g) the
Purchase And Sale Agreement required by paragraph l(a)(x); h) the assignment of
the Down Payment required by paragraph l(a)(xii); i) the Request required by
paragraph l(a)(xiii); j) the full Settlement Amount; and all other
considerations and accords contemplated hereby. If any Obligor applies for or
becomes subject to any legal action (including but not limited to voluntary or
involuntary filing for relief under any chapter of Title 11, United States Code
(Bankruptcy) on or before the ninetieth (9Oth) day after receipt by FDIC of the
full Settlement Amount) that would tend to reduce, impair or delay FDIC's
receipt or enjoyment of the full accord contemplated herein, then (i) this
Agreement shall become null and void as of one day prior to such legal action or
filing, (ii) Obligors and FDIC shall each revert to their respective positions
(except that payments received by FDIC will be credited against Indebtedness)
prior to the execution of this Agreement, and (iii) FDIC shall maintain its
mortgages, deeds of trust, security agreement(s), UCC-1 filing(s) and/or other
evidence of the secured nature of the Indebtedness.
1. Miscellaneous.
(a) Entire Agreement. This Agreement sets forth the entire understanding of
the parties and is the final expression of the agreement among Obligors and
FDIC. This Agreement may not be contradicted by evidence of any prior or
contemporaneous oral statements. This Settlement Agreement may be modified
only by a written amendment.
(b) Recitals. The whereas clauses at the beginning of this Agreement are
joint and several covenants, representations and warranties of Obligors to
FDIC, and not mere recitals.
(c) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the United States of America to the maximum
extent possible and otherwise by the internal laws of the State of Florida.
Obligors shall not assert, commence or remove any claim or action relating
to this Agreement other than before or to the United States District Court
for the Northern District of Florida, Pensacola Division. Obligors consent
to the jurisdiction of such court.
(d) Jury Trial. Obligors and each of them waive any right to trial by jury
with respect to any matter arising under this Agreement or under any
document delivered in connection with this Agreement. This waiver is given
separately by each Obligor and covers each
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instance and each issue as to which the right to jury trial would otherwise
accrue. Obligors acknowledge that no representative or agent of FDIC has
represented, expressly or otherwise, that FDIC will not enforce the
foregoing waiver. FDIC may submit this Agreement to any court as conclusive
evidence of this waiver and acknowledgment.
(e) Interpretation. Obligors and their counsel have participated in the
preparation of this Agreement, and therefore waive the benefit of any rule
requiring resolution of ambiguities strictly against FDIC by reason of
FDIC's preparation of the Agreement.
(f) Attorney Fees. Obligors shall pay all fees and disbursements of any
attorney engaged by FDIC by reason of any breach or threatened or
reasonably anticipated breach of this Agreement by any Obligor.
(g) Binding Effect. This Agreement shall bind and benefit Obligors and FDIC
and their respective successors and assigns. References herein to
"Obligors," "Guarantor" and "Borrower" mean both any of such parties and
all of them. All obligations and agreements of Obligors, Guarantor and
Borrower are joint and several.
(h) Severability. Wherever possible, each provision of this Agreement shall
be interpreted as valid under applicable law. If any provision in this
Agreement or in any instrument or document delivered pursuant to this
Agreement is invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions herein and therein shall not be
affected or impaired.
(i) Survival. All representations, warranties, covenants, and indemnities
made by Obligors herein shall survive any performance, termination and
expiration of this Agreement.
(j) Counterparts. This Agreement may be executed in any number of
counterparts, all of which together constitute one and the same i
instrument.
(k) No Third Party Beneficiaries. Except as provided in paragraph 2, no
person or entity who is not a party to this Agreement shall have or enjoy
any rights hereunder, and FDIC shall have no obligation hereunder to any
third parties.
(a) Criminal Restitution. Nothing in this Agreement waives or affects any
rights FDIC may have to restitution, including any rights under the Victim
Witness Protection Act
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
BORROWER: FDIC:
SUNMEDIA, INC., FEDERAL DEPOSIT INSURANCE
A FLORIDA CORPORATION CORPORATION AS RECEIVER OF
THE NATIONAL BANK OF
WASHINGTON
By: /s/ John W. Biddinger
-------------------------------
By:
--------------------------
Title: President
-----------------------------
Title:
------------------------
508-185-0233
- -----------------------------------
Obligor Social Security Number or Employer
Identification Number
GUARANTOR:
SUNGROUP, INC.,
AN INDIANA CORPORATION
By: /s/ John W. Biddinger
-------------------------------
Title: President
-----------------------------
62-079-0469
- -----------------------------------
Obligor Social Security Number or Employer
Identification Number
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ACKNOWLEDGEMENT
---------------
STATE OF TENNESSEE )
) SS
COUNTY OF )
I, the undersigned, a Notary Public in and for the State of Tennessee, DO
HEREBY CERTIFY THAT __________________, personally known to me to be the same
person whose name is subscribed to the forgoing instrument, appeared before me
this day in person and -acknowledged that as an authorized representative of
SUNGROUP, INC., a Tennessee corporation ("SUNGROUP"), he/she signed and
delivered the said instrument as his/her free and voluntary act and the free and
voluntary act of SUNGROUP for the uses and purposes therein set forth.
GIVEN UNDER my hand and official seal this ___________day of __________,
1995.
_____________________________
NOTARY PUBLIC
My commission expires:_________________
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ACKNOWLEDGEMENT
---------------
STATE OF FLORIDA )
) SS
COUNTY OF _________ )
I, the undersigned, a Notary Public in and for the State of Florida, DO
HEREBY CERTIFY THAT ___________________, personally known to me to be the same
person whose name is subscribed to the forgoing instrument, appeared before me
this day in person and acknowledged that as an authorized representative of
SUNMEDIA, INC., a Florida corporation ("SUNMEDIA"), he/she signed and delivered
the said instrument as his/her free and voluntary act and the free and voluntary
act of SUNMEDIA for the uses and purposes therein set forth.
GIVEN UNDER my hand and official seal this ________ day of ___________,
1995.
____________________________
NOTARY PUBLIC
My commission expires:___________________
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ACKNOWLEDGEMENT
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, the undersigned, a Notary Public in and for the State of Florida,
DO HEREBY CERTIFY THAT ____________________, personally known to me to be the
same person whose name is subscribed to the forgoing instrument, appeared before
me this day in person and acknowledged that as an authorized representative of
THE FEDERAL DEPOSIT INSURANCE CORPORATION AS RECEIVER OF THE NATIONAL BANK OF
WASHINGTON ("FDIC"), he/she signed and delivered the said instrument as his/her
free and voluntary act and the free and voluntary act of FDIC for the uses and
purposes therein set forth.
GIVEN UNDER my hand and official seal this __________ day of
__________, 1995.
________________________
NOTARY PUBLIC
My commission expires:____________________
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EXHIBIT A
Loan Documents
--------------
1. Secured Term Loan Note, dated December 29, 1989, executed by SunMedia,
Inc., a Florida corporation ("Borrower"), in the principal amount of $3,500,000
and made payable to The National Bank of Washington, Washington, D.C. ("NBW").
2. Mortgage and Security Agreement, dated December 22, 1989, and recorded in
Official Records Book 2803, Page 119, of the Public Records of Escambia,
Florida.
3. Loan Agreement, dated December 22, 1989, executed by Borrower in favor of
NBW
4. Security Agreement, dated December 22, 1989, executed by Borrower in favor
of NBW.
1. Unlimited Guaranty, dated December 29, 1989, SunGroup, Inc., a Tennessee
corporation ("Guarantor") NBW.
Executed by in favor of
6. Pledge and Security Agreement, dated December 29, 1989, executed by
Guarantor in favor of NBW.
7. Subordination Agreement, dated December 29, 1989, executed by
Guarantor in favor of NBW.
8. UCC-1 Financing Statement, filed with the Florida Secretary of State.
document number 950000077804.
9. UCC-3 Continuation Statement, filed with the Comptroller of Escambia County
Florida, document number 00179750 in Official Records Book 3702, Page 583.
10. UCC-3 Continuation Statement, filed with the Comptroller of Escambia County
Florida, document number 00179752, in Official Records Book 3702, Page 590.
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EXHIBIT B
Covenant Not To Execute
-----------------------
This Covenant Not To Execute ("Covenant") is made and entered into this
29th day of December, 1995, between the FEDERAL DEPOSIT INSURANCE CORPORATION,
AS RECEIVER OF THE NATIONAL BANK OF WASHINGTON, with an office at 500 West
Monroe Street, Suite 3200, Chicago, Illinois 60661 ("FDIC") and SUNGROUP, INC.,
a Tennessee corporation, whose mailing address is 9102 N. Meridian Street, Suite
545, Indianapolis, Indiana 46260 ("SUNGROUP") and SUNMEDIA, INC., a Florida
corporation, whose mailing address is 9102 N. Meridian Street, Suite 545,
Indianapolis, Indiana 46260 ("SUNMEDIA").
WHEREAS, on the 29th day of December, 1995, an agreed judgment for the sum
of Five Million Two Hundred Eighty Seven Thousand Eight Hundred Ninety Two
Dollars and 35/100 ($5,287,892.35) has or will be recovered by the FDIC jointly
and severally against SunGroup and SunMedia in the action entitled Federal
Deposit Insurance Corporation as Receiver of The National Bank of Washington vs.
Sun Media, Inc.. et al., in the United States District Court for the Northern
District of Florida, Pensacola Division, Case No. 95-30178RV (the "Judgment");
and
WHEREAS, the Judgment remains unpaid and the FDIC has agreed to stay
execution on the Judgment and to not record the Judgment; and
WHEREAS, as a condition precedent to the FDIC's agreement to stay execution
on the Judgment, SunGroup and SunMedia have concurrently with the execution of
this Covenant, entered into a Settlement Agreement (the "Agreement") with the
FDIC
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is agreed as follows:
1. Subject to all of the terms and conditions of the Agreement, and only so
long as SunGroup and SunMedia are both in full compliance with the Agreement,
FDIC covenants to take no action to execute on, or to satisfy, the Judgment or
prosecute the Litigation, as that term is defined in the Agreement, provided,
however, that the foregoing shall not apply to any knowing participation by
SunGroup or SunMedia in any (i) violation of federal or state banking
regulations or (ii) breach of fiduciary duty by bank directors or officers.
2. No provision of this Covenant can be amended or waived, except by a
statement in writing signed by the party against which enforcement of the
amendment or waiver is sought.
3. The parties hereto warrant and agree that the recitals set forth at the
beginning of this Covenant are true.
4. This Covenant, in conjunction with the Agreement, sets forth the entire
understanding of the parties concerning the Indebtedness, as that term is
defined in the Agreement. This Covenant may not be contradicted by evidence of
any prior or contemporaneous oral statements.
5. This Covenant shall be governed by and construed in accordance with the
laws of the
84
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United States of America to the maximum extent possible and otherwise by the
internal laws of the State of Florida.
6. The parties and their counsel have participated in the preparation of this
Covenant, and therefore waive the benefit of any rule requiring resolution of
ambiguities strictly against the FDIC by reason of the FDIC's preparation of the
Covenant.
7. Whenever possible, each provision of this Covenant shall be interpreted as
valid under applicable law. If any provision in this Covenant is invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions herein and therein shall not be affected or impaired.
8. This Covenant may be executed in any number of counterparts, all of which
together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Covenant as of
the date first written above.
SUNGROUP, INC., A TENNESSEE FEDERAL DEPOSIT INSURANCE
CORPORATION CORPORATION AS RECEIVER OF THE
NATIONAL BANK OF WASHINGTON
By: /s/ John W. Biddinger
-----------------------------
By:
---------------------------
Title: President
---------------------------
Title:
------------------------
SUNMEDIA, INC., A FLORIDA
CORPORATION
By: /s/ John W. Biddinger
-----------------------------
Title: President
---------------------------
85
<PAGE>
ACKNOWLEDGEMENT
STATE OF FLORIDA )
) SS
COUNTY OF __________ )
I, the undersigned, a Notary Public in and for the State of Florida,
DO HEREBY CERTIFY THAT __________________________, personally known to me to be
the same person whose name is subscribed to the forgoing instrument, appeared
before me this day in person and acknowledged that as an authorized
representative of SUNMEDIA, INC., a Florida corporation ("SUNMEDIA"), he/she
signed and delivered the said instrument as his/her free and voluntary act and
the free and voluntary act of SUNMEDIA for the uses and purposes therein set
forth.
GIVEN UNDER my hand and official seal this _____ day of ____________,
1995.
_____________________________
NOTARY PUBLIC
My commission expires:______________
86
<PAGE>
ACKNOWLEDGEMENT
STATE OF TENNESSEE )
) SS
COUNTY OF __________ )
I, the undersigned, a Notary Public in and for the State of Tennessee,
DO HEREBY CERTIFY THAT ______________________________, personally known to me to
be the same person whose name is subscribed to the forgoing instrument, appeared
before me this day in person and acknowledged that as an authorized
representative of SUNGROUP, INC., a Tennessee corporation ("SUNGROUP"), he/she
signed and delivered the said instrument as his/her free and voluntary act and
the free and voluntary act of SUNGROUP for the uses and purposes therein set
forth.
GIVEN UNDER my hand and official seal this _____ day of ____________,
1995.
_____________________________
NOTARY PUBLIC
My commission expires: ___________________
87
<PAGE>
ACKNOWLEDGEMENT
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, the undersigned, a Notary Public in and for the State of Florida,
DO HEREBY CERTIFY THAT __________________________, personally known to me to be
the same person whose name is subscribed to the forgoing instrument, appeared
before me this day in person and acknowledged that as an authorized
representative of THE FEDERAL DEPOSIT INSURANCE CORPORATION AS RECEIVER OF THE
NATIONAL BANK OF WASHINGTON ("FDIC"), he/she signed and delivered the said
instrument as his/her free and voluntary act and the free and voluntary act of
FDIC for the uses and purposes therein set forth.
GIVEN UNDER my hand and official seal this _____ day of ____________,
1995.
____________________________
NOTARY PUBLIC
My commission expires: ______________
88
<PAGE>
EXHIBIT C
OBLIGOR FINANCIAL INFORMATION
-----------------------------
89
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 1995 AUDITED
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-START> JAN-01-1995 JAN-01-1994
<PERIOD-END> DEC-31-1995 DEC-31-1994
<CASH> 334,674 0
<SECURITIES> 0 0
<RECEIVABLES> 1,368,280 0
<ALLOWANCES> (38,888) 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 3,046,072 0
<PP&E> 4,664,148 0
<DEPRECIATION> (2,931,010) 0
<TOTAL-ASSETS> 12,209,200 0
<CURRENT-LIABILITIES> 13,154,004 0
<BONDS> 0 0
<COMMON> 3,770,639 0
0 0
0 0
<OTHER-SE> (14,776,108) 0
<TOTAL-LIABILITY-AND-EQUITY> 12,209,200 0
<SALES> 8,042,102 7,859,252
<TOTAL-REVENUES> 9,004,561 8,796,315
<CGS> 0 0
<TOTAL-COSTS> 7,389,029 7,385,194
<OTHER-EXPENSES> 15,026 5,005
<LOSS-PROVISION> 106,542 69,761
<INTEREST-EXPENSE> 611,384 750,093
<INCOME-PRETAX> (71,972) (325,306)
<INCOME-TAX> (1,222,884) 78,216
<INCOME-CONTINUING> 1,150,921 (403,522)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 180,285 0
<CHANGES> 0 0
<NET-INCOME> 1,331,197 (403,522)
<EPS-PRIMARY> .101 (.063)
<EPS-DILUTED> 0 0
</TABLE>
