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 For the fiscal year ended December 31, 1997.
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.)
2201 Cantu Court, Suite 102A Sarasota, Florida 34232-6254
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: 941-377-6710
Securities to be registered pursuant to Section 12(b) of the Act: NONE
Securities to be 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
Secti on 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. [ X ]
State issuer's revenues for its most recent fiscal year. $9,161,416.
As of March 26, 1998, the aggregate market value of the Common Shares (based
on the average bid and asked price of $.375 per share in the over-the-counter
market) held by non-affiliates was approximately $700,973.
As of March 26, 1998, there were 6,543,700 Common Shares outstanding.
Transitional Small Business Disclosure Format. (Check One):
Yes No X
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Page 1 Exhibit Index on Page 20
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TABLE OF CONTENTS
ITEM PAGE
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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 17
11 Security Ownership of Certain Beneficial Owners and
Management 18
12 Certain Relationships and Related Transactions 20
13 Exhibits and Reports on Form 8-K 21
Signatures 23
Index to Exhibits 25
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PART I
Item 1. Description of Business
GENERAL
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SunGroup, Inc. ("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 five years, the Corporation's focus has been on restructuring
its debt obligations to generate sufficient cash flow to service these
requirements. 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 negotiation and asset sales.
CHANGE IN EQUITY
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In 1996, the Corporation's shareholder's equity deficit was substantially
reduced. This improvement resulted from the Corporation's sale of the assets
of its Pensacola radio station and its related debt forgiveness by the Federal
Deposit Insurance Corporation ("FDIC"), significant debt elimination due to
Statutes of Limitations expirations applicable to other Corporation debt and
loan restructurings.
SALE OF ASSETS
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The Corporation consummated the sale of its FM radio station, WOWW, in
Pensacola, Florida on July 2, 1996. The radio station constituted all of the
operating assets of the Corporation's subsidiary located in Florida. The
assets were sold exclusive of certain retained assets, including, without
limitation, accounts receivable. The sale price of the assets of the radio
station was $2.3 million in cash, plus certain closing costs of approximately
$150,000.
The Corporation previously had entered into an agreement with the FDIC,
the first lien holder of the assets, on the disposition of the sale proceeds
of the Pensacola radio station and release of its lien thereon. The FDIC
received $2.094 million from the Pensacola radio station sale proceeds and
discharged the Corporation of indebtedness totaling approximately $5 million.
The Corporation dissolved this subsidiary with all of its outstanding debt in
1997.
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On February 3, 1998, the Corporation, with the approval of the Board of
Directors, entered into an Asset Purchase Agreement with SunBurst Media of
Dallas, Texas to sell substantially all of the assets of the corporation to
SunBurst Media. A shareholders' proxy has been submitted to the Securities
and Exchange Commission (SEC) for their review and approval. The proxy will be
mailed to the shareholders in 2nd Quarter of 1998 and a vote on the sale will
be taken at the shareholders meeting during the 2nd Quarter 1998. SunGroup,
Inc. and SunBurst Media have also filed with the Federal Communications
Commission (FCC) for the transfer of the licenses.
PRINCIPAL SERVICES
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The Corporation itself and through its subsidiary corporations is
principally engaged in the ownership, operation and management of commercial
radio stations in the United States. As of December 31, 1997, the Corporation
owned and/or operated eight radio stations located in Albuquerque/Santa Fe,
New Mexico (KKSS-FM); Shreveport, Louisiana (KMJJ-FM); Bryan/College Station,
Texas (KKYS-FM); Abilene, Texas (KEAN-AM KEAN-FM and KROW-FM); Longview, Texas
(KYKX-FM) and Mt. Pleasant Radio, Inc. Local Marketing Agreement (LMA) with
Mt. Pleasant, Texas (KALK-FM). A summary of information in chart form
regarding each of the Corporation's owned stations is set forth under "Item 2.
Properties".
On June 6, 1996, the Corporation entered into an Asset Purchase Agreement
with Foster Communications Company for the purchase of the construction permit
of KROW in Abilene, Texas. The Federal Communications Commission approved the
transfer of the license for the construction permit to the Corporation on
September 25, 1996. The Corporation constructed a new radio broadcast studio
at its current facilities at KEAN in Abilene. The new station was placed in
operation on October 29, 1997.
COMPANY STRATEGY
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In developing its radio stations, the Corporation has taken a variety of
actions to improve its radio stations' cash flow. These actions include cost
control programs, implementation of numerous promotional activities,
performing internal and external programming reviews to improve the stations'
products in light of their respective target audiences, and enhancing total
station revenues through the development of alternative revenue sources such
as marketing the radio stations' 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 of the stations meet twice a year to focus on matters affecting the
industry and exchange ideas with the design of developing new ideas to
increase revenues in each of the six local markets. The Corporation has also
implemented an annual meeting for its stations' sales managers to exchange
sales ideas and receive management training. The Corporation has implemented
a company-wide interview process on sales
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recruiting. It has also started to focus on non-traditional revenue sources
for its radio stations (database telemarketing, etc.).
The Corporation continues to focus on the latest technology available to
it. The Corporation has created an Intranet System and each station is on the
Internet.
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 station's 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 company-wide
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-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 of 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 in which it is
located. Sales to national advertisers are arranged primarily by a sales
representation firm. Using a network of offices in important cities, this
national firm
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employs its best efforts to exclusively secure national advertising for the
station under a contractual agreement. The sales representation firm receives
compensation in the form of commissions on net revenue produced for each
station from advertising solicited and sold 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 upon a number of
external 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 regulation
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
radio station ownership have been relaxed (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.
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. However, the Corporation built a new FM station in Abilene,
Texas and has recently had and is involved in ongoing discussions with several
other radio stations with regards to expanding its coverage in its current
markets through operating and purchasing additional and new stations.
SEASONALITY
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Advertising expenditures in the radio industry generally tend to follow
overall retail sales seasonal patterns, but expenditures 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.
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FCC REGULATIONS
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The Corporation's radio broadcasting operations are subject to the
jurisdiction of the 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, except KMJJ-FM in Shreveport, Louisiana, have
filed license renewals during 1997. The FCC is in the process of reviewing
the license renewals and the corporation expects the licenses to be renewed.
KMJJ-FM license was renewed by the FCC on December 5, 1996 with a term
expiring June 1, 2003.
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 restrictions on the number
of AM and FM stations which may be owned or controlled nationally by one
entity. 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 upon the number of stations
controlled by an entity, not its market share. The number of stations an
entity can control in a market depends upon the number of signals in the
market, but the number of stations 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 Communications Act, the Telecommunications Act of 1996, 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 station's FCC authorization:
STATION EXPIRATION DATE
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KEAN-AM/FM - Abilene October 1, 1997
(in application)
KKYS-FM - Bryan/College Station October 1, 1997
(in application)
KMJJ-FM - Shreveport June 1, 2003
KKSS-FM - Albuquerque/Santa Fe August 1, 1997
(in application)
KYKX-FM- Longview October 1, 1997
(in application)
KROW-FM - Abilene August 1, 2005
Employees
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The Corporation had 101 full-time and 136 total employees as of
December 31, 1997. Each station normally employs an average of fifteen to
twenty-five people. The Corporate office 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
DATE LEASE OFFICE LEASE
STATION/LOCATION ACQUIRED FREQUENCY LICENSED POWER FORMAT EXPIRATION EXPIRATION
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<S> <C> <C> <C> <C> <C> <C>
KKSS-FM Albuquerque/
Santa Fe, New Mexico 1986 97.3 MHZ 100,000 watts Contemporary 2002 1998
KEAN-AM Abilene, Texas 1985 1280 KHz 500 watts Country Own 2000
KEAN-FM Abilene, Texas 1985 105.1 MHZ 100,000 watts Country 1999 2000
KYKX-FM Longview, Texas 1985 105.7 MHZ 100,000 watts Country 2017 Own
KKYS-FM Bryan/
College Station, Texas 1989 104.9 MHZ 50,000 watts Contemporary Own 2002
KMJJ-FM Shreveport,
Louisiana 1989 99.7 MHZ 50,000 watts Urban 2013 Own
KROW-FM Abilene, Texas 1996 92.5 MHZ 50,000 watts Contemporary Own Own
</TABLE>
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Item 2. Description of Property
None of the Corporation's individual properties 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 ownership or leasing of tower space by which the Corporation
broadcasts its radio signal is critical to the Corporation. The Corporation's
management believes that its current tower leases are adequate for its
existing operations.
In December, 1996, the Corporation moved its headquarters from
Indianapolis, Indiana to Sarasota, Florida. The Corporation leases
approximately 2,100 square feet of office space in Sarasota under a lease
expiring in December, 2001. The Corporation's subsidiaries typically operate
in approximately 3,000-4,000 square feet of office space.
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
The Corporation in the normal course of business is a defendant in a
small number of routine lawsuits. Management believes that the results of any
such litigation will not have an material adverse effect upon the conduct of
the Corporation's business or its financial position.
Applications for the renewals of the licenses of stations KEAN(AM),
Abilene, Texas; KEAN-FM, Abilene, Texas; KYKX (FM), Longview, Texas; and KKYS
(FM) Bryan, Texas (the "Stations") were filed with the Federal Communications
Commission ("FCC") in March 1997. Those applications included information
regarding the Stations' respective Equal Employment Opportunity ("EEO")
programs. On August 1, 1997, the FCC formally requested additional
information concerning the Stations' EEO efforts. In response, the Stations
submitted additional EEO information to the FCC.
On March 12, 1998, in response to an inquiry about the status of the
Stations' renewal applications, Paulette Laden, the Chief of the FCC's EEO
Branch, contacted the Corporation's legal counsel, at the law firm of Wiley,
Rein & Fielding by telephone. Ms. Laden advised our FCC counsel that based on
the responses provided by the Stations, she had determined that the Stations
had "serious" deficiencies with respect to their EEO recruitment efforts. Ms.
Laden advised that the EEO Branch is drafting a decision for review and
disposition by the full Commission. Ms. Laden did not provide any further
details.
Depending on the seriousness of the EEO program deficiencies that may
be found at one or more of the Stations, the range of remedies which may be
imposed by the FCC include: (1) assessing forfeitures against the licensees of
one or more of the Stations; (2) granting the renewals of one or more of the
Stations' licenses subject to special EEO reporting conditions; (3) granting
the renewals of one or more of the Stations' licenses for a short-term subject
to such reporting conditions; (4) assessing forfeitures and granting
short-term renewals to one or more of the Stations as described above; or (5)
denying one or more of the requested renewals of the Stations' licenses.
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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 1997.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
There is no active public trading market for the Corporation's common
stock, but it is traded on the over the counter market and has two market
makers.
As of December 31, 1997, the Corporation had 495 shareholders of record.
The Corporation has not paid any cash dividends on its common shares in
the last seven years and does not expect to pay dividends in the foreseeable
future. Two 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 by its subsidiaries 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: 1997 vs. 1996
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For the years ended December 31, 1997 and 1996, the Corporation operated
the same properties, except for WOWW-FM in Pensacola. Gross revenues for 1997
were up $211,378 or 2.4 % from 1996. This increase is due to slight increases
in local and national advertising. Miscellaneous and network income was flat
for 1996.
Agency commissions as a percentage of gross sales were approximately 10.7%
in 1997 vs. 11.0% in 1996. This decrease is attributable to less political
advertising revenue which originates through agencies.
Technical and programming expenses decreased 2.02% in 1997 from 1996. The
decrease is attributable to the sale of the Pensacola station in 1996.
Excluding the Pensacola station, expenses increased 7.82% 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 1997 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 $573,597 in 1997 from 1996. This increase is
attributable to higher commission costs, and related payroll expenses due to
increased sales. The Corporation also incurred additional legal and
professional fees in its efforts to refinance the debt.
The Corporation did not dispose of any assets in 1997 versus a gain of
$640,355 in 1996. The gains in 1996 were from the sale of the WOWW radio
station in Pensacola ($634,980) and the disposal of other assets in the
ordinary course of business ($5,375).
Interest expense increased 20.6% in 1997. This was a result of an
adjustment to the
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notes payable.
In 1996, the Corporation also recorded other income of $864,450. This
income is for receipt of the new broadcasting tower and related equipment from
Service Broadcasting Corporation at the Corporation's Longview, Texas station.
There was no other income in 1997.
In 1997, other income (expense) consisted of interest income and other
miscellaneous items. The Corporation recorded $21,412 in miscellaneous
expense, which is comprised of $19,761 in fees related to the Local Marketing
Agreement (LMA) of KALK-FM in Mt. Pleasant, Texas and $8,759 in interest
income.
The Corporation recorded approximately $9,307,700 in gains from debt
extinguishment during 1996. This gain was attributable to the settlement with
the FDIC at the time of the sale of the Pensacola radio station and the
write-off of several notes whose Statute of Limitations had expired. In 1997,
the Corporation recorded no gains from debt extinguishment.
The Corporation recognized an income tax benefit of $629,400 in 1997.
This is due largely to the Corporation recognizing a deferred asset related to
its net operating losses from prior year and the current year. The
Corporation had income tax expense of $1,701,713 in 1996 primarily due to the
sale of WOWW in Pensacola and the gain from debt extinguishment.
The Corporation, through one of its subsidiaries, RadioSunGroup of Texas,
Inc., has signed a Local Marketing Agreement (LMA) and Right to Purchase
Agreement with Mt. Pleasant Radio, Inc. for the Corporation to manage and
ultimately purchase radio station KALK-FM, Mt. Pleasant, Texas.
RadioSunGroup of Texas, Inc. has also acquired a construction permit for
KROW-FM in Abilene, Texas. The Corporation has constructed the station and it
became operational on October 29, 1997.
In April, 1997, KKYS-FM, owned by RadioSunGroup of Bryan/College Station,
Inc., a subsidiary of the Corporation, relocated its offices and studios to a
new site in the market. The new location provides better visibility in and
access to the community.
KEAN-AM, owned by RaidoSunGroup of Texas, Inc., which previously had been
simulcast with KEAN-FM, changed to a sports format in February, 1997. The
change was made to give the audience another choice in the market which they
did not previously have. The Corporation views this change as a good
opportunity to create additional income and net revenue, and the changed
format during the second quarter of 1997 resulted in positive cash flow from
this radio station to the Corporation.
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The Corporation is aware of the issues associated with the programming
code in existing computer systems as the Millennium (year 2000) approaches.
The "year 2000" problem is pervasive and complex as virtually every computer
operation will be affected in some way by the rollover of the two-digit value
to 00. The issue is whether computer systems will properly recognize data
sensitive information when the year changes to 2000. Systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail. The Corporation will take steps in 1998 to contact the
various software suppliers it uses to correct the problem.
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 1997, the Corporation generated sufficient funds for working
capital, scheduled debt repayment and capital expenditures. In 1997, the
Corporation generated $846,452 in cash before debt service and capital
expenditures. This compares to $1.33 million in 1996.
On December 15, 1997, the Corporation reached agreement with First Savings
Bank, Arlington, Texas, ("FSB") to renew one of the Corporation's loans,
which was to have matured on December 15, 1997. The note has a principal
balance of $2,184,322 and has been renegotiated to mature on June 30, 1998.
The note calls for monthly interest payments of $21,843.
The Corporation entered into a loan agreement with Young Investments on
December 24, 1997 in the amount of $800,000.00, with a 10% interest rate to be
paid monthly. The note expires June 30, 1998. Proceeds from the loan were
used to payoff the notes of James D. Osburn and Arden Osburn which matured on
January 1, 1998. The payoffs for these two notes were made on January 2,
1998. In addition, Kenneth R. Reynolds agreed to extend his note with the
Corporation, which was to mature on January 1, 1998, until June 30, 1998 at an
interest rate of ten percent (10%), with interest payments to be made monthly.
On March 1, 1998, the Corporation entered into loan agreements with John
W. Biddinger; Margaret H. Biddinger; and Karen Biddinger in the aggregate
amount of $400,000.00. The notes are to mature on June 30, 1998 and carry a
10% interest rate to be paid monthly. The proceeds were used to pay down the
prior note from Young Investments. Young Investments was issued a new note on
March 1, 1998 for $400,000.00, maturing on June 30, 1998, bearing an interest
rate of ten-percent (10%), interest payable monthly.
The Corporation has notes with several entities (see Exhibit #(ii)
attached) which matured on February 15, 1998. All note holders are aware of
the Asset Purchase Agreement (APA) with SunBurst Media for the sale of the
corporation.
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Item 7. Financial Statements
The information called for by this Item is included as Exhibit 99 to this
report beginning on page 94.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
None.
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 December 31, 1997,
their years of service as a Director, and ages:
DIRECTOR AGE SERVICE AS DIRECTOR TERM EXPIRES
John W. Biddinger 57 August, 1984 - Present 2000
James M. Elliott 55 November, 1984 - Present 1997
Dan E. Young 68 December, 1985 - Present 1997
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.
Daniel 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
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Listed below are the Executive Officers of the Corporation as of
December 31, 1997, their positions, offices and ages:
Officer Age Position
John W. Biddinger 57 President
James A. Hoetger 44 Vice President, Treasurer and Secretary
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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.
James A. Hoetger became Vice President/Finance and Chief Financial
Officer of the Corporation in September, 1996, replacing John Southwood, Jr.,
who resigned to pursue other interests. Previously, he was Vice President and
Corporate Controller of Tak Communications, Inc., Madison, Wisconsin, and was
responsible for all accounting and certain collection functions.
Term of Office
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The executive officers and Directors of the Corporation serve annual
terms or until their successors are duly elected and qualified.
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Indemnification
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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.
Specific due dates for these reports have been established, and the
Corporation is required to disclose in this report any failure to file such
forms by these dates during 1997. 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, 1997, all Section 16(a) filing
requirements applicable to the Company's officers, directors and greater than
ten percent shareholders were complied with.
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Item 10. Executive Compensation
The following table summarizes the compensation paid by the
Corporation to its current Chief Executive Officer, as of December 31, 1997,
for the past three fiscal years. The Corporation had no other executive
officers at December 31, 1997 whose total annual salary and bonus from the
Corporation exceeded $100,000 during the past fiscal year.
SUMMARY COMPENSATION TABLE
Annual Compensation
<TABLE>
<CAPTION>
Name and Other Annual All Other
Principal Position Year Salary ($) Bonus ($) Compensation ($) Compensation(s)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
John W. Biddinger, CEO 1997 132,200 0 0 0
1996 132,200 0 0 0
1995 132,200 0 0 0
</TABLE>
Compensation of Directors
- -------------------------
Members of the Board of Directors who are not officers of the
Corporation receive $1,000 per meeting for their attendance at regularly
scheduled Board meeting. There were two such meetings in 1997. 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 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 if 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).
17
<PAGE>
Mr. Biddinger has agreed in restructuring part of the Corporation's
debt to hold his compensation at $132,200 per year.
The Corporation entered into an Employment Agreement with James A.
Hoetger on September 9, 1997. This Agreement is in effect through December
31, 1999. The Employment Agreement calls for annual compensation of $75,000 in
1998 and $80,000 in 1999 and bonuses based on merit and performance determined
by the President of the Corporation.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following tables set forth information as of December 31, 1997, 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 6,543,700 shares of
common stock outstanding and all exercisable options and warrants related to
individuals listed in the tables.
18
<PAGE>
OWNERSHIP BY MANAGEMENT
OF THE CORPORATION'S COMMON STOCK
Amount and Nature of
Name and Address Beneficial Ownership (1) Percent of Class (2)
- ------------------------------------------------------------------------------
John W. Biddinger
7491 Albert Tillinghast Drive
Sarasota, FL 34240 2,420,056 37.0%
James M. Elliott
230 Fountain Square
Bloomington, IN 47404 20,000 .3%
Dan E. Young (3)
3210 E. 96th Street 626,179 9.6%
All Present Directors and
Executive Officers as a
Group (3 persons) 3,066,235 46.9%
FIVE PERCENT SHAREHOLDERS
OF THE CORPORATION'S COMMON STOCK
Amount and Nature of
Name and Address Beneficial Ownership (1) Percent of Class (2)
- ------------------------------------------------------------------------------
John W. Biddinger
7491 Albert Tillinghast Drive
Sarasota, FL 34240 2,420,056 37.0%
Conseco, Inc. (3)
11825 N. Pennsylvania Street
Carmel, Indiana 46032 5,972,060 47.7%
Antar & Co.
601 Jefferson Street
Houston, Texas 77002 1,911,014 29.2%
Dan E. Young (3)
3210 East 96th Street
Indianapolis, Indiana 626,179 9.6%
19
<PAGE>
(1) 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:
Conseco, Inc. 5,972,060
Dan Young, IRA 304,803
All of the warrants for Dan Young, IRA are exercisable for $.11 (in
total, not per share), and all of the warrants for Conseco are
exercisable for $1.00 (in total, not per share), are presently
exercisable, and terminate if not previously exercised by February 15,
2003.
The Dan Young, IRA exercised its warrants (304,803) on January 15,
1998.
POTENTIAL CHANGE IN CONTROL
- ---------------------------
As outlined in Footnote 2, Conseco, Inc. holds exercisable warrants
for 5,972,060 shares at a total exercise price of $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, certain
restructured notes owed to Conseco are not repaid, it will receive additional
warrants for 10% of the Corporation's common stock on a fully diluted basis.
Item 12. Certain Relationships and Related Transactions
The Corporation, through its subsidiary RadioSunGroup of Texas,
entered into a Local Marketing Agreement with Mt. Pleasant Radio, Inc. for
KALK-FM in Mt. Pleasant on January 28, 1997, effective June 1, 1997. As part
of the agreement, the Corporation also has the option to purchase all of the
assets of KALK-FM.
In order for the Corporation to complete the construction permit for
KROW-FM in Abilene, Texas, the Corporation entered into a leasing contract
with SLT of Indiana, Inc. for broadcast equipment. The lease is for
five-years, beginning December 1, 1998.
20
<PAGE>
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits:
---------
1 Asset Purchase Agreement (APA)
2 Press Release
Exhibit No. Description of Exhibit
- ----------- ----------------------
3 (i) Articles of Incorporation (1)
(ii) 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)
21
<PAGE>
(h) Promissory Note for $176,800 between SunGroup, Inc. and
Indiana University Foundation with related warrant A-5 for
118,575 shares. (2)
(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) 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)
(k) 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)
(l) 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)
(m) Adjustment letter related to warrant A-2 issued to
Western National Life Insurance Company in the original amount
of 2,892,000 shares amended to 4,956,050 shares. (3)
(n) 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)
(o) 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)
(p) 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)
(q) Employment agreement with John W. Biddinger,
President. (3)
(r) Amendment number one to the John W. Biddinger
Employment Agreement. (3)
(s) Amendment number two to the John W. Biddinger
Employment Agreement.
22
<PAGE>
(t) Key Employee Incentive Stock Plan of 1986. (4)
(u) Act of Loan Modification and Acknowledgment by
RadioSunGroup of Bryan/College Station, Inc., SunGroup
Broadcasting of Louisiana, Inc. and SunGroup, Inc. in
favor of First Savings Bank of Arlington, Texas, dated December
15, 1996.
(v) Act of Loan Modification and Acknowledgment by
RadioSunGroup of Bryan/College Station, Inc., SunGroup
Broadcasting of Louisiana, Inc. and SunGroup, Inc. in
favor of First Savings Bank of Arlington, Texas, dated December
15, 1997.
21 Subsidiaries of the Registrant. (5)
27 Financial Data Schedule. (5)
99 Financial Statements
(a) No Reports on Form 8-K were filed during the last
quarter of 1997.
(b) 8-K Report for the first quarter of 1998 was filed.
- ------------
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-K for the year ended December 31, 1992.
3 Incorporated by reference to the Corporation's Annual Report on Form
10-KSB for the year ended December 31, 1993.
4 Incorporated by reference to the Corporation's Annual Report on Form
10-KSB for the year ended December 31, 1986.
23
<PAGE>
SIGNTURES
---------
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, 1998 By: /s/ John W. Biddinger
------------------------------------
Sarasota, Florida John W. Biddinger, President
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, 1998 /s/ John W. Biddinger
John W. Biddinger, Director and
(Principal Executive Officer)
DATED: March 27, 1998 /s/ James M. Elliott
James M. Elliott, Director
DATED: March 27, 1998 /s/ James A. Hoetger
James A. Hoetger, Treasurer, Secretary
and Vice President
(Principal Accounting/Financial Officer)
DATED: March 27, 1998 /s/ Dan E. Young
Dan E. Young, Director
24
<PAGE>
INDEX OF EXHIBITS
Exhibit No. Description of Exhibit Page No.
- ----------- ---------------------- --------
3 (i) Articles of Incorporation (5) N/A
(ii) By-Laws as presently in effect (1)
10 Material Contracts
(a) Reinstatement, modification, renewal N/A
and extension agreement between SunGroup, Inc.
and Kenneth R. Reynolds in the amount of
$2,500,000. (6)
(b) Reinstatement, modification, renewal and N/A
extension agreement between SunGroup, Inc. and
Arden Wilson Osburn in the amount of $1,250,000. (2)
(c) Reinstatement, modification, renewal and N/A
extension agreement between SunGroup, Inc. and
John D. Osburn in the amount of $1,250,000. (2)
(d) Promissory Note for $880,000 between N/A
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 N/A
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 N/A
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 N/A
SunGroup, Inc. and Robert A. Davies and related
warrant A-4 for 81,575 shares. (2)
(h) Promissory Note for $176,800 between N/A
SunGroup, Inc. and Indiana University Foundation
with related warrant A-5 for 118,575 shares. (2)
25
<PAGE>
INDEX OF EXHIBITS
Exhibit No. Description of Exhibit Page No.
- ----------- ---------------------- --------
(i) Promissory Note for $265,200 between N/A
SunGroup, Inc. and Dan E. Young - IRA Trust with
related warrant A-6 for 177,862 shares. (2)
(j) Agreement by and among RadioSunGroup of N/A
Bryan/College Station, Inc., SunGroup Broadcasting
of Louisiana, Inc., SunGroup, Inc. and Radio USA,
Ltd. regarding exchange of common stock for
debt. (3)
(k) Second Amended and Restate Promissory Note N/A
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)
(l) Adjustment letter related to warrant A-1 N/A
issued to Bankers National Life Insurance Company
in the original amount of 592,875 shares amended
to 1,016,010 shares. (3)
(m) Adjustment letter related to warrant A-2 N/A
issued to Western National Lie Insurance Company
in the original amount of 2,892,000 shares amended
to 4,956,050 shares. (3)
(n) Adjustment letter related to warrant A-4 N/A
issued to Robert N. Davies in the original amount
of 81,575 shares amended to 139,797 shares. (3)
(o) Adjustment letter related to warrant A-5 N/A
issued to IU Foundation in the original amount
of 118,575 shares amended to 203,202 shares. (3)
26
<PAGE>
(p) Adjustment letter related to warrant A-6 N/A
issued to Dan Young IRA in the original amount
of 177,862 shares amended to 304,803. (3)
(q) Employment Agreement with John W. N/A
Biddinger, President. (3)
(r) Amendment number one to the John W. N/A
Biddinger Employment Agreement. (3)
(s) Key Employee Incentive Stock Plan of N/A
1986. (4)
(t) Amendment number two to the John W. N/A
Biddinger Employment Agreement. (5)
(u) Act of Loan Modification and Acknowledgment N/A
by RadioSunGroup of Bryan/College Station, Inc.,
SunGroup Broadcasting of Louisiana, Inc. and
SunGroup, Inc. in favor of First Savings Bank of
Arlington, Texas, dated December 15, 1996. (5)
(v) Employment Agreement with James A. Hoetger, 29
Vice President.
(w) Act of Loan Modification and Acknowledgment 33
by RadioSunGroup of Bryan/College Station, Inc.,
SunGroup Broadcasting of Louisiana, Inc. and
SunGroup, Inc. in favor of First Savings Bank of
Arlington, Texas, dated December 15, 1997.
(x) Agreement By and Among RadioSunGroup of 49
Texas, Inc. and Mt. Pleasant Radio, Inc., dated
January 27, 1997.
(y) Secured Promissory Note for $800,000 69
between RadioSunGroup of Texas, Inc. and Young
Investments Company (A Nevada Partnership) dated
December 24, 1997.
(z) Cancellation of Secured Promissory Note, 71
dated February 28, 1998.
27
<PAGE>
(aa) Secured Promissory Note for $400,000 72
between RadioSunGroup of Texas and Young
Investments Company (A Nevada Partnership) dated
March 1, 1998 and UCC-1 form.
(bb) Secured Promissory Note for $150,000 75
between RadioSunGroup of Texas and John W. Biddinger
dated March 1, 1998 and UCC-1 form.
(cc) Secured Promissory Note for $150,000 78
between RadioSunGroup of Texas and Margaret H.
Biddinger dated March 1, 1998 and UCC-1 form.
(dd) Secured Promissory Note for $100,000 81
between RadioSunGroup of Texas and Karen Biddinger
dated March 1, 1998 and UCC-1 form.
(ee) Renewal and Extension Agreement effective 84
January 2, 1998 by and between RadioSunGroup of
Texas, Inc. ("Borrower") and Kenneth R. Reynolds
("Lender") in the amount of $516,600.00.
(ff) Renewal and Extension Agreement effective 85
January 2, 1998 by and between RadioSunGroup of
Texas, Inc. ("Borrower") and Kenneth R. Reynolds
("Lender") in the amount of $270,600.00.
(gg) Renewal and Extension Agreement effective 86
January 2, 1998 by and between RadioSunGroup of
Texas, Inc. ("Borrower") and Kenneth R. Reynolds
("Lender") in the amount of $32,800.00.
(hh) Tri-Party Payment Agreement effective 87
January 2, 1998 by and between Radio SunGroup of
Texas, Inc., Kenneth R. Reynolds, John Osburn
and Arden Osburn.
(ii) List of SunGroup notes, which matured of 90
February 15, 1998
21 Subsidiaries of the Registrant (5) N/A
27 Financial Data Schedule (5) N/A
99 Financial Statements 94
- -------------
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-K for the year ended December 31, 1992.
3 Incorporated by reference to the Corporation's Annual Report on Form
10-KSB for the year ended December 31, 1993.
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 Annual Report on Form
10-K for the year ended December 31, 1996.
28
Exhibit 10(v)
SUNGROUP, INC.
EMPLOYMENT AGREEMENT
JAMES A. HOETGER
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of the 9th day of September, 1997 by and between SunGroup, Inc., a Tennessee
Corporation (the "Company") and JAMES A. HOETGER (a/k/a Jim Hoetger), a
resident of Sarasota, Florida (the "Employee").
WITNESSETH
WHEREAS, Company desires to engage Employee to be a key person in the
operation of the Company at it's corporate office: 2201 Cantu Court, Suite
102A, Sarasota, Florida 34232-6254.
WHEREAS, Employee has made many important contributions to the Company
and to the industry as a whole; and
WHEREAS, the parties hereto desire to set forth in this Agreement the
terms, duties and compensation of Employee for the services to be performed by
Employee pursuant to this Agreement.
NOW, THEREFORE, for and in consideration of the premises, the mutual
covenants and agreements set forth herein, the parties hereto do hereby agree
as follows:
1. Employment and Term. Company does hereby employ Employee and
Employee does hereby agree to enter into the employment of Company
for the compensation provided under the terms and conditions
hereinafter set forth. The term of this Agreement shall commence
on September 18, 1997 (the "Commencement Date") and shall continue
for a term ending on the first to occur of the death of the
Employee, or December 31, 1999, 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, 2000, if both parties want to continue the
employment relationship. Employee should take the responsibility
to initiate contract extension discussions in 1999.
2. Services. Employee is engaged by the Company to perform as Vice
President for the Company and the duties of Employee in such
capacity shall include, without limitation, being the Chief
Financial Officer of the Company (sometimes herein referred to as
the "Services").
3. Compensation. For the rendering of the Services, Company shall
pay Employee as follows: see "Exhibit A", attached hereto and made
part hereof this Employment Agreement.
4. Scope of Service and Supervision. The Employee shall devote a
substantial amount of time, attention and energies to the
performance of the Services. The performance of the Services
shall be under the authority of the President of the Company or
such other person(s) as the President of the Company shall
designate to exercise supervisory control over Employee's
performance of Services. It is imperative that Employee deliver a
commitment of extra hours and focused attention to the Company's
needs.
5. Information Confidential. Employee shall not divulge, disclose or
communicate, either verbally or in writing, directly or
indirectly, to any other person or persons, firm or corporation,
and shall not make use of, either directly or indirectly, the
client lists, financial and cost information, brochures,
contracts, and agreements, personnel information, special methods,
general methods or other business secrets of Company, the same
being deemed, as between the parties hereto, to be important,
material and confidential and to affect the effective and
successful conduct of the business of Company and its goodwill.
Further, Employee shall not make known or divulge any information
acquired from Company, either directly or indirectly, to any
person or persons or firms or corporations in competition with or
contemplated competition with Company.
6. Termination by Company for Cause or Due to Death or Disability.
(a) If the Employee is unable to perform the Services, due to
disability or otherwise, for a period of ten (10) consecutive
days, or for fifteen (15) days in any period of twelve (12)
consecutive months, or if the Employee violates any of his
obligations herein, or if the Employee fails to perform Services
in a prompt, workmanlike manner, then, in any such event, the
employment thereunder may be terminated by the Company, at its
option at any time by written notice to the Employee. If the
employment is terminated pursuant to this paragraph, such
termination shall become effective on the date specified in the
notice of termination.
29
<PAGE>
(b) If termination pursuant to this paragraph is for any cause
other than disability, thereafter the Employee shall be
entitled to no further compensation or benefits from Company,
and the Employee shall be entitled only to that amount of Base
Salary which is due and payable for the period from the last
payment of an installment to the date of termination.
(c) If employment is terminated pursuant to this paragraph due to
disability, or it terminated upon death of the Employee,
thereafter Employee, his personal representatives, successors
and assigns shall be entitled to any vested rights the
Employee may have under any insurance or benefit plan from
Company.
(d) The Employee may, by written notice to the Secretary of
Company, designated any persons to be the beneficiary or
beneficiaries of all, or any portion, of the payments
prescribed by this Agreement to be made by the Company after
his death, and in the absence of any such designation, any
such payments shall be made to his estate.
7. Assignment. Neither the rights nor obligations under this
Agreement may be assigned by any party, except that it shall be
binding upon and inure to the benefit of any successor of the
Company in the ownership or operation of the Company, whether by
merger, sale of assets, reorganization or otherwise. Any new
owner of the Company must accept and honor this Agreement and
Employee agrees that this Agreement is automatically assigned to
any new owner of the Company without any consent or approval
needed from Employee.
8. Notices. Any notice expressly provided for under this Agreement
shall be in writing, shall be given either manually or by mail,
telegram, radiogram or cable, and shall be deemed sufficiently
given when actually received by the party to be notified or when
mailed, if mailed by certified or registered mail, postage
prepaid, addressed to such party as his address set forth below.
Either party may, by notice to the other party given in the manner
provided for herein, change his address for receiving such
notices.
(a) If to Company, to:
SUNGROUP, INC.
2201 Cantu Court, Suite 102 A
Sarasota, Florida 34232-6254
Attention: John W. Biddinger, President
(b) If to the Employee, to:
JAMES A. HOETGER
8351 Eagle Crossing
Sarasota, Florida 34241
9. Governing Law. This Agreement shall be executed, construed and
performed in accordance with the laws of the State of Florida.
10. Entire Agreement. This Agreement constitutes the entire agreement
between the parties in connection with the subject matter hereof
and supersedes all prior and contemporaneous agreements and
understandings in connection with such subject matter. No
covenant or condition not expressed in this Agreement shall affect
or be effective to interpret, change or restrict this Agreement.
No change, termination or attempted waiver of any of the
provisions of this Agreement shall be binding unless in writing
signed by the Employee and on behalf of the Company by an officer
other than Employee, thereunto duly authorized by the Company's
Board of Directors. No modification, waiver, termination,
rescission, discharge or cancellation of this Agreement and no
waiver of any provision or default under this Agreement shall
affect the right of any party to enforce any other provision or to
exercise any right or remedy in the event of any other default.
11. Severability. If any term or provision of this Agreement, shall
be invalid or unenforceable to any extent or application, then
the remainder of this Agreement shall be valid and enforceable to
the fullest extent and the broadest application permitted by law.
All of the terms and provisions of this Agreement shall survive
the termination of the period that Employee is employed by the
Employer, whether such termination is voluntary or involuntary, or
initiated by Employee or the Employer.
12. Waiver of Breach. The waiver by either party of any provision of
this Agreement shall not operate or be construed as a waiver of
any subsequent breach by the other party.
13. Headings. The sections, subjects and headings in this Agreement
are inserted for convenience only and shall not affect in any way
the meaning or interpretation of this Agreement.
30
<PAGE>
14. Employee Advancement. Employee and Company want to look forward
to a long relationship and the building of a material appreciation
for each other's contributions and plans. Company advancement
opportunities are based on superior performance and the Employee's
record-to-date at the Company is favorable and positive. Employee
is encouraged to build upon this record. Employee will be measured
by department leadership, overall Station performance and the
individual contributions of Employee.
15. Counterparts. This Agreement may be executed in multiple
counterparts, none of which must be signed by all of the parties
hereto, but all of which together shall constitute one document.
IN WITNESS WHEREOF, the Employee has executed this Agreement, and the
Company has caused this Agreement to be executed on behalf of the Company by
its officer thereunto duly authorized all as of the date first above written.
SUNGROUP, INC. & THE EMPLOYEE
By: /s/JOHN W. BIDDINGER, PRESIDENT By: /s/ JAMES A. HOETGER, VICE PRESIDENT
& CHIEF FINANCIAL OFFICER
31
<PAGE>
"EXHIBIT A"
BASE SALARY:
1998: $75,000 per year
1999: $80,000 per year
INCENTIVE COMPENSATION:
Bonuses based on merit and performance. Amounts to be determined by the
President of the Company.
BENEFITS:
Employee will be eligible to participate in Company insurance and other
benefit plans, as any other employee, as benefit plans may be offered.
Employee will be reimbursed for all reasonable and necessary business expenses
incurred on behalf of the Company.
32
Exhibit 10(w)
ACT OF LOAN MODIFICATION AND | UNITED STATES OF AMERICA
ACKNOWLEDGMENT |
|
BY |
|
RADIOSUNGROUP OF |
BRYAN/COLLEGE STATION, INC., a |
Texas corporation |
|
SUNGROUP BROADCASTING OF |
LOUISIANA, INC., a |
Louisiana corporation |
|
AND |
|
SUNGROUP, INC., a Tennessee |
corporation |
|
IN FAVOR OF |
|
FIRST SAVINGS BANK, FSB, |
a federal savings bank |
BE IT KNOWN, that effective on the 15th day of December, 1997;
BEFORE US, the undersigned duly qualified notary publics 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 Maria, 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 7 1 1 0 1, 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 taxpayer identification number is 62-0790469, and whose
principal place of business is 2201 Cantu Court, Suite 102A, Sarasota, Florida
34232, 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");
<PAGE>
AND
FIRST SAVINGS BANK, FSB, a federal savings bank, whose taxpayer
identification number is 75-2072785, and whose principal place of business is
301 S. Center Street, Arlington, Texas 76010, appearing herein by and through
its President, Richard J. Driscoll ("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 made a part hereof (collectively,
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 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 Republicbank 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 and Lender
hereby agree as follows:
<PAGE>
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'Ietter, 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 M., and the Resource Conservation and Recovery Act of
1976 ('RCRA'), 42 U.S.C. Section 6901 _q M., 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. Section 1801 et seq., 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
biphenyis or (D) designated as a "hazardous substance" pursuant to
Section 311 of the Clean Water Act, 33 U.S.C. Section 1251 et seq. (33
U.S.C. Section 1321) or listed pursuant to Section 307 of the Clear
Water Act (33 U.S.C. Section 1317).
2.5 "Person" shall mean any individual, partnership, corporation
and/or other entity.
<PAGE>
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, 1996, the Loan Documents are modified as
provided herein.
3.1 Principal Balance. Borrower, Guarantor and Lender hereby
acknowledge and agree that the outstanding principal balance of the Note as of
December 15, 1996 is TWO MILLION ONE HUNDRED AND EIGHTY FOUR THOUSAND, THREE
HUNDRED TWENTY-ONE AND 57/100 DOLLARS ($2,184,321.57) (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 Interest Rate. From and after December 15, 1996, until an
event of default or maturity, interest shall accrue on the Principal Balance
at the rate of TWELVE PERCENT (12.0%) per annum, calculated on the basis of
360 days being a year, or, at the election of Lender, the actual number of
days in the applicable calendar year in which accrued.
3.3 Default Interest. From and after the occurrence and during
the pendency of a default under the Loan Documents, and from and after the
maturity of the Notes, whether by acceleration or otherwise, interest shall
accrue on the amount of the Principal Balance outstanding hereunder at the
Maximum Rate (as hereinafter defined).
3.4 Payment Schedule. The Note is hereby modified effective as of
December 15, 1996 by modifying the payment schedule as follows:
3.4.1 Borrower shall pay interest only on the 15th of every month.
Lender will send Borrower each month an invoice for the current
interest due.
3.4.2 Borrower shall pay all outstanding principal and
interest on, and the loan represented by the Notes shall mature on
June 30, 1998 (the "Maturity Date").
(1/12/98)
3.4.3 Borrower shall pay $10,000 as a principal reduction to
lender on June 15, 1998.
(1/12/98)
3.5 Application of Payments. Payments received by the 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 payments; 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.
3.6 Fee. In addition to the other payments due hereunder,
Borrower covenants and agrees to pay Bank on the date hereof, a commitment fee
in the amount of $10,921.61.
<PAGE>
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 the 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
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 shalt, 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;
<PAGE>
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 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;
<PAGE>
6.6 Ile 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 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 conveyance", "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 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;
<PAGE>
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 October 31, 1996, 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 $75,000.00 for the Business of RSG or $75,000.00
for the Business of SGBL; (1/12/98)
6.17 Borrower aqd/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, 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;
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 month 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;
6.24 Guarantor shall this date execute a Guaranty Agreement in
favor of Lender, guaranteeing all obligations of Borrower hereunder and under
the Loan Documents.
<PAGE)
ARTICLE VII
RELEASE
7.1 Borrower, and 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 the is Agreement.
7.2 In connection with 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 and 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.
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.
<PAGE>
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
or 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 Bank.
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 (die "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 it predecessors in
title have held the NCNB Collateral Note and 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 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. 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 interest,
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.
<PAGE>
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 Sayinzs 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 provision of this Agreement at the time performance of such
provisions shall be due shall involved 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
Documents or on account of the 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 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
<PAGE>
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
11.3 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 mamer 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 property given
(a) if hand delivered (effective upon delivery), (b) if mailed (effective
three 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 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 addresses as follows:
If to Lender: First Savings Bank, FSB
301 S. Center Street
Arlington, Texas 76010
Attention: Richard J. Driscoll
Facsimile: (817) 276-0451
If to Borrower: RadioSunGroup of Bryan/College Station, Inc.
#26 Manor East Mall
701 Villa Maria
Bryan, Texas 77805
Attention: John W. Biddinger
Facsimile: (409) 823-5597
SunGroup Broadcasting of Louisiana, Inc.
725 Austin Place
Shreveport, Louisiana 71101
Attention: John W. Biddinger
Facsimile: (318) 227-8020
<PAGE>
If to Guarantor: SunGroup, Inc.
2201 Cantu Court
Suite 102A
Sarasota, Florida 34232
Attention: John W. Biddinger
Facsimile: (941) 378-5449
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.. 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.
11.11 Disclaimer of Novation, Extinguishment and Disch &=. 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,
<PAGE>
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 Severability. 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 Borrower, 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 12th day of January 1998, in the State of
Florida, County of Sarasota, City of Sarasota, 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.
WITNESSES:
X /s/ Lawrence A. Woods
- -----------------------
X /s/ Robert N. Davies
- ----------------------
RADIOSUNGROUP OF BRYAN/COLLEGE
STATION, INC., a Texas Corporation
By: /s/ John W. Biddinger
---------------------------------------
John W. Biddinger, President
(NOTARY SEAL)
/s/ Merily Bryson McFadden
- --------------------------
Notary Public
<PAGE>
THUS DONE AND PASSED, on the 12th day of January 1998, in the State of
Florida, County of Sarasota, City of Sarasota, in presence of the undersigned
Notary and the undersigned competent witnesses, who hereunto sign their names
with SGBL and me after reading of the whole.
WITNESSES:
X /s/ Lawrence A. Woods
- -----------------------
X /s/ Robert N. Davies
- ----------------------
SUNGROUP BROADCASTING OF LOUISIANA,
INC., a Louisiana Corporation
By: /s/ John W. Biddinger
----------------------------
John W. Biddinger, President
(NOTARY SEAL)
/s/ Merily Bryson McFadden
- --------------------------
Notary Public
THUS DONE AND PASSED, on the 12th day of January 1998, in the State of
Florida, County of Sarasota, City of Sarasota, 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 /s/ Lawrence A. Woods
- -----------------------
X /s/ Robert N. Davies
- ----------------------
SUNGROUP, INC.,
a Tennessee Corporation
By: /s/ John W. Biddinger
--------------------------
John W. Biddinger, President
(NOTARY SEAL)
/s/ Merily Bryson McFadden
- --------------------------
Notary Public
<PAGE>
THUS DONE AND PASSED, on the ___day of December 1996, in the State of
Texas, County of Tarrant, City of Arlington, in presence of the undersigned
Notary and the undersigned competent witnesses, who hereunto sign their names
with Lender and me after reading of the whole.
WITNESSES:
X /s/_____________________________
X /s/_____________________________
FIRST SAVINGS BANK, FSB
By: ------------------------------
Richard J. Driscoll, President
- ----------------------------------
NOTARY PUBLIC
EXHIBIT 10 (x)
AGREEMENT
BY AND AMONG
RADIOSUNGROUP OF TEXAS, INC.
AND
MT. PLEASANT RADIO, INC.
January 27, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
1 Definitions 2
2. Time Brokerage 2
3. Payments 3
3.1 Option to Purchase 3
4. Right to Reject or Preempt Programs 4
5. Facilities 4
6. Force Maijeure 5
7. Compliance with Laws 6
8. Compliince with Mt. Pleasant's Program Policies 7
9. Response to Inquiries 7
10. Profits and Losses; Licenses 7
11. Control of the Mt. Pleasant Station 8
12. Right to Use Programs 8
13. Disclosure of Information 8
14. Indemnification 9
15. Non-Default Termination 10
16. Ternination Upon Default 11
17. Liabilities Upon Terminination of this Agreement 12
18. Services Unique 12
19. Due Authority: No Conflict 13
<PAGE>
20. Further Assurances 13
21. No Partnership or Joint Venture 13
22. Successors and Assigns 13
23. Modification and Waiver 13
24. Attorney's Fees 14
25. Governing Law 14
26. Headings 14
27. Notices 14
28. Entire Agreement 15
<PAGE>
AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of this 7
day of January, 1997, by and between RADIOSUNGROUP OF TEXAS, INC. ("Provider")
and MT. PLEASANT RADIO, INC. ("Mt. Pleasant"), an Indiana corporation.
W I T N E S S E T H:
WHEREAS, Mt. Pleasant is or soon will be authorized by the Federal
Communications Commission as the Licensee of radio broadcast station KALK-FM
and licensed to Winfield, Texas (hereinafter, the "Mt. Pleasant Station"); and
WHEREAS, Provider is authorized by the Federal Communications
Commission as the licensee of radio broadcast station KYKX-FM, licensed to
Longview, Texas (hereinafter, the "Provider Station"); and
WHEREAS, Mt. Pleasant desires that Provider provide Programming (as
hereinafter defined) responsive to the needs, interests, issues, and desires
of the Mt. Pleasant Station' s community of license and service area, and Mt.
Pleasant is willing to devote substantially all of Mt. Pleasant Station's
broadcast time to such Programming, believing that Programming provided by
Provider on the Mt. Pleasant Station will responsibly address those needs,
interests, issues and desires; and
WHEREAS, Provider desires to provide to Mt. Pleasant Programming to be
aired on the Mt. Pleasant Station, subject to the terms and conditions set
forth herein;
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements hereinafter set forth. and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Provider and Mt.
Pleasant hereby agree that:
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<PAGE>
1. Definitions: The following terms shall, for the purposes of this
Agreement, have the meanings ascribed herein:
(a) Programming. The term "Programming" shall mean the
programs provided to the Mt. Pleasant Station by Provider, as well as
advertising for products and services, other commercial advertising, and other
material normally broadcast by FM stations in the United States.
(b) Commencement Date. The term "Commencement Date" shall be
the date of approval of the Asset Purchase AgrepSent by the FCC.
(c) Commission. The term "Commission" shall mean the Federal
Communications Commission.
(d) Term. The "Term" of this Agreement shall commence on the
Commencement Date and shall terminate on the earlier to occur of (i) the
effective date of any termination of this Agreement as provided herein; or
(ii) ten (10) years from the Commencement Date.
2. Time Brokerage. During the Term hereof, for the consideration
provided in paragraph 3 below, Mt. Pleasant hereby sells to Provider
substantially all of its broadcast time each day, provided that Mt. Pleasant
shall retain, without reduction in the consideration to be paid by Provider to
Mt. Pleasant, sufficient broadcast time to allow Mt. Pleasant to present
reasonable news, public affairs programming and public service announcements
necessary for the Mt. Pleasant Station to be responsive to the needs,
interests, issues and desires of its community of license and service area.
All contracts, advertising, agreements, purchase orders, and other similar
documents and instruments negotiated and executed by Provider in connection
with the foregoing on or after the Commencement Date shall be in the name of
Provider, provided that Provider shall not represent or warrant in any fashion
that Provider is the licensee of the Mt. Pleasant Station.
During the Term, the Programming to be provided by Provider shall be
of quality sufficient to aid and assist Mt. Pleasant in satisfying its
obligation for the Mt. Pleasant Station to be responsive to the needs,
interests, issues and desires of its community of license and service area,
except to the extent that such Programming is provided by Mt. Pleasant. The
Programming provided by Provider for the Mt. Pleasant Station shall include
local news programming and public service announcements relative to the Mt.
Pleasant Station's community of license and service area. Additionally,
Provider shall provide to Mt. Pleasant on a quarterly basis, a list of issues
responsive programming aired on the Mt. Pleasant Station as part of the
Programming provided by Provider during the preceding quarter, so that Mt.
Pleasant may properly maintain its public file in accordance with all
Commission Rules and Regulations.
3. Payments. In consideration for the right set forth in Section 2
hereof, Provider shall pay in cash to Mt. Pleasant the sum of $7,000.00 per
month, payable on the tenth day of each month. In order to comply with FCC
requirements of station ownership, Mt. Pleasant shall a have maximum of two
employees. The cost associated with those two employees will be billed back
monthly to the Provider.
3.1. Option to Purchase. In further consideration of the rights set
forth herein, Mt. Pleasant hereby grants Provider the option to purchase all
of the assets of the Mt. Pleasant Station at any time during the term of this
Agreement for the following prices:
Price: Term:
$550,000 Year One
$600,000 Year Two
$650,000 Year Three
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<PAGE>
$700,000 Year Four
$750,000 Years Five
$1,000,000 Through Year Ten
This option shall only be exercised upon the Commission's approval of the sale
of such assets and the transfer of the Mt. Pleasant Station license. The
assets of the Mt. Pleasant Station shall be sold free and clear of all liens
and encumbrances.
4. Right to Reject or Preempt Programs. Notwithstanding the grant to
Provider by Mt. Pleasant of the right set forth in Section 2 hereof, Mt.
Pleasant shall retain full authority and power over the operation of the Mt.
Pleasant Station at all times during the term of this Agreement. Mt. Pleasant
shall retain control over the policies and operations of the Mt. Pleasant
Station, including specifically the Programming, and also including, without
limitation, the right to decide whether to accept or reject any of the
Programming (including but not limited to advertisements) for broadcast by the
Mt. Pleasant Station in advance of such broadcasts, and the authority to
preempt such Programming for other programming deemed by Mt. Pleasant, in its
sole discretion, to be of greater national, regional, or local importance, or
necessary to promote the needs, interests, issues and desires of the Mt.
Pleasant Station's community of license and service area.
5. Facilities. Mt. Pleasant has acquired and installed, and will
maintain the necessary transmission equipment to deliver a maximum-strength
signal in accordance with the terms and specifications of its Commission
license. Mt. Pleasant shall be responsible, at its own cost, for insuring that
the Mt. Pleasant Station's transmitting facilities shall comply at all times
with the relevant rules, regulations and policies of the Commission and other
applicable governmental authorities. Mt. Pleasant shall (i) procure and
maintain adequate loss and liability insurance coverage for the Mt. Pleasant
Station's transmitting facilities, which costs shall be
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<PAGE>
reimbursed by Provider; (ii) pay all metered costs of electricity involved in
the operation of the Mt. Pleasant Station, and such costs and all lease and
rent costs during the term of this Agreement shall be billed to Provider;
(iii) bear all maintenance costs of the broadcast and other equipment owned by
Mt. Pleasant, and such costs during the term of this Agreement shall be billed
to Provider; (iv) pay all expenses and assessments related to the broadcasting
of the Programming, and such expenses and assessments during the term of this
Agreement shall be billed to the Provider on a monthly basis; and (v) maintain
its corporate existence in good standing, pay all taxes and assessments owed
by Mt Pleasant on account of its ownership of its property or its operation of
the Mt. Pleasant Station, including the Mt. Pleasant Station's transmitting
facilities, or on account of this Agreement or otherwise. Provider's employees
will take Mt. Pleasant transmitter readings and "log" same accordingly on
behalf of Mt. Pleasant, and Provider's broadcast facilities may serve as the
remote control point for the transmitter of the Mt. Pleasant Station; and,
Provider's employees will also monitor the Mt. Pleasant Station's EBS system.
In the event that any Commission authorizations shall be required by either
Mt. Pleasant or Provider in order to enable Provider to originate and relay
programs to the Mt. Pleasant Station's transmitting facilities for broadcast
by the Mt. Pleasant Station, both parties shall cooperate in obtaining such
authorizations, the expenses to be borne by Mt. Pleasant. Mt. Pleasant shall
further retain the Mt. Pleasant Station's public file as now established.
6. Force Maieure. Any failure or impairment of facilities or any delay
or interruption in broadcasting Programming, or failure at any time to furnish
facilities, in whole or in part, for broadcasting, due to acts of God, strikes
or threats thereof or force majeure or due to causes beyond the control of Mt.
Pleasant or Provider, shall not constitute a breach of
-5-
<PAGE>
this Agreement and neither party shall be liable to the other for such
failure, impairment, delay or interruption or for payment for services not
provided as a result
7. Compliance with Laws. Provider hereby represents and warrants to
Mt. Pleasant that all of the Programming presented by Provider broadcast by
the Mt. Pleasant Station pursuant to this Agreement will comply with all legal
requirements, including but not limited to the Commission's rules, regulations
and policies.
At least ninety (90) days before the start of any primary or general
election campaign, Provider will advise Mt. Pleasant of the rate which
Provider will charge for time to be sold to candidates for public office
and/or their supporters to make certain that the rate charged is in
conformance with the applicable law and policy. Provider will provide to Mt.
Pleasant access to all billing records for air time sales in the ninety (90)
day period preceding any primary or general election to insure that the rates
charged for political time is in conformance with all applicable rules and
policies. Within twenty-four (24) hours of any request to purchase time on its
Programming for or on behalf of a candidate for public office or to support or
urge the defeat of an issue on the ballot in an election, Provider will
immediately report the fact to Mt. Pleasant for approval so that appropriate
records can be kept with respect to the request for such time and the
disposition made thereof.
In order to enable Mt. Pleasant to fulfill its obligations under
Section 317 of Communications Act of 1934, as amended, Provider in compliance
with Section 508 of said Act, will, in advance of any scheduled broadcast by
Mt. Pleasant Station, disclose to Mt. Pleasant any information of which
Provider has knowledge, or which has been disclosed to it, as to any money,
service or other valuable consideration which any person has paid or accepted,
or has agreed to pay or to accept, for the inclusion of any matter as a part
of the Programming or
-6-
<PAGE>
commercial matter to be supplied to Mt. Pleasant as necessary to insure
compliance with this provision. Commercial matter with obvious sponsorship
identifications shall not require disclosure in addition to that contained in
the commercial copy
8. Compliance with Mt. Pleasant's Program Policies. Provider hereby
agrees to conform any Programming to be presented by Provider for broadcast by
the Mt. Pleasant Station to those program policies of Mt. Pleasant's that (I)
are presented by Mt. Pleasant to Provider, in writing, at least ten (10) days
prior to the date upon which such conformance is requested, and (ii) are
otherwise not in violation any law, rule, regulation. ordinance, statute,
policy, injunction, decree or other mandate of any governmental authority or
court.
9. Response to Inquiries. Mt. Pleasant may, but shall not be required
to, cooperate with Provider in responding to any questions, comment, or
complaint from any third party (other than a governmental authority or agent
thereof) with respect to any Programming broadcast by the Mt. Pleasant Station
that was presented for such broadcast by Provider; provided, however, Provider
shall immediately forward to Mt. Pleasant all written questions, comments or
complaints. All responses to questions, comments or complaints with respect to
Programming are subject to the approval of Mt. Pleasant. If requested by Mt.
Pleasant, Provider shall cooperate fully with respect to all responses to such
questions, comments or complaints.
10. Profits and Losses; Licenses. Provider shall retain all revenue
received by it from sale of time broadcast on the Mt. Pleasant Station, and
shall be responsible for all costs in connection with the production of such
revenue. The Provider's liability, if any, based on this Agreement shall be
limited solely to the net income received by the Provider based on this
Agreement.
-7-
<PAGE>
11. Control of the Mt. Pleasant Station. Nothing herein shall be
construed to grant to Provider the power or authority to control or direct the
operations of the Mt. Pleasant Station. Whenever on the premises of the Mt.
Pleasant Station, Provider's employees and agents shall at all times be
subject to the direction and control of Mt. Pleasant, its designated employee
and agents.
12. Right to Use Programs. The right to use any programs (or portions
thereof) presented by Provider for broadcast by the Mt. Pleasant Station
hereunder, and the right to authorize such use in any manner or in media
whatsoever, shall be and shall remain vested in Provider. Mt. Pleasant shall
not authorize, cause or permit, without Provider's prior written
authorization, any program or other material supplied to Mt. Pleasant under
this Agreement to be recorded, duplicated, rebroadcast, or otherwise
transmitted or used for any purpose other than broadcasting by the Mt.
Pleasant Station at the times specified by Provider and in the community and
service area to which the Mt. Pleasant Station are licensed, as provided
herein. Mt. Pleasant shall broadcast all Programming (including all commercial
advertising material) without modification, addition or deletion, provided
that such Programming is not rejected or replaced pursuant to this Agreement,
at the hours and on the days specified in Provider's program schedule.
13. Disclosure of Information. The parties recognize and acknowledge
that during the term of this Agreement. Mt. Pleasant may from time to time
become privy to information belonging to Provider involving rates, program
information, client list(s), and other information which is proprietary,
valuable, special and unique to the business of Provider (whether or not
specifically related to the Mt. Pleasant Station), and that the appropriation
of such information by Mt. Pleasant would work substantial and irreparable
harm to Provider and
-8-
<PAGE>
its business. Mt. Pleasant, therefore, shall not communicate or disclose at
any time during or after the term of this Agreement any information relating
to client lists or other proprietary information, or any part thereof, to any
person, firm, corporation, association, or other entity for any reason or
purpose whatsoever. In addition, Mt. Pleasant shall exercise its best efforts
to prevent the use of copyrighted material and trade secrets by any person or
entity which prior thereto has not been authorized by Provider to use such
information. Notwithstanding the foregoing, the restrictions of this paragraph
shall not apply to court ordered subpoenas or requests from governmental
agencies or courts for information
14. Indemnification. Provider further represents and warrants that the
performing rights to all music contained in such Programming are licensed by
BMI, ASCAP, or SESAC, are in the public domain or are controlled by Provider.
Provider agrees to indemnify and hold Mt. Pleasant, its shareholders,
officers, agents, employees, successors and assigns free and harmless from any
and all claims, damages, liabilities, costs or expenses, including attorneys'
fees, incurred by Mt. Pleasant or such persons by reason of the breach by
Provider of this representation and warranty, or any other representation,
warranty, covenant or agreement made by Provider in this Agreement, and for
all claims, damages, liabilities, costs or expenses, including attorneys' fees
arising from the broadcast of any Programming or other matter provided to Mt.
Pleasant by Provider pursuant to this Agreement. Provider shall defend at its
own expense any action or proceeding arising out of an alleged breach of the
foregoing warranty. Mt. Pleasant shall defend at its own expense any action or
proceeding arising out of any programming or other matter broadcast by the Mt.
Pleasant Station other than Programming or other matter provided to Mt.
Pleasant by Provider pursuant to this Agreement. Mt. Pleasant agrees to
indemnify and hold Provider, his officers, agents, employees, successors and
assigns,
-9-
<PAGE>
free and harmless from any and all claims, damages, liabilities, costs or
expenses, including attorneys' fees incurred by Provider or such person by
reason of any action or proceeding arising out of any programming or other
matter broadcast by the Mt. Pleasant Station other than programming or other
matter provided to Mt. Pleasant by Provider pursuant to this Agreement.
Notwithstanding anything contained herein to the contrary, the Provider's
liability with respect to this Agreement shall be limited solely to the net
income derived from this Agreement.
15. Non-Default Termination. This Agreement may be terminated by the
parties, as provided by this Section and its subparts, if no default has
occurred and without fault or further obligation to the other party in the
following circumstances:
(a) License Termination. By Provider if the main license for the Mt.
Pleasant Station is terminated. for whatever reason, by the Commission or
other federal agency, and the order of termination has become a Final Order.
(b) Modification of Facilities. By Provider, if any action by the
Commission results in changes to the Mt. Pleasant Station's facilities,
including but not limited to, power, frequency, or hours of operation, such
changes occurring at any time during the period of this Agreement so that the
population residing within the predicted one MV/M primary service contour of
the Mt. Pleasant Station is reduced by five (5%) percent or more. Changes in
transmitter site, however, which do not result in substantial changes in
coverage area, will not create any entitlement to modify or terminate this
Agreement by Provider.
(c) Implications of Law. By either party in the event that this
Agreement or the involvement of either party is deemed, preliminarily or
otherwise, to be in material violation of the Communications Act of 1934, as
amended, or any rule, policy or order of the Commission; provided, however,
that upon being advised of any such potential violation,
-10-
<PAGE>
Mt. Pleasant and Provider shall, however, use their best efforts to reform
this Agreement to rectify any such potential violaition.
(d) Actions re Non-Default Termination. In the event of a termination
in accordance with this Section and its Subparts, this Agreement shall be
voidable, and the parties may promptly recover any equipment respectively
owned by them and shall have no further obligation to otherwise pay further
compensation or provide services as set forth in this Agreement. The party
terminating this Agreement pursuant to this Section or its subparts shall
provide the other party with writtten notice of such termination, and the
reason therefor, and the notice must be given at least thirty (30) days before
the effective date of the termination.
16. Termination Upon Default. In the event of any of Event of
Default, the party not in default shall be under no further obligation to
perform hereunder. In the Event of Default by Provider, (i) Mt. Pleasant shall
be under no obligation to make available to Provider any further broadcast
time or broadcast program distribution facilities, and (ii) Provider's
obligation to purchase time on the Mt. Pleasant Station shall he terminated,
and Provider shall transfer and assign to Mt. pleasant all contracts, leases
and agreements, to the extent assignable, which were entered into in
connection with the Programming for the Mt. Pleasant Station by Provider.
Provider shall be liable to Mt. Pleasant for any money damages whatsoever
resulting from any default of this Agreement and Mt. Pleasant shall have the
right to compel the Provider to specifically perform any obligations required
under this Agreement. In the event of any Event of Default by Mt. Pleasant,
Provider may pursue its remedies at law and equity to recover damages or
require Mt. Pleasant to specifically perform this Agreement. The following
shall constitute an Event of Default under this Agreement.
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<PAGE>
(a) Non-Payment. Provider's failure to timely pay the consideration
provided for in Section 3 hereof. For the purposes of this Agreement, Provider
shall be timely in its payments only so long as they are made within thirty
(30) business days from the date due;
(b) Default in Covenants. The default by either party in the
observance or performance of any covenant, condition, or agreement contained
herein; or
(c) Breach of Representation. Should any material representation or
warranty herein made (i) by either party, or (ii) in any certificate or
document furnished by one party to the other pursuant to the provisions
heresf, prove to have been false or misleading in any material respect as of
the time made or furnished. Notwithstanding the foregoing, upon the occurrence
of any Event of Default as described above, the party in default shall have,
at its option, thirty (30) days from the date such default shall occur. to
cure said default, whereupon this Agreement shall continue in full force and
effect, with no right of termination or other recourse or remedy being then
available to the non-defaulting party as a result of such Event of Default
having occurred.
17. Liabilities Upon Termination of this Asyreement. Following
termination of this Agreement for any reason, Provider shall not be
responsible for all liabilities, debts and obligations related to the purchase
of air time on any contracts or agreements written by the Provider or Mt.
Pleasant personnel including, without limitations, accounts payable, barter
agreements, trade-out agreements, for any debts or obligations of Mt.
Pleasant, including any federal and local tax liabilities
18. Services Unique. The parties hereto agree that the facilities and
services to be provided under this Agreement are unique and cannot be readily
purchased or acquired in
-12-
<PAGE>
the open market, and for that reason, either party would be irreparably
damaged in the event of a material breach of this Agreement.
19. Due Authority: No Conflict. Mt. Pleasant hereby warrants and
represents to Provider, and Provider hereby represents and warrants to Mt.
Pleasant, that each is legally qualified under the laws of the State of its
respective incorporation, formation or qualifications, and that each is duly
authorized by all necessary corporate and/or legal action, to execute, deliver
and perform its respective obligations under this Agreement, and that such
execution, delivery and performance does not and will not viogte, conflict
with, constitute a default under, or upon the giving of notice or the lapse of
time, or both, constitute grounds for terrnination of, or acceleration of
obligations under, any charter, certificate, by-law, agreement, contract,
instrument, indenture, franchise, lease. Iicense, permit, rule, regulation,
statute, ordinance, judgment, order, or decree to which such warrantor is
subject or by which it is bound.
20. Further Assurances. Mt. Pleasant and Provider each shall execute
and deliver additional documents and take such other actions that the other
party may reasonably request for purposes of carrying out the transactions
contemplated by this Agreement.
21. No Partnership or Joint Venture. This Agreement is not intended to
be and shall not be construed as a Partnership or Joint Venture Agreement
between the parties. Except as otherwise specifically provided in this
Agreement, no party to this Agreement shall be authorized to act as agent of
or otherwise represent any other party to this Agreement.
22. Successors and Assigns This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective
successors and assigns.
23. Modification and Waiver. No modification or waiver of any
provision of this Agreement shall be effective unless in writing and signed by
the party against whom such
-13-
<PAGE>
modification or waiver is asserted, and no failure to exercise any right,
power or privilege hereunder shall operate to restrict the exercise of the
same right, power or privilege upon any other occasion nor to restrict the
exercise of any other right, power, or privilege upon the same or any other
occasion. Notwithstanding the foregoing, Mt. Pleasant and Provider shall use
their best efforts to modify this Agreement from time to time, to comply with
applicable rules and regulations of the Commission respecting agreements of
this nature.
24. Attorney's Fees. In any act or proceeding brought to enforce any
rights or obligations hereunder, the prevailing party shall be entitled to
receive reimbursement for its reasonable attorney's fees and related costs.
25. Governing Law. This Agreement shall be governed by, construed, and
interpreted in accordance with, and enforceable under the laws of the State of
Texas.
26. Headings. The headings of the sections appearing in this Agreement
are inserted only for convenience of reference, and shall not operate to alter
the meaning of any provision appearing herein.
27. Notices. Notices that are required or permitted to be given
pursuant to this Agreement shall be in writing and shall be delivered by hand,
or shall be mailed by certified United States mail or a national express
service, postage prepaid, to the parties at the addresses shown below or at
such other addresses as the parties may provide to each other in accordance
with the provisions of this Section:
To Provider:
RADIOSUNGROUP OF TEXAS, INC.
Attention: Mr. Ed Cearley
1618 Judson Road
Longview, Texas 75601
-14-
<PAGE>
To Mt. Pleasant:
MT. PLEASANT RADIO, INC.
2201 Cantu Court
Suite 102A
Sarasota, Florida 34232-6254
(a) Alternate Addresses. Notice, as provided by this Section,
may be given to any other person or party, as any party hereto may in the
future designate in writing, upon due notice to the other party(ies).
(b) Date of Notice, Action. The postal receipt for deposit
with the United States Mail or courier service specified herein shall
establish the date of such notification or communication. If any notification,
communication or action is required or permitted to given or taken within a
certain period of time and the last date for doing so falls on a Saturday,
Sunday, a federal legal holiday, or legal holiday by law in the State of
Texas, the last day for such notification, communication or action shall be
extended to the first date thereafter which is not a Saturday, Sunday, or such
legal holiday.
28. Entire Agreement. This Agreement sets forth the entire
understanding between Mt. Pleasant and Provider with respect to the subject
matter hereof, and there are not other agreements, representations,
warranties, or understandings, oral or written, with respect to the subject
matter hereof.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized representative to execute this Agreement as of the date and year
first above written.
MT. Pleasant Radio, Inc.
By: /s/ John W. Biddinger
--------------------------
Title: President
-----------------------
RADIOSUNGROUP OF TEXAS, Inc.
By: /s/ Edgar C. Cearley, III
--------------------------
Title: Vice President, General
Manager
-----------------------
State of Florida
-----------
County of Sarasota
-----------
Personally appeared before me, the undersigned, a Notary Public within
and for said State and County, duly commissioned and qualified,
_________________, with whom I am personally acquainted, or proved to me on
the basis of satisfactory evidence, and who, upon oath, acknowledged himself
to be the President of MT. PLEASANT RADIO, INC., a corporation, the within
named bargainor, and that he as such _____________, being authorized to do so,
executed the foregoing instrument, for the purposes therein contained by
signing the name of the corporation by himself as such officer.
Witness my hand seal at office this 24 day of January, 1997.
/s/ BARBARA B. MICHEL
-----------------------
NOTARY PUBLIC
My Commission Expires: March 14, 1998
[NOTARY SEAL]
State of Texas
-----------
County of Gregg
-----------
-16-
<PAGE>
Personally appeared before me, the undersigned, a Notary Public within
and for said State and County, duly commissioned and qualified,
_________________, with whom I am personally acquainted, or proved to me on
the basis of satisfactory evidence, and who, upon oath, acknowledged himself
to be the Vice President of RADIOSUNGROUP OF TEXAS, INC., a corporation, the
within named bargainor, and that he as such _____________, being authorized to
do so, executed the foregoing instrument, for the purposes therein contained
by signing the name of the corporation by himself as such officer.
Witness my hand seal at office this 27 day of January, 1997.
/s/ SHERRI GARRETT
-----------------------
My Commission Expires: 4-27-99
[NOTARY SEAL]
-17-
EXHIBIT (Y)
CANCELED
SECURED PROMISSORY NOTE
$800,000.00 Nashville, Tennessee December 24, 1997
CANCELED
FOR VALUE RECEIVED, RadioSunGroup of Texas, Inc. ("Maker"), promises
to pay to the order of Young Investments Company (a Nevada Partnership), the
sum of Eight Hundred Thousand and No/100 Dollars ($800,000.00), together with
all interest thereon at the fixed rate of TEN Percent (10%) per annum. Accrued
interest shall be due and payable on January 31, 1998 and on the final day of
each successive calendar month thereafter. Provided, however, on June 30,
1998, all principal and interest then unpaid shall be finally due and payable.
All amounts due under this Note are payable at par in lawful money of
the United States of America, at such place as the holder hereof (hereinafter
"Holder") may direct.
A default shall occur under this Note if Maker fails to make the
payment required hereunder when due (time is of the essence hereof); or if
Maker becomes insolvent, or if Maker files bankruptcy or receivership
proceedings or has such proceedings filed against it; or if any property of
Maker is subjected to attachment, execution or other process; or if a default
occurs under any collateral document securing the indebtedness evidenced by
this Note.
Upon the occurrence of a default, as defined above. Holder may, at its
option, declare all principal and interest provided for under this Note, and
any other obligations of Maker to Holder, to be presently due and payable, and
Holder may enforce any remedies available to Holder under any documents
securing or evidencing, debts of Maker to Holder. Holder may waive any
default before or after it occurs and may restore this Note in full effect
without impairing the right to declare it due for a subsequent default.
Following default, interest shall accrue on the principal balance hereof at
the maximum lawful rate. Privilege is reserved to prepay this Note at any
time. Provided, however, if this Note is prepaid, regardless of the date of
prepayment, such prepayment shall be accompanied by such additional sums as
may be required to ensure that Holder receives a full six months interest on
this Note. For example, if this Note is prepaid on February 1, 1998 (and
assuming the regular interest payment was made as scheduled on January 31,
1998), the prepayment shall be accompanied by an additional five months of
interest as if the Note were paid in full on its maturity date of June 30,
1998.
Maker and all sureties, guarantors, endorsers and other parties to
this instrument hereby consent to any and all renewals, waivers,
modifications, or extensions of time (of any duration) that may be granted by
Holder with respect to this Note and severally waive demand, presentment,
protest, notice of dishonor, and all other notices which might otherwise be
required by law. Holder may release collateral securing this Note or parties
liable therefor, in its sole discretion.
<PAGE>
Maker's performance under the terms of this Note is secured by, and
Maker hereby grants Holder a security interest in all of Maker's presently
owned and hereafter acquired personal property and fixtures including all
accounts receivable, equipment, goods, contract rights, general intangibles,
furniture and other property of Maker. Maker and all sureties, guarantors,
endorsers and other parties hereto agree to pay reasonable attorneys' fees and
all court and other costs that Holder may incur in the course of efforts to
collect the debt evidenced hereby or to protect Holder's interest in any
collateral securing the same.
If any provision of this Note should for any reason be invalid or
unenforceable, the other provisions hereof shall remain in full effect.
Words used herein indicating gender or number shall be read as context
may require.
The provisions of this Note may be amended or waived only by
instrument in writing signed by the Holder and Maker hereof and attached to
this Note.
RADIOSUNGROUP OF TEXAS, INC.
By: /s/John W. Biddinger
-----------------------------
JOHN W. BIDDINGER
CHAIRMAN & PRESIDENT
For good and valuable consideration,
SunGroup, Inc. hereby guarantees to
Holder the timely payment and
performance of this Note.
SunGroup, Inc.'s guarantee of this
Note is absolute and unconditional.
SunGroup, Inc.'s guarantee of the
attached Note is irrevocable.
This guarantee constitutes a
guarantee of payment and
performance and not of collection.
Executed this 29th day of December, 1997.
SUNGROUP, INC.
By: /s/ JAMES A. HOETGER
---------------------------
JAMES A. HOETGER
VICE PRESIDENT/CHIEF FINANCIAL OFFICER
70
EXHIBIT (Z)
NOTICE: (a copy this notice is filed on record in both the SunGroup and
RadioSunGroup of Texas corporate book)
THE ORIGINAL SECURED PROMISSORY NOTE FOR $800,000 from YOUNG
INVESTMENTS COMPANY (A NEVADA PARTNERSHIP), dated December 24, 1997 has been
canceled as of February 28, 1998.
Dated: March 2, 1998
SUNGROUP, INC.
By: /s/ JAMES A. HOETGER
---------------------------
JAMES A. HOETGER
VICE PRESIDENT/CHIEF FINANCIAL OFFICER
71
EXHIBIT (aa)
SECURED PROMISSORY NOTE
-----------------------
$400,000.00 Nashville, Tennessee March 1, 1998
FOR VALUE RECEIVED, RadioSunGroup of Texas, Inc. ("Maker"), promises
to pay to the order of Young Investments Company (a Nevada Partnership), the
sum of Four Hundred Thousand and No/100 Dollars ($400,000.00), together with
all interest thereon at the fixed rate of TEN Percent (10%) per annum. Accrued
interest shall be due and payable on March 31, 1998 and on the final day of
each successive calendar month thereafter. Provided, however, on June 30,
1998, all principal and interest then unpaid shall be finally due and payable.
All amounts due under this Note are payable at par in lawful money of
the United States of America, at such place as the holder hereof (hereinafter
"Holder") may direct.
A default shall occur under this Note if Maker fails to make the
payment required hereunder when due (time is of the essence hereof); or if
Maker becomes insolvent, or if Maker files bankruptcy or receivership
proceedings or has such proceedings filed against it; or if any property of
Maker is subjected to attachment, execution or other process; or if a default
occurs under any collateral document securing the indebtedness evidenced by
this Note.
Upon the occurrence of a default, as defined above. Holder may, at its
option, declare all principal and interest provided for under this Note, and
any other obligations of Maker to Holder, to be presently due and payable, and
Holder may enforce any remedies available to Holder under any documents
securing or evidencing, debts of Maker to Holder. Holder may waive any
default before or after it occurs and may restore this Note in full effect
without impairing the right to declare it due for a subsequent default.
Following default, interest shall accrue on the principal balance hereof at
the maximum lawful rate. Privilege is reserved to prepay this Note at any
time. Provided, however, if this Note is prepaid, regardless of the date of
prepayment, such prepayment shall be accompanied by such additional sums as
may be required to ensure that Holder receives a full four months interest on
this Note. For example, if this Note is prepaid on February 1, 1998 (and
assuming the regular interest payment was made as scheduled on March 31,
1998), the prepayment shall be accompanied by an additional three months of
interest as if the Note were paid in full on its maturity date of June 30,
1998.
Maker and all sureties, guarantors, endorsers and other parties to
this instrument hereby consent to any and all renewals, waivers,
modifications, or extensions of time (of any duration) that may be granted by
Holder with respect to this Note and severally waive demand, presentment,
protest, notice of dishonor, and all other notices which might otherwise be
required by law. Holder may release collateral securing this Note or parties
liable therefor, in its sole discretion.
72
<PAGE>
Maker's performance under the terms of this Note is secured by, and
Maker hereby grants Holder a security interest in all of Maker's presently
owned and hereafter acquired personal property and fixtures including all
accounts receivable, equipment, goods, contract rights, general intangibles,
furniture and other property of Maker.
Maker and all sureties, guarantors, endorsers and other parties hereto
agree to pay reasonable attorneys' fees and all court and other costs that
Holder may incur in the course of efforts to collect the debt evidenced hereby
or to protect Holder's interest in any collateral securing the same.
If any provision of this Note should for any reason be invalid or
unenforceable, the other provisions hereof shall remain in full effect.
Words used herein indicating gender or number shall be read as context
may require.
The provisions of this Note may be amended or waived only by
instrument in writing signed by the Holder and Maker hereof and attached to
this Note.
RADIOSUNGROUP OF TEXAS, INC.
By: /s/ John W. Biddinger
-----------------------------
JOHN W. BIDDINGER
CHAIRMAN & PRESIDENT
For good and valuable consideration,
SunGroup, Inc. hereby guarantees to
Holder the timely payment and
performance of this Note.
SunGroup, Inc.'s guarantee of this
Note is absolute and unconditional.
SunGroup, Inc.'s guarantee of the
attached Note is irrevocable.
This guarantee constitutes a
guarantee of payment and
performance and not of collection.
Executed this 1st day of March, 1998.
SUNGROUP, INC.
By: /s/ JAMES A. HOETGER
---------------------------
JAMES A. HOETGER
VICE PRESIDENT/CHIEF FINANCIAL OFFICER
73
<PAGE>
[FORM OF FINANCING STATEMENT]
74
EXHIBIT (bb)
SECURED PROMISSORY NOTE
-----------------------
$150,000.00 March 1, 1998
FOR VALUE RECEIVED, RadioSunGroup of Texas, Inc. ("Maker"), promises
to pay to the order of JOHN W. BIDDINGER, the sum of One Hundred and Fifty
Thousand and No/100 Dollars ($150,000.00), together with all interest thereon
at the fixed rate of TEN Percent (10%) per annum. Accrued interest shall be
due and payable on March 31, 1998 and on the final day of each successive
calendar month thereafter. Provided, however, on June 30, 1998, all principal
and interest then unpaid shall be finally due and payable.
All amounts due under this Note are payable at par in lawful money of
the United States of America, at such place as the holder hereof (hereinafter
"Holder") may direct.
A default shall occur under this Note if Maker fails to make the
payment required hereunder when due (time is of the essence hereof); or if
Maker becomes insolvent, or if Maker files bankruptcy or receivership
proceedings or has such proceedings filed against it; or if any property of
Maker is subjected to attachment, execution or other process; or if a default
occurs under any collateral document securing the indebtedness evidenced by
this Note.
Upon the occurrence of a default, as defined above. Holder may, at its
option, declare all principal and interest provided for under this Note, and
any other obligations of Maker to Holder, to be presently due and payable, and
Holder may enforce any remedies available to Holder under any documents
securing or evidencing, debts of Maker to Holder. Holder may waive any
default before or after it occurs and may restore this Note in full effect
without impairing the right to declare it due for a subsequent default.
Following default, interest shall accrue on the principal balance hereof at
the maximum lawful rate. Privilege is reserved to prepay this Note at any
time. Provided, however, if this Note is prepaid, regardless of the date of
prepayment, such prepayment shall be accompanied by such additional sums as
may be required to ensure that Holder receives a full four months interest on
this Note. For example, if this Note is prepaid on February 1, 1998 (and
assuming the regular interest payment was made as scheduled on March 31,
1998), the prepayment shall be accompanied by an additional three months of
interest as if the Note were paid in full on its maturity date of June 30,
1998.
Maker and all sureties, guarantors, endorsers and other parties to
this instrument hereby consent to any and all renewals, waivers,
modifications, or extensions of time (of any duration) that may be granted by
Holder with respect to this Note and severally waive demand, presentment,
protest, notice of dishonor, and all other notices which might otherwise be
required by law. Holder may release collateral securing this Note or parties
liable therefor, in its sole discretion.
75
<PAGE>
Maker's performance under the terms of this Note is secured by, and
Maker hereby grants Holder a security interest in all of Maker's presently
owned and hereafter acquired personal property and fixtures including all
accounts receivable, equipment, goods, contract rights, general intangibles,
furniture and other property of Maker.
Maker and all sureties, guarantors, endorsers and other parties hereto
agree to pay reasonable attorneys' fees and all court and other costs that
Holder may incur in the course of efforts to collect the debt evidenced hereby
or to protect Holder's interest in any collateral securing the same.
If any provision of this Note should for any reason be invalid or
unenforceable, the other provisions hereof shall remain in full effect.
Words used herein indicating gender or number shall be read as context
may require.
The provisions of this Note may be amended or waived only by
instrument in writing signed by the Holder and Maker hereof and attached to
this Note.
RADIOSUNGROUP OF TEXAS, INC.
By:
-----------------------------
JAMES A. HOETGER
VICE PRESIDENT, FINANCE
For good and valuable consideration,
SunGroup, Inc. hereby guarantees to
Holder the timely payment and
performance of this Note.
SunGroup, Inc.'s guarantee of this
Note is absolute and unconditional.
SunGroup, Inc.'s guarantee of the
attached Note is irrevocable.
This guarantee constitutes a
guarantee of payment and
performance and not of collection.
Executed this 1st day of March, 1998.
SUNGROUP, INC.
By:
---------------------------
JAMES A. HOETGER
VICE PRESIDENT/CHIEF FINANCIAL OFFICER
76
<PAGE>
[FORM OF FINANCING STATEMENT]
77
<PAGE>
EXHIBIT (cc)
SECURED PROMISSORY NOTE
-----------------------
$150,000.00 March 1, 1998
FOR VALUE RECEIVED, RadioSunGroup of Texas, Inc. ("Maker"), promises
to pay to the order of MARGARET H. BIDDINGER, of One Hundred and Fifty
Thousand and No/100 Dollars ($150,000.00), together with all interest thereon
at the fixed rate of TEN Percent (10%) per annum. Accrued interest shall be
due and payable on March 31, 1998 and on the final day of each successive
calendar month thereafter. Provided, however, on June 30, 1998, all principal
and interest then unpaid shall be finally due and payable.
All amounts due under this Note are payable at par in lawful money of
the United States of America, at such place as the holder hereof (hereinafter
"Holder") may direct.
A default shall occur under this Note if Maker fails to make the
payment required hereunder when due (time is of the essence hereof); or if
Maker becomes insolvent, or if Maker files bankruptcy or receivership
proceedings or has such proceedings filed against it; or if any property of
Maker is subjected to attachment, execution or other process; or if a default
occurs under any collateral document securing the indebtedness evidenced by
this Note.
Upon the occurrence of a default, as defined above. Holder may, at its
option, declare all principal and interest provided for under this Note, and
any other obligations of Maker to Holder, to be presently due and payable, and
Holder may enforce any remedies available to Holder under any documents
securing or evidencing, debts of Maker to Holder. Holder may waive any
default before or after it occurs and may restore this Note in full effect
without impairing the right to declare it due for a subsequent default.
Following default, interest shall accrue on the principal balance hereof at
the maximum lawful rate. Privilege is reserved to prepay this Note at any
time. Provided, however, if this Note is prepaid, regardless of the date of
prepayment, such prepayment shall be accompanied by such additional sums as
may be required to ensure that Holder receives a full four months interest on
this Note. For example, if this Note is prepaid on February 1, 1998 (and
assuming the regular interest payment was made as scheduled on March 31,
1998), the prepayment shall be accompanied by an additional three months of
interest as if the Note were paid in full on its maturity date of June 30,
1998.
Maker and all sureties, guarantors, endorsers and other parties to
this instrument hereby consent to any and all renewals, waivers,
modifications, or extensions of time (of any duration) that may be granted by
Holder with respect to this Note and severally waive demand, presentment,
protest, notice of dishonor, and all other notices which might otherwise be
required by law. Holder may release collateral securing this Note or parties
liable therefor, in its sole discretion.
78
<PAGE>
Maker's performance under the terms of this Note is secured by, and
Maker hereby grants Holder a security interest in all of Maker's presently
owned and hereafter acquired personal property and fixtures including all
accounts receivable, equipment, goods, contract rights, general intangibles,
furniture and other property of Maker.
Maker and all sureties, guarantors, endorsers and other parties hereto
agree to pay reasonable attorneys' fees and all court and other costs that
Holder may incur in the course of efforts to collect the debt evidenced hereby
or to protect Holder's interest in any collateral securing the same.
If any provision of this Note should for any reason be invalid or
unenforceable, the other provisions hereof shall remain in full effect.
Words used herein indicating gender or number shall be read as context
may require.
The provisions of this Note may be amended or waived only by
instrument in writing signed by the Holder and Maker hereof and attached to
this Note.
RADIOSUNGROUP OF TEXAS, INC.
By:
-----------------------------
JOHN W. BIDDINGER
CHAIRMAN & PRESIDENT
For good and valuable consideration,
SunGroup, Inc. hereby guarantees to
Holder the timely payment and
performance of this Note.
SunGroup, Inc.'s guarantee of this
Note is absolute and unconditional.
SunGroup, Inc.'s guarantee of the
attached Note is irrevocable.
This guarantee constitutes a
guarantee of payment and
performance and not of collection.
Executed this 1st day of March, 1998.
SUNGROUP, INC.
By:
---------------------------
JAMES A. HOETGER
VICE PRESIDENT/CHIEF FINANCIAL OFFICER
79
<PAGE>
[FORM OF FINANCING STATEMENT]
80
EXHIBIT (dd)
SECURED PROMISSORY NOTE
-----------------------
$100,000.00 March 1, 1998
FOR VALUE RECEIVED, RadioSunGroup of Texas, Inc. ("Maker"), promises
to pay to the order of KAREN BIDDINGER, the sum of One Hundred Thousand and
No/100 Dollars ($100,000.00), together with all interest thereon at the fixed
rate of TEN Percent (10%) per annum. Accrued interest shall be due and
payable on March 31, 1998 and on the final day of each successive calendar
month thereafter. Provided, however, on June 30, 1998, all principal and
interest then unpaid shall be finally due and payable.
All amounts due under this Note are payable at par in lawful money of
the United States of America, at such place as the holder hereof (hereinafter
"Holder") may direct.
A default shall occur under this Note if Maker fails to make the
payment required hereunder when due (time is of the essence hereof); or if
Maker becomes insolvent, or if Maker files bankruptcy or receivership
proceedings or has such proceedings filed against it; or if any property of
Maker is subjected to attachment, execution or other process; or if a default
occurs under any collateral document securing the indebtedness evidenced by
this Note.
Upon the occurrence of a default, as defined above. Holder may, at its
option, declare all principal and interest provided for under this Note, and
any other obligations of Maker to Holder, to be presently due and payable, and
Holder may enforce any remedies available to Holder under any documents
securing or evidencing, debts of Maker to Holder. Holder may waive any
default before or after it occurs and may restore this Note in full effect
without impairing the right to declare it due for a subsequent default.
Following default, interest shall accrue on the principal balance hereof at
the maximum lawful rate. Privilege is reserved to prepay this Note at any
time. Provided, however, if this Note is prepaid, regardless of the date of
prepayment, such prepayment shall be accompanied by such additional sums as
may be required to ensure that Holder receives a full four months interest on
this Note. For example, if this Note is prepaid on February 1, 1998 (and
assuming the regular interest payment was made as scheduled on March 31,
1998), the prepayment shall be accompanied by an additional three months of
interest as if the Note were paid in full on its maturity date of June 30,
1998.
Maker and all sureties, guarantors, endorsers and other parties to
this instrument hereby consent to any and all renewals, waivers,
modifications, or extensions of time (of any duration) that may be granted by
Holder with respect to this Note and severally waive demand, presentment,
protest, notice of dishonor, and all other notices which might otherwise be
required by law. Holder may release collateral securing this Note or parties
liable therefor, in its sole discretion.
84
<PAGE>
Maker's performance under the terms of this Note is secured by, and
Maker hereby grants Holder a security interest in all of Maker's presently
owned and hereafter acquired personal property and fixtures including all
accounts receivable, equipment, goods, contract rights, general intangibles,
furniture and other property of Maker.
Maker and all sureties, guarantors, endorsers and other parties hereto
agree to pay reasonable attorneys' fees and all court and other costs that
Holder may incur in the course of efforts to collect the debt evidenced hereby
or to protect Holder's interest in any collateral securing the same.
If any provision of this Note should for any reason be invalid or
unenforceable, the other provisions hereof shall remain in full effect.
Words used herein indicating gender or number shall be read as context
may require.
The provisions of this Note may be amended or waived only by
instrument in writing signed by the Holder and Maker hereof and attached to
this Note.
RADIOSUNGROUP OF TEXAS, INC.
By:
-----------------------------
JOHN W. BIDDINGER
CHAIRMAN & PRESIDENT
For good and valuable consideration,
SunGroup, Inc. hereby guarantees to
Holder the timely payment and
performance of this Note.
SunGroup, Inc.'s guarantee of this
Note is absolute and unconditional.
SunGroup, Inc.'s guarantee of the
attached Note is irrevocable.
This guarantee constitutes a
guarantee of payment and
performance and not of collection.
Executed this 1st day of March, 1998.
SUNGROUP, INC.
By:
---------------------------
JAMES A. HOETGER
VICE PRESIDENT/CHIEF FINANCIAL OFFICER
85
<PAGE>
[FORM OF FINANCING STATEMENT]
86
EXHIBIT (ee)
RENEWAL AND EXTENSION AGREEMENT
This Renewal and Extension Agreement ("Agreement") is dated effective as
of January 2 1998, by and between RadioSunGroup of Texas, Inc. ("Borrower")
and Kenneth R. Reynolds, ("Lender").
W I T NE S S E T H
WHEREAS, the Borrower executed and delivered that certain Promissory Note
dated October 31, 1985 (the "Note") in the original principal amount of
$3,127,914.00 bearing interest at the rate stated therein: and
WHEREAS, the Note is secured by various real and personal property; and
WHEREAS, the Borrower and Lender have agreed to extend the final maturity
of the Note to June 30, 1998;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the Borrower and Lender hereby agree as
follows:
1. The Note, including all principal then unpaid shall be due and
payable on June 30, 1998.
2. The interest rate charged on the Note is hereby changed to equal
the fixed rate of interest of ten percent (10%) per annum. Accrued interest
shall be due and payable on January 31, 1998 and on the final day of each
successive calendar month thereafter. Provided, however, on June 30, 1998,
all principal and interest then unpaid shall be finally due and payable.
3. Privilege is reserved to prepay this Note at any time. Provided,
however, if this Note is prepaid, regardless of the date of prepayment, such
prepayment shall be accompanied by such additional sums as may be required to
ensure that Holder receives a full six months interest on this Note. For
example, if this Note is prepaid on February 1, 1998 (and assuming the regular
interest payment was made as scheduled on January 31, 1998), the prepayment
shall be accompanied by an additional five months of interest as if the Note
were paid in full on its maturity date of June 30, 1998.
4. All liens presently securing the Note are hereby ratified and
confirmed as continuing to secure the payment of the Note. Nothing herein
shall in any manner diminish, impair or extinguish the Note or the liens
securing the Note.
5. Borrower and Lender hereby agree that the present unpaid balance
under the Note is $516,600.00 as of the date of this Agreement.
6. The Lender represents and warrants to Borrower that he is the
lawful owner and holder of the Note and that Lender has full power and
authority to enter into this Agreement.
EXECUTED, the date written above.
RadioSunGroup of Texas, Inc.
By: /s/ John W. Biddinger
President
and
By: /s/ Kenneth R. Reynolds
87
EXHIBIT (ff)
RENEWAL AND EXTENSION AGREEMENT
This Renewal and Extension Agreement ("Agreement") is dated effective as
of January 2, 1998, by and between RadioSunGroup of Texas, Inc. ("Borrower")
and Kenneth R. Reynolds, ("Lender").
W I T NE S S E T H
WHEREAS, the Borrower executed and delivered that certain Promissory Note
dated October 31, 1985 (the "Note") in the original principal amount of
$1,609,509.00 bearing interest at the rate stated therein: and
WHEREAS, the Note is secured by various real and personal property; and
WHEREAS, the Borrower and Lender have agreed to extend the final maturity
of the Note to June 30, 1998;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the Borrower and Lender hereby agree as
follows:
1. The Note, including all principal then unpaid shall be due and
payable on June 30, 1998.
2. The interest rate charged on the Note is hereby changed to equal
the fixed rate of interest of ten percent (10%) per annum. Accrued interest
shall be due and payable on January 31, 1998 and on the final day of each
successive calendar month thereafter. Provided, however, on June 30, 1998,
all principal and interest then unpaid shall be finally due and payable.
3. Privilege is reserved to prepay this Note at any time. Provided,
however, if this Note is prepaid, regardless of the date of prepayment, such
prepayment shall be accompanied by such additional sums as may be required to
ensure that Holder receives a full six months interest on this Note. For
example, if this Note is prepaid on February 1, 1998 (and assuming the regular
interest payment was made as scheduled on January 31, 1998), the prepayment
shall be accompanied by an additional five months of interest as if the Note
were paid in full on its maturity date of June 30, 1998.
4. All liens presently securing the Note are hereby ratified and
confirmed as continuing to secure the payment of the Note. Nothing herein
shall in any manner diminish, impair or extinguish the Note or the liens
securing the Note.
5. Borrower and Lender hereby agree that the present unpaid balance
under the Note is $270,600.00 as of the date of this Agreement.
6. The Lender represents and warrants to Borrower that he is the
lawful owner and holder of the Note and that Lender has full power and
authority to enter into this Agreement.
EXECUTED, the date written above.
RadioSunGroup of Texas, Inc.
By: /s/John W. Biddinger
President
and
By: /s/ Kenneth R. Reynolds
88
EXHIBIT (gg)
RENEWAL AND EXTENSION AGREEMENT
This Renewal and Extension Agreement ("Agreement") is dated effective
as of January 2, 1998, by and between RadioSunGroup of Texas, Inc.
("Borrower") and Kenneth R. Reynolds, ("Lender").
W I T NE S S E T H
WHEREAS, the Borrower executed and delivered that certain Promissory Note
dated October 31, 1985 (the "Note") in the original principal amount of
$212,577.00 bearing interest at the rate stated therein: and
WHEREAS, the Note is secured by various real and personal property; and
WHEREAS, the Borrower and Lender have agreed to extend the final maturity
of the Note to March 31, 1998;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the Borrower and Lender hereby agree as
follows:
1. The Note, including all principal then unpaid shall be due and
payable on June 30, 1998.
2. The interest rate charged on the Note is hereby changed to equal
the fixed rate of interest of ten percent (10%) per annum. Accrued interest
shall be due and payable on January 31, 1998 and on the final day of each
successive calendar month thereafter. Provided, however, on June 30, 1998,
all principal and interest then unpaid shall be finally due and payable.
3. Privilege is reserved to prepay this Note at any time. Provided,
however, if this Note is prepaid, regardless of the date of prepayment, such
prepayment shall be accompanied by such additional sums as may be required to
ensure that Holder receives a full six months interest on this Note. For
example, if this Note is prepaid on February 1, 1998 (and assuming the regular
interest payment was made as scheduled on January 31, 1998), the prepayment
shall be accompanied by an additional five months of interest as if the Note
were paid in full on its maturity date of June 30, 1998.
4. All liens presently securing the Note are hereby ratified and
confirmed as continuing to secure the payment of the Note. Nothing herein
shall in any manner diminish, impair or extinguish the Note of the lien
securing the Note.
5. Borrower and Lender hereby agree that the present unpaid balance
under the Note is $32,800.00 as of the date of this Agreement.
6. The Lender represents and warrants to Borrower that he is the
lawful owner and holder of the Note and that Lender has full power and
authority to enter into this Agreement.
EXECUTED, the date written above.
RadioSunGroup of Texas, Inc.
By: /s/ John W. Biddinger
President
and
By: /s/ Kenneth R. Reynolds
89
EXHIBIT (hh)
TRI-PARTY PAYMENT AGREEMENT
---------------------------
This Tri-Party Payment Agreement ("Agreement") is entered into this
2nd day of January, 1998, by and between RadioSunGroup of Texas, Inc.
(hereafter "SunGroup of Texas"), Kenneth R. Reynolds ("Reynolds") and John
Osburn and Arden Osburn (hereafter sometimes collectively referred to as the
"Osburns"). (Reynolds and the Osburns also are sometimes hereafter referred to
collectively as the "Holders").
W I T N E S S E T H:
WHEREAS, SunGroup of Texas executed and delivered that certain
$212,577.00 Promissory Note dated October 31, 1985 as amended by those certain
Renewal Abilene Agreements dated November 16, 1986 and those certain 1991
Reinstated Agreements dated November 1, 1991, (the "Small Abilene Note")
payable to the order of Taylor Country Broadcasting, Inc. ("TCBI"); and
WHEREAS, SunGroup of Texas executed and delivered that certain
$1,609,509.00 Promissory Note dated October 31, 1985 as amended by those
certain Renewal Abilene Agreements dated November 16, 1986 and those certain
1991 Reinstated Agreements dated November 1, 1991, (the "Large Abilene Note")
payable to the order of TCBI; and
WHEREAS, SunGroup of Texas executed and delivered that certain
$3,127,914.00 Promissory Note dated October 31, 1985 as amended by those
certain Renewal Longview Agreements dated November 16, 1986, and that certain
1991 Reinstated Agreement dated November 1, 1991, (the "Longview Note")
payable to the order of Stereo 105, Inc.; and
WHEREAS, TCBI transferred and assigned all of its interest in the
Small Abilene Note and the Large Abilene Note to Reynolds and John Osburn and
Stereo 105, Inc. transferred and assigned all of its interest in the Longview
Note to Reynolds and John Osburn; and
WHEREAS, John Osburn then transferred and assigned one-half of his
interest to Arden Osburn; and
WHEREAS, the owners and holders of the Small Abilene Note, the Large
Abilene Note and the Longview Note are now as follows: Reynolds (an undivided
½ interest), John Osburn (an undivided ¼ interest) and Arden
Osburn (an undivided ¼ interest); and
WHEREAS, SunGroup, the Osburns and the Reynolds wish to enter into an
agreement regarding certain payments to be received by the Holders; and NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which are acknowledged, the undersigned hereby agree as follows:
1. Concurrently herewith, Holders have received $32,800.00 to be
applied to the unpaid balance of the Small Abilene Note (which is presently
$65,600.00). Upon
90
<PAGE>
application of this sum, the remaining unpaid balance of the Small Abilene
Note shall be $32,800.00.
2. Concurrently herewith, Holders have received the sum of
$270,600.00 to be applied to the unpaid balance of the Large Abilene Note
(which is presently $541,200.00). Upon application of this sum, the remaining
unpaid balance of the Large Abilene Note shall be $270,600.00.
3. Concurrently herewith, Holders have received the sum of
$516,600.00 to be applied to the unpaid balance of the Longview Note (which is
presently $1,033,200.00). Upon application of this sum, the remaining unpaid
balance of the Longview Note shall be $516,600.00.
4. Reynolds has agreed that all sums received from SunGroup of
Texas as set forth above (the "Payments"), shall be delivered to John and
Arden Osburn.
5. In consideration of the delivery of the Payments to the
Osburns, John Osburn and Arden Osburn hereby sell, bargain, assign and convey
unto Reynolds all their right, title and interest in and to the Small Abilene
Note, the Large Abilene Note, and the Longview Note, and all collateral and
security therefor. The effect of the conveyance contained in this paragraph
is that Reynolds shall hereafter be the sole and lawful owner and holder of
the Small Abilene Note, Large Abilene Note, and Longview Note and the Osburns
will not retain any interest. To evidence the conveyance and assignment set
forth in this paragraph, John Osburn and Arden Osburn shall deliver the
original Small Abilene Note, Large Abilene Note, and Longview Note to Reynolds
with all necessary endorsements.
6. John Osburn and Arden Osburn shall also contemporaneously
herewith execute and deliver UCC-3 termination statements and other releases
of collateral set forth on Exhibit A attached hereto. The releases filed by
John Osburn and Arden Osburn shall in no way impair the remaining secured
creditor and other rights of Reynolds as the holder of the Small Abilene Note,
Large Abilene Note and Longview Note.
7. After the date hereof, all Payments under the Small Abilene
Note, Large Abilene Note, and Longview Note to be made by SunGroup of Texas
shall be sent to Reynolds at, and all correspondence regarding the Small
Abilene Note, Large Abilene Note, and Longview Note shall be also sent to
Reynolds at, the following address:
Kenneth R. Reynolds
Radio Station KAGG
4101 South Texas Street
Bryan, Texas 77802
8. The Osburns and all parties hereto agree that after the
execution of delivery of this Agreement, and delivery of the Payments, that
they will execute and deliver such additional endorsements, releases,
termination statements, and such additional documentation as may be required
to evidence, the transactions described herein.
91
<PAGE>
9. The parties hereto represent and warrant that the recitals set
forth at the beginning of this Agreement are true and accurate.
RADIOSUNGROUP OF TEXAS, INC.
By: /s/ John W. Biddinger
CHAIRMAN & PRESIDENT
_/s/ John Osburn
-------------------------------
JOHN OSBURN
/s/ Arden Osburn
-------------------------------
ARDEN OSBURN
/s/ Kenneth R. Reynolds
-------------------------------
KENNETH R. REYNOLDS
EXHIBIT (ii)
NOTE-HOLDER ORIGINAL AMOUNT MATURITY DATE
OF NOTE
Walter L. Koon, Jr.
Indiana University Foundation $167,426.65 February 15, 1998
John W. Biddinger $93,333.06 February 15, 1998
Robert A. Davies $124,469.18 February 15, 1998
John Cederdahl
Bankers National Life $799,655.11 February 15, 1998
John Cederdahl
Western National Life Insurance
Company $3,821,912.77 February 15, 1998
Jan Chenowith
Dan Young IRA Trust $265,200.00 February 15, 1998
93
EXHIBIT 99(a)
SunGroup, Inc. and Subsidiaries
Consolidated Financial Statements
December 31, 1997 and 1996
<PAGE>
SunGroup, Inc. and Subsidiaries
Table of Contents
PAGE
- -----------------------------------------------------------------------------
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
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Stockholders
SunGroup, Inc. and Subsidiaries
Sarasota, Florida
We have audited the accompanying consolidated balance sheet of SunGroup, Inc.
and subsidiaries as of December 31, 1997 and 1996, 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, 1997 and 1996, and the results of
their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles.
As discussed in the subsequent event footnote to the financial statements, on
February 3, 1998, the Corporation entered into an asset purchase agreement to
sell substantially all of its assets except cash and accounts receivable. The
consummation of the sale is subject to the approval of the Corporation's
stockholders and the Federal Communications Commission. If the sale is
consummated, all of the Corporation's obligations will be settled and
remaining net proceeds will be distributed to the stockholders.
Geo. S. Olive & Co. LLC
Indianapolis, Indiana
March 9, 1998
<PAGE>
SUNGROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 1997 1996
- -----------------------------------------------------------------------------
Gross Revenues $9,161,416 $8,950,038
Agency commissions (979,632) (986,139)
---------- ----------
8,181,784 7,963,899
---------- ----------
Expenses
Technical and programming 2,050,326 2,092,683
Selling, general and administrative 5,681,098 5,107,501
---------- ----------
7,731,424 7,200,184
---------- ----------
Income From Operations 450,360 763,715
---------- ----------
Other Income (Expense)
Gain on disposal of assets 640,355
Income from tower relocation 864,450
Interest expense (349,034) (289,400)
Other (21,412) 190,191
---------- ----------
(370,446) 1,405,596
---------- ----------
Income Before Income Taxes and
Extraordinary Item 79,914 2,169,311
Income Taxes (Benefit) (629,400) 972,071
---------- ----------
Income Before Extraordinary Item 709,314 1,197,240
Extraordinary Gain From Debt
Extinguishment,net of income
taxes of $729,642 8,578,057
---------- ----------
NET INCOME $ 709,314 $9,775,297
========== ==========
BASIC AND DILUTED EARNINGS PER SHARE
Income before extraordinary item $.05 $.09
Extraordinary item .64
---------- ----------
Net Income $.05 $.73
========== ==========
See notes to consolidated financial statements.
97
<PAGE>
SUNGROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31 1997 1996
- -----------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,338,065 $ 551,750
Accounts receivable, less allowances
of $59,028 and $67,500 1,460,218 1,638,889
Income taxes receivable 10,000 61,000
Prepaid expenses and other current assets 183,146 192,813
Deferred income taxes 1,582,591
------------ -----------
Total current assets 4,574,020 2,444,452
------------ -----------
PROPERTY, PLANT AND EQUIPMENT, net 1,591,970 1,645,180
------------ -----------
OTHER ASSETS
Intangible assets 5,748,421 6,133,910
Other assets 84,595 14,524
------------ -----------
5,833,016 6,148,434
------------ -----------
$11,999,006 $10,238,066
============ ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Current maturities of long-term debt $ 9,981,522 $ 2,898,430
Accounts payable and accrued expenses 805,606 921,313
Accrued interest payable 16,085
------------ -----------
Total current liabilities 10,787,128 3,835,828
------------ -----------
LONG-TERM DEBT 624,341 7,538,217
------------ -----------
DEFERRED INCOME TAXES 1,108,395 94,193
------------ -----------
STOCKHOLDERS' DEFICIT
Common stock--no par value
Authorized--30,000,000 shares
Issued and outstanding--6,543,700 shares 3,770,639 3,770,639
Additional paid-in capital 5,969,195 5,969,195
Retained deficit (10,260,692) (10,970,006)
------------ -----------
(520,858) (1,230,172)
------------ -----------
$11,999,006 $10,238,066
============ ===========
See notes to consolidated financial statements.
98
<PAGE>
SUNGROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT DEFICIT
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 6,442,099 $3,770,639 $5,969,195 $(20,745,303) $(11,005,469)
Warrants exercised for
$0.11 in total 101,601
Net income 9,775,297 9,775,297
-------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 6,543,700 3,770,639 5,969,195 (10,970,006) (1,230,172)
Net income 709,314 709,314
-------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 6,543,700 $3,770,639 $5,969,195 $(10,260,692) $ (520,858)
===================================================================
</TABLE>
See notes to consolidated financial statements.
99
<PAGE>
SUNGROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31 1997 1996
- -----------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 709,314 $9,775,297
Reconciliation of net income to net cash
provided by operating activities
Depreciation and amortization 656,259 689,381
(Gain) loss on disposal of assets (640,355)
Net expense from barter transactions 40,818 92,851
Extraordinary gain from debt extinguishment (9,307,697)
Income from tower relocation (664,450)
Deferred income taxes (568,389) 1,290,466
Changes in
Accounts receivable 178,671 9,749
Income tax receivable 51,000 (61,000)
Prepaid expenses and other current assets 9,667 (122,400)
Accounts payable and accrued expenses (156,525) 250,934
Interest payable (4,292) 16,659
Other assets (70,071) 2,244
--------------------------
Net cash provided by operating activities 846,452 1,331,679
--------------------------
INVESTING ACTIVITIES
Purchase of property and equipment (184,639) (160,558)
Purchase of intangible asset (32,921) (150,000)
Proceeds from sale of assets 2,101,038
--------------------------
Net cash provided (used) by investing activities (217,560) 1,790,480
--------------------------
FINANCING ACTIVITIES
Repayments of long-term debt (642,577) (2,905,083)
Proceeds from long-term debt 800,000
--------------------------
Net cash provided (used) by financing
activities 157,423 (2,905,083)
--------------------------
INCREASE IN CASH AND CASH EQUIVALENTS 786,315 217,076
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 551,750 334,674
--------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $1,338,065 $ 551,750
==========================
SUPPLEMENTAL CASH FLOWS INFORMATION
Interest paid $ 315,119 $ 226,102
Income taxes paid 102,807 216,775
NON-CASH TRANSACTIONS
Accrued interest added to note 11,793 11,474
Accounts payable funded by buyer 192,214
See notes to consolidated financial statements.
100
<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, 1997, the Corporation owned and operated seven radio stations, AM
and FM, in Louisiana, Texas, and New Mexico. Each radio station is licensed
with the Federal Communications Commission ("FCC"), with each license required
to be renewed every seven 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 AND CASH EQUIVALENTS
Cash and cash equivalents consist of bank deposits in federally insured
accounts. At December 31, 1997, the Corporation's cash accounts exceeded
federally insured limits by approximately $1,045,000.
For purposes of the statement of cash flows, the Corporation considers all
highly liquid debt instruments, if any, purchased with an original maturity of
three months or less to be cash equivalents.
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 25 years using the
straight-line method. During 1997, the Corporation incurred costs associated
with the operations of a station in Texas under a time brokerage agreement.
These costs are being amortized over 5 years.
101
<PAGE>
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, and depreciation is computed on a
straight-line basis using estimated lives as follows:
- -----------------------------------------------------------------------------
Buildings 20 years
Broadcast equipment 5-10 years
Furniture and fixtures 10 years
Transportation equipment 3 years
Leasehold improvements Life of lease
102
<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 other income.
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.
- - Property and Equipment
Property and equipment consist of the following:
DECEMBER 31 1997 1996
- -----------------------------------------------------------------------------
Land $ 235,307 $ 235,307
Buildings 543,391 507,177
Leasehold improvements 91,334 81,406
Equipment and furnishings 2,893,138 2,754,641
Vehicles 138,944 138,944
-------------------------------
3,902,114 3,717,475
Accumulated depreciation (2,310,144) (2,072,295)
-------------------------------
$1,591,970 $1,645,180
===============================
103
<PAGE>
- - INTANGIBLE ASSETS
Intangible assets consist of the following:
DECEMBER 31 1997 1996
- -----------------------------------------------------------------------------
Goodwill $4,243,678 $4,243,678
Broadcast license 5,236,716 5,236,716
Start-up costs 32,921
-------------------------------
9,513,315 9,480,394
Accumulated amortization (3,764,894) (3,346,484)
-------------------------------
$5,748,421 $6,133,910
===============================
104
<PAGE>
SUNGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - LONG-TERM DEBT
Long-term debt consists of the following:
DECEMBER 31 1997 1996
- -----------------------------------------------------------------------------
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. In January 1998, the
Corporation paid $820,000 in full
satisfaction of two of the note holders. The
third note holder has renegotiated a new note
bearing interest at 10%, maturing June 1998 $1,640,000 $2,190,000
Note payable, an individual, interest at
0%(a); monthly principal payments based on
cash flow of subsidiary; balance due August
2002 225,628 303,915
Note payable, a related party, interest at
2.7%; $500,000 face amount; accrued interest
added to note; due January 2003 435,928 424,135
Note payable, bank, interest at prime plus
1%; monthly payments of $1,520 including
interest; balance due September 2000 47,988 60,610
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 3,821,913 3,821,913
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 799,655 799,655
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 167,427 167,427
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, institution, interest at 10%;
monthly payments of interest only; balance
due June 1998. 800,000
Note payable, financial institution, interest
at 17.5%; monthly payments of $217 including
interest; balance due October 1997 1,668
-----------------------------
105
<PAGE>
Note payable, financial institution, interest
at 12%; monthly payments of interest
only; balance due June 1998 2,184,322 2,184,322
-----------------------------
10,605,863 10,436,647
Current maturities (9,981,522) (2,898,430)
-----------------------------
$ 624,341 $7,538,217
=============================
(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.
106
<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.
The Corporation was in default of two notes totaling $4,621,568 at December
31, 1997 due to the violation of certain debt covenants.
The Corporation had several notes payable which had been in default for a
number of years and the creditors had not sought collection on these notes.
Many of these notes had 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. As the debt holder did not initiate
collection procedures within the prescribed time period of the statute of
limitations, the notes are no longer collectible by the creditors. During
1996, $4,567,400 of principal and accrued interest was written off as the
statute of limitations had expired. This forgiveness of debt is accounted for
as an extraordinary item in the consolidated statement of operations.
During 1996, the Corporation sold the assets of one of its subsidiaries. The
net proceeds of $2,094,000 were applied against the note payable to the FDIC
which was secured by these assets. There was a remaining balance of
$2,959,700 of principal and accrued interest which was forgiven by the note
holder and is also included as an extraordinary item. This subsidiary also
had a bond payable to a broadcasting company in the amount of $1,780,600 which
was in a secondary position. This liability has also been forgiven and is
treated as an extraordinary item.
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.
Future maturities of long-term debt are as follows:
YEARS ENDING DECEMBER 31
- -----------------------------------------------------------------------------
1998 $ 9,981,522
1999 170,021
2000 18,392
After 2002 435,928
-----------
$10,605,863
===========
107
<PAGE>
SUNGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - Stockholders' Equity
During 1996, a warrant holder (who is also an officer and director) exercised
a warrant for 101,601 shares of a total amount of $0.11.
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 $9,307,700 (including $6,104,100 of
principal and $3,203,600 in accrued interest) was written off during 1996
resulting in an extraordinary gain of $9,307,700. For $4,567,400 of this
debt, 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. The remaining $4,740,300 of the
debt write off resulted from the settlement of the liabilities of a subsidiary
after the sale of all its assets.
- - INCOME TAXES
Income tax expense consists of tax on income before extraordinary item and tax
related to the extraordinary item.
The reconciliation of income tax to the tax at the federal statutory income
tax rate is as follows:
DECEMBER 31 1997 1996
- -----------------------------------------------------------------------------
Income before income taxes and extraordinary item $ 79,914 $ 2,169,311
Extraordinary gain before income taxes 9,307,699
-------------------------
Income before income taxes $ 79,914 $11,477,010
=========================
Tax expense at statutory rate of 34% $ 21,171 $ 3,902,183
Tax effect of
State income tax (net of federal effect) (85,156) 403,803
Nondeductible expenses 83,964 84,683
Net operating losses written-off in prior years (576,487)
Other 40,839 2,451
Increase (decrease) in valuation allowance (113,731) (2,691,407)
-------------------------
$(629,400) $1,701,713
=========================
108
<PAGE>
SUNGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income tax expense (benefit) consists of the following:
YEAR ENDED DECEMBER 31 1997 1996
- -----------------------------------------------------------------------------
Current payable
Federal $ (72,503) $ 94,000
State 11,492 317,247
-------------------------------
(61,011) 411,247
-------------------------------
Deferred
Federal (427,873) 1,288,621
State (140,516) 1,845
-------------------------------
(568,389) 1,290,466
-------------------------------
$(629,400) $1,701,713
===============================
Allocation of income tax
expense (benefit)
Income tax expense
(benefit) resulting
from continuing
operations $(629,400) $ 972,071
Income tax expense
resulting from
extraordinary gain 729,642
-------------------------------
$(629,400) $1,701,713
===============================
A net cumulative deferred tax (liability) and asset of $(1,108,395) and
$1,582,591 are included in the balance sheet. The components of the net
deferred tax (liability) asset are as follows:
DECEMBER 31 1997 1996
- -----------------------------------------------------------------------------
Difference in depreciation methods of
property and equipment $ (24,688) $ (8,197)
Difference in amortization method of
broadcast licenses (985,626) (1,038,521)
Allowance for doubtful accounts 20,070 22,950
Imputed interest on zero percent notes 53,396 181,360
State deferred taxes 23,411 80,645
Other 495
Net operating loss carryforwards 1,394,800 694,963
Alternative minimum tax credit 94,000
-------------------------------
481,858 27,200
Valuation allowance (7,662) (121,393)
-------------------------------
$ 474,196 $ (94,193)
===============================
Assets $1,492,172 $ 1,073,918
Liabilities (1,010,314) (1,046,718)
Valuation allowance (7,662) (121,393)
-------------------------------
$ 474,196 $ (94,193)
===============================
109
<PAGE>
SUNGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The valuation allowance at December 31, 1997 is $7,662 and was decreased by
$113,731 during the current year due to the anticipated gain to be recognized
from the expected sale of the Corporation's assets.
At December 31, 1997, the Corporation has approximately $4,102,000 of federal
net operating loss carryforwards, which expire in the years 2006 through 2012.
- - INCENTIVE COMPENSATION PLANS
The Corporation accounts for its incentive stock option plans in accordance
with Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock
Issued to Employees. Although the Corporation has elected to follow APB
Opinion No. 25, SFAS No. 123 requires pro forma disclosures of net income and
earnings per share as if the Corporation had accounted for its employee stock
options under that statement. The Corporation has not made the pro forma
disclosures required by SFAS No. 123 as they are not significant.
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 3,200 options exercisable under the above Plan at
December 31, 1997 and 1996, but no options had been exercised as of those
dates. A summary of changes in the stock options follows:
NUMBER OF SHARES
DECEMBER 31 1997 1996
- -----------------------------------------------------------------------------
Qualified
Outstanding at beginning of year 3,200 5,700
Expired (2,500)
------------------
Outstanding at end of year 3,200 3,200
==================
Option price range at December 31 $3.00 $3.00
TO to
$4.00 $4.00
In addition, in 1987 a non-qualified Plan was established to grant options to
certain other key 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 per share under this
Plan at December 31, 1997 and 1996, but no options had been exercised as of
those dates. These options expire in 1999.
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 per share. The option is exercisable over a ten-year period, but had not
been exercised as of December 31, 1997 and 1996.
110
<PAGE>
SUNGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - EARNINGS PER SHARE
Basic and diluted earnings per share have been computed based upon weighted
average common shares outstanding, which average shares totaled 13,163,562 and
13,340,406 during 1997 and 1996.
The Corporation had no dilutive securities in 1997 or 1996.
Options to purchase 17,200 shares of common stock at $3 to $4 per share were
outstanding at December 31, 1997 and 1996, but were not included in the
computation of diluted EPS because the options' exercise price was greater
than the average market price of the common shares during those years.
- - STOCK WARRANTS
The Corporation has outstanding 4,956,050 warrants exercisable for a total
price of $.89. In addition, there are an additional 1,663,812 warrants which
are exercisable at a total price of $.44. All of the warrants include an
anti-dilutive provision. These warrants are generally exercisable immediately
upon issuance.
One lender, which is owed $4,621,568, holds 5,972,060 of these warrants, which
represent approximately 45% of the Corporation's outstanding stock on a
converted basis.
- - OTHER INCOME
In 1996, the Corporation had an agreement with another broadcasting company to
move the transmitter site of its Longview, Texas radio station in exchange for
$200,000 cash and real and personal property of approximately $664,450. The
Corporation recognized a gain of $864,450.
- - COMMITMENTS AND CONTINGENCIES
The Corporation has an employment agreement with its president through May 31,
2000 which includes a provision for an 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.
111
<PAGE>
The Corporation has employment agreements with each of the radio station
general managers through December 31, 1998. These agreements provide
compensation ranging from $75,000 to $120,000 plus bonus incentives based on
station cash flows. The employees are eligible for insurance and benefit
plans provided by the Corporation. The employees or their
beneficiaries/estates are entitled to the designated payments in the event of
disability, death, or a change in control of the subsidiary. The agreement
terminates if employee terminates employment or if the Corporation terminates
the employee. The Corporation is not insured against either the death or
disability of the employees.
112
<PAGE>
SUNGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 $177,612 in 1997 and $174,403 in 1996.
The Corporation and certain of its subsidiaries have marketing service
agreements which expire between 1998 and 2000.
Minimum commitments under non-cancelable leases and marketing services
contracts are as follows:
YEARS ENDING DECEMBER 31
- -----------------------------------------------------------------------------
1998 $219,025
1999 220,030
2000 168,652
2001 128,572
2002 52,642
Thereafter 148,320
--------
$937,241
========
The Corporation, in the normal course of business, is a defendant in certain
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.
- - DISPOSITION
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.
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 July 2, 1996, the Corporation sold substantially all of the assets of the
Pensacola Property. The sales price of the Pensacola Property assets was $2.3
million in cash, plus closing costs of approximately $150,000.
113
<PAGE>
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. The FDIC received $2,094,214 from the Pensacola Property sale
proceeds. The Corporation is discharged from indebtedness to the FDIC.
114
<PAGE>
SUNGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - SUBSEQUENT EVENT
On February 3, 1998, the Corporation entered into an asset purchase agreement
to sell substantially all of its assets for $24,000,000 to Sunburst Media.
The Corporation will retain its cash and accounts receivable. It is
anticipated that the net proceeds, after payment of the Corporation's
outstanding obligations, will be distributed and the Corporation liquidated
after all affairs are wound up.
Consummation of the transaction is subject to the approval of the
Corporation's stockholders and the FCC. A closing date has not been
established.
On March 12, 1998, the FCC, upon review of the Corporation's applications for
license renewal for four stations, determined that the stations had serious
deficiencies with respect to their Equal Employment Opportunity ("EEO")
programs. The range of remedies that may be imposed by the FCC include (1)
monetary penalties; (2) granting the renewal of one or more of the stations'
licenses subject to special EEO reporting conditions; (3) granting the renewal
of one or more of the stations' licenses for a short term subject to such
reporting conditions; (4) monetary penalties and granting short term renewals;
or (5) denying one or more of the requested renewals of the stations'
licenses.
115
EXHIBIT 99(b)
United States
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
--------
CURRENT REPORT pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
Date of Report (Date of earliest event reported): February 20, 1998
SunGroup, Inc.
(Exact name of registrant as specified in its charter)
Tennessee 0-3851 62-0790469
State of other jurisdiction Commission IRS Employer
of incorporation File No. Identification No.
2201 Cantu Court, Suite 102A, Sarasota, FL 34232-6254
(Address of principal executive offices)
Registrant's telephone number, including area code: 941-377-6710
116
<PAGE>
ITEM 5
OTHER EVENTS
On February 3, 1998 SunGroup, Inc. entered into an Agreement to sell
substantially all of the assets of radio stations: KEAN-FM; KEAN-AM; KROW-FM,
Abilene, Texas; KYKX-FM, Longview, Texas; KKSS, Albuquerque, New Mexico;
KKYS-FM, Bryan/College Station, Texas; KMJJ-FM, Shreveport, Louisiana;
Alpha-Web Designs, Shreveport, Louisiana; Arklatex, Shreveport, Louisiana;
Abilene Broadcasting, Abilene, Texas; Big Bass, Inc., Sarasota, Florida; to
SunBurst Media, Inc. of Dallas, Texas. The assets being sold are exclusive
of certain retained assets, including without limitation to, accounts
receivable. The sales price of the assets of the radio stations is $24
million in cash, plus certain closing costs. The sale is contingent upon,
among other conditions, consent by the Federal Communications Commission to
the assignment of SunGroup, inc. various broadcast licenses for the stations
to SunBurst Media. SunGroup, Inc. does not anticipate any difficulty with
the transfer to SunBurst Media. There exists no material relationship between
SunBurst and SunGroup, or any of its officers, directors or affiliates.
ITEM 7
Financial Statements and Exhibits
Exhibits
(1) Financial Statements
(2) Asset Purchase Agreement, by and between SunGroup, Inc. and SunBurst
Media of Dallas Texas, dated February 3, 1998
(3) Copy of Press Release (attachments).
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SunGroup, Inc.
Dated: February 20, 1998 By:
-------------------------------------
James A. Hoetger
Vice President, Finance
117
<PAGE>
EXHIBIT FOR SEC 8-K ITEM 7 (C)
SUNGROUP, INC.
2201 Cantu Court, Suite 102A
Sarasota, Florida 34232-6254
941-377-6710 - Telephone - 941-378-5449 - Fax
NOVEMBER 19, 1997
CONTACT:
JOHN W. BIDDINGER, CHAIRMAN AND PRESIDENT
PRESS RELEASE
-------------
ON NOVEMBER 13, 1997, SUNGROUP, INC. ("SUNGROUP") ENTERED INTO A LETTER OF
INTENT ("LETTER OF INTENT") WITH SUNBURST MEDIA MANAGEMENT, INC. ("SUNBURST").
THE LETTER OF INTENT PROVIDES FOR SUNBURST'S ACQUISITION OF SUBSTANTIALLY ALL
OF THE ASSETS OF SUNGROUP FOR A PRICE OF TWENTY FOUR MILLION DOLLARS
($24,000,000), AND THAT THE COMPANY WILL CONTINUE TO KEEP IT'S ACCOUNTS
RECEIVABLES AND CASH.
SENIOR MANAGEMENT OF SUNGROUP HAS BEEN ADVISED OF THE LETTER OF INTENT AND IS
PARTICIPATING IN PREPARING THE REQUIRED DUE DILIGENCE. SUNBURST WILL BEGIN
VISITING SUNGROUP'S RADIO STATIONS ON NOVEMBER 21, 1997.
THE TRANSACTIONS CONTEMPLATED BY THE LETTER OF INTENT ARE SUBJECT TO APPROVAL
BY THE SHAREHOLDERS OF BOTH SUNGROUP AND SUNBURST. THE TRANSACTIONS ARE ALSO
SUBJECT TO FCC AND OTHER APPLICABLE REGULATORY APPROVALS.
SUNGROUP CURRENTLY OWNS 7 RADIO STATIONS:
KEAN-AM & FM & KROW FM (ABILENE, TEXAS),
KYKX-FM (LONGVIEW, TEXAS),
KMJJ-FM (SHREVEPORT, LOUISIANA),
KKSS-FM (ALBUQUERQUE, NEW MEXICO), AND
KKYS-FM (BRYAN, TEXAS).
ALL OF SUNGROUP'S RADIO STATIONS ARE SUBJECT TO THE LETTER OF INTENT.
SUNBURST CURRENTLY OWNS 12 RADIO STATIONS LOCATED IN:
SPRINGFIELD, MISSOURI
LAKE CHARLES, LOUISIANA
McALLEN BROWNSVILLE, TEXAS
IN ADDITION, SUNBURST PRESENTLY HAS OTHER PROPERTIES UNDER CONTRACT.
118
<PAGE>
EXHIBIT FOR SEC 8-K ITEM 7 (C)
SUNGROUP, INC.
2201 Cantu Court, Suite 102A
Sarasota, Florida 34232-6254
941-377-6710 - Telephone - 941-378-5449 - Fax
FEBRUARY 5, 1998
CONTACT:
JOHN W. BIDDINGER, CHAIRMAN AND PRESIDENT
PRESS RELEASE
-------------
John W. Biddinger, Chairman and President of SunGroup, Inc. (the "Company")
announced today that the Board of Directors has approved and the Company has
officially signed the previously announced agreement for the sale of
substantially all of its assets, including its radio stations KEAN-AM/FM,
KROW-FM, Abilene, Texas; KYKX-FM, Longview, Texas; KKYS-FM, Bryan, Texas;
KKSS-FM, Albuquerque, New Mexico; and, KMJJ-FM, Shreveport, Louisiana to
Sunburst Media of Dallas, Texas for the sum of Twenty-Four Million Dollars
($24,000,000). The Company will retain its accounts receivable and cash in
the transaction. Sunburst Media owns twelve stations in three other markets
in addition to those being acquired from the Company.
Consummation of the transaction is subject to the approval of the shareholders
of SunGroup, who will be allowed to vote on the transaction in the next few
weeks. Finalization of the agreement is also subject to the approval of the
Federal Communications Commission, which is expected to occur sometime in
April or May, 1998.
The Company further announced that Sunburst Media has entered into additional
agreements which provide for the simultaneous transfer of KMJJ-FM, Shreveport,
Louisiana to an affiliate of Capstar Broadcasting, Austin, Texas and for the
transfer of KKSS-FM, Albuquerque/Santa Fe, New Mexico to an affiliate of
Trumper Communications, II L.P., Chicago, Illinois.
119
<PAGE>
SunGroup, Inc. and Subsidiaries
Consolidated Financial Statements
December 31, 1997 and 1996
<PAGE>
SunGroup, Inc. and Subsidiaries
Table of Contents
PAGE
- -----------------------------------------------------------------------------
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
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Stockholders
SunGroup, Inc. and Subsidiaries
Sarasota, Florida
We have audited the accompanying consolidated balance sheet of SunGroup, Inc.
and subsidiaries as of December 31, 1997 and 1996, 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, 1997 and 1996, and the results of
their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles.
As discussed in the subsequent event footnote to the financial statements, on
February 3, 1998, the Corporation entered into an asset purchase agreement to
sell substantially all of its assets except cash and accounts receivable. The
consummation of the sale is subject to the approval of the Corporation's
stockholders and the Federal Communications Commission. If the sale is
consummated, all of the Corporation's obligations will be settled and
remaining net proceeds will be distributed to the stockholders.
Geo. S. Olive & Co. LLC
Indianapolis, Indiana
March 9, 1998
<PAGE>
SUNGROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 1997 1996
- -----------------------------------------------------------------------------
Gross Revenues $9,161,416 $8,950,038
Agency commissions (979,632) (986,139)
---------- ----------
8,181,784 7,963,899
---------- ----------
Expenses
Technical and programming 2,050,326 2,092,683
Selling, general and administrative 5,681,098 5,107,501
---------- ----------
7,731,424 7,200,184
---------- ----------
Income From Operations 450,360 763,715
---------- ----------
Other Income (Expense)
Gain on disposal of assets 640,355
Income from tower relocation 864,450
Interest expense (349,034) (289,400)
Other (21,412) 190,191
---------- ----------
(370,446) 1,405,596
---------- ----------
Income Before Income Taxes and
Extraordinary Item 79,914 2,169,311
Income Taxes (Benefit) (629,400) 972,071
---------- ----------
Income Before Extraordinary Item 709,314 1,197,240
Extraordinary Gain From Debt
Extinguishment,net of income
taxes of $729,642 8,578,057
---------- ----------
NET INCOME $ 709,314 $9,775,297
========== ==========
BASIC AND DILUTED EARNINGS PER SHARE
Income before extraordinary item $.05 $.09
Extraordinary item .64
---------- ----------
Net Income $.05 $.73
========== ==========
See notes to consolidated financial statements.
<PAGE>
SUNGROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31 1997 1996
- -----------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,338,065 $ 551,750
Accounts receivable, less allowances
of $59,028 and $67,500 1,460,218 1,638,889
Income taxes receivable 10,000 61,000
Prepaid expenses and other current assets 183,146 192,813
Deferred income taxes 1,582,591
------------ -----------
Total current assets 4,574,020 2,444,452
------------ -----------
PROPERTY, PLANT AND EQUIPMENT, net 1,591,970 1,645,180
------------ -----------
OTHER ASSETS
Intangible assets 5,748,421 6,133,910
Other assets 84,595 14,524
------------ -----------
5,833,016 6,148,434
------------ -----------
$11,999,006 $10,238,066
============ ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Current maturities of long-term debt $ 9,981,522 $ 2,898,430
Accounts payable and accrued expenses 805,606 921,313
Accrued interest payable 16,085
------------ -----------
Total current liabilities 10,787,128 3,835,828
------------ -----------
LONG-TERM DEBT 624,341 7,538,217
------------ -----------
DEFERRED INCOME TAXES 1,108,395 94,193
------------ -----------
STOCKHOLDERS' DEFICIT
Common stock--no par value
Authorized--30,000,000 shares
Issued and outstanding--6,543,700 shares 3,770,639 3,770,639
Additional paid-in capital 5,969,195 5,969,195
Retained deficit (10,260,692) (10,970,006)
------------ -----------
(520,858) (1,230,172)
------------ -----------
$11,999,006 $10,238,066
============ ===========
See notes to consolidated financial statements.
<PAGE>
SUNGROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT DEFICIT
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 6,442,099 $3,770,639 $5,969,195 $(20,745,303) $(11,005,469)
Warrants exercised for
$0.11 in total 101,601
Net income 9,775,297 9,775,297
-------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 6,543,700 3,770,639 5,969,195 (10,970,006) (1,230,172)
Net income 709,314 709,314
-------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 6,543,700 $3,770,639 $5,969,195 $(10,260,692) $ (520,858)
===================================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
SUNGROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31 1997 1996
- -----------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 709,314 $9,775,297
Reconciliation of net income to net cash
provided by operating activities
Depreciation and amortization 656,259 689,381
(Gain) loss on disposal of assets (640,355)
Net expense from barter transactions 40,818 92,851
Extraordinary gain from debt extinguishment (9,307,697)
Income from tower relocation (664,450)
Deferred income taxes (568,389) 1,290,466
Changes in
Accounts receivable 178,671 9,749
Income tax receivable 51,000 (61,000)
Prepaid expenses and other current assets 9,667 (122,400)
Accounts payable and accrued expenses (156,525) 250,934
Interest payable (4,292) 16,659
Other assets (70,071) 2,244
--------------------------
Net cash provided by operating activities 846,452 1,331,679
--------------------------
INVESTING ACTIVITIES
Purchase of property and equipment (184,639) (160,558)
Purchase of intangible asset (32,921) (150,000)
Proceeds from sale of assets 2,101,038
--------------------------
Net cash provided (used) by investing activities (217,560) 1,790,480
--------------------------
FINANCING ACTIVITIES
Repayments of long-term debt (642,577) (2,905,083)
Proceeds from long-term debt 800,000
--------------------------
Net cash provided (used) by financing
activities 157,423 (2,905,083)
--------------------------
INCREASE IN CASH AND CASH EQUIVALENTS 786,315 217,076
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 551,750 334,674
--------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $1,338,065 $ 551,750
==========================
SUPPLEMENTAL CASH FLOWS INFORMATION
Interest paid $ 315,119 $ 226,102
Income taxes paid 102,807 216,775
NON-CASH TRANSACTIONS
Accrued interest added to note 11,793 11,474
Accounts payable funded by buyer 192,214
See notes to consolidated financial statements.
<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, 1997, the Corporation owned and operated seven radio stations, AM
and FM, in Louisiana, Texas, and New Mexico. Each radio station is licensed
with the Federal Communications Commission ("FCC"), with each license required
to be renewed every seven 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 AND CASH EQUIVALENTS
Cash and cash equivalents consist of bank deposits in federally insured
accounts. At December 31, 1997, the Corporation's cash accounts exceeded
federally insured limits by approximately $1,045,000.
For purposes of the statement of cash flows, the Corporation considers all
highly liquid debt instruments, if any, purchased with an original maturity of
three months or less to be cash equivalents.
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 25 years using the
straight-line method. During 1997, the Corporation incurred costs associated
with the operations of a station in Texas under a time brokerage agreement.
These costs are being amortized over 5 years.
<PAGE>
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, and depreciation is computed on a
straight-line basis using estimated lives as follows:
- -----------------------------------------------------------------------------
Buildings 20 years
Broadcast equipment 5-10 years
Furniture and fixtures 10 years
Transportation equipment 3 years
Leasehold improvements Life of lease
<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 other income.
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.
- - Property and Equipment
Property and equipment consist of the following:
DECEMBER 31 1997 1996
- -----------------------------------------------------------------------------
Land $ 235,307 $ 235,307
Buildings 543,391 507,177
Leasehold improvements 91,334 81,406
Equipment and furnishings 2,893,138 2,754,641
Vehicles 138,944 138,944
-------------------------------
3,902,114 3,717,475
Accumulated depreciation (2,310,144) (2,072,295)
-------------------------------
$1,591,970 $1,645,180
===============================
<PAGE>
- - INTANGIBLE ASSETS
Intangible assets consist of the following:
DECEMBER 31 1997 1996
- -----------------------------------------------------------------------------
Goodwill $4,243,678 $4,243,678
Broadcast license 5,236,716 5,236,716
Start-up costs 32,921
-------------------------------
9,513,315 9,480,394
Accumulated amortization (3,764,894) (3,346,484)
-------------------------------
$5,748,421 $6,133,910
===============================
<PAGE>
SUNGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - LONG-TERM DEBT
Long-term debt consists of the following:
DECEMBER 31 1997 1996
- -----------------------------------------------------------------------------
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. In January 1998, the
Corporation paid $820,000 in full
satisfaction of two of the note holders. The
third note holder has renegotiated a new note
bearing interest at 10%, maturing June 1998 $1,640,000 $2,190,000
Note payable, an individual, interest at
0%(a); monthly principal payments based on
cash flow of subsidiary; balance due August
2002 225,628 303,915
Note payable, a related party, interest at
2.7%; $500,000 face amount; accrued interest
added to note; due January 2003
435,928 424,135
Note payable, bank, interest at prime plus
1%; monthly payments of $1,520 including
interest; balance due September 2000 47,988 60,610
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 3,821,913 3,821,913
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 799,655 799,655
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 167,427 167,427
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, institution, interest at 10%;
monthly payments of interest only; balance
due June 1998. 800,000
Note payable, financial institution, interest
at 17.5%; monthly payments of $217 including
interest; balance due October 1997 1,668
-----------------------------
<PAGE>
Note payable, financial institution, interest
at 12%; monthly payments of interest
only; balance due June 1998 2,184,322 2,184,322
-----------------------------
10,605,863 10,436,647
Current maturities (9,981,522) (2,898,430)
-----------------------------
$ 624,341 $7,538,217
=============================
(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.
<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.
The Corporation was in default of two notes totaling $4,621,568 at December
31, 1997 due to the violation of certain debt covenants.
The Corporation had several notes payable which had been in default for a
number of years and the creditors had not sought collection on these notes.
Many of these notes had 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. As the debt holder did not initiate
collection procedures within the prescribed time period of the statute of
limitations, the notes are no longer collectible by the creditors. During
1996, $4,567,400 of principal and accrued interest was written off as the
statute of limitations had expired. This forgiveness of debt is accounted for
as an extraordinary item in the consolidated statement of operations.
During 1996, the Corporation sold the assets of one of its subsidiaries. The
net proceeds of $2,094,000 were applied against the note payable to the FDIC
which was secured by these assets. There was a remaining balance of
$2,959,700 of principal and accrued interest which was forgiven by the note
holder and is also included as an extraordinary item. This subsidiary also
had a bond payable to a broadcasting company in the amount of $1,780,600 which
was in a secondary position. This liability has also been forgiven and is
treated as an extraordinary item.
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.
Future maturities of long-term debt are as follows:
YEARS ENDING DECEMBER 31
- -----------------------------------------------------------------------------
1998 $ 9,981,522
1999 170,021
2000 18,392
After 2002 435,928
-----------
$10,605,863
===========
<PAGE>
SUNGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - Stockholders' Equity
During 1996, a warrant holder (who is also an officer and director) exercised
a warrant for 101,601 shares of a total amount of $0.11.
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 $9,307,700 (including $6,104,100 of
principal and $3,203,600 in accrued interest) was written off during 1996
resulting in an extraordinary gain of $9,307,700. For $4,567,400 of this
debt, 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. The remaining $4,740,300 of the
debt write off resulted from the settlement of the liabilities of a subsidiary
after the sale of all its assets.
- - INCOME TAXES
Income tax expense consists of tax on income before extraordinary item and tax
related to the extraordinary item.
The reconciliation of income tax to the tax at the federal statutory income
tax rate is as follows:
DECEMBER 31 1997 1996
- -----------------------------------------------------------------------------
Income before income taxes and extraordinary item $ 79,914 $ 2,169,311
Extraordinary gain before income taxes 9,307,699
-------------------------
Income before income taxes $ 79,914 $11,477,010
=========================
Tax expense at statutory rate of 34% $ 21,171 $ 3,902,183
Tax effect of
State income tax (net of federal effect) (85,156) 403,803
Nondeductible expenses 83,964 84,683
Net operating losses written-off in prior years (576,487)
Other 40,839 2,451
Increase (decrease) in valuation allowance (113,731) (2,691,407)
-------------------------
$(629,400) $1,701,713
=========================
<PAGE>
SUNGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income tax expense (benefit) consists of the following:
YEAR ENDED DECEMBER 31 1997 1996
- -----------------------------------------------------------------------------
Current payable
Federal $ (72,503) $ 94,000
State 11,492 317,247
-------------------------------
(61,011) 411,247
-------------------------------
Deferred
Federal (427,873) 1,288,621
State (140,516) 1,845
-------------------------------
(568,389) 1,290,466
-------------------------------
$(629,400) $1,701,713
===============================
Allocation of income tax
expense (benefit)
Income tax expense
(benefit) resulting
from continuing
operations $(629,400) $ 972,071
Income tax expense
resulting from
extraordinary gain 729,642
-------------------------------
$(629,400) $1,701,713
===============================
A net cumulative deferred tax (liability) and asset of $(1,108,395) and
$1,582,591 are included in the balance sheet. The components of the net
deferred tax (liability) asset are as follows:
DECEMBER 31 1997 1996
- -----------------------------------------------------------------------------
Difference in depreciation methods of
property and equipment $ (24,688) $ (8,197)
Difference in amortization method of
broadcast licenses (985,626) (1,038,521)
Allowance for doubtful accounts 20,070 22,950
Imputed interest on zero percent notes 53,396 181,360
State deferred taxes 23,411 80,645
Other 495
Net operating loss carryforwards 1,394,800 694,963
Alternative minimum tax credit 94,000
-------------------------------
481,858 27,200
Valuation allowance (7,662) (121,393)
-------------------------------
$ 474,196 $ (94,193)
===============================
Assets $1,492,172 $ 1,073,918
Liabilities (1,010,314) (1,046,718)
Valuation allowance (7,662) (121,393)
-------------------------------
$ 474,196 $ (94,193)
===============================
<PAGE>
SUNGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The valuation allowance at December 31, 1997 is $7,662 and was decreased by
$113,731 during the current year due to the anticipated gain to be recognized
from the expected sale of the Corporation's assets.
At December 31, 1997, the Corporation has approximately $4,102,000 of federal
net operating loss carryforwards, which expire in the years 2006 through 2012.
- - INCENTIVE COMPENSATION PLANS
The Corporation accounts for its incentive stock option plans in accordance
with Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock
Issued to Employees. Although the Corporation has elected to follow APB
Opinion No. 25, SFAS No. 123 requires pro forma disclosures of net income and
earnings per share as if the Corporation had accounted for its employee stock
options under that statement. The Corporation has not made the pro forma
disclosures required by SFAS No. 123 as they are not significant.
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 3,200 options exercisable under the above Plan at
December 31, 1997 and 1996, but no options had been exercised as of those
dates. A summary of changes in the stock options follows:
NUMBER OF SHARES
DECEMBER 31 1997 1996
- -----------------------------------------------------------------------------
Qualified
Outstanding at beginning of year 3,200 5,700
Expired (2,500)
------------------
Outstanding at end of year 3,200 3,200
==================
Option price range at December 31 $3.00 $3.00
TO to
$4.00 $4.00
In addition, in 1987 a non-qualified Plan was established to grant options to
certain other key 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 per share under this
Plan at December 31, 1997 and 1996, but no options had been exercised as of
those dates. These options expire in 1999.
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 per share. The option is exercisable over a ten-year period, but had not
been exercised as of December 31, 1997 and 1996.
<PAGE>
SUNGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - EARNINGS PER SHARE
Basic and diluted earnings per share have been computed based upon weighted
average common shares outstanding, which average shares totaled 13,163,562 and
13,340,406 during 1997 and 1996.
The Corporation had no dilutive securities in 1997 or 1996.
Options to purchase 17,200 shares of common stock at $3 to $4 per share were
outstanding at December 31, 1997 and 1996, but were not included in the
computation of diluted EPS because the options' exercise price was greater
than the average market price of the common shares during those years.
- - STOCK WARRANTS
The Corporation has outstanding 4,956,050 warrants exercisable for a total
price of $.89. In addition, there are an additional 1,663,812 warrants which
are exercisable at a total price of $.44. All of the warrants include an
anti-dilutive provision. These warrants are generally exercisable immediately
upon issuance.
One lender, which is owed $4,621,568, holds 5,972,060 of these warrants, which
represent approximately 45% of the Corporation's outstanding stock on a
converted basis.
- - OTHER INCOME
In 1996, the Corporation had an agreement with another broadcasting company to
move the transmitter site of its Longview, Texas radio station in exchange for
$200,000 cash and real and personal property of approximately $664,450. The
Corporation recognized a gain of $864,450.
- - COMMITMENTS AND CONTINGENCIES
The Corporation has an employment agreement with its president through May 31,
2000 which includes a provision for an 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.
<PAGE>
The Corporation has employment agreements with each of the radio station
general managers through December 31, 1998. These agreements provide
compensation ranging from $75,000 to $120,000 plus bonus incentives based on
station cash flows. The employees are eligible for insurance and benefit
plans provided by the Corporation. The employees or their
beneficiaries/estates are entitled to the designated payments in the event of
disability, death, or a change in control of the subsidiary. The agreement
terminates if employee terminates employment or if the Corporation terminates
the employee. The Corporation is not insured against either the death or
disability of the employees.
<PAGE>
SUNGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 $177,612 in 1997 and $174,403 in 1996.
The Corporation and certain of its subsidiaries have marketing service
agreements which expire between 1998 and 2000.
Minimum commitments under non-cancelable leases and marketing services
contracts are as follows:
YEARS ENDING DECEMBER 31
- -----------------------------------------------------------------------------
1998 $219,025
1999 220,030
2000 168,652
2001 128,572
2002 52,642
Thereafter 148,320
--------
$937,241
========
The Corporation, in the normal course of business, is a defendant in certain
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.
- - DISPOSITION
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.
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 July 2, 1996, the Corporation sold substantially all of the assets of the
Pensacola Property. The sales price of the Pensacola Property assets was $2.3
million in cash, plus closing costs of approximately $150,000.
<PAGE>
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. The FDIC received $2,094,214 from the Pensacola Property sale
proceeds. The Corporation is discharged from indebtedness to the FDIC.
<PAGE>
SUNGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - SUBSEQUENT EVENT
On February 3, 1998, the Corporation entered into an asset purchase agreement
to sell substantially all of its assets for $24,000,000 to Sunburst Media.
The Corporation will retain its cash and accounts receivable. It is
anticipated that the net proceeds, after payment of the Corporation's
outstanding obligations, will be distributed and the Corporation liquidated
after all affairs are wound up.
Consummation of the transaction is subject to the approval of the
Corporation's stockholders and the FCC. A closing date has not been
established.
On March 12, 1998, the FCC, upon review of the Corporation's applications for
license renewal for four stations determined that the stations had serious
deficiencies with respect to their Equal Employment Opportunity ("EEO")
programs. The range of remedies that may be imposed by the FCC include (1)
monetary penalties; (2) granting the renewal of one or more of the stations'
licenses subject to special EEO reporting conditions; (3) granting the renewal
of one or more of the stations' licenses for a short term subject to such
reporting conditions; (4) monetary penalties and granting short term renewals;
or (5) denying one or more of the requested renewals of the stations'
licenses.