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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ________ to ________
Commission file number 333-60575
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INTEREP NATIONAL RADIO SALES, INC.
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(Exact name of registrant as specified in its charter)
New York 13-1865151
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Park Avenue, New York, New York 10017
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(Address of principal executive offices) (Zip Code)
(212) 916-0700
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(Registrant's telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act: None.
Securities registered under Section 12(g) of the Exchange Act: None.
Indicate by check mark whether the registrant: (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for past 90 days.
Yes [_] No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ((S) 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
As there is no trading market for the Registrant's common stock, the
Registrant has not computed the aggregate market value of the Registrant's
common stock held by non-affiliates.
The number of shares of the Registrant's Common Stock as of March 30, 1999
was 297,976 shares of Common Stock, $0.01 par value per share.
DOCUMENTS INCORPORATED BY REFERENCE:
None
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PART I
Item 1. BUSINESS
General
Interep National Radio Sales, Inc., a New York corporation ("Interep"
or the "Company"), is the largest independent national spot radio advertising
representation firm ("rep firm") in the United States. The Company is the
exclusive rep firm for independent radio stations, regional radio station groups
and national station groups, including, among others, Infinity Broadcasting
Corporation ("Infinity"), Clear Channel Communications, Inc. ("Clear Channel")
and the ABC Radio Division of ABC, Inc. ("ABC"). The Company serves radio
stations in all 50 states and in 97 of the top 100 radio markets. The Company's
client radio stations are diversified across all formats, including country,
rock, sports, Hispanic, classical, urban, news and talk. Interep has built
strong relationships with its clients, some of which date back 40 years. The
Company represents its clients pursuant to exclusive representation contracts.
National spot advertising is commercial air time sold by radio
stations to advertisers located outside of their local markets and typically
represents approximately 20% of a radio station's revenue. Radio stations
typically retain rep firms like Interep on an exclusive basis to sell commercial
air time to national and regional advertisers and sell air time to local
advertisers through in-house sales forces.
Interep's principal executive offices are located at 100 Park Avenue,
New York, New York 10017. The Company's telephone number is (212) 916-0700, and
its Internet address is www.interep.com.
Operating Strategy
The Company's objectives are to continue to enhance its position as
the leading national spot radio advertising rep firm in the United States and to
increase revenues and earnings. The Company's strategy to attain these goals
includes the following:
Superior Client Service. The Company strives to provide consistently
superior services to its clients with innovative features that differentiate it
from its competitors. For example, Interep pioneered the use of dedicated rep
firms, such as ABC Radio Sales, CBS Radio Sales and Clear Channel Radio Sales,
for the representation of individual radio station groups, which allows a client
to benefit from the comprehensive services offered by the Company while still
projecting its corporate identity to advertisers. The Company also provides
wide-ranging market research, sales planning and selling strategy consulting
services to its clients. The Company has enhanced the level of its services to
clients and advertisers alike through the growing use of technology, such as
networked and mobile computing. The Company has recently opened its Internet
website, where clients and advertisers, on a secure basis, can access market
research.
Promotion of Radio. Interep believes that, although radio
advertising expenditures are rising, they still are not commensurate with
consumer exposure time to radio. This provides an opportunity for continued
growth. The Company uses its proprietary database of demographic and
socioeconomic profiles of radio audiences in promoting the use of radio for
advertising. In 1991, Interep introduced its Radio 2000(R) program to advance
the ongoing growth of radio advertising by focusing on advertisers who do not
use radio advertising or who are underutilizing the medium. The Radio 2000 sales
force works with these advertisers to demonstrate how radio can help them
achieve their goals and create marketing opportunities. The Company believes
that Radio 2000 has contributed to the growth of radio advertising revenues in
the aggregate and, by virtue of Interep's leading market position, its own
growth.
Expanding Market Share. Interep will seek to continue to expand its
market share by (i) developing new clients, (ii) packaging and marketing
portfolios of client stations as "unwired networks" of unaffiliated stations
grouped together to meet advertisers' particular needs and (iii) developing
innovative sales programs. The Company seeks to represent station groups that
are acquirers of additional radio stations, such
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as Infinity, Clear Channel, Sinclair Communications, Inc. and ABC, in order to
accelerate the growth of its client base. The Company uses unwired networks of
its client stations to radio advertisers and advertising agencies to enable
advertisers to place advertisements efficiently on as few as two stations or as
many as all stations represented by Interep to target specific groups or
markets. The Company believes that its innovations, such as Radio 2000 and
dedicated rep firms, will continue to contribute to its growth.
Industry Overview
The Radio Representation Business. Radio stations generally retain
national rep firms, such as the Company, on an exclusive basis, to sell national
spot commercial air time to advertisers located outside of the stations' local
markets. Sales of air time to local advertisers are usually handled by a
station's own sales force. National spot radio advertising is so named because
it is placed or "spotted" in one or more broadcast markets, in contrast to
network advertising, which is broadcast simultaneously throughout the United
States on network-affiliated stations. Although it varies by station, national
spot radio advertising is believed to typically account for approximately 20% of
a radio station's revenue. Generally, national spot radio advertising time is
purchased by advertising agencies or media buying services hired by advertisers
to place advertising.
The Company believes that a product or service can be advertised
efficiently through spot purchases of radio air time. Because of its national
presence, large market share, established relationships with advertising
agencies and media buying services and extensive marketing resources, the
Company can sell national spot air time more effectively than its client
stations could on their own. A rep firm seeks to promote the interests of each
individual radio station client that it represents to facilitate the purchase of
national spot air time on that station. This is accomplished, in part, by
identifying advertiser needs and matching those needs with the demographic
profile and other relevant characteristics typical of the station's audience.
The ability to target specific groups is important because an advertiser's given
product may appeal to a specific socioeconomic or demographic group, and
different radio programming formats are usually designed to appeal to specific
audiences. There are approximately two dozen major radio programming formats in
the United States, including country, rock, sports, Hispanic, classical, urban,
news and talk. Within each format there are sub-formats that tend to attract an
audience with similar characteristics, and the differences between the audiences
can be significant. Research can show a correlation between the target market
for an advertiser's product and the audience attracted to a particular radio
programming format. Thus, the Company believes that it demonstrates to
advertisers that radio, in general, and its client stations, in particular, are
a highly effective advertising medium.
Clients. The Company represents many of the largest and most
successful radio station groups in the United States. For the year ended
December 31, 1998, Infinity (then the Radio Group of CBS Corporation) accounted
for 25.9% of the total commission revenues of the Company. No other station or
station group accounted for more than 10% of such commission revenues.
Representation Contracts. Rep firms generate revenues by earning
commissions on the sale of advertising time on client stations. Revenues are
based on radio station "net billings," that is, gross advertising billings less
customary advertising agency and media buying service commissions (which are
typically 15% in the aggregate). The Company's representation contracts are
exclusive and generally provide for an initial term followed by an evergreen
period. During the evergreen period, the contract term continues unless and
until notice of cancellation is given in accordance with the provisions of the
contract, typically involving at least 12 months' notice.
Representation contracts generally provide for termination payments to
be made to a rep firm if the client terminates the contract without cause. The
amount of such payments is typically equal to the estimated commissions that
would have been payable to the rep firm during the remaining portion of the
initial term and the evergreen period, plus two months. For example, if a
contract with an initial term of five years and a one-year evergreen period is
canceled after three years, the Company would be compensated in an amount equal
to 38 months of commissions (that is, 24 months for the remaining term, 12
months for the evergreen notice period, plus two months). It is customary in the
industry for the successor rep firm to make this payment. The Company generally
amortizes the cost of acquiring a new representation contract over the
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initial term of such contract, although contracts are expected to provide
significantly longer-term revenue beyond this initial period. The Company
recognizes revenue resulting from the termination of a contract with a client as
of the effective date of the termination. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--General", below.
Government Regulation. The radio industry is subject to regulation by
the Federal Communications Commission ("FCC") under the Communications Act of
1934 (the "Communications Act"). The Telecommunications Act of 1996 amended the
Communications Act in several key respects. It required the FCC to revise its
ownership rules for radio stations to remove the national limit on the number of
stations that any one single entity may own, or in which it could have an
attributable interest, and to increase the number of stations that an entity may
own, or in which it may have an attributable interest, in a local market. The
FCC implemented these directives in March 1996 by revising its multiple
ownership rules for radio stations. There is now no limit on the number of radio
stations one entity may own, operate or control nationally. As to local market
restrictions, in most circumstances, the revised rules permit an entity to own,
or hold an attributable interest in, a maximum of between five and eight
stations (a maximum of between three and five of which may be in the same
service (e.g., AM or FM)) in the same market, depending on the size of the
market (as determined in accordance with FCC regulations). The revised rules
have led to significant growth in the concentration of ownership of radio
stations among fewer owners. These changes have had the effect of increasing
the level and frequency of buyouts of representation contracts, which has
resulted in and may, in the future, result in the Company losing clients as well
as gaining clients. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--General", below.
In addition, the United States Congress and the FCC regularly have
under consideration, and may adopt in the future, new laws, regulations and
policies regarding a wide variety of matters (including technological changes)
that could affect the operations and ownership of the Company's clients and, as
a result, the Company's business. The Company is unable to predict if or when
such laws, regulations or policies might be adopted and implemented and, if
implemented, the effect they will have on the radio representation industry or
the future results of the Company's operations. Notwithstanding these
considerations, the Company believes that it is also possible that larger
station groups may be more likely than single station owners to pursue national
spot advertising and to do so through rep firms. As individual stations become
acquired by large station groups, additional commercial inventory would likely
become available for a national spot rep firm to sell.
The Company's Organization
The Company is organized into seven rep firms and five geographic
regions. The rep firms focus on servicing client stations while the regional
offices coordinate selling efforts to advertisers. Some of the rep firms, such
as McGavren Guild, Allied Radio Partners and D&R Radio, have long histories and
are the product of mergers or consolidations of two or more smaller rep firms.
Others, such as CBS Radio Sales, Clear Channel Radio Sales and ABC Radio Sales,
were recently established for the purpose of representing a single station group
as a dedicated unit. The rep firms operate through the Company's 15
strategically-located offices in Atlanta, Boston, Chicago, Dallas, Detroit, Los
Angeles, Miami, Minneapolis, New York, Philadelphia, Portland, St. Louis, San
Antonio, San Francisco and Seattle. The names of the Company's rep firms are
McGavren Guild, D&R Radio, CBS Radio Sales, Allied Radio Partners, Clear Channel
Radio Sales, Caballero Spanish Media and ABC Radio Sales.
The Company's rep firms collaborate on the marketing of radio to
advertisers and advertising agencies. Once advertisers or agencies decide to use
radio, each rep firm is responsible for selling the strengths of its client
stations. The presidents of the rep firms, as well as the senior management of
the Company, concentrate on expanding the Company's market share
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by developing new clients and maintaining service relationships with existing
clients. The activities of the rep firms' respective marketing and sales forces
are coordinated through the Company's regional executives, working with the rep
firm presidents. The regional executives are responsible for the overall sales
effort to advertisers and for managing the Company's relationships with
advertisers within their regions. Between the rep firm presidents and the
regional executives, relationships with radio station and advertising agencies
are closely coordinated. Senior management of the Company is responsible for
planning firm-wide strategy, establishing policies and procedures, operating the
Radio 2000 program and providing research and technology resources and financial
and accounting services for all of the rep firms and offices. The Company
employs marketing, research and sales support personnel to facilitate its
overall sales efforts on behalf of its client stations as well as employees in
the information services, corporate communications, administrative and financial
areas.
Sales Support
Interep's sales force is strategically located in 15 cities across the
United States to provide effective coverage of the major media buying centers.
In order to sell air time for its clients, the Company has established strong
relationships with advertisers, advertising agencies and media buying services.
The Company has also implemented the Radio 2000 program and established a sales
force of Radio Marketing Specialists dedicated to the promotion of radio
advertising for this purpose. These specialists help advertisers, through their
advertising agencies or media buying services, develop effective radio
advertising strategies with the objective of influencing and facilitating their
purchases of radio advertising air time.
The Company supports its sales efforts with sophisticated media
research, using a proprietary database of demographic and socioeconomic profiles
of every major U.S. radio market to help advertisers refine their radio
advertising strategies. This database is compiled from a wide array of industry
information and data services (e.g., The Arbitron Company, Scarborough,
AdSpender, and Simmons Market Research). The Company provides advertisers with
profiles of the audiences of the Company's client stations in specific
geographic areas, and, by showing correlations between buying patterns for
various products and services and specific demographic and socioeconomic
characteristics, helps advertisers reach their target audiences. The information
may also be used to recommend specific promotions, the appropriate blending of
media for an advertising campaign or the most effective programming vehicles for
a particular advertising campaign. In this way, the Company's sales force helps
advertisers plan radio advertising schedules using selected stations represented
by the Company. The Company also provides sales promotion support through
concept development and sales promotion programs. These programs blend
advertising support, merchandising and sales incentive programs to enable the
Company to suggest promotional campaigns, including partnerships with other
advertising media.
The Company believes that the overall demand for national radio
advertising is enhanced by its packaging and selling of advertising time on
various "unwired networks," which are unaffiliated groups of client stations
grouped together to meet advertisers' particular needs. By placing advertising
with these networks, an advertiser can reach a large, targeted audience more
efficiently than if it were to place advertising with many stations one at a
time. Due to the Company's leading market share and diverse client station base,
it is well-positioned to offer unwired networks. An advertising agency or media
buying service derives additional benefits from the Company's unwired networks
as the Company often performs research, scheduling, billing, payment and pre-
analysis and post-analysis functions relating to the advertising time purchase.
The Company has an extensive computer network with over 600 computer
terminals. Each employee has his or her own desktop or mobile computer equipped
with e-mail and internet capability linked directly to many client stations and
advertising agencies.
The Company uses an extensive in-house training program for its work
force called the Interep Radio University. This program was established to help
ensure the continuing effectiveness of the Company's staff. The Company requires
most of its professional employees to spend approximately two weeks each year in
the Company's in-house training programs, which use its own personnel as well as
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instructors from some of the leading marketing and management education programs
in the United States, including Harvard Business School and The Wharton School.
Internet
The Company has recently begun to expand its representation activities
to the Internet and is focusing on representing radio stations which broadcast
radio programming over the Internet (sometimes referred to as "audio streaming"
or "bit streaming"), as well as Internet website operators. With regard to the
former, the Company will seek national advertisers for the advertising spots
which are included in the radio programming on its client stations which is also
broadcast over the Internet, much as it does for normal radio broadcasts. For
website operators, the Company seeks advertisers who typically place "banner"
advertise ments on the websites which, if clicked, bring the Internet user to a
promotion or the website of the advertiser.
Competition
The Company's success depends on its ability to acquire and retain
representation contracts with radio stations. The media representation business
is highly competitive, both in the competition for clients and in the sale of
air time to advertisers. The Company's only significant competitor in the
national spot radio representative industry is Katz Media Group, Inc., a
subsidiary of a major radio station group owner. The change of ownership of a
client station frequently results in a change of representation firm. The pace
of consolidation in the radio industry has increased as a result of the
Telecommunications Act of 1996, resulting in larger station groups. In addition,
the recent increase in the number of ownership changes of radio stations has
increased the frequency of the termination or buyout of representation
contracts. Further, as station groups have become larger, they have gained
bargaining power with representation firms over rates and terms. As a result,
the Company continually competes for both the acquisition of new client stations
as well as the maintenance of existing relationships.
The Company competes not only with other independent and network media
representatives but also with direct national advertising, national radio
networks, syndicators and other brokers of radio advertising. The Company also
competes on behalf of its clients for advertising dollars with other media such
as broadcast and cable television, newspapers, magazines, outdoor and transit
advertising, Internet advertising, point-of-sale advertising and yellow pages
directories. Certain of the Company's competitors have greater financial and
marketing resources than does the Company, and such resources may provide them
with a competitive advantage in competing for client stations.
The Company believes that its ability to compete successfully is based
on its ability to acquire and retain representation contracts, the number of
stations and the inventory of air time it represents, its ability to offer
unwired networks, its strong relationships with advertisers, its research and
marketing services to clients and advertisers, its use of technology, the
experience of its management and the training and motivation of its sales
personnel. The Company believes that it competes effectively, in part, through
its employees' knowledge of, and experience in, the Company's business and
industry and their long standing relationships with clients.
1998 Financing Transactions
In July 1998, the Company effected a Rule 144A private placement of
$100 million principal amount of its 10% Senior Subordinated Notes due 2008 (the
"Original Notes"). In March 1999, the Company consummated an exchange offer of
$100 million principal amount of its 10% Senior Subordinated Notes due 2008 (the
"New Notes") for the Original Notes. The New Notes are identical to the Original
Notes, except that they were registered under the Securities Act of 1933. The
New Notes are governed by an Indenture, dated July 2, 1998, between the Company,
its subsidiaries and Summit Bank, as trustee (the "Indenture").
The issuance of the Original Notes was a part of a series of
transactions (the "Financing Transactions") effected by the Company in 1998 to
refinance existing indebtedness, to redeem preferred
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stock and associated shares of common stock, increase the availability of funds
for working capital and general corporate purposes (including funds to acquire
representation contracts) and to enhance the Company's operating and financial
flexibility. The Financing Transactions included the repayment of all
outstanding obligations under the Company's then current $55.0 million revolving
credit facility (the "Old Credit Facility) and the establishment of a new $10.0
million credit facility (the "New Credit Facility"). Borrowings under the New
Credit Facility are subject to the achievement of certain financial ratios and
compliance with certain other covenants. In addition, the Company repurchased
all of its outstanding shares of its Series A Preferred Stock, at face value
plus accrued dividends, and certain associated shares of the Company's Common
Stock (the "Common Stock") held by Providence Media Partners, L.P.
("Providence"), for a total purchase price of $14.1 million, and of its Series B
Preferred Stock, at face value plus accrued dividends, and certain associated
shares of Common Stock, from certain members of management, for a total purchase
price of $2.6 million. The Company will incur annual interest expense of $10.0
million in respect of the New Notes and a $0.4 million annual amortization
charge related to the Financing Transactions.
Employees
As of February 28, 1999, the Company employed approximately 610
employees, of which approximately 581 were sales-related personnel. None of the
Company's employees are represented by a union. The Company believes that its
relations with its employees are excellent.
Item 2. PROPERTIES
The Company leases approximately 145,000 square feet of office space
in 16 cities through out the United States. The Company's principal executive
offices are located at 100 Park Avenue, New York, New York, where the Company
occupies 66,700 square feet under a lease which expires in March 2005. The
Company believes that its office premises are adequate for its foreseeable
needs.
Item 3. LEGAL PROCEEDINGS
The Company from time to time is involved in litigation incidental to
the conduct of its business. The Company is not a party to any lawsuit or
proceeding which, in the opinion of management, is likely to have a material
adverse effect on the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
There is no trading market for the Company's Common Stock. The number
of holders of record of the Company's Common Stock as of March 30, 1999 was
49. The Company did not pay cash dividends to its shareholders for the years
ended December 31, 1998 or 1997. The Indenture provides that the Company will
not declare or pay any cash dividends unless at the time of such payment certain
conditions are met, including that there be no defaults with respect to the New
Notes.
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Item 6. SELECTED FINANCIAL DATA
Selected Consolidated Financial Data
The following table presents selected consolidated financial data of the Company
as of and for the years ended December 31, 1994, 1995, 1996, 1997 and 1998,
which was derived from audited consolidated financial statements of the Company.
The following data should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the Company's
Consolidated Financial Statements and the Notes thereto included elsewhere
herein.
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<CAPTION>
Year Ended December 31,
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1994 1995 1996 1997 1998
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(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Commission revenue $ 66,559 $ 70,306 $ 72,858 $ 87,096 $ 87,735
Contract termination revenue 10,918 12,194 18,876 26,586 37,221
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Total revenues 77,477 82,500 91,734 113,682 124,956
Operating expenses:
Selling expenses 47,130 48,240 53,251 63,135 61,618
General and administrative expenses 11,186 14,005 9,626 12,541 11,864
Depreciation and amortization (1) 9,929 13,073 20,988 28,954 36,436
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Total operating expenses 68,245 75,318 83,865 104,630 109,918
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Operating income 9,232 7,182 7,869 9,052 15,038
Interest expense, net (2) 3,280 3,385 3,911 3,779 6,744
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Income before provision for income taxes 5,952 3,797 3,958 5,273 8,294
Provision for income taxes 422 1,843 1,885 2,359 3,446
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Net income 5,530 1,954 2,073 2,914 4,848
Preferred stock dividend requirements and
redemption premium (3) 903 1,159 1,364 1,590 5,031
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Net income (loss) applicable to common shareholders $ 4,627 $ 795 $ 709 $ 1,324 $ (183)
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Balance Sheet Data (at end of period):
Cash and cash equivalents $ 5,208 $ 1,752 $ 2,653 $ 1,419 $ 32,962
Total assets 56,375 76,881 93,930 141,030 184,508
Long-term debt (including current portion) 24,227 35,221 34,235 44,425 100,103
Redeemable preferred stock 2,639 3,970 5,334 6,924 -
Redeemable common stock 3,678 4,132 4,662 4,522 -
Shareholders' deficit (2,589) (1,452) (2,684) (1,609) (1,222)
Other Financial Data:
EBITDA (4) $ 19,161 $ 20,255 $ 28,857 $ 38,006 $ 51,474
EBITDA margin 24.7% 24.6% 31.5% 33.4% 41.2%
Capital expenditures 1,283 1,689 1,021 792 1,270
Net cash flows from operating activities 15,880 14,001 35,982 23,821 29,404
Net cash flows from investing activities (1,746) (5,199) (1,021) (792) (1,270)
Net cash flows from financing activities (10,778) (12,258) (34,060) (24,263) 3,409
Ratio of earnings to fixed charges (5) 2.24x 1.75x 1.69x 1.96x 1.75x
</TABLE>
(1) Includes amortization of contract acquisition costs.
(2) Interest expense is shown net of interest income of $99, $109, $138, $109
and $864 during the years ended December 31, 1994, 1995, 1996, 1997 and
1998, respectively.
(3) Includes payment in excess of carrying value of $4,097 in conjunction with
the redemption of the preferred stock in July 1998.
(4) EBITDA represents income before interest, taxes, depreciation and
amortization. EBITDA does not represent net income or cash flows from
operations, as these terms are defined under generally accepted accounting
principles and should not be considered as an alternative to net income as
an indicator of the Company's operating performance or to cash flows as a
measure of liquidity. The Company has included EBITDA herein because it
understands that such information is used by certain investors as one
measure of an issuer's historical ability to service debt.
(5) Ratio of earnings to fixed charges represents income from operations before
fixed charges less interest expense and the imputed interest factor of rent
expense.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion is based upon and should be read in
conjunction with "Selected Consolidated Financial Data" and the Consolidated
Financial Statements, including the notes thereto, included elsewhere in this
Report.
Certain statements contained in this Report, including without
limitation, statements containing the words "believes", "anticipates",
"intends", "expects" and words of similar import, constitute "forward-looking
statements." Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company or industry results to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
following: general economic and business conditions, both domestic and foreign;
industry capacity; demographic changes; existing government regulations and
changes in, or the failure to comply with, government regulations; liability and
other claims asserted against the Company; competition; the loss of any
significant customers; changes in operating strategy or development plans; the
ability to attract and retain qualified personnel; the significant indebtedness
of the Company after the Financing Transactions; and other factors referenced in
this Report. Certain of these factors are discussed in more detail elsewhere in
this Report, including, without limitation, under the caption "Business." Given
these uncertainties, prospective investors are cautioned not to place undue
reliance on such forward-looking statements. The Company disclaims any
obligation to update any such factors or to publicly announce the result of any
revisions to any of the forward-looking statements contained herein to reflect
future events or developments.
General
The Company derives substantially all of its revenues from commissions
on sales of national spot radio advertising air time on behalf of radio stations
represented by the Company. Generally, national spot advertising time is
purchased by advertising agencies or media buying services retained by
advertisers to create advertising campaigns and to place advertising with radio
stations and other media. The Company receives commissions from its client radio
stations based on the national spot radio advertising billings of the station,
net of the standard advertising agency and media buying services commissions
(typically 15%). Commission rates are negotiated and set forth in a client's
representation contract. Since commissions are based on the prices paid to radio
stations for spots, the Company's revenue base is constantly adjusted for
inflation.
The Company's operating results generally are dependent on (i)
increases and decreases in the size of the total national spot radio advertising
market, (ii) changes in the Company's share of this market, (iii) acquisitions
and terminations of representation contracts and (iv) the Company's operating
expense levels. The effect of these factors on the Company's financial condition
and results of operations has varied from period to period.
Total United States national spot radio advertising annual revenues
have grown from approximately $1.1 billion to approximately $2.0 billion during
the six years ended December 31, 1998. The performance of the national spot
radio advertising market is influenced by a number of factors, including, but
not limited to, general economic conditions, consumer attitudes and spending
patterns, the share of total advertising spent on radio and the share of total
radio advertising represented by national spot radio.
The Company's share of the national spot advertising market changes as
a result of increases and decreases in the amount of national spot advertising
broadcast on the Company's client stations.
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Moreover, the Company's market share increases as the Company acquires
representation contracts with new client stations, and decreases if current
client station representation contracts are terminated. Thus, the Company's
ability to attract new clients, while retaining existing clients, significantly
affects its market share. In this regard, the value of representation contracts
which have been acquired or terminated during the last few years has tended to
increase, due to a number of factors, including the consolidation of ownership
in the radio broadcast industry following the enactment of the
Telecommunications Act of 1996. Accordingly, in recent years, the Company's rep
contract acquisition activity has increased and the Company has devoted a
significant amount of its resources to acquiring representation contracts. At
the same time, there has been an increase in the amount of revenue received by
the Company on the termination of representation contracts. The decision to
acquire a representation contract is based on the market share opportunity
presented and an analysis of the costs and net benefits to be derived. The
Company continuously seeks opportunities to acquire additional representation
contracts on attractive terms, while maintaining its current clients. The
Company's ability to acquire and maintain representation contracts has had, and
will continue to have, a significant impact on its revenues and cash flows.
Following industry practice, the Company acts as the exclusive
national rep firm for each of its client radio stations pursuant to a written
contract. If a station terminates its contract prior to the scheduled
termination date, the station is obligated to pay the Company, as required by
the contract or in accordance with industry practice, an amount approximately
equal to the commissions the Company would have earned during the unexpired term
of the canceled contract, plus an additional two months of "spill over"
commissions (representing commissions earned on advertising placed or committed
to prior to the contract termination but broadcast thereafter). In practice,
these amounts are usually paid by the successor rep firm which signs a new
contract with the station and assumes the responsibility for payment to the
former rep firm. Such payments are usually made in equal monthly installments
over a period consisting of one-half the number of months remaining under the
terminated contract. For example, if the Company acquires the representation
contract of a station which is terminating its contract with a competing rep
firm with a remaining unexpired term of 12 months, the total obligation would be
14 months of commissions payable in seven equal monthly installments.
The Company recognizes revenue resulting from the termination of a
contract with a client as of the effective date of the termination. In this
regard, when a contract is terminated, the unamortized portion, if any, of the
expense originally incurred on acquisition of such contract is written-off
entirely. Historically, these amounts have not been material. With respect to
its entry into a representation contract with a new client, the Company
amortizes the contract acquisition cost incurred in equal monthly installments
over the life of the new contract. As a result, the Company's operating income
is affected, negatively or positively, by the acquisition or loss of client
stations.
The Company has been unable to identify a method to forecast any
trends in buyout activity, or in the amount of revenue or expense which will
likely be associated with buyouts during a particular period. Generally, the
amount of revenue resulting from the buyout of a representation contract depends
on the length of the remaining term of the contract and the revenue generated
under the contract during the 12 months preceding the date of termination (the
"trailing period"). The amount recognized by the Company as contract termination
revenue in any period is not, however, indicative of such revenue that may be
realized in any future period from contract terminations, because, historically,
the level of buyout activity has varied from period to period and because the
length of the remaining terms, and the commission revenue generation, of the
contracts which are terminated in any period also vary to a considerable extent.
Accordingly, while the consolidation of ownership in the radio broadcast
industry which has followed the enactment of the Telecommunications Act of 1996
has increased buyout activity and amounts, the impact of such activity on the
Company's revenues and income is expected to be uncertain, due to the variables
of contract length and commission generation.
While the commission revenue generated under a representation contract
during a trailing period is used in the calculation of the payments to be made
by the Company on its acquisition of such contract, such revenue should not be
relied on as an indication of the future commission revenue to be generated by
the Company under that contract. Such revenue will depend on a number of
factors, including the amount of national spot advertising broadcast by the
station involved. This, in turn, will be affected by
8
<PAGE>
factors such as general and local economic conditions, consumer attitudes and
spending patterns, the share of total advertising spent on radio and the share
of total radio advertising represented by national spot radio.
The Company's selling and corporate expense levels are dependent on
management decisions regarding operating and staffing levels and on inflation.
Selling expenses represent all costs associated with the Company's marketing,
sales and sales support functions. Corporate expenses include items such as
corporate management, corporate communications, financial services, advertising
and promotion expenses and employee benefit plan contributions.
The Company's business normally follows the pattern of advertising
expenditures in general and is seasonal to the extent that radio and television
advertising spending increases during the fourth calendar quarter in connection
with the Christmas season and tends to be relatively weaker during the first
calendar quarter. Radio advertising generally increases during the second and
third quarters due to holiday-related advertising, school vacations and back-to-
school sales. In addition, radio also tends to experience increases in the
amount of advertising revenues as a result of special events such as
Presidential election campaigns. Furthermore, the level of advertising revenues
of radio stations, and therefore the level of revenues of the Company, is
susceptible to prevailing general and local economic conditions and the
corresponding increases or decreases in the budgets of advertisers, as well as
market conditions and trends affecting advertising expenditures in specific
industries.
Results of Operations
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Commission Revenues. Commission revenue increased in 1998 to $87.7
million, approximately 1.0%, from $87.1 million in 1997. The increase is
primarily attributable to a general increase in national spot advertising on
client stations, as revenue from new client station representation contracts was
offset in large part by the loss of representation contracts, primarily with
SFX, which was acquired by an affiliate of a competitor of the Company, and
Nationwide Communications, which was acquired by Jacor Communications.
Contract Termination Revenue. Contract termination revenue increased
$10.6 million during 1998 to $37.2 million, from $26.6 million in 1997,
primarily as a result of the termination of the SFX and Nationwide Communication
representations. This 40% increase in amount reflected the fact that the value
of representation contracts acquired or terminated during the last few years has
tended to increase, due to a number of factors, including the consolidation of
ownership in the radio broadcast industry following the enactment of the
Telecommunications Act of 1996. During 1998, approximately 220 client stations
terminated rep contracts with the Company, which contracts generated an
aggregate of approximately $9.6 million of commission revenue during their
trailing periods.
Selling Expenses. Selling expenses for 1998 declined by $1.5 million
or approximately 2.4%, to $61.6 million, from $63.1 million during 1997. The
improvement was primarily due to the effect of cost reduction programs initiated
by the Company during 1997.
General and Administrative Expenses. General and administrative
expenses declined approximately 5.4%, to $11.9 million for 1998, from $12.5
million during 1997. The primary cause of this improvement was the lower cost
levels achieved through the relocation of the Company's accounting and finance
functions from New York to Florida in 1997.
Depreciation and Amortization. Depreciation and amortization
increased by $7.5 million in 1998, to $36.4 million, from $29 million in 1997.
This 25.8% increase was due to the amortization of new representation contracts.
The Company acquired representation contracts with approximately 300 new radio
stations in 1998. These contracts are believed by the Company to have generated
an aggregate of approximately $10.7 million of commission revenue during the
trailing periods preceding their acquisition.
9
<PAGE>
Operating Income. Operating income increased by $6 million, or 66.1%,
for 1998, compared with 1997, for the reasons discussed above.
Interest Expense, net. Interest expense, net increased $3.0 million,
or 78.4%, to $6.7 million for 1998, compared to $3.8 million for 1997. This
increase primarily resulted from the interest on the $100.0 million of Original
Notes issued in July 1998, offset by the $0.8 million increase in interest
earned on temporary investments.
Provision for Income Taxes. Provision for income taxes for 1998
increased to $3.4 million, from $2.4 million for 1997. This $1 million, or
46.1%, increase was the result of an increase in the Company's pretax income.
Net Income. The Company's net income for 1998 increased by $1.9
million, or 66.4%, to $4.8 million, from $2.9 million in 1997, for the reasons
discussed above.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Commission Revenues. Commission revenue increased $14.2 million, or
20.0%, to $87.1 million during 1997 from $72.9 million in 1996. This increase
was caused primarily by the Company's entry into new representation contracts
during 1997 with (i) CBS stations and Jefferson-Pilot Corp. stations previously
represented by a subsidiary of CBS, Inc., (ii) Susquehanna stations and (iii)
radio stations acquired by Clear Channel, including stations formerly owned by
Paxson Communications Corp.
Contract Termination Revenue. Contract termination revenue increased
$7.7 million during 1997 to $26.6 million, from $18.9 million in 1996. This
40.8% increase reflected the fact that the value of representation contracts
acquired or terminated during the last few years has tended to increase, due to
a number of factors, including the consolidation of ownership in the radio
broadcast industry following the enactment of the Telecommunications Act of
1996. During 1997, approximately 160 client stations terminated rep contracts
with the Company which generated in aggregate approximately $7.0 million of
commission revenue during the trailing periods.
Selling Expenses. Selling expenses increased approximately 18.6% in
1997, to $63.1 million, from $53.3 million during the prior year. This $9.8
million increase was related to the increase in commission revenue in the same
period, both due to the Company's entry into new representation contracts, as
well as an increase in management incentive compensation of $1.5 million payable
on the achievement of specific goals.
General and Administrative Expenses. General and administrative
expenses for 1997 were $12.5 million, an increase of $2.9 million, or 30.3%,
over 1996. The major factors in this increase were a one-time cost of $1.4
million to relocate the Company's accounting and finance functions from New York
to Florida as part of the Company's cost reduction programs and the increased
costs attendant on servicing new representation contracts.
Depreciation and Amortization. Depreciation and amortization
increased by $8.0 million in 1997, to $29.0 million, from $21.0 million in 1996.
This 38.0% increase was due to the amortization of new representation contracts.
The Company acquired, in 1997, representation contracts with approximately 360
new stations, which contracts are believed by the Company to have generated an
aggregate of approximately $14.0 million of commission revenue during the
trailing periods preceding their acquisition.
Operating Income. Operating income increased $1.2 million, or 15.0%,
to $9.0 million in 1997, from $7.9 million in 1996, for the reasons discussed
above.
Interest Expense, net. Interest expense, net declined approximately
$0.1 million to $3.8 million in 1996, from $3.9 million in 1997 due to slightly
lower average borrowings for the year.
10
<PAGE>
Provision for Income Taxes. Provision for income taxes for 1997
increased by $0.5 million, to $2.4 million, from $1.9 million in 1996 as a
result of an increase in the Company's pretax income.
Net Income. The Company's net income increased $0.8 million to $2.9
million in 1997 as compared to $2.1 million in 1996, for the reasons discussed
above.
Liquidity and Capital Resources
The Company's cash requirements have been primarily funded by cash
provided from operations and financing transactions. Cash provided by operating
activities during 1998 amounted to $29.4 million, as compared to $23.8 million
in 1997 and $36.0 million in 1996. These fluctuations were primarily
attributable to changes in receivables pertaining to representation contract
buyouts.
Net cash used in investing activities is attributable to capital
expenditures. Capital expenditures of $1.3 million, $0.8 million and $1.0
million for 1998, 1997 and 1996, respectively, were primarily for computer
equipment and upgrades.
Overall cash provided by financing activities of $3.4 million during
1998 resulted from the Financing Transactions in 1998 offset by acquisitions of
station representation contracts. Cash used in financing activities during 1997
and 1996 was $24.3 million and $34.1 million, respectively, primarily
attributable to acquisitions of station representation contracts and debt
repayments offset by increased borrowings.
In general, as the Company acquires new representation contracts, it
uses more cash and, as its contracts are terminated, it receives additional
cash. For the reasons noted in "General" above, the Company is not able to
predict the amount of cash it will require for contract acquisitions, or the
cash it will receive on contract terminations, from period to period. The
Company believes, however, that, based on its historical performance, it will
generate sufficient cash from operations and borrowings to fund its foreseeable
contract acquisition payment requirements.
In July 1998, as part of the Financing Transactions, the Company
issued $100.0 million principal amount of the Original Notes, which were
subsequently exchanged for the same principal amount of the New Notes. The
proceeds of this issuance were used in part to repay the entire outstanding
balance under the Company's then current credit facility and to redeem all of
the outstanding shares of the Company's Series A Preferred Stock and Series B
Preferred Stock, at face value plus accrued dividends, and certain associated
shares of the Company's Common Stock. The Company also entered into the New
Credit Facility, which provided for a $10.0 million revolving credit facility,
with BankBoston, N.A. ("BankBoston") and Summit Bank ("Summit"). The term of the
New Credit Facility is six years. The Company's obligations under the New
Credit Facility are secured by a first priority perfected lien on all property
and assets, tangible and intangible, of the Company and its subsidiaries. The
Company has made no borrowings under the New Credit Facility to date.
The Company believes that its enhanced liquidity due to the Financing
Transactions, together with anticipated cash from continuing operations, should
be sufficient to fund its operations and anticipated needs for required
representation contract acquisition payments and to make required payments of
principal and interest under the New Credit Facility and 10.0% annual interest
payments on the New Notes. The Company may not, however, generate sufficient
cash flow for these purposes or to repay the New Notes at maturity. The
Company's ability to fund its operations and required contract buyout payments
and to make scheduled principal and interest payments will depend on its future
performance, which, to a certain extent, is subject to general economic,
financial, competitive, legislative, regulatory and other factors that are
beyond its control. The Company may also need to refinance all or a portion of
the New Notes on or prior to maturity. There can be no assurance that the
Company will be able to effect any such refinancing on commercially reasonable
terms or at all.
11
<PAGE>
Year 2000 Assessment
Many computer systems experience problems handling dates beyond the
year 1999. Therefore, some computer hardware and software will need to be
modified prior to the Year 2000 in order to remain functional. During 1998, the
Company completed an assessment of its internal readiness to implement Year 2000
compliant systems on a timely basis. The Company currently utilizes software
systems for its accounting, billing and database management functions, among
others, which were developed by third parties or which the Company developed
using third party software development tools. These third parties have advised
the Company that such systems are Year 2000 compliant or, in some cases, will be
made Year 2000 compliant through the installation of software patches or
upgrades. The Company expects to complete implementation of all necessary
programming changes needed to make its systems Year 2000 compliant during the
first quarter of 1999 and does not believe that the related cost will have a
material adverse effect on the Company. The Company estimates that its
expenditures for Year 2000 compliance implementation during 1999 could be
$250,000. There can be no assurance, however, that there will not be a delay
in, or increased costs associated with, the implementation of such changes, and
any inability to implement such changes could have a material adverse effect on
the Company.
The Company has not completed its assessment of the Year 2000
compliance of its radio station clients, nor of the possible consequences to the
Company of the failure of one or more of its radio station clients to become
Year 2000 compliant on a timely basis. It is possible that if a substantial
number of the Company's radio station clients failed to implement Year 2000
compliant billing or payment systems, for example, their payments to the Company
of commissions on the sale of radio advertising time might be disrupted, which
might adversely effect the Company's cash flow. The Company will discuss these
matters with its key radio station clients during 1999 to attempt to ascertain
whether and to what extent such problems are likely to occur. It is not clear,
however, what, if any measures the Company could take to deal with such
eventualities while still maintaining client relationships. The Company has
been advised by its principal suppliers of data base information services and
payroll services that they will be Year 2000 compliant on a timely basis. The
Company does not believe that it has other relationships with vendors or
suppliers which, if disrupted due to the failure of such vendors and suppliers
to deal adequately with their own Year 2000 compliance issues, would have a
material adverse effect on the Company.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates
which may adversely affect its results of operations and financial condition.
The Company seeks to minimize the risks from these interest rate fluctuations
through its regular operating and financing activities. The Company's policy is
not to use financial instruments for trading or other speculative purposes. The
Company is not currently a party to any financing instruments.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial information required by this item appears in the pages
marked F-1 through F-20 at the end of this Report and is incorporated herein by
reference as if fully set forth herein.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
12
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Directors and Executive Officers
The following table sets forth certain information regarding the
directors and the executive officers (the "Executive Officers") of the Company:
Name Age Positions
---- --- ---------
Ralph C. Guild .............. 70 Chairman of the Board and Chief Executive
Officer; Director
Marc G. Guild ............... 48 President, Marketing Division; Director
William J. McEntee, Jr. ...... 55 Vice President and Chief Financial Officer
Stewart Yaguda .............. 43 President, Radio 2000
Charles Parra ............... 35 Chief Information Officer
Leslie D. Goldberg .......... 56 Director
Jerome S. Traum ............. 63 Director
All directors are elected, and all Executive Officers are appointed,
for terms of one year.
Ralph C. Guild has been Chairman of the Board and Chief Executive
Officer of the Company since 1986, and has served as a director of the Company
since 1967. He has been employed by the Company or its predecessors since 1957
in various capacities. In November 1991, Mr. Guild became one of the first
inductees into the Broadcasting Hall of Fame. Mr. Guild serves on the Boards of
Trustees of the Museum of Television & Radio, the Center for Communications and
the University of the Pacific. In April 1998, Mr. Guild received the Golden Mike
Award from the Broadcasters Foundation for outstanding contributions to the
radio industry.
Marc G. Guild has been President, Marketing Division, of the Company
since November 1989, and has served as a director of the Company since 1989. He
was Executive Vice President of Network Sales/Operations of the Company from
1986 to 1989. Mr. Guild has been employed by the Company or its predecessors
since 1975 in various capacities. As President, Marketing Division of the
Company, Mr. Guild plays a key role in the Company's sales and marketing
programs, the Interep Radio University and the Company's research and technology
divisions and also oversees the Company's regional executives. Mr. Guild serves
on the Board of Directors of the International Radio and Television Foundation.
Marc Guild is the son of Ralph Guild.
William J. McEntee, Jr. has been Vice President and Chief Financial
Officer of the Company since March 1997. Mr. McEntee serves in such positions
pursuant to a Services Agreement between the Company and Media Financial
Services, Inc. See "Certain Transactions and Relationships." Mr. McEntee was
Chief Financial Officer at Sudbrink Broadcasting in West Palm Beach, Florida,
from 1971 through 1994. Mr. McEntee owned and managed WCEE-TV in Mt. Vernon,
Illinois from 1994 until selling the station in 1996. Mr. McEntee currently owns
WIOJ-AM in Jacksonville, Florida. He is a certified public accountant and
formerly served as an audit manager for Arthur Andersen & Co.
Stewart Yaguda has been President of the Company's Radio 2000 Program
since April 1992. Mr. Yaguda was a director of marketing for Ciba-Geigy, an
international pharmaceuticals company, from 1985 to 1992, where he was
responsible for a marketing budget of over $30 million for certain over-the-
counter drugs. From 1981 to 1985, he was a product manager at Nabisco Brands. As
President of the Company's Radio 2000 Program, Mr. Yaguda is responsible for
attracting new advertisers to radio and expanding the advertising budgets of
existing radio advertisers. He holds an M.B.A. from New York University.
13
<PAGE>
Charles Parra has been Chief Information Officer of the Company since
September 1997. From July 1995 to August 1997, he was the Company's Director of
Information Technology. Mr. Parra was a project manager for the information
systems group at Russell Reynolds Associates, a New York-based executive search
firm, from 1993 through 1995. From 1990 to 1993, Mr. Parra was a technical
specialist for Sharp Electronics.
Leslie D. Goldberg served as President of the Company from August 1986
to the end of 1995, and has served as a director of the Company since 1986. He
has been employed by the Company since 1968 in various capacities. Mr. Goldberg
serves on the Board of Directors of the Radio Advertising Bureau.
Jerome S. Traum has served as a director of the Company since 1994.
Mr. Traum has been a partner with the New York law firm of Moses & Singer since
June 1995. Before that, he was of counsel to the New York law firm of Proskauer
Rose Goetz & Mendelsohn, beginning in 1991. Previously, he was a general partner
of The Blackstone Group, an investment banking firm.
Director Compensation
Directors do not receive compensation for their services as directors,
but are reimbursed for any reasonable out-of-pocket expenses incurred in
connection with attending meetings of the Board of Directors.
Item 11. EXECUTIVE COMPENSATION
The following table shows compensation for services rendered in all
capacities to the Company for the year ended December 31, 1998 by the "Executive
Officers," that is, the Chief Executive Officer and the Company's four most
highly compensated executive officers other than the Chief Executive Officer.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term Compensation
-----------------------------------
Annual Compensation Awards Payouts
----------------------------------- -------------------------- -------
Securities
Restricted Underlying
Name and Other Annual Stock Options/ LTIP All Other
Principal Position Year Salary Bonus Compensation Award(s) SARs (#) Payouts Compensation(1)
------------------ ---- -------- -------- --------------- ------------- ----------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ralph C. Guild 1998 $910,659 $215,000 $104,583(2) -- -- -- $19,141
Chairman of the Board
and Chief Executive
Officer
Marc G. Guild . 1998 315,659 126,000 -- -- -- -- 19,141
President, Marketing
Division
William J. McEntee, Jr. . 1998 111,223 -- -- -- -- -- 9,855
Vice President and
Chief Financial
Officer(3)
Stewart Yaguda . 1998 125,659 66,000 27,500(4) -- -- -- 19,141
President, Radio
2000 Division
Charles Parra . 1998 108,865 5,000 -- -- -- -- 11,840
Chief Information
Officer
</TABLE>
- ------------------
(1) Includes amounts contributed by the Company on behalf of Messrs. Ralph
Guild, Marc Guild, William McEntee, Stewart Yaguda and Charles Parra to the
Stock Growth Plan of $14,341, $14,341, $8,777,
14
<PAGE>
$14,341 and $11,135, respectively and to the 401(k) Plan of $4,800, $4,800,
$1,078, $4,800 and $705, respectively.
(2) Represents payments under a supplemental income agreement. See "--
Employment Contracts".
(3) Mr. McEntee serves in such capacities pursuant to a Services Agreement
between the Company and Media Financial Services, Inc. See "Certain
Transactions and Relationships." Mr. McEntee began his employment with the
Company on March 1, 1997.
(4) Represents contributions to a compensation deferral arrangement.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
- ------------------------------------------------------------------------------------------------------------------
Potential
Realizable
Value At
Assumed Annual
Individual Grants Rates Of Stock
- ---------------------------------------------------------------------------------------------------- Price
Number of Percent Of Appreciation
Securities Total Options/ For Option
Underlying SARs Granted Exercise Or Term
Option/SARs To Employees Base Price -------------------
Name Granted(#) In Fiscal Year ($/Sh) Expiration Date 5% ($) 10% ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ralph C. Guild 30,000 59.7% $79.36 June 2008 1,908,731 4,449,561
60,000 $83.92 July 2008 3,543,862 8,625,523
2,500 $87.78 December 2008 138,011 349,747
------------------------------------------------------------------------------------------
Marc G. Guild 5,000 9.7% $79.36 June 2008 318,122 741,594
10,000 $83.92 July 2008 590,644 1,437,587
------------------------------------------------------------------------------------------
William J. McEntee, Jr. 5,000 12.9% $79.36 June 2008 318,122 741,594
15,000 $83.92 July 2008 885,966 2,156,381
------------------------------------------------------------------------------------------
Stewart Yaguda 10,000 6.5% $83.92 July 2008 590,644 1,437,587
------------------------------------------------------------------------------------------
Charles Parra - - - - - -
------------------------------------------------------------------------------------------
</TABLE>
__________
See footnotes to Security Ownership Table at page 20, below.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
The following table sets forth, as to each Executive Officer who holds
options, the status of their options at the end of fiscal 1998. No options were
exercised by any of them during fiscal 1998.
<TABLE>
<CAPTION>
Number of Number of In-the-Money
Shares Acquired Value Unexercised Options/ Options/SARs at
Name on Exercise Realized($) SARs at Fiscal Year End Fiscal Year End ($)(1)
---- --------------- ----------- ------------------------ ----------------------------
Exercisable Non- Exercisable Non-exercisable
----------- exercisable ----------- ---------------
-----------
<S> <C> <C> <C> <C> <C> <C>
Ralph C. Guild ............. -- -- 60,000 62,500 1,396,000 --
Marc G. Guild .............. -- -- 10,000 10,000 191,450 38,600
William J. McEntee, Jr. ..... -- -- 5,000 15,000 42,100 57,900
Stewart Yaguda ............. -- -- -- 10,000 -- 38,600
Charles Parra .............. -- -- -- -- -- --
</TABLE>
- ---------------
(1) Fair market value of the Common Stock as of June 30, 1998 ($87.78 per
share), as determined by an independent appraisal, minus exercise price
multiplied by the number of shares subject to the option. In determining the
fair market value of the Common Stock, for which no trading market exists,
the Board of Directors relies on independent appraisals, the most recent of
which is as of June 30, 1998.
15
<PAGE>
Employee Stock Ownership Plan
The Company established the ESOP in 1975 to provide participating
employees with a stock ownership interest in the Company. The ESOP is a stock
bonus plan qualified under Section 401(a) of the Internal Revenue Code of 1986,
as amended (the "Code"), and is also an employee stock ownership plan under
Section 4975(e)(7) of the Code. The assets of the ESOP are held in trust and are
invested primarily in the Common Stock. The trustees of the ESOP are appointed
by the Board of Directors of the Company and are responsible for the
administration of the ESOP and the investment of its assets. The current
trustees are Ralph Guild, Leslie D. Goldberg and Marc Guild.
Each employee of the Company becomes eligible to participate in the
ESOP following completion of one year of service, with a minimum of 1,000 hours
of service to the Company. As of December 31, 1998, the ESOP had 404
participants. ESOP participation is mandatory and non-contributory for all
eligible employees. Individual accounts are maintained under the ESOP for each
participant. A participant becomes fully vested in his or her account in stages
over five years of service to the Company or earlier, without regard to years of
credited service, on the occurrence of total and permanent disability, death or
attainment of the later of age 65 or the fifth anniversary of his or her
participation in the ESOP. In the event of termination of the employment of a
participant who is not fully vested, any non-vested portion of his or her
account will be forfeited and reallocated among the remaining participants'
accounts.
The Company may make annual contributions to the ESOP, in the form of
cash or shares of Common Stock, in such amounts as may be determined by its
Board of Directors, subject to certain limitations imposed by the Code. Company
contributions for each plan year are allocated to the participants' accounts
based on the relative total compensation of each participant, subject to certain
limitations under the Code. The Company has made, however, no contributions to
the ESOP since 1994. The Company made a loan to the ESOP of $1.9 million in 1996
to fund distributions of the Common Stock from the ESOP in connection with the
termination of employment of participants. As of December 31, 1998, none of
such indebtedness remained outstanding. See "Risk Factors--Repurchase Obligation
Under Employee Benefit Plan".
The ESOP provides that the trustees will generally determine the
manner in which shares of Common Stock owned by the ESOP are voted. With
respect, however, to voting in connection with certain significant matters
specified in the Code, such as mergers, recapitalizations, or a liquidation,
dissolution or sale of all or substantially all of the assets of the Company,
each participant has the right to direct the trustees as to the voting of the
shares of Common Stock allocated to his or her account. Allocated shares for
which no directions are received in these circumstances will be voted by the
trustees as they deem to be in the best interests of the ESOP and its
participants.
Following a participant's termination of service, distribution of the
vested amount in his or her account will generally be made in cash. Cash
distributions will be based on the fair market value of the Common Stock,
determined by the ESOP's independent appraiser as of the December 31 preceding
the participant's termination. Distributions will normally be made in equal
quarterly installments over a period of time ranging up to five years, depending
on the size of the participant's account. Pending the final date of
distribution, a participant's account balance will be credited with interest at
rates based on U.S. Treasury Bill rates.
16
<PAGE>
Stock Growth Plan
The Board of Directors established the Stock Growth Plan, effective as
of January 1, 1995, to provide participating employees with a stock ownership
interest in the Company. The Stock Growth Plan is a stock bonus plan qualified
under Section 401(a) of the Code. The assets of the Stock Growth Plan are
invested primarily in Common Stock and are held in trust. The trustees of the
Stock Growth Plan are appointed by the Board of Directors and are responsible
for the administration of the Stock Growth Plan and the investment of its
assets. The current trustees are Ralph Guild, Leslie D. Goldberg and Marc Guild.
Each employee of the Company who is regularly scheduled to work at
least 20 hours per week is eligible to participate in the Stock Growth Plan as
of his or her date of hire. As of December 31, 1998, the Stock Growth Plan had
561 participants. Participation in the Stock Growth Plan is mandatory for all
eligible employees. All Stock Growth Plan participants are at all times fully
vested in their accounts without regard to age or years of service.
The Company makes regular payments to the Stock Growth Plan following
each payroll period, primarily in the form of cash (although payments in the
form of shares of Common Stock are permitted under the provisions of the Stock
Growth Plan) in such amounts as may be determined by the Board of Directors,
subject to certain limitations imposed by the Code. Such cash payments have been
used, and are intended to be used, for the foreseeable future, primarily to
purchase shares of Common Stock from the ESOP. These purchases are designed to
fulfill the Stock Growth Plan's purpose of investing in the Company, while
providing increased liquidity for the ESOP. Individual accounts are maintained
under the Stock Growth Plan for each participant. Payments for each plan year
are allocated to the participants' accounts based on the relative total
compensation of each participant, subject to certain limitations under the Code
and by taking into account benefits available under the Social Security Act.
The Stock Growth Plan provides that the trustees will generally
determine the manner in which the shares of Common Stock owned by the Stock
Growth Plan are voted. With respect to voting in connection with certain
significant matters specified in the Code, such as mergers, recapitalizations,
or a liquidation, dissolution or sale of all or substantially all of the assets
of the Company, each participant has the right to direct the trustees as to the
voting of the shares of Common Stock allocated to his or her account. Allocated
shares for which no directions are received in these circumstances will be voted
by the trustees as they deem to be in the best interests of the ESOP and its
participants.
Following a participant's termination of service, distribution of his
or her account will be made in four annual installments, with the first
installment to occur as soon as practicable after termination of employment. If
a participant's benefit does not exceed $3,500, the distribution will be made in
a single lump sum as soon as practicable following termination of service.
Distributions will normally be made in cash.
Compensation Deferral Plan
The Company established a Compensation Deferral Plan in 1994 for the
purpose of providing deferred compensation to a select group of executive
employees. The Compensation Deferral Plan had 15 participants, each of whom is
or was a member of senior management or a highly compensated employee. During
1994 and 1995, each plan participant deferred the receipt of a portion of the
compen sation otherwise payable to them for such periods. The Company then
contributed to the Compensation Deferral Plan trust shares of the Series B
Preferred Stock and the Common Stock. Each participant's account was credited
with an initial balance of the Series B Preferred Stock (valued at $1,000 per
share) equal in value to the amount deferred by the participant, plus 11.2875
shares of Common Stock for each share of the Series B Preferred Stock so
credited. The Company made no further contributions to the Compensation Deferral
Plan. In connection with the Financing Transactions, the cash proceeds of the
redemption of the shares of the Series B Preferred Stock and the associated
shares of the Common Stock were allocated among the plan participants strictly
in accordance with the shares allocated to their account
17
<PAGE>
as of the date of redemption. The Compensation Deferral Plan is in the process
of distributing such proceeds to the participants and is being terminated. See
"Certain Transactions and Relationships."
401(k) Plan
The Company maintains the 401(k) Plan, which allows employees to save
a portion of their salaries on a tax-deferred basis pursuant to the provisions
of Section 401(k) of the Code. Each employee of the Company becomes eligible to
participate in the 401(k) Plan on the first day of the month following the date
he or she completes one year of service. As of December 31, 1998, the 401(k)
Plan had [560] participants. The assets of the 401(k) Plan are held in trust.
The trustee of the 401(k) Plan is appointed by the Board of Directors of the
Company, and the current trustee is Fidelity Management Trust Company.
Each eligible employee may make a pre-tax contribution from salary in
an amount not greater than 15% of his or her respective total compensation
during each calendar year under the 401(k) Plan. For 1998, the limit under the
Code for pre-tax contributions is $10,000. As of December 31, 1998, the 401(k)
Plan had 143 participants.
Each year, the Company contributes, for each participant who makes a
pre-tax contribution, a matching contribution on the first 6% of such
participant's compensation ("Matching Contribution") in an amount equal to a
percentage of such participant's pre-tax contribution. Such percentages are
determined annually by the Board of Directors, and the percentage for 1998 was
50%. The Company may also make discretionary contributions to be allocated among
all participants in proportion to their relative total compensation. In order to
share in the allocation of matching contributions and discretionary
contributions, a participant must be employed on the last day of the calendar
year (and, for discretionary contributions, complete at least 1,000 hours of
service), unless such employee terminated employment during the year as a result
of such employee's retirement, death or disability. In any year, combined
Company and employee contributions (when aggregated with contributions to the
ESOP and the Stock Growth Plan) allocated to a participant are not permitted to
exceed the lesser of $30,000 or 25% of a participant's total taxable
compensation for the year. The portion of a participant's account balance
attributable to pre-tax contributions is at all times 100% vested and non-
forfeitable, while the portion attributable to contributions made by the Company
vests in 20% increments on the completion of each year of service with the
Company. Participants direct the investment of their accounts. The 401(k) Plan
currently offers participants the choice of four mutual funds provided through
Fidelity Investments.
A 401(k) participant's account will be distributed to such participant
following separation from service, attainment of retirement age, death or
disability. In addition, upon attaining age 59/1//2, a participant may elect to
withdraw the balance in such participant's account. Prior to the occurrence of
any of the foregoing events, a participant may apply for a hardship withdrawal
of his or her pre-tax contributions in certain circumstances. Subject to certain
dollar limitations imposed by the 401(k) Plan and federal law, a participant is
also permitted to borrow from the 401(k) Plan.
Employment Contracts
Ralph Guild is employed as Chairman of the Board and Chief Executive
Officer of the Company under an employment agreement with the Company renewed in
March 1999. The term of this agreement runs through February 29, 2004 and is
automatically extended for an additional year each March 1 unless either the
Company or Mr. Guild notifies the other on or before February 1 of the same year
of its or his election not to extend the agreement. Under the agreement, Mr.
Guild receives a base salary of not less than $925,000 per year, plus any
bonuses, incentive or other types of additional compensation which the Board of
Directors determines to pay. Further, Mr. Guild is entitled, annually, to
receive incentive compensation based on increases in the Company's EBITDA. If
EBITDA for the year in question is greater than the EBITDA for the previous
year, Mr. Guild will be entitled to a bonus equal to a percentage of his base
salary equal to two times the percentage increase of EBITDA for such year over
the higher of EBITDA for the prior year and the highest EBITDA for any prior
year back to 1998. If the Company elects not to extend
18
<PAGE>
the term of the agreement, the Company will retain Mr. Guild as a consultant for
two years after the end of the term of the agreement at a fee equal to his base
salary in effect at such time.
The agreement provides for continued payment of Mr. Guild's base
salary through the balance of its term, plus two years, if (i) Mr. Guild
terminates his employment with the Company by reason of the Company's material
breach of the agreement, (ii) Mr. Guild is not re-appointed as Chairman of the
Board and Chief Executive Officer of the Company or ceases to be elected as a
director of the Company, other than by his own choice or for reasons justifying
his termination of employment by the Company for cause, or (iii) there is a
change in control of the Board of Directors of the Company. Mr. Guild may not
compete with the Company during the term of the employment agreement and for any
period during which he is receiving compensation thereunder. The employment
agreement also provides (i) in the case of Mr. Guild's permanent disability, for
payments to Mr. Guild equal to 75% of his then current salary, less any income
disability benefits to which Mr. Guild may be entitled, for the balance of his
employment term and (ii) in the case of Mr. Guild's death, for a death benefit
equal, on the request of Mr. Guild's estate or his designated beneficiary, to
either the present value at the time of his death of the entire amount of the
salary that would have been payable to him for the balance of his employment
term or the payment of his then current salary over the balance of his
employment term.
Mr. Guild also has a supplemental income agreement pursuant to which
the Company pays him $104,583 per year, payable in monthly installments, through
2008. The Company maintains a whole life insurance policy on Mr. Guild for the
purpose of funding the supplemental income agreement.
Marc Guild is employed as President, Marketing Division of the Company
under an employment agreement entered in 1991. The term of this agreement runs
through January 1, 2001 and is automatically extended for an additional year
each January 1 unless either the Company or Mr. Guild notifies the other on or
before December 1 of the preceding year of its or his election not to extend the
agreement. Under the agreement, Mr. Guild receives a base annual salary of
$320,000 and an incentive amount of $80,000 per year, which is payable by the
Company only if it achieves certain financial or other goals set by the Company
and Mr. Guild at the beginning of each year. The agreement provides for
continued payments of base salary through the balance of its term if (i) there
is a change in control of the Company, (ii) Mr. Guild is not re-appointed to his
office with the Company or ceases to be a director of the Company, other than by
reason of his own choice or the termination of his employment for cause by the
Company or (iii) Mr. Guild's termination of his employment by reason of a
material breach by the Company of the agreement. The agreement also provides (i)
in the case of Mr. Guild's permanent disability, for payments to him equal to
75% of his then current salary, less any income disability benefits that he may
receive or to which he may be entitled, for the duration of the term of the
agreement and (ii) in the case of Mr. Guild's death, for a death benefit equal
to the present value at the time of death of the entire amount of the salary
that would have been payable to Mr. Guild for the balance of his employment term
or the payment of his then current salary over the balance of his employment
term.
Indemnification Agreements
The Company is a party to an indemnity agreement with each of its
directors and certain of its executive officers which provides that the
indemnitee will be entitled to receive indemnification, which may include
advancement of expenses, to the full extent permitted by law for all expenses,
judgments, fines, penalties and settlement payments incurred by the indemnitee
in actions brought against him or her in connection with any act taken in the
indemnitee's capacity as a director or executive officer of the Company. Under
these agreements, an indemnitee's entitlement to indemnification in a particular
case will be made by a majority of the disinterested members of the Board of
Directors, if such members constitute a quorum of the full Board and, if they do
not, by independent legal counsel selected by the Board.
19
<PAGE>
Compensation Committee Interlocks and Insider Participation
For the fiscal year ended December 31, 1998, the entire Board of
Directors determined executive officer compensation. Two members of the Board of
Directors, Ralph Guild and Marc Guild, are officers of the Company, and have
participated in certain transactions with the Company during fiscal 1998.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 30, 1999, information
concerning the beneficial ownership of the Common Stock by (i) each person known
to the Company to own beneficially more than 5% of the Common Stock, (ii) each
director of the Company, (iii) each of the Executive Officers and (iv) all
directors and Executive Officers of the Company as a group. As of March 30,
1999, there were 297,976 shares of Common Stock outstanding and 36,573 shares
held in treasury.
<TABLE>
<CAPTION>
Number of Shares
Name Beneficially Owned(1) Percent
- ---- --------------------- --------
<S> <C> <C>
ESOP(1) ............................................................. 199,684 67.0%%
Stock Growth Plan(1) ................................................ 67,366 22.6
Ralph C. Guild(2),(3) ............................................... 163,718 38.9
Marc G. Guild(2), (4) ............................................... 29,082 9.1
William J. McEntee, Jr.(5) .......................................... 20,066 6.3
Stewart Yaguda (6) .................................................. 10,914 3.5
Charles Parra ....................................................... 258 *
Leslie D. Goldberg (7) .............................................. -- --
Jerome S. Traum ..................................................... -- --
All Directors and Executive Officers as a Group (7 Persons)(1),(3)-(7) 224,038 47.6
</TABLE>
- ---------------
* Less than 1%
(1) The shares shown in this table as being owned beneficially by Messrs. Ralph
Guild, Marc Guild, McEntee, Yaguda and Parra and by all directors and
executive officers as a group include shares owned by the ESOP and the Stock
Growth Plan and allocated to plan accounts maintained for such persons. At
March 30, 1999, the combined number of shares allocated by such plans to
such persons and all directors and executive officers as a group was as
follows: Ralph Guild, 32,563 shares, Marc Guild, 6,052 shares, William J.
McEntee, Jr., 66 shares, Stewart Yaguda, 914 shares, Charles Parra, 258
shares, and all directors and executive officers as a group, 39,853 shares.
ESOP and Stock Growth Plan participants have the right to direct the votes
of the shares allocated to them with respect to certain significant matters
submitted to a vote of the Company's shareholders, although the trustees of
the ESOP and Stock Growth Plan have the authority to vote all shares held by
such plans in their discretion with regard to all other matters, including
the election of directors. Messrs. Ralph Guild, Goldberg and Marc Guild are
the sole trustees of the ESOP and the Stock Growth Plan. See "Manage ment--
Executive Compensation."
(2) Ralph Guild and Marc Guild are father and son and each disclaims beneficial
ownership of the other's holdings.
(3) Includes options granted to Ralph Guild (i) in 1988 to purchase 10,000
shares of the Common Stock at an exercise price of $32.62 per share, (ii) in
1991 to purchase 10,000 shares at an exercise price of $57.91 per share,
(iii) in 1995 to purchase 10,000 shares at an exercise price of $81.63 per
share, (iv) in June 1998 to purchase 30,000 shares at an exercise price of
$79.36 per share and (v) in July 1998 to purchase 60,000 shares at an
exercise price of $83.92 per share. All of such options are currently
exercisable. The options referred to in clauses (i), (ii) and (iii) expire
in December 2005 and the options referred to in clause (iv) and (v) expire
in June 2008 and July 2008, respectively. Does not include options to
purchase 2,500 shares of Common Stock granted in December 1998, at an
exercise price of $87.78,which will not be exercisable until June 1999 and
will expire in December 2008. All of the exercise prices referred to in
this Note 3 were equal to the value per share of Common Stock on the date of
grant, as established by an independent appraiser.
(4) Includes options granted to Marc Guild in (i) 1991 to purchase 5,000 shares
of Common Stock at the appraisal-based exercise price of $57.91 per share,
(ii) June 1998 to purchase 5,000 shares of Common
20
<PAGE>
Stock at the appraisal-based exercise price of $79.36 per share and (iii)
July 1998 to purchase 10,000 shares of Common Stock at the appraisal-based
exercise price of $83.92 per share, all of which are fully exercisable.
These options expire in December 2005, June 2008 and July 2008,
respectively.
(5) Includes options granted to Mr. McEntee in (i) June 1998 to purchase 5,000
shares of Common Stock at the appraisal-based exercise price of $79.36 per
share and (ii) July 1998 to purchase 15,000 shares of Common Stock at the
appraisal-based exercise price of $83.92 per share, all of which are fully
exercisable. Such options will expire in June 2008 and July 2008,
respectively.
(6) Includes options granted to Mr. Yaguda in July 1998 to purchase 10,000
shares of Common Stock at the appraisal-based exercise price of $83.92 per
share, which options are fully exercisable and will expire in July 2008.
(7) Does not include options to purchase 2,500 shares of Common Stock granted to
Mr. Goldberg in December 1998, at an exercise price of $87.78 ,which will
not be exercisable until June 1999 and will expire in December 2008.
The address for the ESOP, the Stock Growth Plan and Messrs. Marc
Guild, Yaguda and Parra is Interep National Radio Sales, Inc., 100 Park Avenue,
New York, New York 10017. Ralph Guild's address is 10 South Lake Trail, Palm
Beach, Florida 33480. Mr. Goldberg's address is 200 Keller Lane, North Salem,
New York 10560. Mr. McEntee's address is 2090 Palm Beach Lakes Boulevard, West
Palm Beach, Florida 33409 and Mr. Traum's address is Moses & Singer, 1301 Avenue
of the Americas, New York, New York 10019.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In November 1993, Providence purchased 5,000 shares of the Series A
Preferred Stock and 57,117 shares of the Common Stock for an aggregate purchase
price of $5.0 million. As part of the Financing Transactions, the Company
redeemed all of the shares of the Series A Preferred Stock owned by Providence
(including the 5,000 shares issued to Providence in 1993 and 2,813 shares issued
or issuable to Providence as stock dividends from time to time thereafter
through the date of redemption in lieu of cash dividends) at their face value of
$7.8 million, and all of the 57,117 shares of the Common Stock and options to
acquire an additional 3,183 shares of Common Stock owned by Providence for an
additional $6.3 million, for a total redemption price of $14.1 million.
In connection with the Financing transactions, the Company also
redeemed all of the 1,389 shares of the Series B Preferred Stock and the 11,150
shares of the Common Stock held by the Compensation Deferral Plan for an
aggregate redemption price of $2.6 million, of which $1.4 million was
attributable to the face value of the shares of the Series B Preferred Stock and
the balance was attributable to such shares of the Common Stock. Following such
redemption, the Compensation Deferral Plan was terminated and cash distributions
were made to its 15 participants out of the proceeds of the redemption,
including $1.1 million to Ralph Guild, $0.1 million to Marc Guild and $0.1
million to Mr. Yaguda.
Pursuant to a Services Agreement (the "Services Agreement") between
the Company and Media Financial Services, Inc. ("Media"), the Company retained
Media, for a five-year term commencing June 1, 1997, to provide certain
financial and accounting services for the Company and its subsidiaries,
including the preparation of monthly, quarterly and annual financial statements,
the preparation and filing of all required federal, state and local tax returns
and all billing, accounts receivable, accounts payable and collections
functions. Media currently employs 36 full-time employees. Under the Services
Agreement, Mr. McEntee, who is the President of Media, is in charge of all
services rendered by Media to the Company and, pursuant to the Services
Agreement, serves as Vice President and Chief Financial Officer of the Company
for an annual salary of $120,000. For its services, Media was paid a fee of
approximately $2.5 million in year one of the Services Agreement and its annual
fees for the second, third, fourth and fifth years will be approximately $2.7
million, $2.8 million, $3.0 million and $3.1 million.
Since December 1979, the Company has leased from a trust, of which
Ralph Guild is the income beneficiary and Marc Guild is the trustee, a building
which is used from time to time by the Company for training sessions and
management meetings. The lease expires on December 31, 2009 and provides
21
<PAGE>
for base annual rentals increasing from $78,000 per year to $102,000 per year
over the term of the lease, subject to adjustment for actual usage. In each of
1996, 1997 and 1998 total lease expense was $74,000. The Company believes the
terms of the building lease arrangement are at least comparable to, if not more
favorable to the Company than, the terms which would have been obtained in
transactions with unrelated parties. The Company intends to continue these or
other arrangements in the future as long as it believes each transaction is more
beneficial to the Company than using an unrelated provider.
Mr. Guild is indebted to the Company in the amount of $39,000
pursuant to a promissory note made in 1991 in the original principal amount of
$389,000. The note bears interest at a variable rate equal to the lowest rate
permitted for federal income tax purposes and is payable in annual installments
of principal and interest through December 31, 1999.
In December 1995, Leslie D. Goldberg resigned his positions as
President and Chief Operating Officer of the Company. Pursuant to an agreement
entered by the Company and Mr. Goldberg at such time, Mr. Goldberg received
severance payments in 1997 of $565,700 and in January and February 1998 totaling
$94,283 in consideration in part of consulting services rendered by Mr. Goldberg
and his non-competition covenant in favor of the Company. The Company's
obligation to make severance payments to Mr. Goldberg expired after February
1998.
In June 1998, the Company, at the suggestion of the Initial
Purchasers, disposed of its non-radio rep firm subsidiary, Corporate Family
Network, Inc. ("CFN"). The results of operations of CFN had resulted in
immaterial losses since its inception. The Company sold CFN to Ralph C. Guild
for a purchase price of $200,000, which was the Company's estimate of the net
fair market value of CFN, payable $50,000 in cash and $150,000 by execution and
delivery by Mr. Guild of his promissory note payable to the Company in three
annual installments of $50,000 each and bearing interest at a fluctuating rate
equal to the prime rate of BancBoston, N.A., plus one percent.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following Exhibits are filed as part of this Report:
<TABLE>
<C> <S>
- --------------------------------------------------------------------------------------------
3.1 Restated Certificate of Incorporation of the Company dated April 25, 1985.
- --------------------------------------------------------------------------------------------
3.2 Certificate of Amendment of the Certificate of Incorporation of the Company, dated
June 24, 1993.
- --------------------------------------------------------------------------------------------
3.3 Certificate of Amendment of the Certificate of Incorporation of the Company, dated
November 9, 1993.
- --------------------------------------------------------------------------------------------
3.4 Certificate of Amendment of the Certificate of Incorporation of the Company, dated
February 14, 1994.
- --------------------------------------------------------------------------------------------
3.5 By-Laws (as amended) of the Company.
- --------------------------------------------------------------------------------------------
4.1 A/B Exchange Registration Rights Agreement, dated July 2, 1998, among the
Company, the Guarantors, BancBoston Securities Inc., Loenbaum & Company
Incorporated and SPP Hambro & Co., LLC.
- --------------------------------------------------------------------------------------------
4.2 Indenture, dated July 2,1998, between the Company, the Guarantors and Summit
Bank.
- --------------------------------------------------------------------------------------------
4.3 Form of Note (Included in Exhibit 4.2).
- --------------------------------------------------------------------------------------------
4.4* Supplemental Indenture, dated as of March 22, 1999, among American Radio
Sales, Inc., the Company, the Guarantors and Summit Bank as Trustee.
- --------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
<TABLE>
<C> <S>
- --------------------------------------------------------------------------------------------
10.1 Revolving Line of Credit Agreement, dated July 2, 1998, among the Company, the
Guarantors and Various Financial Institutions Now or Hereafter parties hereto,
BancBoston, N.A.
- --------------------------------------------------------------------------------------------
10.2 LLC Membership Interest Pledge Agreement, dated July 2, 1998, made by the
Company and McGavren Guild, Inc. in favor of BancBoston, N.A.
- --------------------------------------------------------------------------------------------
10.3 Security Agreement, Dated July 2, 1998, among the Company, the Guarantors and
BankBoston, N.A.
- --------------------------------------------------------------------------------------------
10.5 Agreement of Lease, dated June 15, 1998, between the Prudential Insurance
Company of America and the Company.
- --------------------------------------------------------------------------------------------
10.6 Amended Lease, dated June 15, 1998, between the Tuxedo Park Executive
Conference Center Proprietorship and the Company.
- --------------------------------------------------------------------------------------------
10.7 Agreement, dated June 29, 1998, between the Company and Ralph C. Guild.
- --------------------------------------------------------------------------------------------
10.8 Promissory Note, dated June 29, 1998, by Ralph C. Guild in favor of the Company.
- --------------------------------------------------------------------------------------------
10.9 Interep National Radio Sales, Inc. Compensation Deferral Plan.
- --------------------------------------------------------------------------------------------
10.10 Trust Agreement under the Interep National Radio Sales, Inc. Compensation
Deferral Plan, dated August 22, 1994.
- --------------------------------------------------------------------------------------------
10.11 Services Agreement, dated June 1, 1997, between the Company and Media
Financial Services, Inc.
- --------------------------------------------------------------------------------------------
10.12 Amendment to Services Agreement, dated July 1, 1997, between the Company and
Media Financial Services, Inc.
- --------------------------------------------------------------------------------------------
10.13* Amendment No. 2 to Services Agreement, dated as of March 25, 1999, between the
Company and Media Financial Services, Inc.
- --------------------------------------------------------------------------------------------
10.14* Fifth Amended and Restated Employment Agreement, dated as of March 1, 1999,
between the Company and Ralph C. Guild.
- --------------------------------------------------------------------------------------------
10.15 Employment Agreement, dated January 1, 1991, between the Company and Marc G.
Guild.
- --------------------------------------------------------------------------------------------
10.16 Amendment, dated June 29, 1998, to Employment Agreement, dated January 1,
1991, between the Company and Marc G. Guild.
- --------------------------------------------------------------------------------------------
10.17 Non-Qualified Stock Option granted to Ralph C. Guild on December 31, 1988.
- --------------------------------------------------------------------------------------------
10.18 Amendment and Extension of Option, dated January 1, 1991, between the Company
and Ralph C. Guild.
- --------------------------------------------------------------------------------------------
10.19 Non-Qualified Stock Option granted to Ralph C. Guild on January 1, 1991.
- --------------------------------------------------------------------------------------------
10.20 Non-Qualified Stock Option granted to Ralph C. Guild on December 31, 1995
- --------------------------------------------------------------------------------------------
10.21 Non-Qualified Stock Option granted to Marc G. Guild on January 1, 1991
- --------------------------------------------------------------------------------------------
10.22 Non-Qualified Stock Option granted to Ralph C. Guild on June 29, 1997
- --------------------------------------------------------------------------------------------
10.23 Non-Qualified Stock Option granted to Marc G. Guild on June 29, 1997.
- --------------------------------------------------------------------------------------------
10.24 Non-Qualified Stock Option granted to William J. McEntee, Jr. on June 29, 1997.
- --------------------------------------------------------------------------------------------
10.25 Deferred Compensation Agreement, dated September 30, 1997, between the
Company and Stewart Yaguda.
- --------------------------------------------------------------------------------------------
10.26 Supplemental Income Agreement, dated December 31, 1986, between the Company
and Ralph C. Guild.
- --------------------------------------------------------------------------------------------
10.27 Agreement, dated June 18, 1993, between The Company and Ralph C. Guild.
- --------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
<TABLE>
<C> <S>
- --------------------------------------------------------------------------------------------
10.28 Non-Qualified Stock Option Granted to Ralph C. Guild on July 10, 1998.
- --------------------------------------------------------------------------------------------
10.29 Non-Qualified Stock Option Granted to Marc G. Guild July 10, 1998.
- --------------------------------------------------------------------------------------------
10.30 Non-Qualified Stock Option Granted to Stewart Yaguda July 10, 1998.
- --------------------------------------------------------------------------------------------
10.31 Non-Qualified Stock Option Granted to William J. McEntee, Jr. July 10, 1998.
- --------------------------------------------------------------------------------------------
10.32* Non-Qualified Stock Option Granted to Ralph C. Guild, December 16, 1998.
- --------------------------------------------------------------------------------------------
10.33* Non-Qualified Stock Option Granted to Leslie D. Goldberg, December 16, 1998.
- --------------------------------------------------------------------------------------------
12.1* Calculation of Ratio of Earnings to Fixed Charges.
- --------------------------------------------------------------------------------------------
21.1 Subsidiaries of Registrant.
- --------------------------------------------------------------------------------------------
27.1* Financial Data Schedule
- --------------------------------------------------------------------------------------------
</TABLE>
Except where noted by an asterisk (*) as filed herewith, all exhibits are
incorporated by reference to the Registration Statement on Form S-4
(Registration No. 333-60575) of Interep National Radio Sales, Inc.
(b) Reports on Form 8-K
None.
24
<PAGE>
INTEREP NATIONAL RADIO SALES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants........................................................ F-2
Consolidated Balance Sheets as of December 31, 1998 and 1997.................................... F-3
Consolidated Statements of Operations for the Years Ended December 31, 1998, 1997 and 1996 ..... F-4
Consolidated Statements of Shareholders' Deficit for the Years Ended December 31, 1998, 1997 and
1996............................................................................................ F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996 ..... F-6
Notes to Consolidated Financial Statements...................................................... F-7
Financial statement schedule for the years ended December 31, 1998, 1997 and 1996
Schedule II- Valuation and Qualifying Accounts.................................................. F-20
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Interep National Radio Sales, Inc.:
We have audited the accompanying consolidated balance sheets of Interep National
Radio Sales, Inc. (a New York corporation) and subsidiaries as of December 31,
1998 and 1997, and the related consolidated statements of operations,
shareholders' deficit and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements (as restated-see Note 14)
and the schedule referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule 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 financial statements referred to above present fairly, in
all material respects, the financial position of Interep National Radio Sales,
Inc. and subsidiaries as of December 31, 1998 and 1997, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
New York, New York
March 12, 1999
F-2
<PAGE>
INTEREP NATIONAL RADIO SALES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands except share information)
<TABLE>
<CAPTION>
December 31,
-----------------
1998 1997
------- -------
ASSETS (as Restated)
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................................................. $32,962 $ 1,419
Receivables, less allowance for doubtful accounts of $1,626 and $1,220 in 1998 and
1997, respectively.................................................................................... 35,104 31,196
Representation contract buyouts receivable............................................................ 11,447 10,946
Current portion of deferred representation contract costs............................................. 33,742 38,698
Prepaid expenses and other current assets............................................................. 1,207 678
--------- ---------
Total current assets.................................................................................. 114,462 82,937
--------- ---------
Fixed assets, net..................................................................................... 4,311 4,335
Deferred costs on representation contract purchases................................................... 45,702 36,270
Station contract rights, net.......................................................................... 1,681 2,922
Representation contract buyouts receivable............................................................ 6,920 6,974
Other assets.......................................................................................... 11,432 7,592
--------- ---------
Total assets.......................................................................................... $184,508 $141,030
======== =========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Capitalized lease obligations......................................................................... $103 $291
Accounts payable and accrued expenses................................................................. 16,537 24,698
Accrued interest...................................................................................... 4,972 155
Representation contract buyouts payable............................................................... 20,219 21,691
Accrued employee-related liabilities.................................................................. 6,520 4,586
--------- ---------
Total current liabilities............................................................................. 48,351 51,421
--------- ---------
Long-term debt........................................................................................ 100,000 44,134
--------- ---------
Representation contract buyouts payable............................................................... 26,706 23,885
--------- ---------
Other noncurrent liabilities.......................................................................... 10,673 11,753
--------- ---------
Commitments and contingencies
Common and preferred stock subject to redemption:
Series A cumulative redeemable preferred stock, $.01 par value-subject to
mandatory redemption, 25,000 shares authorized, 7,441 issued and outstanding in
1997 (redemption value of $7,441 in 1997)............................................................. - 6,174
Series B cumulative redeemable preferred stock, $.01 par value-5,000 shares
authorized, 1,323 issued and outstanding in 1997 (redemption value of $1,323 in
1997)................................................................................................. - 750
Common stock subject to redemption-57,117 shares issued and outstanding in 1997
(stated at redemption value).......................................................................... - 4,522
--------- ---------
Total common and preferred stock subject to redemption................................................ - 11,446
Shareholders' deficit:
Common stock, $.04 par value-1,000,000 shares authorized, 334,549
shares issued in both 1998 and 1997................................................................... 14 14
Additional paid-in-capital............................................................................ 1,163 638
Accumulated deficit................................................................................... (320) (137)
Receivable from Employee Stock Ownership Plan......................................................... (82) (182)
Treasury stock, at cost-36,573 and 34,955 shares in 1998 and 1997, respectively....................... (1,997) (1,942)
--------- ---------
Total shareholders' deficit........................................................................... (1,222) (1,609)
--------- ---------
Total liabilities and shareholders' deficit........................................................... $184,508 $141,030
==================
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE>
INTEREP NATIONAL RADIO SALES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
For the Year Ended
December 31,
-------------------------
1998 1997 1996
------- ------- ------
(as Restated)
Commission revenues........................... $87,735 $87,096 $72,858
Contract termination revenue.................. 37,221 26,586 18,876
------- ------- -------
Total revenues................................ 124,956 113,682 91,734
Operating expenses:
Selling expenses.............................. 61,618 63,135 53,251
General and administrative expenses........... 11,864 12,541 9,626
Depreciation and amortization expense......... 36,436 28,954 20,988
------- ------- -------
Total operating expenses...................... 109,918 104,630 83,865
------- ------- -------
Operating income.............................. 15,038 9,052 7,869
Interest expense, net......................... 6,744 3,779 3,911
------- ------- ------
Income before provision for income taxes...... 8,294 5,273 3,958
Provision for income taxes.................... 3,446 2,359 1,885
------- ------- ------
Net income.................................... 4,848 2,914 2,073
Preferred stock dividend requirements and
redemption premium......................... 5,031 1,590 1,364
------- ------- ------
Net(loss)income applicable to common
shareholders.................................. $(183) $1,324 $709
======= ======= ======
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE>
INTEREP NATIONAL RADIO SALES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
(in thousands except share information)
<TABLE>
<CAPTION>
Common Stock Additional Treasury Stock
------------- Paid-in Accumulated Receivable ----------------
Shares Amount Capital Deficit from ESOP Shares Amount
------ ------ ---------- ----------- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996(as Restated)323,549 $13 $895 $(1,780) $(188) 3,913 $392
Net income.......................... - - - 2,073 - - -
Treasury stock purchases............ - - - - - 18,396 1,344
Accretion of preferred stock........ - - - (640) - - -
Accrued dividends in-kind on
preferred stock..................... - - - (724) - - -
Increase of receivable from ESOP.... - - - - (67) - -
Revaluation of common stock subject
to redemption....................... - - - (530) - - -
------- ------ ---------- ------------- ----------- -------- -------
Balance, December 31, 1996
(as Restated) ...................... 323,549 13 895 (1,601) (255) 22,309 1,736
Net income.......................... - - - 2,914 - - -
Treasury stock purchases............ - - - - - 12,646 206
Accretion of preferred stock........ - - - (793) - - -
Accrued dividends in-kind on
preferred stock..................... - - - (797) - - -
Reduction of receivable from ESOP... - - - - 73 - -
Revaluation of common stock subject
to redemption....................... - - - 140 - - -
Exercise of stock options........... 11,000 1 (257) - - - -
------- ------ ---------- ------------- ----------- -------- -------
Balance, December 31, 1997
(as Restated) ...................... 334,549 14 638 (137) (182) 34,955 1,942
Net income.......................... - - - 4,848 - - -
Treasury stock purchases............ - - - - - 3,247 302
Accretion of preferred stock........ - - - (492) - - -
Accrued dividends in-kind on
preferred stock..................... - - - (442) - - -
Reduction of receivable from ESOP... - - - - 100 - -
Earned compensation, executive stock
options - - 753 - - - -
Redemption of preferred stock and
common stock subject to redemption - - (228) (4,097) - (1,629) (247)
------- ------ ---------- ------------- ----------- -------- ------
Balance, December 31, 1998.......... 334,549 $14 $1,163 $(320) $(82) 36,573 $1,997
======= ====== ========== ============= =========== ======== ======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE>
INTEREP NATIONAL RADIO SALES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the Year Ended
December 31,
----------------------------
1998 1997 1996
--------- -------- --------
Cash flows from operating activities: (as Restated)
<S> <C> <C> <C>
Net income................................................................... $ 4,848 $2,914 $2,073
Adjustments to reconcile income to net cash provided by operating activities:
Depreciation and amortization................................................ 36,436 28,954 20,988
Stock option compensation expense............................................ 753 - -
Changes in assets and liabilities-
Receivables.................................................................. (3,908) (4,487) (1,450)
Representation contracts buyout receivable................................... (447) (5,966) 9,471
Prepaid expenses and other current assets.................................... (529) 243 654
Other noncurrent assets...................................................... (5,259) 954 (5,211)
Accounts payable and accrued expenses........................................ (8,161) (809) 9,984
Accrued interest............................................................. 4,817 13 (482)
Accrued employee-related liabilities......................................... 1,934 2,457 (383)
Other noncurrent liabilities................................................. (1,080) (452) 338
------- -------- --------
Net cash provided by operating activities.................................... 29,404 23,821 35,982
------- -------- -------
Cash flows from investing activities:
Additions to fixed assets.................................................... (1,270) (792) (1,021)
------- -------- -------
Net cash used in investing activities........................................ (1,270) (792) (1,021)
------- -------- -------
Cash flows from financing activities:
Station representation contracts payments.................................... (35,609) (33,991) (31,427)
Debt repayments.............................................................. (61,572) (6,100) (1,820)
Borrowings in accordance with credit agreement............................... 17,250 16,519 1,341
Issuance of senior subordinated notes........................................ 100,000 - -
Redemption of preferred stock and common stock subject to redemption......... (16,705) - -
Sales and issuances of stock, net of issuance costs.......................... - (256) -
Purchases of treasury stock.................................................. (55) (206) (1,344)
Other, net................................................................... 100 (229) (810)
------- -------- -------
Net cash provided by (used in) financing activities.......................... 3,409 (24,263) (34,060)
------- -------- -------
Net increase (decrease) in cash and cash equivalents......................... 31,543 (1,234) 901
Cash and cash equivalents, beginning of period............................... 1,419 2,653 1,752
------- ------- -------
Cash and cash equivalents, end of period..................................... $32,962 $1,419 $2,653
======= ======== =======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest paid................................................................ $2,387 $3,220 $3,274
Income taxes paid, net....................................................... 341 235 628
Non-cash investing and financing activities:
Station representation contracts acquired.................................... $36,958 $67,168 $39,342
======= ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
INTEREP NATIONAL RADIO SALES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands except share information)
1. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Interep
National Radio Sales, Inc. ("Interep"), together with its subsidiaries
(collectively, the "Company"). All significant intercompany transactions and
balances have been eliminated.
Revenue Recognition
The Company is a national representation ("rep") firm serving radio broadcast
clients throughout the United States. Commission revenue is derived from sales
of advertising time for radio stations under representation contracts.
Commissions and fees are recognized in the month the advertisement is
broadcast. In connection with its unwired network business, the Company
collects fees for unwired network radio advertising and, after deducting its
commissions, remits the fees to the respective radio stations. Since it is
common practice in the industry for rep companies not to pay a station until
the corresponding receivable is paid, and since the receivable and payable are
equal, except for the commissions, fees payable to stations have been offset
against the related receivable from advertising agencies in the accompanying
consolidated balance sheets.
In accordance with industry practice, commissions are recognized based on the
standard broadcast calendar that ends on the last Sunday in each reporting
period. The broadcast calendar for the calendar years ended December 31, 1998,
1997 and 1996 had 52 weeks.
Representation Contract Termination Revenue and Contract Acquisition Costs
The Company's station representation contracts usually renew automatically
from year to year unless either party provides written notice of termination at
least twelve months prior to the next automatic renewal date. In accordance
with industry practice, in lieu of termination, an arrangement is normally made
for the purchase of such contracts by a successor representative firm. The
purchase price paid by the successor representation firm is generally based
upon the historic commission income projected over the remaining contract
period plus two months (the "Buyout Period").
Costs of obtaining station representation contracts are deferred and
amortized over the Buyout Period. Such amortization is included in the
accompanying consolidated statements of operations as a component of
depreciation and amortization expense. Amounts which are to be amortized during
the next year are included as current assets in the accompanying consolidated
balance sheets. Income earned from the loss of station representation contracts
(contract termination revenue) is recognized on the effective date of the
buyout agreement.
In addition, costs incurred as a result of commission rate reductions are
deferred and amortized over the remaining life of the existing representation
agreement. Such amortization is included in the accompanying consolidated
statements of operations as a component of depreciation and amortization
expense.
Fixed Assets, net
Furniture, fixtures and equipment are recorded at cost and are depreciated
over three to ten-year lives, and leasehold improvements are amortized over the
shorter of the lives of the leases or assets, all on a straight-line basis.
F-7
<PAGE>
INTEREP NATIONAL RADIO SALES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands except share information)
Depreciation and Amortization Expense
A summary of depreciation and amortization expense for the years ended
December 31, 1998, 1997 and 1996 is as follows:
1998 1997 1996
------- ------- -------
Depreciation and amortization of office facilities... $1,294 $1,587 $1,796
Amortization of contract acquisition costs........... 32,482 24,603 16,562
Amortization of intangible assets.................... 2,660 2,764 2,630
------- ------- -------
$36,436 $28,954 $20,988
======= ======= =======
Cash and Cash Equivalents
Cash equivalents consist of cash in excess of daily requirements which are
invested in overnight deposits.
Station Contract Rights, Net
Station contract rights consist of costs of purchased businesses in excess of
net tangible assets acquired and are stated at cost less accumulated
amortization. These costs are being amortized using the straight-line method
over 5 years. Amortization expense for 1998, 1997 and 1996 was $959, $978 and
$1,206, respectively, and is included in the above table. Other intangible
assets include noncompete agreements which are being amortized over their
contractual lives of two to four years.
Recoverability of intangible assets is assessed regularly (at least annually)
and impairments, if any, are recognized in operating results if a permanent
diminution in value were to occur based upon an undiscounted cash flow
analysis. The Company has determined that no such impairment exists.
Employee Stock Ownership Plan
The Company has an Employee Stock Ownership Plan ("ESOP") for eligible
employees. Cash contributions made by the Company to the ESOP are recorded as
compensation expense and stock repurchases made by the Company from the ESOP
are recorded in treasury stock. Any outstanding receivable to the Company from
the ESOP is recorded as a reduction to shareholders' equity and shares of the
Company's stock owned by the ESOP are treated as outstanding common stock.
Income Taxes
Income taxes are recognized during the year in which transactions enter into
the determination of financial statement income, with deferred taxes being
provided for temporary differences between amounts of assets and liabilities
recorded for tax and financial reporting purposes.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-8
<PAGE>
INTEREP NATIONAL RADIO SALES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands except share information)
2. New Accounting Pronouncements
In 1998, the Company adopted Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income"("SFAS 130"). SFAS 130 establishes new
rules for the reporting and displaying of comprehensive income and its
components. The Company has no material items of comprehensive income for the
periods presented.
In 1998, the Company adopted Statement of Financial Accounting Standards No.
131, "Disclosure about Segments of an Enterprise and Related Information". The
Statement requires the Company to report segment financial information
consistent with the presentation made to the Company's management for decision
making purposes. The Company is managed as one segment and all revenues are
derived solely from radio representation operations and related activities. The
Company's management decisions are based on operating cash flow of $29,404,
$23,821, and $35,982 in 1998, 1997 and 1996,respectively, general and
administrative expenses of $11,864, $12,541 and $9,626 in 1998, 1997, and 1996,
respectively, and EBITDA (income before interest, taxes, depreciation and
amortization)of $51,474, $38,006, and $28,857 in 1998, 1997, and 1996,
respectively.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). The Statement establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet and measured at its fair value. This Statement also requires
that changes in the derivative's fair value be recognized currently in earnings.
To date, the Company has not, and has no present intention, to invest in any
derivative instruments or participate in any hedging activities. Accordingly,
the adoption of SFAS 133 will not have any effect on the Company.
3. Fixed Assets
Fixed assets are comprised of the following:
December 31,
--------------------
1998 1997
--------- ---------
Furniture and equipment......................... $ 11,318 $ 10,159
Leasehold improvements.......................... 5,889 5,778
Equipment held under lease...................... 3,461 3,461
-------- --------
20,668 19,398
Less-Accumulated depreciation and amortization.. (16,357) (15,063)
-------- --------
Fixed assets, net............................... $ 4,311 $ 4,335
======== ========
4. Accounts Payable
The Company utilizes a cash management system whereby overnight investments
are determined daily. Included in accounts payable are $7,218 and $5,580 of book
overdrafts as of December 31, 1998 and 1997, respectively, which result from
this cash management program.
F-9
<PAGE>
INTEREP NATIONAL RADIO SALES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands except share information)
5. Employee Stock Plans
Employee Stock Ownership Plan
Under the terms of the Company's nonleveraged Employee Stock Ownership Plan
("ESOP") and Trust ("ESOT"), the Company may make annual contributions to the
ESOT in the form of either cash or common stock of the Company for the benefit
of eligible employees. In lieu of contributions, the Company may repurchase
shares of common stock from the ESOP or advance money to the plan from time to
time. The amount of annual funding is at the discretion of the Board of
Directors of the Company except that the minimum amount must be sufficient to
enable the ESOT to meet its current obligations. No cash contributions were made
by the Company in 1998, 1997 and 1996 and consequently no compensation cost was
incurred during 1998, 1997 or 1996. In lieu of contributions during 1998, 1997
and 1996, the Company loaned money to the ESOP. At December 31, 1998 and 1997,
$82 and $182, respectively, of this advance remained outstanding and is recorded
as a reduction of shareholders' equity. The ESOP intends to repay the Company
through the proceeds of the sale of company stock to the Interep Radio Store
Stock Growth Plan (the "Stock Growth Plan"). Substantially all assets of the
ESOT consist of common shares of the Company, and the ESOT currently has no
alternative method to fund its payment to participants except through Company
funding (see the Stock Growth Plan below).
Pursuant to the ESOP, as amended, employees of the Company and each of its
subsidiaries are eligible to participate, subject to certain uniform
requirements. Upon leaving the Company, employees may sell the shares back to
the ESOT at the then fair market value of the Company's common stock; related
distributions are made in quarterly installments over a period not to exceed
five years, depending upon the former employee's total account balance. The
portion of the vested liability relating to terminated employees as of December
31, 1997 was $4,480 and is payable over a one to five-year period. As discussed
in Note 9, the independent appraisal as of December 31, 1998 has not yet been
completed.
The Company has purchased life insurance policies on certain of its
executives for which Interep is the beneficiary. Proceeds from these policies
will be used to partially fund payments under the ESOP for these executives.
Such policies had a cash surrender value of $2,839 and $2,405 as of December
31, 1998 and 1997, respectively, with no offsetting loans.
As of December 31, 1998 and 1997, the Company's ESOP owned 199,684 and
223,363 shares, respectively, representing approximately 60% and 67%,
respectively, of the Company's total shares outstanding, before consideration
of common stock equivalents. All shares owned by the ESOP as of December 31,
1998 and 1997 were allocated and earned.
Stock Growth Plan
On January 1, 1995, the Company established the Stock Growth Plan, a
qualified stock bonus plan through which a portion of qualified employee
compensation is allocated to the plan. Participation in the Stock Growth Plan
is mandatory and non-contributory for all eligible employees. Stock Growth Plan
participants are at all times fully vested in their accounts without regard to
age or years of service. The Company, through employee withholdings, makes
regular quarterly cash contributions to the Stock Growth Plan. For the years
ended December 31, 1998, 1997 and 1996, the Company recorded compensation
expense of $2,521, $2,886 and $1,882, respectively in relation to these
contributions. Contributions to the Stock Growth Plan are used to repurchase
shares of Interep common stock from the ESOP, the Interep Radio Store Wealth
Attainment Plan (the "401(k) Plan") and shares held by terminated employees.
Shares owned by the Stock Growth Plan are recorded as outstanding stock of the
Company. Distributions to participants will be made in cash upon termination of
F-10
<PAGE>
INTEREP NATIONAL RADIO SALES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands except share information)
employment over a period not to exceed three years. The Stock Growth Plan
purchased 23,679, 24,345 and 22,839 shares from the ESOP in 1998, 1997 and
1996, respectively. The weighted average fair value of stock purchased by the
plan during 1998, 1997 and 1996 was $83.69, $82.26 and $80.40, respectively,
based on independent appraisals.
Stock Options
A summary of the Stock Options outstanding during the years ended December 31,
1998, 1997 and 1996 is set forth below:
Number of Weighted
Shares Subject Average
to Option Exercise Price
-------------- --------------
Outstanding at December 31, 1995.......... 69,183 $62.20
Exercised during 1996..................... (10,000) 57.91
-------------- --------------
Outstanding and exercisable at
December 31, 1996..................... 59,183 62.93
Exercised during 1997..................... (11,000) 57.91
-------------- --------------
Outstanding and exercisable at
December 31, 1997..................... 48,183 64.07
Granted during 1998, at prices less than
fair market value..................... 157,500 83.31
Redeemed during 1998...................... (3,183) 81.63
-------------- --------------
Outstanding at December 31, 1998.......... 202,500 78.76
-------------- --------------
Options exercisable at December 31, 1998.. 85,000 70.61
-------------- --------------
The following table summarizes information regarding the stock options
outstanding at December 31, 1998, pursuant to the terms of the Plan:
Options Outstanding Options Exercisable
At Exercise Remaining At Exercise
December 31, 1998 Price Contractual Life December 31, 1998 Price
- ------------------- --------- ---------------- ------------------ --------
10,000............ $32.62 7 Years 10,000........... $32.62
15,000............ 57.91 7 Years 15,000........... 57.91
20,000............ 81.63 7 Years 20,000........... 81.63
40,000............ 79.36 9.5 Years 40,000........... 79.36
95,000............ 83.92 9.5 Years ------
22,500............ 87.78 10 Years 85,000
- ------- ======
202,500
=======
Compensation expense of $753 was recognized in 1998, which represents the
difference between fair market value and the option exercise price on the date
of grant. Under generally accepted accounting principles this also resulted in a
credit to additional paid in capital.
F-11
<PAGE>
INTEREP NATIONAL RADIO SALES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands except share information).
In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement No. 123, "Accounting for Stock-Based Compensation." The Company
adopted the disclosure provisions of FASB Statement No. 123 in 1996, but opted
to remain under the expense recognition provisions of Accounting Principles
Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," in
accounting for stock option plans. Had compensation expense for stock options
granted under the Plan been determined based on fair value at the grant dates
consistent with the disclosure method required in accordance with FASB Statement
No. 123, the Company's net income for 1998 would have been decreased to the
proforma amounts shown below:
Net income:
As reported... $4,848
Pro forma..... 3,139
There would have been no impact on 1997 or 1996 reported results as all options
granted in previous years vested 100% on the grant dates, and no options were
granted in 1997 or 1996.
The weighted average fair value of options granted in 1998 of $39.92 was
estimated as of the date of grant using the Black-Scholes stock option pricing
model, based on the following weighted average assumptions: weighted average
risk free interest rate of 5.55%, dividend yield of 0%, volatility of 0% and
expected term of 10 years.
6. Employee Benefit Plans
Managers' Incentive Compensation Plans
The Company maintains various managers' incentive compensation plans for
substantially all managerial employees. The plans provide for incentives to be
earned based on attainment of threshold operating profit and market share goals
established each year, as defined. The Company provided approximately $5,071,
$4,551 and $3,030 for such compensation during 1998, 1997 and 1996,
respectively.
401(k) Plan
The Company has a defined contribution plan, the 401(k) Plan, which covers
substantially all employees who have completed one year of service with the
Company. Under the terms of the 401(k) Plan, the Company may contribute a
matching contribution percentage determined by, and at the discretion of, the
Board of Directors but not in excess of the maximum amount deductible for
federal income tax purposes. Company contributions vest to the employees at 20%
per year over a five-year period. The Company provided $892, $728 and $641 in
the form of cash in 1998, 1997 and 1996, respectively.
As of December 31, 1996, the 401(k) Plan owned 21,029 shares, representing
approximately 6% of the Company's total shares outstanding, before consideration
of common stock equivalents. During 1996, the Company repurchased 3,948 shares,
from the 401(k) Plan relating to terminated employees. During 1997, the ESOP
purchased all remaining shares held by the 401(k) Plan.
F-12
<PAGE>
INTEREP NATIONAL RADIO SALES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands except share information)
Deferred Compensation Plans
Certain of Interep's subsidiaries maintain deferred compensation plans which
cover employees selected at the discretion of management. Participants are
entitled to deferred compensation and other benefits under these plans. In 1998,
1997, and 1996, the Company provided compensation expense of $72, $14 and $14,
respectively related to these plans. The Company did not provide any
compensation expense in 1998. All amounts due under these plans were fully
vested as of December 31, 1998 and are recorded as liabilities on the Company's
consolidated balance sheet; however, they remain subject to further
appreciation/depreciation upon changes in value (as defined).
The Company has agreements with several of its employees to provide
supplemental income benefits. The benefits under these plans were fully vested
as of December 31, 1998. The Company provided $226, $262 and $476 in 1998, 1997
and 1996, respectively, for these plans which principally represented interest
on the vested benefits.
In 1994, the Company established a compensation deferral plan for key
executives. Participants made a one-time election to defer certain of their
compensation and have such amounts contributed to a tax-deferred trust in the
form of Series B Cumulative Redeemable Preferred Stock (the "Series B Preferred
Stock") and Interep common stock. No contributions were made in 1998, 1997 or
1996. The Company redeemed all of the outstanding Series B Preferred Stock and
redeemable common stock during 1998. Distribution to participants out of the
trust are being made in cash. As of December 31, 1998, the Company has $1,424
classified as accrued employee-related liabilities on the accompanying
consolidated balance sheet relating to the redemption.
Other
The Company has life insurance policies on certain of its executives for
which Interep is the beneficiary. Proceeds from these policies will be used to
partially fund certain of the retirement benefits under these supplemental
agreements. Such policies had cash surrender values of $1,229 and $1,115 as of
December 31, 1998 and 1997, respectively, and offsetting loans of $793 and
$673, respectively.
7. Income Taxes
Interep and its subsidiaries file a consolidated federal tax return. However,
for state tax purposes, separate tax returns are filed in various jurisdictions
where losses on certain subsidiaries are not available to offset income on
other subsidiaries, and tax benefits on such losses may not be realized. As a
result, the consolidated tax provisions are determined considering this tax
reporting structure and may not fluctuate directly with consolidated pretax
income.
Components of the provisions for income taxes are as follows:
Year Ended December 31,
----------------------
1998 1997 1996
------- ------ -------
Current:
Federal... $ 240 $ - $ -
State..... 252 412 400
Deferred.. 2,954 1,947 1,485
------ ------ ------
Total provision... $3,446 $2,359 $1,885
====== ====== ======
F-13
<PAGE>
INTEREP NATIONAL RADIO SALES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands except share information)
A reconciliation of the U.S. federal statutory tax rate to the effective tax
rate on the income before income taxes for the periods ended December 31, 1998,
1997 and 1996, is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------ ------
<S> <C> <C> <C>
Provision computed at the federal statutory rate of 34%.... $2,820 $1,793 $1,346
State and local taxes, net of federal income tax benefit... 292 272 264
Nondeductible travel and entertainment expense............. 303 249 298
Nondeductible insurance premiums........................... (102) 45 (23)
Other...................................................... 133 - -
------ ------ ------
Total...................................................... $3,446 $2,359 $1,885
====== ====== ======
</TABLE>
Temporary differences and carryforwards which gave rise to deferred tax
assets and liabilities at December 31, 1998 and 1997, are as follows:
December 31,
-------------
1998 1997
------ ------
Deferred tax assets:
Depreciation and amortization........................ $1,460 $1,349
Accruals not currently deductible for tax purposes... 3,190 2,603
Consolidated net operating loss carryforward......... - 2,543
Other................................................ 884 -
------ ------
5,534 6,495
------ ------
Deferred tax liabilities:
Buyout receivable.................................... 7,347 6,093
Unamortized representation contracts................. 6,167 4,410
Other................................................ 344 1,362
------ ------
Net deferred tax liability........................... $8,324 $5,370
====== ======
As of December 31, 1998, the Company had $492 of accrued taxes on its books.
As of December 31, 1997, the Company has a refund receivable of $110. The
Company utilized all net operating loss carryforwards in 1998.
8. Long-Term Debt
Long-term debt at December 31, 1998 and 1997, includes the following:
1998 1997
------- -------
Senior subordinated notes (a)..................... $100,000 $ -
Borrowings under revolving credit facility(b)..... - 44,000
------- -------
100,000 44,000
Capitalized lease obligations(c).................. 103 425
------- -------
100,103 44,425
Less-Current portion.............................. 103 291
------- -------
$100,000 $44,134
======= =======
F-14
<PAGE>
INTEREP NATIONAL RADIO SALES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands except share information)
(a) On July 2, 1998, the Company issued (the "Offering") $100,000,000 aggregate
principal amount of 10.0% Senior Subordinated Notes (the "Notes") due on July 1,
2008. The Notes are general unsecured obligations of the Company, and the
indenture agreement for the Notes stipulates, among other things, restrictions
on incurrence of additional indebtedness, payment of dividends, repurchase of
equity interests(as defined), creation of liens (as defined), transactions with
affiliates (as defined), sale of assets or certain mergers and consolidations.
The Notes bear interest at the rate of 10.0% per annum, payable semiannually in
arrears on January 1 and July 1 of each year, commencing on January 1, 1999. The
Notes are subject to redemption at the option of the Company, in whole or in
part, at any time after July 1, 2003. In addition, at any time and from time to
time prior to July 1, 2001, the Company may redeem up to an aggregate of 30% in
principal amount of Notes originally issued under the indenture agreement at a
redemption price equal to 110.0% of the principal amount thereof, plus accrued
and unpaid interest and liquidated damages, if any, with the net cash proceeds
of one or more equity offerings (as defined). All of the Company's now existing
subsidiaries are guarantors of these Notes and all guarantor subsidiaries are
wholly owned by the Company. The guarantee is full, unconditional, joint and
several with other guarantor subsidiaries. The Company has no other assets or
operations separate from its investment in the subsidiaries.
A portion of the net proceeds of the Offering were used to refinance bank
indebtedness and to redeem all of the outstanding shares of Series A and Series
B cumulative redeemable preferred stock and all of the outstanding shares of the
common stock subject to redemption.
In addition, on July 2, 1998, the Company entered into a $10.0 million
revolving credit facility (the "New Credit Facility") with BankBoston, N.A.
("BankBoston") and Summit Bank ("Summit"). The term of the New Credit Facility
is six years. The lenders under the New Credit Facility are BankBoston, Summit
and any other lenders reasonably acceptable to the Company, with BankBoston
acting as administrative agent. The New Credit Facility requires the Company to
pay a commitment fee at a rate per annum equal to .375% to .50%, depending upon
certain financial ratios, of the unutilized amount available under the facility.
As of December 31, 1998, there was no amount outstanding under the New Credit
Facility. The Company capitalized $4,389 of the costs incurred in the Offering
of which, $205 has been expensed in 1998.
(b) In 1997, the Company entered into an Amended and Restated Revolving Line of
Credit Agreement (the "Credit Agreement") which provided for borrowings of up to
$55,000. The Credit Agreement replaced the 1995 secured senior financing
facility. Unamortized debt issue costs relating to the 1995 secured senior
financing facility of $186 were written off in conjunction with the refinancing.
The Credit Agreement was terminated in 1998 and was replaced by the Notes and
New Credit Facility. Unamortized debt issue costs relating to the 1997 Credit
Agreement of $709 were written off in conjunction with the refinancing.
The weighted average interest rate charged to the Company under the 1997 Credit
Agreement was 7.6% in 1998 and 8.8% in both 1997 and 1996.
F-15
<PAGE>
INTEREP NATIONAL RADIO SALES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands except share information)
(c) Certain of the Company's office furniture and equipment is rented under
lease arrangements expiring between 1998 and 2000. Such leases have been
capitalized, and the discounted obligations have been reflected as liabilities
in the accompanying consolidated balance sheets. Amortization of capital lease
assets is included in depreciation expense. Future payments under these
leases are as follows:
1999.......................................... 197
2000.......................................... 13
Thereafter.................................... -
----
210
Less-Amount representing interest............. 107
----
Present value of net minimum lease payments... $103
====
9. Common and Preferred Stock Subject to Redemption
On June 29, 1998, the Company redeemed all of the outstanding shares of its
Series A Preferred Stock, at face value plus accrued dividends, and certain
associated shares of its common stock, for a total purchase price of $14.1
million. Also on that date, the Company redeemed all of the outstanding shares
of its Series B Preferred Stock, at face value plus accrued dividends, and
certain associated shares of Common Stock, from certain members of management,
for a total purchase price of $2.6 million. The excess of the purchase price
over the carrying amount of the redeemable stock at June 29, 1998 of $4,325 has
been charged to additional paid in capital to the extent applicable with the
remainder charged to retained earnings.
Accretion of the Series A Preferred Stock in 1998, 1997 and 1996 was $457,
$735 and $590, respectively. Accretion of the Series B Preferred Stock in 1998,
1997 and 1996 was $35, $58 and $50, respectively. Dividends-in-kind on the
Series A Preferred Stock in 1998, 1997 and 1996 were $372, $676 and $615,
respectively (consisting of 372, 676 and 615 shares, respectively).
Dividends-in-kind on the Series B Preferred Stock for 1998, 1997 and 1996 were
$70, $121 and $109, respectively (consisting of 70, 121 and 109 shares,
respectively).
The Company has traditionally repurchased the shares of its common stock held
by departing employees outside the ESOP at a price equal to the then
independently appraised value. The purchase price is payable in quarterly
installments, including interest at rates prevailing for U.S. Treasury
securities, over a one to five-year period depending upon the total value of the
shares. During 1998, 1997 and 1996, in connection with employee terminations,
the Company repurchased 3,247, 12,646 and 18,396 shares of common stock,
respectively, at a price equal to the then fair market value of the shares. The
independent appraisal as of December 31, 1997 and 1996 was $79.36 and $79.17,
respectively.
F-16
<PAGE>
INTEREP NATIONAL RADIO SALES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands except share information)
10. Related Party Transactions
Since December 1979, the Company has leased from a trust, of which one of its
executives is an income beneficiary and one of its executives is the trustee, a
building which is used by the Company for training sessions and management
meetings. The current lease expires on December 31, 2009 and provides for a
base annual rental which is adjusted each year to reflect inflation and actual
usage. Total lease expense was $74 in 1998, 1997 and 1996.
At December 31, 1998 and 1997, an executive was indebted to Interep in the
total amount of $201 and $170, respectively (including accrued interest), which
is evidenced by a promissory note payable to Interep. This note bears variable
interest at the lowest rate permitted for federal income tax purposes, which
was 4.33% and 5.68% at December 31, 1998 and 1997, respectively, and is due in
equal annual installments of principal and interest through December 31, 1999.
As of December 31, 1998, an executive was indebted to Interep in the total of
$489 by execution of promissory notes payable to the Company in annual
installments of $200,000 and bearing interest at a fluctuating rate equal to the
prime commercial lending rate plus 1%.
From June 1997 to December 1997, Interep was indebted to an executive of the
Company for amounts up to $2,000 plus interest. The interest expense incurred
is included in the consolidated statements of operations for 1997.
In 1997, the Company entered into an agreement with Media Financial Services,
Inc., an affiliate of one of the Company's executives, whereby Media Financial
Services provides financial and accounting services to the Company. The fee for
these services amounted to approximately $2,600 and $1,435 in 1998 and 1997,
respectively.
The Company believes the terms of the arrangements relating to the building
rental, indebtedness and accounting services are at least comparable to, if not
more favorable for the Company, than the terms which would have been obtained
in transactions with unrelated parties.
11. Commitments and Contingencies
At December 31, 1998, the Company was committed under operating leases,
principally for office space, which expire at various dates through 2009.
Certain leases are subject to rent reviews and require payment of expenses under
escalation clauses. Rent expense was $4,292, $4,266 and $4,145 in 1998, 1997 and
1996, respectively. The noncash portion of rent expense was $114, $85 and $89
for 1998, 1997 and 1996, respectively. Future minimum rental commitments under
noncancellable leases are as follows:
1999......... $4,114
2000......... 4,121
2001......... 4,124
2002......... 4,217
2003......... 3,996
Thereafter... 9,692
The Company has employment agreements with certain of its officers and
employees for terms ranging from three to six years with annual compensation
aggregating approximately $1,680. These agreements include escalation clauses
(as defined) and provide for certain additional bonus and incentive
compensation.
F-17
<PAGE>
INTEREP NATIONAL RADIO SALES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands except share information)
The Company may be involved in various legal actions from time to time
arising in the normal course of business. In the opinion of management, there
are no matters outstanding that would have a material adverse effect on the
consolidated financial position or results of operations of the Company.
The Company has long term representation contract buyouts payable due over
the next five years, as follows:
December 31,
1999......... $20,219
2000......... 12,308
2001......... 7,394
2002......... 2,684
2003......... 1,468
Thereafter... 2,852
12. Supplemental Information
Interest expense is shown net of interest income of $864, $109 and $138 in
1998, 1997 and 1996, respectively.
One broadcast group (a different group in 1996) contributed
approximately 29.0%, 28.7% and 13.1% of the Company's total revenues in 1998,
1997 and 1996, respectively. No other client group contributed revenues in
excess of 10% in 1998, 1997 or 1996.
In 1998 and 1997, contract buyout receivables from one group of radio rep
firms represented $16,926 and $17,425, respectively, of the Company's total
contract buyout receivables.
In 1997, the Company relocated its accounting department from New York to
Florida. Severance and relocation costs in connection with this move totaled
$1,350.
13. Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial instruments
is made in accordance with the requirements of SFAS No. 107, "Disclosures about
Fair Value of Financial Instruments." The estimated fair value amounts have
been determined by the Company using available market information and
appropriate valuation methodologies. However, considerable judgment is
necessarily required in interpreting market data to develop the estimates of
fair value. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that the Company could realize in a current market
exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.
December 31, 1998
-------------------
Carrying Estimated
Amount Fair Value
-------- ----------
Assets:
Cash and cash equivalents... $32,962 $32,962
Liabilities:
Long-term debt.............. 100,000 100,000
F-18
<PAGE>
INTEREP NATIONAL RADIO SALES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands except share information)
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
Cash and Cash Equivalents
The carrying amount approximates fair value because of the short maturity of
those instruments.
Long-Term Debt
The fair value of long-term debt is estimated based on financial instruments
or financial instruments with similar terms, credit characteristics and
expected maturities.
The fair value estimates presented herein are based on pertinent information
available to the Company as of December 31, 1998. Although the Company is not
aware of any factors that would significantly affect the estimated fair value
amounts, such amounts have not been comprehensively reevaluated for purposes of
these financial statements since that date, and current estimates of fair value
may differ significantly from the amounts presented herein.
14. Restatement
During 1998, the Company retroactively restated its deferred tax liabilities
due to an unrecorded temporary difference relating to unamortized representation
contract costs. Accordingly, the balance sheet has been restated to reflect
additional deferred tax liability of $3,130 as of December 31, 1997 and a
corresponding reduction in retained earnings of $3,130, $3,008, and $1,523 at
December 31, 1997, 1996, and 1995, respectively. The statement of operations has
been restated to reflect an increase in deferred tax provision and a decrease in
net income of $122 and $1,485, for the years ended December 31, 1997 and 1996.
F-19
<PAGE>
Schedule II
INTEREP NATIONAL RADIO SALES, INC.
VALUATION AND QUALIFYING ACCOUNTS
(in thousands except share information)
Additions
Balance at charged to Balance
beginning of costs and at end of
period expenses Deductions period
------------------------------------------------
December 31, 1996
Allowance for Doubtful
Accounts Current receivables $880 $223 $(120) $983
December 31, 1997
Allowance for Doubtful
Accounts Current receivables $983 $755 $(518) $1,220
December 31, 1998
Allowance for Doubtful
Accounts Current receivables $1,220 $1,227 $(821) $1,626
F-20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 19834, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
INTEREP NATIONAL RADIO SALES, INC.
March 30, 1999 By: /s/ Ralph C. Guild
---------------------------------------------------
Ralph C. Guild
President and Chief Executive Officer and
Chairman of the Board (principal executive
officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Ralph C. Guild President, Chief Executive March 30, 1999
- ------------------------------ Officer,
Ralph C. Guild Chairman of the Board and Director
/s/ Marc G. Guild President, Marketing Division; March 30, 1999
- ------------------------------ Director
Marc G. Guild
/s/ William J. McEntee, Jr. Vice President and Chief Financial March 30, 1999
- ------------------------------ Officer (Principal Financial and
William J. McEntee, Jr. Accounting Officer)
/s/ Leslie D. Goldberg Director March 30, 1999
- ------------------------------
Leslie D. Goldberg
/s/ Jerome S. Traum Director March 30, 1999
- ------------------------------
Jerome S. Traum
</TABLE>
<PAGE>
EXHIBIT 4.4
SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
March 22, 1999, among American Radio Sales, Inc. (the "Guaranteeing
Subsidiary"), a subsidiary of Interep National Radio Sales, Inc. (or its
permitted successor), a New York corporation (the "Company"), the other
Guarantors (as defined in the Indenture referred to herein) and Summit Bank, as
trustee under the Indenture referred to below (the "Trustee").
W I T N E S S E T H:
-------------------
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of July 2, 1998 providing for
the issuance of an aggregate principal amount of up to $100.0 million of 10%
Senior Subordinated Notes due 2008 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental
indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally
and fully guarantee all of the Company's Obligations under the Notes and the
Indenture on the terms and conditions set forth herein (the "Note Guarantee");
and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without
-----------------
definition shall have the meanings assigned to them in the Indenture.
2. Agreement To Guarantee. The Guaranteeing Subsidiary hereby
----------------------
agrees as
follows:
(a) Along with all Guarantors named in the Indenture, to jointly and
severally Guarantee to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and
assigns, irrespective of the validity and enforceability of the
Indenture, the Notes or the obligations of the Company hereunder
or thereunder, that:
(i) the principal of and interest on the Notes will be promptly
paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue
principal of and interest on the
<PAGE>
Notes, if any, if lawful, and all other obligations of the
Company to the Holders or the Trustee hereunder or thereunder
will be promptly paid in full or performed, all in accordance
with the terms hereof and thereof; and
(ii) in case of any extension of time of payment or renewal of
any Notes or any of such other obligations, that same will be
promptly paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. Failing payment when
due of any amount so guaranteed or any performance so
guaranteed for whatever reason, the Guarantors shall be fully
and unconditionally obligated to pay on a joint and several
basis the same immediately.
(b) The obligations hereunder shall be unconditional, irrespective of
the validity, regularity or enforceability of the Notes or the
Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any
provisions hereof or thereof, the recovery of any judgment against
the Company, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor.
(c) The following is hereby waived: diligence presentment, demand of
payment, filing of claims with a court in the event of insolvency
or bankruptcy of the Company, any right to require a proceeding
first against the Company, protest, notice and all demands
whatsoever.
(d) This Note Guarantee shall not be discharged except by complete
performance of the obligations contained in the Notes and the
Indenture.
(e) If any Holder or the Trustee is required by any court or otherwise
to return to the Company, the Guarantors, or any Custodian,
Trustee, liquidator or other similar official acting in relation
to either the Company or the Guarantors, any amount paid by either
to the Trustee or such Holder, this Note Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and
effect.
(f) The Guaranteeing Subsidiary shall not be entitled to any right of
subrogation in relation to the Holders in respect of any
obligations guaranteed hereby until payment in full of all
obligations guaranteed hereby.
(g) As between the Guarantors, on the one hand, and the Holders and
the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in
Article 6 of the Indenture for the
-2-
<PAGE>
purposes of this Note Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in
respect of the obligations guaranteed hereby, and (y) in the event
of any declaration of acceleration of such obligations as provided
in Article 6 of the Indenture, such obligations (whether or not
due and payable) shall forthwith become due and payable by the
Guarantors for the purpose of this Note Guarantee.
(h) The Guarantors shall have the right to seek contribution from any
non-paying Guarantor so long as the exercise of such right does
not impair the rights of the Holders under the Guarantee.
(i) Pursuant to Section 11.03 of the Indenture, after giving effect to
any maximum amount and any other contingent and fixed liabilities
that are relevant under any applicable Bankruptcy or fraudulent
conveyance laws, and after giving effect to any collections from,
rights to receive contribution from or payments made by or on
behalf of any other Guarantor in respect of the obligations of
such other Guarantor under Article 11 of the Indenture shall
result in the obligations of such Guarantor under its Note
Guarantee not constituting a fraudulent transfer or conveyance.
3. Execution and Delivery. Each Guaranteeing Subsidiary agrees that
----------------------
the Note Guarantees shall remain in full force and effect notwithstanding or any
failure to endorse on each Note a notation of such Note Guarantee.
4. Guaranteeing Subsidiary May Consolidate, Etc. On Certain Terms.
--------------------------------------------------------------
(a) The Guaranteeing Subsidiary may not consolidate with or merge with
or into (whether or not such Guarantor is the surviving Person)
another corporation, Person or entity whether or not affiliated
with such Guarantor unless:
(i) subject to Section 11.05 of the Indenture, the Person formed
by or surviving any such consolidation or merger (if other
than such Guarantor) unconditionally assumes all the
obligations of such Guarantor, pursuant to a supplemental
indenture in form and substance reasonably satisfactory to
the Trustee, under the Notes, the Indenture, Registration
Rights Agreement and the Note Guarantee on the terms set
forth herein or therein; and
(ii) immediately after giving effect to such transaction, no
Default or Event of Default exists.
(b) In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor corporation, by supplemental
indenture,
-3-
<PAGE>
executed and delivered to the Trustee and satisfactory in form to
the Trustee, of the Note Guarantee endorsed upon the Notes and the
due and punctual performance of all of the covenants and
conditions of the Indenture to be performed by the Guarantor, such
successor corporation shall succeed to and be substituted for the
Guarantor with the same effect as if it had been named herein as a
Guarantor. Such successor corporation thereupon may cause to be
signed any or all of the Note Guarantees to be endorsed upon all
of the Notes issuable hereunder which theretofore shall not have
been signed by the Company and delivered to the Trustee. All the
Note Guarantees so issued shall in all respects have the same
legal rank and benefit under the Indenture as the Note Guarantees
theretofore and thereafter issued in accordance with the terms of
the Indenture as though all of such Note Guarantees had been
issued at the date of the execution hereof.
(c) Except as set forth in Articles 4 and 5 of the Indenture, and
notwithstanding clauses (a) and (b) above, nothing contained in
the Indenture or in any of the Notes shall prevent any
consolidation or merger of a Guarantor with or into the Company or
another Guarantor, or shall prevent any sale or conveyance of the
property of a Guarantor as an entirety or substantially as an
entirety to the Company or another Guarantor.
5. Releases.
--------
(a) In the event of a sale or other disposition of all of the assets
of any Guarantor, by way of merger, consolidation or otherwise, or
a sale or other disposition of all to the capital stock of any
Guarantor, then such Guarantor (in the event of a sale or other
disposition, by way of merger, consolidation or otherwise, of all
of the capital stock of such Guarantor) or the corporation
acquiring the property (in the event of a sale or other
disposition of all or substantially all of the assets of such
Guarantor) will be released and relieved of any obligations under
its Note Guarantee; provided that the Net Proceeds of such sale or
other disposition are applied in accordance with the applicable
provisions of the Indenture, including without limitation Section
4.10 of the Indenture. Upon delivery by the Company to the Trustee
of an Officers' Certificate and an Opinion of Counsel to the
effect that such sale or other disposition was made by the Company
in accordance with the provisions of the Indenture, including
without limitation Section 4.10 of the Indenture, the Trustee
shall execute any documents reasonably required in order to
evidence the release of any Guarantor from its obligations under
its Note Guarantee.
(b) Any Guarantor not released from its obligations under its Note
Guarantee shall remain liable for the full amount of principal of
and interest on the
-4-
<PAGE>
Notes and for the other obligations of any Guarantor under the
Indenture as provided in Article 11 of the Indenture.
6. No Recourse Against Others. No past, present or future director,
--------------------------
officer, employee, incorporator, stockholder or agent of the Guaranteeing
Subsidiary, as such, shall have any liability for any obligations of the Company
or any Guaranteeing Subsidiary under the Notes, any Note Guarantees, the
Indenture or this Supplemental Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of the
Notes by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Notes. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
7. New York Law to Govern. THE INTERNAL LAW OF THE STATE OF NEW
----------------------
YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE AND THE
NOTE GUARANTEE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS
OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION
WOULD BE REQUIRED THEREBY.
8. Counterparts. The parties may sign any number of copies of this
------------
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
9. Effect of Headings. The Section headings herein are for
------------------
convenience only and shall not affect the construction hereof.
10. The Trustee. The Trustee shall not be responsible in any manner
-----------
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiary and the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: March 22, 1999
--------------
American Radio Sales, Inc.
By: /s/ William J. McEntee, Jr.
---------------------------------
Name: William J. McEntee, Jr.
Title: Vice President and Chief Financial
Officer
-5-
<PAGE>
INTEREP NATIONAL RADIO SALES, INC.
By: /s/ William J. McEntee, Jr.
--------------------------------
Name: William J. McEntee, Jr.
Title: Vice President and Chief Financial
Officer
McGAVREN GUILD, INC.
By: /s/ William J. McEntee, Jr.
--------------------------------
Name: William J. McEntee, Jr.
Title: Vice President and Chief Financial
Officer
D&R RADIO, INC.
By: /s/ William J. McEntee, Jr.
--------------------------------
Name: William J. McEntee, Jr.
Title: Vice President and Chief Financial
Officer
CBS RADIO SALES, INC.
By: /s/ William J. McEntee, Jr.
---------------------------------
Name: William J. McEntee, Jr.
Title: Vice President and Chief Financial
Officer
ALLIED RADIO PARTNERS, INC.
By: /s/ William J. McEntee, Jr.
--------------------------------
Name: William J. McEntee, Jr.
Title: Vice President and Chief Financial
Officer
-6-
<PAGE>
CLEAR CHANNEL RADIO, LLC
By: /s/ William J. McEntee, Jr.
---------------------------------
Name: William J. McEntee, Jr.
Title: Vice President and Chief Financial
Officer
CABALLERO SPANISH MEDIA L.L.C.
By: /s/ William J. McEntee, Jr.
--------------------------------
Name: William J. McEntee, Jr.
Title: Vice President and Chief Financial
Officer
SUMMIT BANK
as Trustee
By: /s/ Jennifer J. Houle
--------------------------------
Name: Jennifer J. Houle
Title: Assistant Vice President
<PAGE>
EXHIBIT 10.13
AMENDMENT NO. 2 TO
SERVICES AGREEMENT
AMENDMENT, dated as of March 25, 1999, to the AGREEMENT, dated as of
June 1, 1997 (as amended by an Amendment, dated as of July 1, 1997, the
"Agreement"), between INTEREP NATIONAL RADIO SALES, INC., a New York corporation
("Interep"), and MEDIA FINANCIAL SERVICES, INC., a Florida corporation
("Media").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Interep and Media are parties to the Agreement, and wish,
pursuant to Section 2(m), the second paragraph of Section 4 and Section 5 of the
Agreement, to modify the Agreement to increase the compensation payable to Media
in light of its (i) new responsibilities and attendant costs with regard to
financial reporting due to the completion of Interep's Rule 144A note offering,
the registration with the Securities and Exchange Commission of notes which were
exchanged for such Rule 144A notes and the subsequent preparation and filing of
periodic reports required under the federal securities laws and (ii) increased
duties and attendant costs due to Interep's entry into representation contracts
with the CBS and ABC station groups (such increased responsibilities and duties
are referred to together as the "Additional Services");
NOW, THEREFORE, the parties agree that the Agreement is amended as set
forth below:
1. Definitions. Capitalized terms used in this Amendment have the
meanings given to them in the Agreement.
2. Effective Date. This Amendment shall be effective as of June 1,
1998.
3. Fees. In order to reflect the costs attendant on providing the
Additional Services, which costs are set forth in Exhibit A to this Amendment
(which shall also be Schedule B to the Agreement, as amended), the fees payable
by Interep to Media in years 2, 3, 4 and 5 of the Term shall be increased by
$240,000 per year. Accordingly, Section 4 of the Agreement is amended to read
in its entirety as follows:
"Section 4. In consideration of the services to be provided by
Media to Interep pursuant to this Agreement, Interep shall pay annual fees
to Media as follows:
Contract Year Annual Fee
------------- ----------
1 $2,580,000
2 $2,820,000
3 $2,961,000
4 $3,109,050
5 $3,264,503
<PAGE>
Schedule A illustrates how the initial annual fee was calculated and
Schedule B illustrates how the annual fees for succeeding years were
calculated. If the Term is extended beyond five years, Media's fees shall
be in such amounts as the parties shall agree. All annual fees shall be
payable, in advance, in 24 equal semi-monthly installments (initially
$107,500 per installment) on the first and 16th days of each month. Media
shall render invoices for such monthly fees to Interep at least five days
prior to the scheduled payment dates. Media shall be responsible for the
payment of any sales, use or similar taxes, if any, that may be payable
with respect to the services it provides pursuant to this Agreement.
Further, if pursuant to clause (m) of Section 2, Media provides
additional services to Interep, or Interep forms or acquires an additional
subsidiary, business segment or business, with the result that Media must
expand its personnel, office space or facilities, the parties shall in good
faith negotiate and agree on an appropriate increase in Media's fee to take
the reasonable, additional costs of such expansion into account.
If Media finds, initiates or otherwise arranges for financing for
Interep, or is able to reduce the charges of any firm which provides or
arranges for such financing, Interep shall pay Media a fee for its
financing activities, or an incentive for its cost savings, as the case may
be, and as the parties shall agree."
4. Savings Clause. In all other respects, the Agreement shall
continue unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
INTEREP NATIONAL RADIO SALES, INC.
By /s/ Ralph C. Guild
-----------------------------------------
Ralph C. Guild
Chairman of the Board
MEDIA FINANCIAL SERVICES, INC.
By /s/ William J. McEntee, Jr.
-----------------------------------------
William J. McEntee, Jr.
President
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<PAGE>
EXHIBIT 10.14
FIFTH AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of March 1, 1999, between INTEREP NATIONAL RADIO
SALES, INC., a New York corporation (the "Company"), and RALPH C. GUILD
("Guild").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company and Guild are parties to an Employment Agreement,
dated as of August 1, 1986, as amended and restated as of August 1, 1987,
January 1, 1989, January 1, 1991 and June 1, 1995 (as so amended and restated,
the "Original Agreement"); and
WHEREAS, the Company and Guild wish to amend and restate the Original
Agreement in order to extend the term of the Original Agreement and to make
certain other changes;
NOW, THEREFORE, in consideration of the mutual agreements set forth
below, the parties agree that the Original Agreement is amended and restated as
follows:
1. Employment
(a) Term. Subject to the terms and conditions of this Agreement, the
Company employs Guild, and Guild agrees to serve, as Chairman of the Board and
Chief Executive Officer of the Company for a term commencing on the date hereof
and ending on February 29, 2004, unless extended as provided in the following
sentence (the "Term"). On March 1, 2000 and each following March 1 during the
Term, the Term shall automatically be extended for one additional year, unless
the Company or Guild notifies the other on or before the immediately preceding
February 1 that the Term is not to be so extended. For example, (i) if no such
notice is given on February 1, 2000, the Term would automatically be extended by
one year and would end on February 28, 2005 or (ii) if such notice is given by
the Company on February 1, 2000, the Term would end on February 29, 2004 and the
Consulting Period (as defined in Section 1(c)) would begin on the following day.
(b) Duties. Guild shall report directly to the Board of Directors of
the Company. The Company shall use its best efforts to cause Guild to be elected
a director of the Company at all times during the Term. Guild shall perform his
duties to the best of his ability and shall devote a reasonable portion of his
time, energies and skills to such duties, subject to the understanding that he
has various investments and participates in other business ventures and
activities which may, from time to time, require his attention, but which shall
not interfere with the performance of his duties to the Company. It is further
understood that such other investments, ventures and activities may include
radio stations that may compete in the same markets as radio stations which are
clients of the Company. Guild may perform his duties at the offices of the
Company or at such other loca tions as he reasonably deems appropriate.
(c) Consulting. If the Company gives Guild notice pursuant to Section
1(a) that the Term of this Agreement is not to be extended, the Company shall
retain Guild as a consultant
<PAGE>
for a period of two years beginning on the day after the last day of the Term
(the "Consulting Period"). During the Consulting Period, Guild shall provide
the Company with such advice, assistance and services regarding any aspect of
the Company's business and affairs as the Company and Guild shall from time to
time agree. During the Consulting Period, the Company shall pay Guild annual
consulting fees in an amount equal to Guild's base salary under Section 2(a) in
effect at the end of the Term, the Company shall provide him with the health,
hospitalization and welfare benefits referred to in Section 3, and the
provisions of Section 4 (other than those respecting vacations) shall apply.
The Company shall pay such consulting fees to Guild in equal semi-monthly
installments or, if Guild requests the Company in writing at any time, the
Company shall pay to Guild an amount equal to the total consulting fees payable
during the Consulting Period (or then remaining balance thereof) discounted at
the discount rate (as defined in Section 7(b)) to present value as of the date
of such request. Any such accelerated payment shall not relieve Guild of his
obligation to perform the consulting services contemplated by this Section 1(c).
2. Compensation.
(a) Base Salary. During the Term, the Company shall pay Guild a
base salary of not less than $925,000 per year ("base salary"), payable in
equal semi-monthly installments; provided, however, that the Company and Guild
-------- -------
may from time to time agree on different payment schedules, which may involve
the payment of portions of such annual salary (not to exceed $175,000 at any one
time) in advance to assist Guild, for example, in making life insurance premium
payments. The foregoing shall not preclude Guild from receiving salary
increases or awards of bonuses, incentive or other types of additional
compensation (in addition to the bonus compensation described in Section 2(b))
which the Company in its sole discretion may wish to pay.
(b) Incentive Bonus. In addition to his base salary, Guild shall be
entitled to receive a minimum incentive bonus ("incentive bonus") in respect of
each year during the Term, based on the Company's performance and calculated as
follows. If the Company achieves 1999 EBITDA in excess of its 1998 EBITDA,
Guild shall be entitled to a bonus in respect of fiscal 1999 equal to a
percentage of his 1998 base salary, which percentage shall be equal to two times
the percentage increase of 1999 EBITDA over 1998 EBITDA. Thereafter, for each
fiscal year of the Company for which EBITDA exceeds EBITDA for the prior year,
Guild shall similarly be entitled to an incentive bonus equal to a percentage of
his base salary for such year, which percentage shall be equal to two times the
percentage increase of EBITDA for such year over the higher of (i) EBITDA for
the prior year and (ii) the highest EBITDA for any prior year back to 1998.
"EBITDA" means the Company's operating income, plus depreciation, amortization
and other non-cash items, including non-cash rent and compensation expense, plus
payments made pursuant to this Section 2(b), as derived based on the Company's
audited financials for the fiscal year in respect of which it is determined,
except that "Contract termination revenues" shall be excluded from operating
income for purposes of calculating the incentive bonus.
All incentive bonus amounts payable hereunder shall be paid within 30
days following the Company's determination thereof, which shall be not later
than 30 days following the delivery to the Company of audited financials for the
year in respect of which the determination is made; provided, however, that the
-------- -------
Company may defer payment of any incentive bonus payment
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<PAGE>
for up to 12 months if necessary or advisable to preserve working capital or for
other significant business reasons. If the Company elects to defer any incentive
bonus payment, the Company shall pay interest on the amount deferred at a
fluctuating rate per annum equal to the interest rate per annum charged the
Company by its principal lenders, as such rate is in effect from time to time.
The Company shall pay such interest to Guild quarterly in arrears on the last
business day of each calendar quarter during which any deferred incentive bonus
payment remains outstanding.
3. Benefit Plans. Guild shall be entitled to participate in all
employee fringe benefit plans and policies that the Company may make available
to, or have in effect for, its senior executives from time to time, including,
without limitation, health, hospitalization and welfare benefits, pension,
profit-sharing and similar plans, stock option, incentive compensation, savings,
investment, retirement and supplemental benefit plans, in each case subject to
the eligibility and other provisions of any such plan or policy. Nothing in
this Section 3 shall require the Company to institute or make available to Guild
any particular benefit plan or policy.
4. Expenses; Vacations; Facilities. Guild shall be entitled to
incur on behalf of the Company reasonable and necessary expenses in connection
with the performance of his duties and in accordance with the customary practice
of the Company. The Company shall reimburse Guild for any such expenses paid by
him. Whenever Guild is required to travel in connection with his duties, he may
arrange for his wife to accompany him and for the Company to reimburse him for
the related cost. During each 12-month period during the Term, Guild shall be
entitled to paid vacation in accordance with his status and the policies of the
Company regarding paid vacation time for its senior executives. During the Term
and any Consulting Period, the Company shall provide Guild with all reasonable
secretarial assistance and office and technical facilities necessary for the
performance of his duties hereunder and suitable to his position.
5. Temporary Disability. If, during the Term, Guild becomes
disabled, through illness or otherwise, from performing his duties hereunder, he
shall be entitled to a leave of absence for up to six consecutive months. The
Company shall continue to pay Guild's compensation during any such leave of
absence. If such disability continues beyond such period, it shall be deemed to
be a permanent disability subject to the provisions of Sections 6(b) and 7(a).
6. Rights of Termination.
(a) Termination for Cause by the Company. The Company shall have the
right to terminate Guild's employment forthwith for cause, limited to (i) an
action by Guild involving willful malfeasance or gross negligence or (ii)
Guild's incapacity to perform the duties called for under this Agreement by
reason of the abuse of alcohol or drugs.
(b) Permanent Disability; Death. If Guild is disabled through illness
or other wise from performing his duties hereunder for a period in excess of six
consecutive months, so that such disability is deemed to be a permanent
disability under Section 5, the Company shall have the option, exercisable on
written notice to Guild and only so long as such disability continues, to
terminate his employment under this Agreement. Any such termination shall be
effective as of the
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<PAGE>
end of the month in which such written notice is given to Guild. If Guild dies,
the Term shall end on the date of his death.
(c) Termination for Cause by Guild. Guild shall have the right,
exercisable within six months after the occurrence of any of the following
events, to terminate his employment under this Agreement on delivery of 30 days'
written notice thereof to the Company:
(i) if the Company violates this Agreement in any material
respect, and such violation is not cured within 15 days of Guild's written
notice thereof to the Company;
(ii) if Guild is not re-elected or re-appointed to the offices of
Chairman of the Board and Chief Executive Officer, other than by his own
choice, by reason of his permanent disability, or is removed from such
offices, other than for reasons justifying termination by the Company under
Section 6(a);
(iii) if Guild ceases to be a member of the Board of Directors of
the Company, other than by his own choice, by reason of his permanent
disability or for reasons justifying termination under Section 6(a); or
(iv) in the event of a change of control of the Board of
Directors of the Company as a result of (A) a contest for the control of
the Company, (B) the consolidation of the Company with, or merger of the
Company into, any other corporation, (C) the acquisition of the Company, of
a controlling interest in the Company or of all or substantially all of the
assets of the Company by another person, or (D) the cessation of the
corporate existence of the Company or failure to continue such existence in
full force and effect as a result of any circumstances.
7. Effects of Termination.
(a) Termination for Permanent Disability. If Guild's employment
terminates under Section 6(b) on account of Guild's permanent disability, the
Company shall continue to pay (or cause to be paid) to Guild, for the remainder
of the Term (the "Remainder Term"), in equal semi-monthly installments, 75% of
his then current salary, less the aggregate amount of all income disability
benefits which he may receive or to which he may be entitled for such period by
reason of (i) any group health insurance plan which is intended to function as a
salary replacement plan, (ii) any applicable compulsory state disability law,
(iii) the Federal Social Security Act, (iv) any applicable workmen's
compensation law or similar law and (v) any disability plan to which the Company
or any of its affiliates has contributed or for which it has made payroll
deductions, other than those which reimburse for actual medical expenses.
(b) Payment on Termination by Reason of Death or by Guild for Cause.
If Guild dies during the Term or the Remainder Term, or if Guild elects to
terminate his employment hereunder pursuant to Section 6(c), (i) the Company
shall continue to pay (or cause to be paid) to Guild or his designated
beneficiary (or, if no beneficiary has been designated, his estate), for the
Remainder Term, in equal semi-monthly installments, the base salary that would
have been payable
-4-
<PAGE>
to Guild during the Remainder Term pursuant to Section 2(a) had Guild's
employment not been terminated, and (ii) after the Remainder Term, if Guild
elected to terminate his employment hereunder pursuant to Section 6(c), the
Company shall also pay during the Consulting Period the consulting fees that
would have been payable during the Consulting Period as if the Company had
elected not to extend the Term pursuant to Section 1(a). If, however, Guild or
his designated beneficiary or estate so requests the Company in writing at any
time after Guild's election to terminate his employment pursuant to Section 6(c)
or Guild's death, the Company shall pay to him or his designated beneficiary
(or, if no beneficiary has been designated, his estate), an amount equal to the
total base salary and, if applicable, consulting fees, otherwise owing pursuant
to the preceding sentence, discounted at the Discount Rate (as defined below) to
its present value as of the date of such request (the "Notice Date"). The
Company shall pay such amount in a lump sum not later than 30 days after the
Notice Date. "Discount Rate" means the yield to maturity, as determined on the
Notice Date, on U.S. Treasury obligations having an original maturity comparable
to the Remainder Term plus, if applicable, the Consulting Period. Guild may
waive his right to receive all or part of any payment otherwise owing pursuant
to this Section 7(b) by written notice to the Company and may also elect to
receive a portion of any payments owing to him pursuant to this Section 7(b) on
the installment basis referred to in the first sentence of this Section 7(b) and
a portion on the lump sum basis referred to in the second sentence hereof.
(c) General. Except as otherwise set forth in Sections 7(a) and 7(b),
Guild's right to receive the base salary provided for in Section 2(a) shall
cease on the effective date of any termination of his employment under Section
6, nor shall he have any right to any incentive bonus in respect of the year in
which termination occurs, unless it occurs as of December 31 of such year.
Termination of Guild's employment under any provision of this Agreement shall
not affect the right of Guild or his designated beneficiary or estate to receive
benefits accrued to him through the date of such termination under this
Agreement or any employee benefit plan of the Company in which he is then
participating; provided, however, that the rights of Guild or his designated
-------- -------
beneficiary or estate under any such plan and any termination of his
participation thereunder shall be governed by the terms of such plans as then in
effect. All payments and rights under Sections 7 (a) and 7(b) shall be in lieu
of any other amounts Guild (or his estate) might be entitled to receive under
this Agreement for any breach hereof by the Company. Payments under Sections
7(a) or 7(b) shall not affect Guild's right to receive any severance payments or
other benefits to which he is entitled in accordance with the Company's policy.
At Guild's request at any time prior to the termination of his employment
hereunder, the Company shall provide him with such reasonable security as Guild
shall reasonably request to secure payment of all amounts payable to him after
such termination, such as a bank letter of credit, bond or security interest in
a portion of the Company's assets.
8. Confidentiality. All information possessed by Guild relative to
the activities of the Company which is of a secret or confidential nature,
including business plans, sales or marketing data, financial data, developments
and administrative procedures, is the property of the Company. Guild shall not,
during the Term and any Remainder Term, disclose any such information to others
not in the employ of the Company or its subsidiaries or use it for his benefit
or that of any third party. Nothing herein shall prevent Guild, subsequent to
the termination of his employment hereunder, from using and availing himself of
his general skill, knowledge and
-5-
<PAGE>
experience, including that pertaining to or derived from the non-confidential
aspects of the business of the Company.
9. Non-Competition. During the Term , any Remainder Term with
respect to which he is receiving payment hereunder and any Consulting Period,
Guild shall not, anywhere in the United States of America, without the consent
of the Board of Directors of the Company:
(a) engage in any national radio sales representation business on
behalf of any party other than the Company and its subsidiaries;
(b) solicit business from or represent any client of the Company or
any of its subsidiaries in connection with national radio sales representation;
or
(c) offer employment to or hire any employee of the Company or any of
its subsidiaries.
10. Notices. Any notice given by either party to the other shall be
in writing and delivered by personal delivery or registered or certified mail,
return receipt requested, addressed to Guild at his address of record with the
Company, or to the Company at is principal office, as the case may be, or, in
either case, at such other place as Guild or the Company may from time to time
designate in writing. The date of personal delivery or the date of mailing any
such notice shall be deemed to be the date of delivery thereof.
11. Prior Agreements; Amendments. This Agreement constitutes the
entire agreement between the Company and Guild with regard to its subject matter
and merges and supersedes any employment understandings or agreements which may
have been previously made between the Company and Guild (other than the
Supplemental Income Agreement, dated as of December 31, 1986 and amended as of
June 18, 1993, and the Amendment and Extension of Option, dated January 1, 1991
and amended as of June 18, 1993), including, without limitation, the Original
Agreement. This Agreement may not be changed, waived, discharged or terminated
orally, but only by an instrument in writing, signed by the party against which
enforcement of such change, waiver, discharge or termination is sought.
12. Parties in Interest. Neither this Agreement nor any rights or
obligations hereunder may be assigned by one party without the consent of the
other, except that this Agreement (a) shall be binding on and inure to the
benefit of any successor of the Company whether by merger, consolidation, sale
of assets or otherwise, and references to the Company shall be deemed to include
any such successor, and (b) to the extent provided herein, shall be binding on
and inure to the benefit of the estate, heirs, designated beneficiaries or
personal representatives, if any, of Guild, and references to Guild shall be
deemed to include such estate, heirs, designated beneficiaries or personal
representatives. Any designation by Guild of a beneficiary to receive payments
hereunder in the event of Guild's death or permanent disability, and any change
in such designation, shall be made by written notice from Guild to the Company.
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<PAGE>
13. Severability. If any provision of this Agreement is held
invalid, illegal or unenforceable by a court or tribunal of competent
jurisdiction, the remainder of this Agreement shall not be affected thereby, and
such provision shall be carried out as nearly as possible according to its
original terms and intent to eliminate such invalidity or unenforceability. In
this regard, the parties agree that the provisions of Section 9, including,
without limitation, the scope of the territorial and time restrictions, are
reasonable and necessary to protect and preserve the Company's legitimate
interests. If the provisions of Section 9 are held by a court of competent
jurisdiction to be in any respect unreasonable, then such court may reduce the
territory or time to which it pertains or otherwise modify such provisions to
the extent necessary to render such provisions reasonable and enforceable.
14. Miscellaneous. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Headings used in this
Agreement are for convenience only and shall not be used in the interpretation
of this Agreement. References to Sections are to the sections of this
Agreement.
15. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Florida applicable to
agreements made and fully to be performed therein by residents thereof.
16. Arbitration. Any dispute arising out of or relating to any
provision of this Agreement or to the parties' performance of any of their
respective obligations hereunder shall be resolved before a single arbitrator
chosen in accordance with the Rules of the American Arbitration Association as
at the time in effect Florida. The arbitration shall take place in a major city
in Florida designated by Guild and otherwise in accordance with such Rules.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
INTEREP NATIONAL RADIO SALES, INC.
By /s/ William J. McEntee, Jr.
-----------------------------------------------
William J. McEntee, Jr., Vice President
/s/ Ralph C. Guild
-----------------------------------------------
RALPH C. GUILD
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<PAGE>
EXHIBIT 10.32
INTEREP NATIONAL RADIO SALES, INC.
NON-QUALIFIED STOCK OPTION
For valuable consideration, the receipt and sufficiency of which is
acknowledged, INTEREP NATIONAL RADIO SALES, INC., a New York corporation (the
"Company"), grants to RALPH C. GUILD, with a residence address of 10 South Lake
Trail, Palm Beach, Florida 33480 ("Optionee"), a non-qualified stock option (the
"Option") to purchase from the Company an aggre gate of 2,500 shares of the
Company's Common Stock, par value $.04 per share (the "Common Stock"), at an
exercise price equal to the fair market value per share of the Common Stock on
the date hereof, which shall be determined based on the independent appraisal
thereof to be conducted for the Company's Employee Stock Ownership Plan as of
June 30, 1998 (the "Option Price"). This Option shall be exercisable at any
time on and after the six-month anniversary of the date hereof until the close
of business on the tenth anniversary of the date hereof (the "Termination
Date"), and may be exercised in whole or in part from time to time. The Company
shall give Optionee written notice of the pending expiration of this Option on a
date no earlier than twelve months prior to, and no later than 6 months prior
to, the Termination Date.
Subject to the provisions of this Option, this Option may be exercised
by written notice to the Company stating the number of shares of Common Stock
with respect to which it is being exercised. Such notice shall be accompanied
by Optionee's full payment of the Option Price for the shares to be purchased by
certified or bank cashier's check payable to the order of the Company or by any
other means acceptable to the Company.
As soon as practicable after receipt of such notice and payment, and
subject to the next paragraph, the Company shall, without transfer or issue tax
or other expense to Optionee, deliver to Optionee a certificate for the shares
purchased. Such delivery shall be made at the offices of the Company, at such
other place as may be mutually acceptable to the Company and Optionee or, at the
election of the Company, by certified mail addressed to Optionee at Optionee's
address set forth above or, if different, Optionee's address shown in the
records of the Company.
The Company shall have the right to withhold an appropriate number of
shares of Common Stock (based on the fair market value thereof on the date of
exercise) for payment of taxes required by law or to take such other action as
may be necessary in the opinion of the Company to satisfy all withholding tax
obligations. The Company may postpone the time of delivery of certificates for
shares of Common Stock for such additional time as the Company shall deem
necessary or desirable to enable it to comply with the requirements of any
applicable laws or regulations relating to the authorization, issuance or sale
of securities.
The issuance of the shares of Common Stock subject hereto and issuable
on the exercise of this Option and the transfer or resale of such shares shall
be subject to such restrictions as are, in the opinion of the Company's counsel,
required to comply with the Securities Act of 1933 and the rules and regulations
thereunder, and the certificates representing such shares shall, if it is deemed
advisable by counsel, bear a legend to such effect. On exercise of this
Option, Optionee shall, if so requested by the Company, deliver to the Company a
written representation that he is
<PAGE>
acquiring the shares of Common Stock to be purchased solely for his own account
for investment and not with a view to, or for resale in connection with, any
distribution thereof.
During Optionee's lifetime, this Option shall be exercisable only by
Optionee (except as otherwise provided below), and neither this Option nor any
right hereunder shall be assignable or transferable otherwise than by will or
the laws of descent and distribution (as provided below), or be subject to
attachment, execution or other similar process. If Optionee attempts to
alienate, assign, pledge, hypothecate or otherwise dispose of this Option or of
any right hereunder, except as provided for herein, or in the event of any levy
or any attachment, execution or similar process upon the rights or interest
hereby conferred, this Option shall terminate and become null and void.
Notwithstanding the foregoing, Optionee shall have the right to transfer this
Option during his lifetime to a trust for the benefit of his spouse and/or his
descendants.
In the event of Optionee's death prior to the Termination Date, this
Option may be exercised after the date of Optionee's death by Optionee's estate
or beneficiaries, or by the trustee or trustees of a trust for the benefit of
his spouse and/or his descendants, but in no event may this Option be exercised
later than the Termination Date. All rights with respect to this Option (to the
extent held by Optionee at death and not by such a trust), including the right
to exercise it, shall pass in the following order: (a) to such persons as
Optionee may designate in a writing duly delivered to the Company (in the form
available from the Company for such purpose), or in the absence of such a
designation, (b) to Optionee's estate (this Option to be exercised by the legal
representative). References to "Optionee" shall be deemed to include Optionee's
estate, executor, beneficiaries or the trustee or trustees of any trust for the
benefit of his spouse and/or his descendants, as appropriate.
The right of the Company to terminate (whether by dismissal,
discharge, retirement or otherwise) Optionee's employment with it at any time at
will, or as otherwise provided by an agreement between the Company and Optionee,
is specifically reserved. The termination of Optionee's employment with the
Company, for any reason, shall, however, have no effect on this Option, which
shall continue in full force and effect in accordance with its terms.
In the event of any change in the number of shares of outstanding
Common Stock by reason of a stock split, reverse stock split, stock dividend,
combination or reclassification of shares, recapitalization or any other event
changing the number of shares of Common Stock outstanding without receipt of
consideration by the Company, the number of shares of Common Stock covered by
this Option and the Option Price thereof shall automatically be adjusted to
equal that number of shares of Common Stock (including fractional shares, if
any) that Optionee would have owned immediately after such event had he,
immediately prior to such event, owned that number of shares of Common Stock
that he otherwise would have been entitled to receive pursuant to this Option.
In the event of any capital reorganization of the Company, sale of
substantially all of the assets of the Company or any reclassification of the
shares of Common Stock of the Company other than into shares of Common Stock of
the Company, or in case of any consolidation or merger of the Company into or
with another corporation, provision shall be made so that Optionee shall have
the right thereafter to receive his proportionate share of the securities or
property (including any contingent or deferred payments) issued or issuable with
respect to the number of shares of Common
2
<PAGE>
Stock which Optionee has the right to receive under this Option, to the end that
the provisions of this Option shall thereafter be applicable, as nearly as
reasonably may be, in relation to securities or other property distributed in
respect of the Common Stock. This Option shall be binding on and inure to the
benefit of any successor of the Company, whether by merger, consolidation, sale
of assets or otherwise, and reference herein to the Company shall be deemed to
include any such successor.
If there is any other change affecting the Common Stock or any
distribution (other than normal cash dividends) to holders of Common Stock, such
adjustments as may be deemed equitable by the Board of Directors, including
adjustments to avoid fractional shares, shall be made to give proper effect to
such event.
Neither Optionee nor any person entitled to exercise Optionee's rights
under this Option shall have any right to receive dividends or any other rights
of a stockholder with respect to any shares of Common Stock subject to this
Option, unless and until a certificate for such shares shall have been issued
on the exercise of this Option.
Each notice relating to this Option shall be in writing and delivered
in person or by certified mail to the proper address. All notices to the
Company shall be addressed to it at its offices at 100 Park Avenue, New York,
New York 10017, c/o the Company's Secretary, and shall become effective when
received by the Secretary. All notices to Optionee or other persons then
entitled to exercise any rights with respect to this Option shall be addressed
to Optionee or such other persons at Optionee's address specified above. Anyone
to whom a notice may be given under this Option may designate a new address by
written notice to that effect.
This Option and all determinations made and actions taken pursuant
hereto, to the extent not otherwise governed by the Internal Revenue Code of
1986, as amended from time to time, or the securities laws of the United States
of America, shall be governed by and construed in accordance with the laws of
the Sate of New York. This Option shall be void and of no effect after the
Termination Date.
IN WITNESS WHEREOF, the Company has caused this Option to be executed
by its officers, thereunto duly authorized, as of December 16, 1998.
INTEREP NATIONAL RADIO SALES, INC.
By /s/ Ralph C. Guild
----------------------------------------------
Ralph C. Guild
Chairman of the Board
ATTEST:
/s/ Paul Parzuchowski
- --------------------------------
Paul Parzuchowski, Secretary
3
<PAGE>
EXHIBIT 10.33
INTEREP NATIONAL RADIO SALES, INC.
NON-QUALIFIED STOCK OPTION
For valuable consideration, the receipt and sufficiency of which is
acknowledged, INTEREP NATIONAL RADIO SALES, INC., a New York corporation (the
"Company"), grants to LESLIE D. GOLDBERG, with a residence address of 200 Keeler
Lane, North Salem, New York 10560 ("Optionee"), a non-qualified stock option
(the "Option") to purchase from the Company an aggregate of 2,500 shares of the
Company's Common Stock, par value $.04 per share (the "Common Stock"), at an
exercise price equal to the fair market value per share of the Common Stock on
the date hereof, which shall be determined based on the independent appraisal
thereof to be conducted for the Company's Employee Stock Ownership Plan as of
June 30, 1998 (the "Option Price"). This Option shall be exercisable at any
time on and after the six-month anniversary of the date hereof until the close
of business on the tenth anniversary of the date hereof (the "Termination
Date"), and may be exercised in whole or in part from time to time. The Company
shall give Optionee written notice of the pending expiration of this Option on a
date no earlier than twelve months prior to, and no later than six months prior
to, the Termination Date.
Subject to the provisions of this Option, this Option may be exercised
by written notice to the Company stating the number of shares of Common Stock
with respect to which it is being exercised. Such notice shall be accompanied
by Optionee's full payment of the Option Price for the shares to be purchased by
certified or bank cashier's check payable to the order of the Company or by any
other means acceptable to the Company.
As soon as practicable after receipt of such notice and payment, and
subject to the next paragraph, the Company shall, without transfer or issue tax
or other expense to Optionee, deliver to Optionee a certificate for the shares
purchased. Such delivery shall be made at the offices of the Company, at such
other place as may be mutually acceptable to the Company and Optionee or, at the
election of the Company, by certified mail addressed to Optionee at Optionee's
address set forth above or, if different, Optionee's address shown in the
records of the Company.
The Company shall have the right to withhold an appropriate number of
shares of Common Stock (based on the fair market value thereof on the date of
exercise) for payment of taxes required by law or to take such other action as
may be necessary in the opinion of the Company to satisfy all withholding tax
obligations. The Company may postpone the time of delivery of certificates for
shares of Common Stock for such additional time as the Company shall deem
necessary or desirable to enable it to comply with the requirements of any
applicable laws or regulations relating to the authorization, issuance or sale
of securities.
The issuance of the shares of Common Stock subject hereto and issuable
on the exercise of this Option and the transfer or resale of such shares shall
be subject to such restrictions as are, in the opinion of the Company's counsel,
required to comply with the Securities Act of 1933 and the rules and regulations
thereunder, and the certificates representing such shares shall, if it is deemed
advisable by counsel, bear a legend to such effect. On exercise of this
Option, Optionee shall, if so requested by the Company, deliver to the Company a
written representation that he is
<PAGE>
acquiring the shares of Common Stock to be purchased solely for his own account
for investment and not with a view to, or for resale in connection with, any
distribution thereof.
During Optionee's lifetime, this Option shall be exercisable only by
Optionee (except as otherwise provided below), and neither this Option nor any
right hereunder shall be assignable or transferable otherwise than by will or
the laws of descent and distribution (as provided below), or be subject to
attachment, execution or other similar process. If Optionee attempts to
alienate, assign, pledge, hypothecate or otherwise dispose of this Option or of
any right hereunder, except as provided for herein, or in the event of any levy
or any attachment, execution or similar process upon the rights or interest
hereby conferred, this Option shall terminate and become null and void.
Notwithstanding the foregoing, Optionee shall have the right to transfer this
Option during his lifetime to a trust for the benefit of his spouse and/or his
descendants.
In the event of Optionee's death prior to the Termination Date, this
Option may be exercised after the date of Optionee's death by Optionee's estate
or beneficiaries, or by the trustee or trustees of a trust for the benefit of
his spouse and/or his descendants, but in no event may this Option be exercised
later than the Termination Date. All rights with respect to this Option (to the
extent held by Optionee at death and not by such a trust), including the right
to exercise it, shall pass in the following order: (a) to such persons as
Optionee may designate in a writing duly delivered to the Company (in the form
available from the Company for such purpose), or in the absence of such a
designation, (b) to Optionee's estate (this Option to be exercised by the legal
representative). References to "Optionee" shall be deemed to include Optionee's
estate, executor, beneficiaries or the trustee or trustees of any trust for the
benefit of his spouse and/or his descendants, as appropriate.
The right of the Company to terminate (whether by dismissal,
discharge, retirement or otherwise) Optionee's employment with it at any time at
will, or as otherwise provided by an agreement between the Company and Optionee,
is specifically reserved. The termination of Optionee's employment with the
Company, for any reason, shall, however, have no effect on this Option, which
shall continue in full force and effect in accordance with its terms.
In the event of any change in the number of shares of outstanding
Common Stock by reason of a stock split, reverse stock split, stock dividend,
combination or reclassification of shares, recapitalization or any other event
changing the number of shares of Common Stock outstanding without receipt of
consideration by the Company, the number of shares of Common Stock covered by
this Option and the Option Price thereof shall automatically be adjusted to
equal that number of shares of Common Stock (including fractional shares, if
any) that Optionee would have owned immediately after such event had he,
immediately prior to such event, owned that number of shares of Common Stock
that he otherwise would have been entitled to receive pursuant to this Option.
In the event of any capital reorganization of the Company, sale of
substantially all of the assets of the Company or any reclassification of the
shares of Common Stock of the Company other than into shares of Common Stock of
the Company, or in case of any consolidation or merger of the Company into or
with another corporation, provision shall be made so that Optionee shall have
the right thereafter to receive his proportionate share of the securities or
property (including any contingent or deferred payments) issued or issuable with
respect to the number of shares of Common
2
<PAGE>
Stock which Optionee has the right to receive under this Option, to the end that
the provisions of this Option shall thereafter be applicable, as nearly as
reasonably may be, in relation to securities or other property distributed in
respect of the Common Stock. This Option shall be binding on and inure to the
benefit of any successor of the Company, whether by merger, consolidation, sale
of assets or otherwise, and reference herein to the Company shall be deemed to
include any such successor.
If there is any other change affecting the Common Stock or any
distribution (other than normal cash dividends) to holders of Common Stock, such
adjustments as may be deemed equitable by the Board of Directors, including
adjustments to avoid fractional shares, shall be made to give proper effect to
such event.
Neither Optionee nor any person entitled to exercise Optionee's rights
under this Option shall have any right to receive dividends or any other rights
of a stockholder with respect to any shares of Common Stock subject to this
Option, unless and until a certificate for such shares shall have been issued
on the exercise of this Option.
Each notice relating to this Option shall be in writing and delivered
in person or by certified mail to the proper address. All notices to the
Company shall be addressed to it at its offices at 100 Park Avenue, New York,
New York 10017, c/o the Company's Secretary, and shall become effective when
received by the Secretary. All notices to Optionee or other persons then
entitled to exercise any rights with respect to this Option shall be addressed
to Optionee or such other persons at Optionee's address specified above. Anyone
to whom a notice may be given under this Option may designate a new address by
written notice to that effect.
This Option and all determinations made and actions taken pursuant
hereto, to the extent not otherwise governed by the Internal Revenue Code of
1986, as amended from time to time, or the securities laws of the United States
of America, shall be governed by and construed in accordance with the laws of
the Sate of New York. This Option shall be void and of no effect after the
Termination Date.
IN WITNESS WHEREOF, the Company has caused this Option to be executed
by its officers, thereunto duly authorized, as of December 16, 1998.
INTEREP NATIONAL RADIO SALES, INC.
By /s/ Ralph C. Guild
-----------------------------------------------
Ralph C. Guild
Chairman of the Board
ATTEST:
/s/ Paul Parzuchowski
- ----------------------------------------------
Paul Parzuchowski, Secretary
3
<PAGE>
EXHIBIT 12.1
<TABLE>
<CAPTION>
Interep National Radio Sales, Inc.
Calculation of Earnings to Fixed Charges
(Thousands of dollars)
Years Ended December 31,
1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
Earnings:
Operating income $ 9,232 $ 7,182 $ 7,869 $ 9,052 $ 15,038
Fixed charges 1,359 1,401 1,455 1,511 2,355
-------------------------------------------------------------------------------
Earnings as adjusted $ 10,591 $ 8,583 $ 9,324 $ 10,563 17,393
Fixed Charges:
Interest on debt $ 3,379 $ 3,494 $ 4,049 $ 3,888 7,608
Amortization of debt issuance costs 94 55 73 89 924
Imputed interest portion of rent 1,265 1,346 1,382 1,422 1,431
-------------------------------------------------------------------------------
Total fixed charges $ 4,738 $ 4,895 $ 5,504 $ 5,399 9,963
Ratio of earnings to fixed charges $ 2.24 $ 1.75 $ 1.69 $ 1.96 $ 1.75
===============================================================================
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statements of Operations and Consolidated Balance Sheets of Interep
National Radio Sales, Inc. and Subsidiaries and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1998 JAN-01-1997 JAN-01-1996
<PERIOD-END> DEC-31-1998 DEC-31-1997 DEC-31-1996
<CASH> 32,962 1,419 2,653
<SECURITIES> 0 0 0
<RECEIVABLES> 48,177 43,362 38,859
<ALLOWANCES> 1,626 1,220 982
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 114,462 82,937 64,342
<PP&E> 20,668 19,398 17,678
<DEPRECIATION> 16,357 15,063 13,462
<TOTAL-ASSETS> 184,508 141,030 93,930
<CURRENT-LIABILITIES> 48,351 51,421 44,378
<BONDS> 100,000 0 0
0 6,924 5,334
0 0 0
<COMMON> 14 4,536 4,675
<OTHER-SE> (1,236) (1,623) (2,697)
<TOTAL-LIABILITY-AND-EQUITY> 184,508 141,030 93,930
<SALES> 87,735 87,096 72,858
<TOTAL-REVENUES> 124,956 113,682 91,734
<CGS> 0 0 0
<TOTAL-COSTS> 109,918 104,630 83,865
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 6,744 3,779 3,911
<INCOME-PRETAX> 8,294 5,273 3,958
<INCOME-TAX> 3,446 2,359 1,885
<INCOME-CONTINUING> 4,848 2,914 2,073
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 4,848 2,914 2,073
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
