U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number: 0-22486
SFX BROADCASTING, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3649750
(State of Incorporation) (I.R.S. Employer
Identification No.)
150 East 58th Street, 19th Floor
New York, New York 10155
(Address of principal executive offices)
Registrant's telephone number, including area code: ( 212)-407-9191
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $.01 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of August 14, 1996, the
number of shares outstanding of the Registrant's Class A Common Stock, $.01
par value, and Class B Common Stock, $.01 par value, was 6,431,897 and
856,156, respectively.
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SFX BROADCASTING, INC. AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
JUNE 30, 1996
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PART I FINANCIAL INFORMATION
Page
Number
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ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets at June 30, 1996 (unaudited) and December 31, 1995.................. 3
Consolidated Statements of Operations for Three Months Ended June 30, 1996 and 1995 (unaudited) 5
Consolidated Statements of Operations for Six Months Ended June 30, 1996 and 1995 (unaudited)... 6
Consolidated Statements of Cash Flows for Six Months Ended June 30, 1996 and 1995 (unaudited)... 7
Notes to Consolidated Financial Statements ..................................................... 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS..................................................................... 13
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS............................................................................ 20
ITEM 2. CHANGES IN SECURITIES........................................................................ 21
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................................................. 22
SIGNATURES
</TABLE>
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SFX BROADCASTING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------------- -----------------
ASSETS (Unaudited) (Note)
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Current Assets:
Cash and cash equivalents..................................................... $ 378,794 $ 11,893
Accounts receivable, net...................................................... 23,697 18,034
Prepaid broadcast rights and other current assets............................. 2,890 2,578
----------------- -----------------
Total current assets..................................................... 405,381 32,505
Property and equipment, at cost, less accumulated depreciation................ 28,635 16,767
Broadcast licenses and other intangible assets, less accumulated amortization. 202,726 129,543
Receivables from affiliates, including accrued interest....................... 2,420 4,439
Deposits on station acquisitions.............................................. 12,313 3,000
Other assets.................................................................. 9,977 1,083
----------------- -----------------
Total assets............................................................. $ 661,452 $ 187,337
================= =================
</TABLE>
Note: The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
See accompanying notes to consolidated financial statements
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<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------------- -----------------
LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited) (Note)
<S> <C> <C>
Current Liabilities:
Accounts payable and accrued expenses......................................... $ 13,522 $ 8,741
Accrued interest.............................................................. 4,833 2,303
Current portion of capital lease obligations.................................. 224 311
Current portion of debt....................................................... 199 260
----------------- -----------------
Total current liabilities................................................ 18,778 11,615
Deferred income taxes payable................................................. 7,415 7,415
Capital lease obligations, less current portion............................... 1,254 1,352
Debt, less current portion.................................................... 576 609
Subordinated notes............................................................ 450,594 80,000
----------------- -----------------
Total liabilities........................................................ 478,617 100,991
Redeemable preferred stock.................................................... 152,928 3,285
Shareholders' Equity:
Class A voting common stock, $.01 par value; 10,000,000 shares authorized;
6,458,215 issued; 6,431,897 outstanding at June 30, 1996, and
6,458,215 outstanding at December 31, 1995............................... 64 64
Class B voting convertible common stock, $.01 par value;1,000,000 shares
authorized; 1,000,000 issued; 856,126 outstanding at June 30,1996, and
1,000,000 outstanding at December 31, 1995............................... 10 10
Additional paid-in-capital.................................................... 111,482 115,184
Treasury stock; 170,192 shares................................................ (6,393) --
Accumulated deficit........................................................... (75,256) (32,197)
----------------- -----------------
Total shareholders' equity............................................... 29,907 83,061
----------------- -----------------
Total liabilities and shareholders' equity............................... $ 661,452 $ 187,337
================= =================
</TABLE>
Note: The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
See accompanying notes to consolidated financial statements
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<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30,
----------------------------------------
1996 1995
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Revenue......................................................................... $ 31,573 $ 23,550
Less: agency commissions........................................................ 3,819 2,826
---------------- ----------------
Net revenue..................................................................... 27,754 20,724
Station operating expenses...................................................... 19,121 13,705
Depreciation, amortization, duopoly integration costs and acquisition related
costs...................................................................... 2,349 1,987
Corporate expenses.............................................................. 1,580 972
Non-recurring charges including adjustments to broadcast rights agreement....... 27,489 5,000
---------------- ----------------
Total operating expenses........................................................ 50,539 21,664
Operating loss.................................................................. (22,785) (940)
Investment income............................................................... (2,134) (102)
Interest expense................................................................ 6,204 3,635
---------------- ----------------
Loss before income taxes and extraordinary item................................. (26,855) (4,473)
Income tax benefit.............................................................. -- (1,923)
---------------- ----------------
Loss before extraordinary item.................................................. (26,855) (2,550)
Extraordinary loss on debt retirement........................................... 15,219 --
---------------- ----------------
Net loss........................................................................ (42,074) (2,550)
Redeemable preferred stock dividends and accretion.............................. 831 73
---------------- ----------------
Net loss applicable to common stock............................................. $ (42,905) $ (2,623)
================ ================
Net loss per common share before extraordinary item............................. $ (3.72) $ (0.44)
Extraordinary loss on debt retirement per common share.......................... (2.05) --
---------------- ----------------
Net loss per common share....................................................... $ ( 5.77) $ (0.44)
================ =================
Weighted average common shares outstanding...................................... 7,437,642 5,976,058
</TABLE>
See accompanying notes to consolidated financial statements
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<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------------------
1996 1995
---------------- ----------------
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Revenue......................................................................... $ 53,978 $ 39,156
Less: agency commissions........................................................ 6,424 4,715
---------------- ----------------
Net revenue..................................................................... 47,554 34,441
Station operating expenses...................................................... 33,177 23,381
Depreciation, amortization, duopoly integration costs and acquisition related
costs...................................................................... 4,648 3,684
Corporate expenses.............................................................. 2,790 1,779
Non-recurring charges including adjustments to broadcast rights agreement....... 27,489 5,000
---------------- ----------------
Total operating expenses........................................................ 68,104 33,844
Operating (loss) income......................................................... (20,550) 597
Investment income............................................................... (2,298) (99)
Interest expense................................................................ 9,588 6,067
---------------- ----------------
Loss before income taxes and extraordinary item................................. (27,840) (5,371)
Income tax benefit.............................................................. -- (2,300)
---------------- ----------------
Loss before extraordinary item.................................................. (27,840) (3,071)
Extraordinary loss on debt retirement........................................... 15,219 --
---------------- ----------------
Net loss........................................................................ (43,059) (3,071)
Redeemable preferred stock dividends and accretion ............................. 967 144
---------------- ----------------
Net loss applicable to common stock............................................. $ (44,026) $ (3,215)
================ ================
Net loss per common share before extraordinary item............................. $ (3.87) $ (0.54)
Extraordinary loss on debt retirement per common share.......................... (2.04) --
---------------- ----------------
Net loss per common share....................................................... $ (5.91) $ (0.54)
================ ================
Weighted average common shares outstanding...................................... 7,447,929 5,946,251
</TABLE>
See accompanying notes to consolidated financial statements
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<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------------------
1996 1995
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Operating Activities:
Net loss.......................................................................... $(43,059) $(3,071)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization................................................ 4,371 3,684
Interest on receivables from related parties................................. (158) (134)
Non-cash portion of non-recurring charge..................................... 8,578 --
Deferred tax benefit......................................................... -- (2,300)
Loss on sale of investments.................................................. -- 84
Write off of debt costs...................................................... 5,593 --
Changes in assets and liabilities:
Increase in accounts receivable.............................................. (5,601) (3,317)
Increase in prepaid broadcast rights and other assets........................ (9,372) (1,465)
Increase in accrued interest payable......................................... 1,802 36
Increase in accounts payable, accrued expenses and other liabilities......... 3,238 5,190
Decrease in other liabilities................................................ -- (294)
---------------- ----------------
Net cash used in operating activities............................................ (34,608) (1,587)
Investing activities:
Deposits on station acquisitions.................................................. (12,313) (5,000)
Purchase of stations, net of cash acquired........................................ (73,404) (14,642)
Proceeds from the sale of short term investments.................................. -- 7,918
Advances to related party......................................................... (2,420) (2,000)
Proceeds from sale of assets...................................................... -- 300
Purchase of property, plant and equipment......................................... (639) (6,031)
Increase in other intangibles..................................................... (2,055) --
---------------- ----------------
Net cash used in investing activities............................................. (90,831) (19,455)
Financing activities:
Additions to debt issuance costs.................................................. (14,910) (1,848)
Proceeds from senior and subordinted debt......................................... 471,500 22,000
Payments on subordinated debt..................................................... (79,406) --
Payments on senior loans and capital lease obligations............................ (21,801) (266)
Decrease in accrued stock acquisition cost........................................ -- (1,150)
Proceeds from preferred stock offering............................................ 143,445 --
Purchase of treasury stock........................................................ (6,393) --
Dividends paid on preferred stock ................................................ (95) --
---------------- ----------------
Net cash provided by financing activities......................................... 492,340 18,736
Net increase (decrease) in cash and cash equivalents.............................. 366,901 (2,306)
Cash and cash equivalents at beginning of period.................................. 11,893 3,194
---------------- ----------------
Cash and cash equivalents at end of period........................................ $ 378,794 $ 888
================ =================
</TABLE>
See accompanying notes to consolidated financial statements
- 7 -
<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
Information with respect to the three and six months ended June 30, 1996
and 1995 is unaudited. The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with Rule 10-01 of Regulation
S-X. Accordingly, they do not include all the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, the unaudited interim financial
statements contain all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation of the financial position, results of
operations and cash flows of SFX Broadcasting, Inc. (the "Company" or "SFX"),
for the periods presented.
The results of operations for the three and six month period are not
necessarily indicative of the results of operations for the full year. For
further information refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1995.
NOTE 2 - RECENTLY COMPLETED ACQUISITIONS AND DISPOSITIONS
In June 1996, SFX acquired substantially all of the assets of WROQ-FM,
Greenville, South Carolina, for approximately $14.0 million (the "Greenville
Acquisition") and WTRG-FM and WRDU-FM, both operating in Raleigh, North
Carolina, and WMFR-AM, WMAG-FM and WTCK-AM (formerly WWWB-AM), each operating
in Greensboro, North Carolina for approximately $36.8 million (the "HMW
Acquisition"). Multi-Market Radio, Inc. ("MMR"), a publicly held radio
broadcasting Company in which the Company's Chief Executive Officer is a
significant shareholder, initially entered into the acquisition agreements
relating to these stations. SFX and MMR agreed that SFX would finance the
purchase of such stations and that MMR would transfer the purchased assets to
SFX simultaneously with the acquisition by MMR. The Company has recorded the HMW
Acquisition and the Greenville Acquisition using the purchase method of
accounting based on the preliminary allocation of the purchase price. The
amounts recorded are subject to change based on the final allocation of the
purchase price.
In July 1996, SFX acquired substantially all of the assets of
WJDX-FM, Jackson, Mississippi for a purchase price of approximately $3.0
million (the "Jackson Acquisition").
In July 1996, SFX acquired from Prism Radio Partners L.P. ("Prism"), a
privately-held radio broadcasting company, substantially all of the assets
used in the operation of eight FM and five AM radio stations located in four
markets: Jacksonville, Florida; Raleigh, North Carolina; Tucson, Arizona and
Wichita, Kansas (the "Prism Acquisition"). The purchase price was
approximately $82.8 million.
In July 1996, SFX acquired Liberty Broadcasting Inc. ("Liberty
Broadcasting") for a purchase price of approximately $227.0 million, plus
$10.5 million for working capital (the "Liberty Acquisition"). Liberty
Broadcasting was a privately-held radio broadcasting company which owned and
operated or provided programming to or sold advertising on behalf of 14 FM and
six AM radio stations (the "Liberty Stations") located in six markets;
Washington, DC/Baltimore, Maryland; Nassau-Suffolk, New York; Providence,
Rhode Island; Hartford Connecticut; Albany, New York and Richmond, Virginia.
In July 1996, SFX sold three of the Liberty Stations operating in the
Washington, DC/Baltimore, Maryland market (the "Washington Dispositions"), for
$25.0 million, of which approximately $22.0 million was received by SFX at the
closing and the remainder of which will be paid to SFX upon the satisfaction
of certain conditions.
The Greenville Acquisition, the HMW Acquisition, the Jackson Acquisition,
the Prism Acquisition and, the Liberty Acquisition are collectively herein
referred to as the "Completed Acquisitions."
NOTE 3 - OTHER RECENT TRANSACTIONS
AGREEMENT WITH SCMC. On April 15, 1996, SFX and Sillerman Communications
Management Corporation ("SCMC"), a corporation controlled by Robert F. X.
Sillerman, the Chief Executive Officer of the Company, entered into the SCMC
Termination Agreement pursuant to which SCMC assigned to SFX its rights to
receive fees for consulting and marketing services payable by each
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<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
of MMR and Triathlon Broadcasting Company ("Triathlon"), a publicly-traded
radio company operating in small and medium-sized markets in the midwest and
west, except for fees relating to certain transactions pending at the date of
such agreement, and SFX and SCMC terminated the arrangement pursuant to which
SCMC performed financial consulting services for SFX. In consideration
therefor, SFX agreed to cancel $2.0 million of indebtedness plus accrued
interest thereon owing from SCMC to the Company upon completion of the MMR
Merger (as hereinafter defined) and SCMC received warrants to purchase up to
600,000 shares of Class A Common Stock of SFX at an exercise price, subject to
adjustment, of $33.75 per share (the market price at the time the financial
consulting arrangement was terminated) of which a warrant to purchase up to
300,000 shares is immediately exercisable. The exercise of the remaining
warrants is subject to stockholder approval. In connection with such agreement,
the Company recognized a non-recurring, non-cash charge to earnings of
approximately $5.6 million during the three-month period ended June 30, 1996,
which is one half of the value of the warrants (fair value of approximately $9
million) and loan forgiveness. The remainder will be allocated to the Triathlon
Agreement and amortized over the life of the agreement. Subsequent to the
termination of its current relationship with SCMC, SFX intends to perform
internally the functions performed by SCMC.
REPAYMENT OF OLD CREDIT AGREEMENT. On May 31, 1996, SFX repaid all
amounts outstanding under its $50.0 million senior credit facility (the "Old
Credit Agreement").
PREFERRED STOCK OFFERING, NOTE OFFERING, AND NEW CREDIT AGREEMENT. In May
1996, SFX completed a private placement of $450.0 million in aggregate
principal amount of its 10.75% Senior Subordinated Notes due 2006 (the "Note
Offering") and a private placement of $149.5 million in aggregate liquidation
preference of its Series D Preferred Stock (the "Preferred Stock Offering").
Pursuant to its contractual obligations with the original purchasers of the
securities offered in the Note Offering and the Preferred Stock Offering, SFX
filed registration statements with the Securities and Exchange Commission
relating to an exchange offer for the notes that were the subject of the Note
Offering and a "shelf" offering of the Series D Preferred Stock by the holders
thereof. Such registration statements were declared effective in July 1996. In
addition, SFX has received an underwritten commitment from its lender for a
senior credit facility of $150.0 million and expects to enter into a
definitive credit agreement (the "New Credit Agreement") with respect to such
facility. SFX has been advised by its lender that it has received commitments
significantly in excess of $150 million. The Company is currently considering
whether to expand the facility beyond $150 million. There can be no assurance,
however, that SFX will be able to enter into the New Credit Agreement on a
timely basis or at all.
TENDER OFFER. Concurrently with the closings of the Preferred Stock
Offering and the Note Offering (collectively, the "Financing"), SFX completed
the tender offer (the "Tender Offer") and a related consent solicitation (the
"Consent Solicitation") with respect to its 11.375% Senior Subordinated Notes
due 2000 (the "Old Notes"). SFX purchased approximately $79.4 million in
principal amount of the $80.0 million in principal amount of the Old Notes
outstanding in the Tender Offer. SFX also entered into a supplemental
indenture amending the terms of the indenture pursuant to which the Old Notes
were issued.
AGREEMENTS WITH MESSRS. ARMSTRONG, BENSON AND HICKS. In April 1996, SFX
entered into an Agreement (the "Armstrong Agreement") with D. Geoffrey
Armstrong, Chief Financial Officer of SFX, pursuant to which Mr. Armstrong
agreed to become the Chief Operating Officer of SFX concurrently with the
completion of the MMR Merger (as hereinafter defined) and defer certain payments
due to him under his employment agreement. SFX also agreed in the Armstrong
Agreement to repurchase certain securities owned by Mr. Armstrong. In June 1996,
Mr. Armstrong was designated by the Board of Directors to begin serving as the
Chief Operating Officer of SFX and to resign as Chief Financial Officer of SFX
upon the consummation of the MMR Merger. The $4.6 million paid pursuant to the
Armstrong Agreement was expensed as a non-recurring charge. Concurrently with
such agreement, SFX entered into an employment agreement with Thomas Benson
pursuant to which he agreed to serve as Vice President of Financial Affairs of
SFX and to serve as Chief Financial Officer of SFX upon the consummation of the
MMR Merger. In June 1996, SFX entered into an Agreement (the "Hicks Agreement")
with R. Steven Hicks, the former President, Chief Executive Officer, Chief
Operating Officer and a Director of SFX, pursuant to which Mr. Hicks resigned
from all positions held by him with SFX, sold to SFX all of the securities of
SFX then owned by him or which he had the right to obtain and agreed to refrain
from owning or operating for a period of one year from completion of the MMR
Merger any direct or indirect interest in radio stations in certain markets in
the United States in which SFX currently owns and operates, or subsequent to the
MMR Merger, will own and operate radio stations in return for payments
aggregating $18.6 million. The Company recorded a non-recurring charge in the
quarter ended June 30, 1996 of $19.8 million in connection with the Armstrong
Agreement and Hicks Agreement.
AGREEMENT WITH MR. FERREL. In July 1996, SFX granted Michael G. Ferrel ten-
year options to purchase up to 50,000 shares of Class A Common Stock at an
exercise price of $33.75 per share. Such options are immediately exercisable.
Such
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<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
options were granted to Mr. Ferrel in consideration for his serving as a
consultant to SFX and in connection with his anticipated employment by SFX as
its Chief Executive Officer. See Note 6--Pending MMR Merger. SFX will record a
charge to earnings in the quarter ended September 30, 1996 in connection with
these options of approximately $350,000.
NOTE 4 - TERMINATION OF BROADCAST RIGHTS AGREEMENT
In August 1994, the Company entered into an agreement to broadcast Texas
Rangers baseball games on KRLD-AM and to syndicate the games through Texas
State Networks, for a period of four years, commencing with the 1995 season.
While the contract contemplated the possibility of a baseball work stoppage,
and contained certain provisions affording the Company partial relief from the
payment of rights fees under certain specified conditions related to work
stoppages, the nature of the major league baseball strike and consequently the
damage to the value of the Texas Rangers broadcast rights has been more
material than management had anticipated. The total rights fees under the
four-year agreement, subject to adjustment, were stated at $17,000,000. In the
second quarter of 1995, the Company recorded a charge of $5,000,000 with
respect to the estimated diminished value of the contract.
In March of 1996, the Company made its annual rights fee payment relating
to the broadcast of Texas Rangers baseball games, reducing such payment by an
amount calculated to reflect the adjustment provisions contained in the rights
agreement with respect to the major league baseball labor dispute which
resulted in the work stoppages during the 1994 and 1995 major league baseball
seasons. The Company received notice from the Texas Rangers disputing the
adjustment and credits taken by the Company. On April 11, 1996, in order to
facilitate the Houston Exchange (as hereinafter defined), the Company and the
Texas Rangers amended the radio broadcast rights agreement. The amended terms
provide for the termination of the agreement no later than November 30, 1996.
The Company recorded a $1,600,000 charge in the second quarter of 1996 related
to the termination of the agreement and to adjust the value of the contract for
the 1996 season.
NOTE 5 - PENDING ACQUISITONS AND DISPOSITIONS
In connection with the Prism Acquisition, SFX has agreed to purchase from
Prism substantially all of the assets used in the operation of two FM radio
stations and one AM radio station, each operating in Louisville, Kentucky,
upon renewal of the Federal Communications Commission ("FCC") licenses of such
stations (the "Louisville Acquisition"). SFX has entered into two separate
agreements to sell these stations upon their acquisition (the "Louisville
Dispositions") for $19.5 million. SFX expects that it will recognize no gain
or loss on the Louisville Dispositions.
In addition, SFX has agreed to acquire substantially all of the assets of
WHSL-FM, Greensboro, North Carolina, for a purchase price of $6.0 million (the
"Greensboro Acquisition") and substantially all of the assets of WSTZ-FM and
WZRX-AM, each operating in Jackson, Mississippi, for approximately $3.5
million (the "Additional Jackson Acquisition"). MMR has entered into the
acquisition agreements relating to these stations. SFX and MMR have agreed
that SFX will finance the purchase of such stations and that MMR will transfer
ownership of the stations to SFX simultaneously with the acquisition by MMR.
SFX has also (i) entered into an agreement pursuant to which SFX will
exchange radio station KRLD-AM, Dallas, Texas, and the Texas State Networks
for radio station KKRW-FM, Houston, Texas (the "Houston Exchange"), (ii)
entered into an agreement pursuant to which SFX will sell radio station
KTCK-AM, Dallas, Texas for approximately $11.5 million, net of certain
anticipated payments to the original seller (the "Dallas Disposition"), and
(iii) entered into an agreement pursuant to which SFX will exchange three FM
radio stations and one AM radio station, each operating in the Long Island,
New York market, all of which were acquired in the Liberty Acquisition, for
two FM radio stations, WAPE- FM and WFYV-FM, both operating in the
Jacksonville, Florida market and both of which Chancellor Radio Broadcasting
Company ("Chancellor") has agreed to acquire, and a payment to SFX in the amount
of $11.0 million from Chancellor (the "Chancellor Exchange"). The Company does
not expect to recognize a gain or loss on either the Houston Exchange or the
Chancellor Exchange. Until the consummation of the Chancellor Exchange, SFX and
Chancellor are providing programming and selling advertising pursuant to local
marketing agreements on the Jacksonville radio stations and the Long Island
radio stations, respectively.
The Louisville Acquisition, the MMR Merger, the Greensboro Acquisition, the
Additional Jackson Acquisition, the Houston Exchange and the Chancellor
Exchange are referred to herein collectively as the "Pending Acquisitions" The
Pending Acquisitions and the Completed Acquisitions are referred to herein
collectively as the "Acquisitions." The Louisville Dispositions and the Dallas
Dispositions are referred to herein collectively as the "Pending
Dispositions." The Pending Dispositions and the Washington Disposition are
referred to herein collectively as the "Dispositions."
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<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
The timing and completion of the Pending Acquisitions and the Pending
Dispositions are subject to a number of conditions, certain of which are
beyond SFX's control, and there can be no assurance that such transactions
will be completed during such periods, approved by the FCC or completed on the
terms described herein, or at all.
NOTE 6 - PENDING MMR MERGER
In April 1996, the Company entered into an amended and restated agreement
(the "Merger Agreement") and plan of merger (the "MMR Merger"), as amended in
May and July 1996, pursuant to which it has agreed to acquire MMR. Following
completion of the MMR Merger, MMR will become a wholly-owned subsidiary of the
Company. MMR is a radio broadcasting company which owns and operates, provides
programming to or sells advertising on behalf of 11 FM stations and one AM
station located in seven markets: New Haven, Connecticut;
Springfield/Northampton, Massachusetts; Daytona Beach, Florida; Augusta,
Georgia; Biloxi, Mississippi; and Myrtle Beach, South Carolina. MMR has
entered into agreements or letters of intent to acquire WKSS-FM, Hartford,
Connecticut, and WMYB-FM, Myrtle Beach, South Carolina, and to sell KOLL-FM,
Little Rock, Arkansas (the "MMR Dispositions"). MMR is currently negotiating
the termination of a Joint Sales Agreement ("JSA") with WCHZ-FM operating in
Augusta, Georgia.
Upon consummation of the MMR Merger and subject to certain conditions,
including approval of the shareholders of MMR and SFX, the outstanding
securities of MMR will be converted into shares of common stock of the Company
as follows: (i) the shares of Class A Common Stock of MMR and the shares of
Series B Convertible Preferred Stock of MMR will be converted into that number
of shares of Class A Common Stock of the Company determined on the basis of
the Exchange Ratio (as defined below) and (ii) the shares of Class B Common
Stock of MMR, the shares of Class C Common Stock of MMR and shares of original
preferred stock of MMR will be converted into the number of shares of Class B
Common Stock of the Company determined on the basis of the Exchange Ratio.
The Exchange Ratio means the number of shares of Class A Common Stock or
Class B Common Stock of the Company, as the case may be, to be issued in the
MMR Merger equal to the quotient obtained by dividing $12.00 by the average of
the last bid and asked prices of the Company's Common Stock for the 20
consecutive trading days ending on the fifth trading day prior to the closing
(the "Class A Common Stock Price"); provided, however, that (1) in the event
that the Class A Common Stock Price exceeds $42.00 but is equal to or less
than $44.00, then the Exchange Ratio shall be the quotient obtained by
dividing (i) the sum of (A) $12.00, plus (B) the product of (I) twenty-five
percent (25%) multiplied by (II) the difference between the Class A Common
Stock Price and $42.00 by (ii) the Class A Common Stock Price, (2) in the
event that the Class A Common Stock Price exceeds $44.00, then the Exchange
Ratio shall be the quotient obtained by dividing (i) the sum of (A) $12.50,
plus (B) the product of (I) thirty percent (30%) multiplied by (II) the
difference between the Class A Common Stock Price and $44.00, or (3) in the
event that the Class A Common Stock Price is less than $32.00, then the Exchange
Ratio shall be .3750.
Upon the completion of the MMR Merger, each outstanding option or stock
appreciation rights issued pursuant to MMR's stock option plans, whether
vested or unvested, will be assumed by the Company.
Additionally, each outstanding (i) Class A Warrant (the "MMR Class A
Warrants") and Class B Warrant (the "MMR Class B Warrants") of MMR issued in
connection with MMR's public ofering in March 1994, (ii) option issued
pursuant to the unit purchase options issued to the underwriters of MMR's
public offering in March 1994, (iii) warrant issued to the underwriters of
MMR's initial public offering in July 1993, (iv) warrant issued to The Huff
Alternative Income Fund, L.P. and (v) options issued to Robert F.X. Sillerman
outside MMR's stock option plans (collectively, the "MMR Warrants"), shall be
assumed by the Company.
In the Merger Agreement, SFX agreed that, if requested by MMR, it would
negotiate in good faith to enter into an agreement to advance up to $18.0
million to MMR to enable MMR to acquire WKSS-FM, Hartford, Connecticut, and up
to $5.0 million to MMR for working capital. As of June 30, 1996, the Company
had advanced MMR approximately $2.4 million for working capital (the "MMR
Loan"), including $2 million which was paid to SCMC for investment banking
services provided to MMR in connection with the MMR Merger. SFX and MMR are
currently negotiating the terms of such loan. It is anticipated that the MMR
Loan will be an interest at a rate of 12%. In addition, SFX and MMR agreed that
Michael G. Ferrel, the Chief Executive Officer, Chief
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SFX BROADCASTING, INC. AND SUBSIDIARIES
Operating Officer and President of MMR, would become the Chief Executive
Officer of SFX upon the consummation of the Merger and MMR agreed to make
available to SFX, until the earlier of the termination of the Merger Agreement
or the consumation of the MMR Merger, the services of Mr. Ferrel as a
consultant to SFX to the extent that such services do not conflict with Mr.
Ferrel's obligations to MMR. Upon completion of the MMR Merger the Company will
be required to repay MMR's senior debt and senior subordinated notes totaling
approximately $40.1 million and to treat any amounts outstanding under the MMR
Loan as contributed capital.
In addition, in the Merger Agreement, SFX has agreed to enter into a
Local Marketing Agreement (the "LMA") with, and assigned its rights under a
Joint Sales Agreement with respect to WYSR-FM, Albany, New York, to, MMR
pursuant to which MMR will provide programming to and sell advertising on
behalf of the following stations acquired by SFX from Liberty Broadcasting;
WHCN-FM, WMRQ-FM and WPOP-AM, each operating in Hartford, Connecticut, WSNE-
FM, WHJY-FM and WHJJ-AM, each operating in Providence, Rhode Island, WGNA-FM,
WGNA-AM, WPYX-FM, WTRY-AM and WYSR-FM, each operating in Albany, New York, and
WMXB-FM, operating in Richmond, Virginia (collectively, the "MMR Liberty
Stations"). It is anticipated that these agreements will provide that
substantially all of the Broadcast Cash Flow (as defined herein) generated by
these stations will be paid by MMR to SFX. In the event that the Merger
Agreement is terminated, except in certain circumstances, MMR will have the
right, subject to the receipt of prior FCC approval, to acquire SFX's
interests in the MMR Liberty Stations for $100.0 million, or, in certain
circumstances, to acquire SFX's interests in the MMR Liberty Stations pursuant
to an exchange of stations intended to qualify as a like-kind exchange under
section 1031 of the Internal Revenue Code of 1986, as amended. The MMR Merger
will be accounted for as a purchase transaction.
The MMR Merger will be accounted for using the purchase method of
accounting.
See accompanying notes to consolidated financial statements
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<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the consolidated
financial statements and related notes thereto. The following discussion
contains certain forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, risks and uncertainties relating to leverage,
the need for additional funds, consummation of the Pending Acquisitions or the
Pending Dispositions, integration of the Acquisitions, the ability of the
Company to achieve certain cost savings, the management of growth, the
popularity of radio as a broadcasting and advertising medium and changing
consumer tastes.
GENERAL
The Company currently owns and operates, provides programming to or sells
advertising on behalf of 54 radio stations located in eighteen markets.
Following completion of the Pending Acquisitions and the Pending Dispositions,
the Company will own and operate, provide programming to or sell advertising
on behalf of 64 radio stations (49 FM and 15 AM) located in 21 markets. The
Company intends to finance the Pending Acquisitions from the remaining
proceeds of the Company's recent Financing and the Dispositions.
The following analysis of the financial condition and results of
operations of the Company should be read in conjunction with the Company's
consolidated financial statements and notes thereto.
The performance of a radio station group, such as the Company, is
customarily measured by its ability to generate Broadcast Cash Flow. Broadcast
Cash Flow is defined as net revenues (including, where applicable, fees earned
by the Company pursuant to the SCMC Termination Agreement) less station
operating expenses. Although Broadcast Cash Flow is not a measure of
performance calculated in accordance with generally accepted accounting
principles ("GAAP"), the Company believes that Broadcast Cash Flow is accepted
by the broadcasting industry as a generally recognized measure of performance
and is used by analysts who report publicly on the performance of broadcasting
companies. Nevertheless, this measure should not be considered in isolation or
as a substitute for operating income, net income, net cash provided by
operating activities or any other measure for determining the Company's
operating performance or liquidity which is calculated in accordance with
GAAP.
The primary source of the Company's revenue is the sale of advertising
time on its radio stations. The Company's most significant station operating
expenses are employee salaries and commissions, programming expenses and
advertising and promotional expenditures. The Company strives to control these
expenses by working closely with local station management.
The Company's revenues are primarily affected by the advertising rates
its radio stations charge. The Company's advertising rates are in large part
based on a station's ability to attract audiences in the demographic groups
targeted by its advertisers, as measured principally by Arbitron (an
independent rating service) on a quarterly basis. Because audience ratings in
local markets are crucial to a station's financial success, the Company
endeavors to develop strong listener loyalty. The Company believes that the
diversification of formats on its stations helps to insulate it from the
effects of changes in the musical tastes of the public in any particular
format.
The number of advertisements that can be broadcast without jeopardizing
listening levels (and the resulting ratings) is limited in part by the format
of a particular station. The Company's stations strive to maximize revenue by
constantly managing the number of commercials available for sale and adjusting
prices based upon local market conditions. In the broadcasting industry, radio
stations often utilize trade (or barter) agreements which exchange advertising
time for goods or services (such as travel or lodging), instead of for cash.
The Company seeks to minimize its use of trade agreements.
The Company's advertising contracts are generally short-term. The Company
generates most of its revenue from local advertising, which is sold primarily
by a station's sales staff. For the three and six months ended June 30, 1996,
approximately 77% of the Company's revenues were from local advertising. To
generate national advertising sales, the Company engages independent
advertising sales representatives that specialize in national sales for each
of its stations.
The Company's revenues vary throughout the year. As is typical in the
radio broadcasting industry, the Company's
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SFX BROADCASTING, INC. AND SUBSIDIARIES
first calendar quarter generally produces the lowest revenues for the year,
and the fourth calendar quarter generally produces the highest revenues for
the year. The Company's operating results in any period may be affected by the
incurrence of advertising and promotion expenses that do not necessarily
produce commensurate revenues until the impact of the advertising and
promotion is realized in future periods.
Fee revenue from the SCMC Termination Agreement will fluctuate
principally based upon the level of acquisition and financing activity of
Triathlon above the minimum annual fees of $800,000 (which minimum fees shall
increase to $900,000 at such time as Triathlon has used an amount equal to the
net proceeds of its last public offering in the manner contemplated by the
registration statement filed in connection therewith) of which $625,000 is due
in the first calendar quarter of 1997.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30, 1995
The Company's net revenues increased 34% to $27.8 million from $20.7
million, for the three months ended June 30, 1996 ("1996 quarter") and 1995
("1995 quarter"), respectively, due to revenue increases in all of the
Company's markets, and net revenues related to the operations of WMAG-FM,
WTCK-AM, WMFR-AM, and WHSL-FM, Greensboro, North Carolina, WSTZ-FM, Jackson,
Mississippi, and WROQ-FM, Greenville, South Carolina, which the Company began
operating in the first quarter of 1996, and the net revenues related to the
operations of WRDU-FM and WTRG-FM, Raleigh, North Carolina, which SFX began
operating in June 1996. The increase in net revenue from existing operations
was related to strong radio advertising growth averaging approximately 11% in
the Company's markets, combined with improved inventory management, ratings
and other factors generally affecting sales and rates.
Station operating expenses increased 40% to $19.1 million in the 1996
quarter from $13.7 million in the 1995 quarter primarily due to: the inclusion
of expenses of $3.1 million related to the stations which SFX began operating
as discussed above; and $1.8 million of increases in variable costs related to
the increase in net revenues of the existing SFX stations.
Depreciation, amortization, duopoly integration costs and acquisition
related costs increased 15% to $2.3 million from $2.0 million due to the
inclusion of depreciation and amortization related to the acquisition of
WTDR-FM and WLYT- FM, Charlotte, North Carolina in February 1996 (the
"Charlotte Acquisition") and the acquisition of KTCK-AM, Dallas, Texas, in
September 1995 (the "Dallas Acquisition"), and to $277,000 of certain one time
acquisition related costs in Charlotte.
Corporate, general and administrative expenses were $1.6 million and
$971,000 for the 1996 second quarter and 1995 second quarter, respectively.
The increase reflects the growth in the Company's overall operations.
The Company recorded a non-recurring charge of $27.5 million in the 1996
quarter which consisted primarily of payments in excess of the fair value of
stock repurchased totaling $12.5 million to Mr. Hicks and the reserve by the
Company of $2.3 million relating to the loan and accrued interest to Mr.
Hicks, $5.6 million related to the reserve of the loan and accrued interest to
SCMC and the issuance of 600,000 warrants to SCMC, $4.6 million for the
repurchase of Mr. Armstrong's options, and a charge of $1.6 million related to
the early termination of the Company's contract to broadcast Texas Rangers
baseball and an adjustment in the value of the contract for the 1996 season. In
the 1995 quarter, the Company recorded a $5 million special charge related to
the write down in value of the Company's broadcast rights of Texas Rangers
baseball.
Operating loss was $22.8 million for the 1996 quarter as compared to
operating loss of $940,000 for the 1995 quarter due to the results discussed
above.
Interest expense, net of investment income, increased 15% to $4.1 million
from $3.5 million in 1995 quarter, primarily due to one month of interest on
the $450 million of subordinated debt issued in May 1996. Additionally,
interest on borrowings of $21.5 million related to the Charlotte Acquisition
that was completed in February 1996, contributed to the increase.
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<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
The Company incurred an extraordinary loss totaling $15.2 million in the
1996 quarter which consisted primarily of payments of $9 million for the
repurchase premium and consent payments related to the early redemption of
$79.4 million of the Old Notes in the Tender Offer and the related Consent
Solicitation and the write-off of $5.6 million of debt issue costs.
The Company recorded no income tax benefit for the 1996 quarter compared
to income tax benefit of $1.9 million for the 1995 quarter. For the 1995 quarter
the Company recorded a tax benefit based on the then anticipated tax rate for
the full year. The Company has not provided a tax benefit for the 1996 quarter
based upon the expectation of recording a full valuation allowance for the
current year loss, prior to giving effect to the pending acquisitions.
The Company's net loss was $42.1 million for the 1996 quarter compared to
a net loss of $2.6 million for the 1995 quarter due to the factors discussed
above.
Broadcast Cash Flow increased 23% to $8.6 million for the 1996 quarter
from $7.0 million for the 1995 quarter. The increase was a result of the
inclusion in the 1996 quarter of the results of WRDU-FM, WTRG-FM, WROQ-FM,
WSTZ-FM, WMAG-FM, WTCK-FM, WMFR-AM and WHSL-FM for the portions of the periods
the Company owned and operated, provided programming to or sold advertising on
behalf of the stations as well as improved results at the Company's existing
stations in all markets except Jackson.
Results for the 1996 quarter include WLYT-FM and WTDR-FM, Charlotte,
North Carolina, for which the Company had provided programming and sold
advertising time pursuant to an LMA prior to the Charlotte Acquisition;
KYXY-FM, San Diego, California, for which the Company had provided programming
and sold advertising time pursuant to an LMA since January 1995 and was
acquired on April 13, 1995; KTCK-AM, Dallas, Texas for which the Company had
provided programming and sold advertising time pursuant to an LMA prior to the
Dallas Acquisition; WMAG-FM, WTCK-AM, WMFR-AM and WHSL-FM, each operating in
Greensboro, North Carolina; WSTZ-FM, Jackson, Mississippi; WROQ-FM, Greenville,
South Carolina; for which the Company had sold advertising pursuant to a JSA
beginning in the first quarter of 1996 quarter; and WRDU-FM and WTRG-FM, Raleigh
North Carolina, which the Company acquired in June 1996.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
The Company's net revenues increased 38% to $47.6 million from $34.4
million, for the six months ended June 30, 1996 and 1995, respectively, due to
revenue increases at all of the Company's markets, $5.8 million of net
revenues related to the operations of WMAG-FM, WTCK-AM, WMFR-AM, and WHSL-FM,
Greensboro, North Carolina, WSTZ-FM, Jackson, Mississippi, and WROQ-FM,
Greenville, South Carolina, which were implemented in the first quarter of
1996, and the net revenues related to the operations of WRDU-FM and WTRG-FM,
Raleigh, North Carolina, which SFX began operating in June 1996. The increase
in net revenue from existing operations was related to strong radio
advertising growth averaging approximately 9.6% in the Company's markets,
combined with improved inventory management, ratings and other factors
generally affecting sales and rates.
Station operating expenses increased 42% to $33.2 million for the six
months ended June 30, 1996 from $23.4 million for the six months ended June
30, 1995 primarily due to: the inclusion of expenses of $4.9 million related
to the stations which SFX began operating as discussed above; the inclusion of
expenses of $2.1 million related to KYXY-FM, San Diego, California, KTCK-AM,
Dallas, Texas, and WTDR-FM and WLYT-FM, both operating in Charlotte, North
Carolina for the entire six month period ended June 30, 1996; and $1.3 million
of increases in variable expenses related to the increases of net revenue at
the existing SFX stations.
Depreciation, amortization, duopoly integration costs and acquisition
related costs increased 26% to $4.6 million from $3.7 million due to the
inclusion of depreciation and amortization related to the San Diego, Charlotte
and Dallas Acquisitions, and to $277,000 of certain one time acquisition
related costs in Charlotte.
Corporate, general and administrative expenses were $2.8 million and
$1.8 million for the six months ended June 30, 1996 and 1995, respectively.
The increase reflects the growth in the Company's overall operations.
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SFX BROADCASTING, INC. AND SUBSIDIARIES
The Company recorded a non-recurring charge of $27.5 million in the
second quarter of 1996 which consisted primarily of payments in excess of the
fair value of stock repurchased totaling $12.5 million to Mr. Hicks and the
reserve by the Company of $2.3 million relating to the loan and accrued
interest to Mr. Hicks, $5.6 million related to the reserve of the $2.0 million
loan and accrued interest to SCMC and the issuance of 600,000 warrants to SCMC,
$4.6 million of the repurchase of Mr. Armstrong's options, and a charge of $1.6
million related to the termination of the Company's contractual four-year
broadcast rights of Texas Rangers baseball and an adjustment in the value of the
contract for the 1996 season. In the 1995 quarter, the Company recorded a $5
million special charge related to the write down in value of the Company's
broadcast rights of Texas Rangers baseball.
Operating loss was $20.6 million for the six month period ended June 30,
1996 compared to operating income of $600,000 for the same period in 1995 due
to the results discussed above.
Interest expense, net of investment income, increased 22% to $7.3 million
from $6.0 million in the period ended June 30, 1995, primarily due to one
month of interest on the $450 million of subordinated debt issued in May 1996.
Additionally, interest on borrowings of $21.5 million, of which $18.5 million
was outstanding in the first quarter of 1996, related to the Charlotte
Acquisition contributed to the increase.
The Company incurred an extraordinary loss totaling $15.2 million in the
period ended June 30, 1996 which consisted primarily of payments of $9 million
for the repurchase premium and consent payments related to the early
redemption of $79.4 million of the Company's Old Notes in the Tender Offer and
the related Consent Solicitations and the write-off of $5.6 million of debt
issue costs.
The Company recorded no income tax benefit for the six month period ended
June 30, 1996 compared to income tax benefit of $2.3 million for the same
period ended 1995. For the 1995 quarter the Company recorded a tax benefit based
on the then anticipated tax rate for the full year. The Company has not provided
a tax benefit for the 1996 quarter based upon the expectation of recording a
full valuation allowance for the current year loss, prior to giving effect to
the pending acquisitions.
The Company's net loss was $43.1 million for the six month period ended
June 30, 1996 compared to a net loss of $3.1 million for the same period ended
1995 due to the factors discussed above.
Broadcast Cash Flow increased 30% to $14.4 million for the six months
ended June 30, 1996 from $11.1 million for the 1995 period. The increase was
primarily a result of the inclusion of the results of KYXY-FM, KTCK-AM, WTDR-
FM, WLYT-FM, WRDU-FM, WTRG-FM, WROQ-FM, WSTZ-FM, WMAG-FM, WTCK-FM, WMFR-AM and
WHSL-FM for the portions of the periods the Company owned and operated,
provided programming to or sold advertising on behalf of the stations as well
as improved results at the Company's existing stations in all markets except
Jackson.
Results for the six month period ending June 30, 1996 include WLYT-FM and
WTDR-FM, Charlotte, North Carolina, for which the Company had provided
programming and sold advertising time pursuant to an LMA prior to its
acquisition in the first quarter of 1996; KYXY-FM, San Diego, California, for
which the Company had provided programming and sold advertising time pursuant
to an LMA since January 1995 and was acquired on April 13, 1995; KTCK-AM,
Dallas, Texas for which the Company had provided programming and sold
advertising time pursuant to an LMA since March 1995 and was acquired on
September 14, 1995; WMAG-FM, WTCK-AM, WMFR-AM and WHSL-FM, each operating in
Greensboro, North Carolina; WSTZ-FM, Jackson, Mississippi; WROQ-FM,
Greenville, South Carolina; for which the Company had sold advertising
pursuant to a JSA beginning in the first quarter of 1996 quarter; and WRDU-FM
and WTRG-FM, Raleigh North Carolina, which the Company acquired in June 1996.
FUTURE CHARGES. In April 1996, the Company and SCMC entered into the SCMC
Termination Agreement pursuant to which the consulting arrangement between
such parties was terminated in consideration for the assignment by SCMC to the
Company of the right to receive certain consulting fees payable by MMR and
Triathlon, the agreement to cancel $2.0 million of indebtedness plus accrued
interest thereon owing from SCMC to the Company upon completion of the MMR
Merger and the issuance of warrants to SCMC to purchase up to 600,000 shares
of Class A Common Stock at an exercise price of $33.75 per share (fair value of
approximately $9 million). In connection with the SCMC Termination Agreement,
the Company has allocated $5.6 million of value to the Triathlon Agreement and
will amortize such amounts over the life of the agreement.
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<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal need for funds has historically been to fund the
acquisition of radio stations, and to a lesser extent, capital expenditures
and the redemption of outstanding securities. The Company's principal sources
of funds for these requirements have historically been the proceeds from the
public and private offerings of equity and debt securities, borrowings under
credit agreements and, to a significantly lesser extent, cash flows from
operations.
STATEMENTS OF CASH FLOWS. Net cash used in operating activities was $34.6
million for the six months ended June 30, 1996 as compared to $1.6 million for
the six months ended June 30, 1995. The increase was primarily due to the cash
portion of the non-recurring charges.
Net cash used in investing activities was $90.8 million for the six
months ended June 30, 1996 as compared to $19.4 million of cash used in
investing activities for the six months ended June 30, 1995. The cash used in
investing activities in 1996 related primarily to the Charlotte , Greenville
and HMW Acquisitions while the cash used in investing activities in 1995
relates to the sale of investments offset by the purchase of KYXY in San
Diego.
Net cash provided by financing activities was $492.0 million for the six
months ended June 30, 1996 as compared to net cash provided by financing
activities of $18.7 million for the six months ended June 30, 1995. The net
cash provided by financing activities was primarily due to the proceeds of the
Note offering and Preferred Stock offering.
RECENT ACQUISITIONS AND DISPOSITIONS. In June 1996, SFX completed the
Greenville Acquisition and the HMW Acquisition. MMR initially entered into the
acquisition agreements relating to these stations. SFX and MMR agreed that SFX
would finance the purchase of such stations and that MMR would transfer the
purchased assets to SFX simultaneously with the acquisition by MMR.
In July 1996, SFX completed the Jackson Acquisition, the Prism
Acquisition, the Liberty Acquisition and the Washington Dispositions.
PENDING ACQUISITIONS AND DISPOSITIONS. The Company has entered into
agreements relating to the Pending Acquisitions and the Pending Dispositions.
In April 1996, the Company entered into the Merger Agreement pursuant to which
it has agreed to acquire MMR in exchange for capital stock of the Company
having a value estimated at approximately $80.0 million assuming the reported
price of the Company's stock is $40.00 per share and an MMR Class A Common
Stock price of $12.00 per share. In addition, MMR has entered into an
agreement to acquire radio station WKSS-FM, Hartford, Connecticut, for a
purchase price of $18.0 million of which $1.8 million was placed in escrow as
a deposit by MMR (the "MMR Hartford Acquisition"). The Company has agreed to
repay MMR's senior debt and subordinated notes totaling approximately $40.1
million as of July 31, 1996 and to treat any amounts outstanding under the MMR
Loan as contributed capital. The Company expects that MMR's outstanding Class A
Warrants to purchase 1,840,000 shares of MMR Class A Common Stock will be
exercised at an exercise price of $7.75 per share. MMR is entitled to call such
warrants for redemption at a nominal price in the event that the trading price
of MMR's Class A Common Stock exceeds $10.75 per share, on average, for twenty
consecutive trading days following notice and a thirty-day opportunity to
exercise such warrants. The Company anticipates that such notice will be
issued and the warrants will be exercised within ninety days. Such exercise
would result in net proceeds of approximately $13.6 million of which $2.8
million has been received by MMR through warrant exercises as of August 12,
1996. In the event such exercise fails to occur, MMR's borrowing under its
credit agreement would be repaid by the Company with additional borrowings under
the New Credit Agreement at the time of the MMR Merger. MMR also plans to offer
to exchange MMR's outstanding Class B Warrants to purchase 1,840,000 shares of
MMR Class A Common Stock at a ratio of 5 Class B Warrants for each share of
Class A Common Stock prior to the completion of the MMR Merger.
The timing and completion of the Pending Acquisitions, the Merger, the
Houston Exchange and the Chancellor Exchange and the Dispositions are subject
to a number of conditions, certain of which are beyond SFX's control, and
there can be no assurance that such transactions will be completed during such
periods, approved by the FCC or completed on the terms described herein, or at
all.
In the event that the MMR Merger is terminated, the Company will be
required, except in certain circumstances, to pay $3.5 million to MMR. In
addition, the Company will be required to pay MMR $1.0 million in the event
the majority of the combined voting power of SFX votes with respect to, but
does not vote in favor of, the MMR Merger.
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<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
The Company intends to finance the Pending Acquisitions and the repayment
of indebtedness of MMR, from the proceeds of the Financing, the Dispositions,
the MMR Dispositions and the exercise of the MMR Class A Warrants and
available cash.
The Company anticipates that it will consummate all of the Pending
Acquisitions and Pending Dispositions within approximately 60 days. However,
the closing of each of the transactions is subject to certain closing
conditions, certain of which are beyond the Company's control, and there can
be no assurance as to when such transactions will be completed or that they
will be completed on the terms described herein, or at all. In the event that
the Pending Dispositions and exercise of MMR's Class A Warrants are not
consummated in a timely manner, the Company may be required to seek additional
financing. There can be no assurance that such financing will be available to
the Company on commercially acceptable terms, if at all. The MMR Merger is
also subject to stockholder approval.
The Company expects that the Acquisitions will be accounted for using the
purchase method of accounting, that the intangible assets created in the
purchase transactions will be amortized against future earnings of the
combined companies, that such amounts will be substantial and that they will
continue to affect the Company's operating results in the future. These
expenses, however, do not result in an outflow of cash by the Company and do
not impact the Company's Broadcast Cash Flow.
SOURCES OF LIQUIDITY. In March 1995, the Company entered into the Old
Credit Agreement. In May 1996, the Company repaid all amounts owing under the
Old Credit Agreement with the proceeds of the Financing. The Company has
received a firm commitment from a lending institution to underwrite a new $150
million senior credit facility (the "New Credit Agreement"). SFX has been
advised by its lender that it has received commitments significantly in excess
of $150 million. The Company is currently considering whether to expand the
facility beyond $150 million. The Company's obligations under the New Credit
Agreement will be secured by substantially all of its assets in which a
security interest may lawfully be granted, including property, stock of
subsidiaries and accounts receivable, and are guaranteed by the subsidiaries
of the Company. There can be no assurance that the Company will be able to
enter into the New Credit Agreement on a timely basis, or at all. To the
extent that the Dispositions and the exercise of the MMR Class A Warrants do
not occur, borrowings will be required under the New Credit Agreement for the
MMR Merger.
In May 1996, the Company issued $149.5 million in aggregate liquidation
preference of the Series D Preferred Stock. Dividends on the Series D
Preferred Stock are payable quarterly in cash. The Series D Preferred Stock
will be converted into shares of Class A Common Stock at any time prior to the
close of business on the maturity date, unless previously redeemed or
repurchased. The Certificate of Designation contains certain covenants that,
among other things, limit the ability of the Company and its subsidiaries to
engage in transactions with their affiliates.
In May 1996, the Company issued $450.0 million of its 10.75% Senior
Subordinated Notes due in 2006. The Note Offerings contain covenants that,
among other things, limit the ability of the Company and its subsidiaries to
engage in transactions with their affiliates.
The Company expects that any additional acquisitions of radio stations
will be financed through funds generated from operations, cash on hand, funds
which may be available under the New Credit Agreement and additional debt and
equity financing. The availability of additional acquisition financing cannot
be assured, and, depending on the terms of the proposed acquisition financing,
could be restricted by the New Credit Agreement and/or the debt incurrence
test under the indenture relating to its 10.75% Senior Subordinated Notes due
2006 (the "Notes").
The Company's ability to make scheduled payments of principal of, or to
pay interest on or to refinance, its debt and to make dividend payments on the
Series D Preferred Stock depends on its future financial performance, which,
to a certain extent, is subject to general economic, financial, competitive,
legislative, regulatory and other factors beyond its control, as well as the
success of the radio stations to be acquired and the integration of such
stations into the Company's operations. Based upon the Company's current level
of operations and anticipated improvements, management believes that cash flow
from operations, together with the net proceeds of the Financing, the
Dispositions, the MMR Dispositions, the exercise of the MMR Class A Warrants
and available borrowings under the New Credit Agreement, will be adequate
- 18 -
<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
to meet the Company's anticipated future requirements for working capital,
capital expenditures, scheduled payments of interest on its debt and to make
dividend payments on the Series D Preferred Stock. There can be no assurance
that the Pending Dispositions and the exercise of the MMR Class A Warrants
will occur or that the Company's business will generate sufficient cash flow
from operations, that anticipated improvements in operating results will be
achieved or that future working capital borrowings will be available in an
amount sufficient to enable the Company to service its debt, to make dividend
payments on the Series D Preferred Stock or to make necessary capital or other
expenditures. The Company may be required to refinance a portion of the Notes
or the aggregate liquidation preference of the Series D Preferred Stock prior
to their respective maturities. There can be no assurance that the Company
will be able to raise additional capital through the sale of securities, the
disposition of radio stations or otherwise for any such refinancing.
- 19 -
<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In a complaint (Civil Action No. 602056-96) dated April 18, 1996, Paul
Pops, who purports to be a stockholder of MMR, brought suit in the Supreme
Court of the State of New York against MMR, each of the directors of MMR, the
Company and Robert F.X. Sillerman, the Chief Executive Officer of SFX, seeking
to enjoin the MMR Merger or, in the alternative, seeking monetary damages. The
suit alleges that the consideration to be paid to the MMR stockholders in the
MMR Merger is unfair and grossly inadequate. The suit also alleges that in
connection with entering into the MMR Merger Agreement, the directors of MMR
violated their fiduciary duties to MMR and its stockholders and that the
Company aided and abetted such violation. The plaintiff is seeking to have his
suit certified as a class action representing the interests of the
stockholders of MMR. The defendants consider the case to be without merit and
have filed a motion to dismiss the complaint for failure to state a cause of
action. SFX and MMR are engaged in discussions with the plaintiff's counsel
regarding the plaintiff's objection to the MMR Merger and do not believe this
litigation will materially delay the consummation of the MMR Merger.
In the opinion of management, there are no other material threatened or
pending legal proceedings against the Company or any entity affiliated with
Mr. Sillerman, which, if adversely decided, would have a material effect on
the financial condition or prospects of the Company.
- 20 -
<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
ITEM 2. CHANGES IN SECURITIES
In the Consent Solicitation, the Company solicited consents to certain
proposed amendments to the indenture pursuant to which the Old Notes were
issued (the "Old Indenture"). The Company received such consents in respect of
a majority of the outstanding principal of the Old Notes and in May 1996 the
Company entered into a supplemental indenture amending the terms of
the Old Indenture. The supplemental indenture modifies the provisions
of the Old Indenture governing the Company's ability to, among other things,
(i) pay dividends and make certain other payments (including
acquisition-related payments), (ii) incur indebtedness, (iii) enter into
certain transactions with affiliates, (iv) dispose of its assets, (v) engage
in different lines of business and (vi) merge or consolidate with or into
another entity, or sell or transfer substantially all of its assets to another
entity. In addition, certain definitions were changed, added or deleted in the
Old Indenture to effect the changes to the covenants noted above. The
supplemental indenture also harmonized the covenants listed above and the
"Events of Default" provisions in the Old Indenture with the corresponding
covenants, provisions and definitions contained in the indenture governing the
Notes issued in the Note Offering.
The indenture (the "Indenture") governing the notes that were sold in the
Note Offering contain provisions which limit the rights of the holders of the
Class A Common Stock of the Company, including, but not limited to, provisions
which restrict the payment of dividends. A copy of the Indenture is filed as an
exhibit hereto and is incorporated herein by reference.
- 21 -
<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON REPORT 8-K
(A) EXHIBITS
<TABLE>
<CAPTION>
<C> <S>
4.1 First Supplemental Indenture, dated as of May 23, 1996, between SFX Broadcasting, Inc. and
Chemical Bank (Incorporated by reference to Exhibit 4.4 of the Form S-4 of SFX Broadcasting,
Inc. (Commission File No. 333-6553) filed on June 21, 1996).
4.2 Indenture relating to the 10.75% Senior Subordinated Notes due 2006 Iincorporated by reference to
Exhibit 4.3 of the Form S-4 of SFX Broadcasting, Inc. (Commission File No. 333-65531 filed on
June 21, 1996).
10.1 Amendment No. 1 to Amended and Restated Agreement and Plan of Merger (Incorporated by
Reference to Exhibit 10.9 to Multi-Market Radio, Inc.'s Form 10-Q for the quarter ended March 31,
1996).
10.2 Form of Local Marketing Agreement between Chancellor Radio Broadcasting Company and SFX
Broadcasting, Inc. relating to the Jacksonville stations.
10.3 Form of Local Marketing Agreement between Chancellor Radio Broadcasting Company and SFX
Broadcasting, Inc. relating to the Long Island stations.
10.4 Form of Time Brokerage Agreement between KRBE Company and SFX Broadcasting, Inc.
10.5 Local Marketing Agreement, dated June 28, 1996, between SFX Broadcasting of South Carolina,
Inc. and HMW Communications, Inc.
11.1 Statement Regarding Calculation of Per Share Earnings
27 Financial Data Schedule
99.1 Asset Purchase Agreement by and between Multi-Market Radio, Inc. and Puritan Radiocasting
Company (Incorporated by Reference to Exhibit 10.1 to Multi-Market Radio, Inc.'s 10-Q for the
quarter ended March 31, 1996).
99.2 Programming Agreement by and between Multi-Market Radio, Inc. and Puritan Radiocasting
Company (Incorporated by Reference to Exhibit 10.2 to Multi-Market Radio, Inc.'s 10-Q for the
quarter ended March 31, 1996).
99.3 Asset Purchase Agreement by and between Multi-Market Radio, Inc. and Wilks Broadcast
Acquisitions, Inc. (Incorporated by Reference to Exhibit 10.3 to Multi-Market Radio, Inc.'s 10-Q
for the quarter ended March 31, 1996).
99.4 Local Marketing Agreement by and between Multi-Market Radio, Inc. and Wilks Broadcast
Acquisitions, Inc. (Incorporated by Reference to Exhibit 10.4 to Multi-Market Radio, Inc.'s 10-Q
for the quarter ended March 31, 1996).
99.5 Asset Purchase Agreement by and between Multi-Market Radio, Inc. and Precision Media
Corporation (Incorporated by Reference to Exhibit 10.5 to Multi-Market Radio, Inc.'s 10-Q for the
quarter ended March 31, 1996).
99.6 Letter Agreement by and between Multi-Market Radio, Inc. and Jones Eastern Radio of Augusta,
Inc. (Incorporated by Reference to Exhibit 10.6 to Multi-Market Radio, Inc.'s 10-Q for the quarter
ended March 31, 1996).
99.7 Local Market Agreement by and between Multi-Market Radio, Inc. and Jones Eastern Radio of
Augusta, Inc. (Incorporated by Reference to Exhibit 10.7 to Multi-Market Radio, Inc.'s 10-Q for the
quarter ended March 31, 1996).
99.8 Local Market Agreement by and between Southern Starr of Arkansas, Inc. and Triathlon
-22-
<PAGE>
Broadcasting of Little Rock, Inc. (Incorporated by Reference to Exhibit 10.10 to Multi-Market
Radio, Inc.'s 10-Q for the quarter ended March 31, 1996).
99.10 Advertising Brokerage Agreement by and between GMR Broadcasting, Inc. and Multi-Market
Radio of Augusta, Inc. (Incorporated by Reference to Exhibit 10.53 to Multi-Market Radio, Inc.'s
Annual Report on Form 10-KSB for the year ended December 31, 1995).
99.11 Time Sales Agreement by and between Morey Organization, Inc. and Liberty Broadcasting Inc.
(Incorporated by Reference to Exhibit 10.59 to Multi-Market Radio, Inc.'s Annual
Report on Form 10-KSB for the year ended December 31, 1995).
99.12 Local Marketing Agreement by and between Yale Broadcasting Company, Inc. and General
Broadcasting of Connecticut, Inc. (Incorporated by Reference to Exhibit 10.53 to Multi-Market
Radio, Inc.'s Annual Report on Form 10-KSB for the year ended December 31, 1995).
99.13 Voting agreement, dated July 26, 1996, executed by Chilton Investment
Partners, L.P. and Richard L. Chilton (Incorporated by reference to
Exhibit 99.1 to the Form 8-K filed by Multi-Market Radio on August 8, 1996).
99.14 Voting agreement, dated July 26, 1996, executed by Gabriel Capital,
L.P. and Ariel Fund Limited (Incorporated by reference to Exhibit
99.2 to the Form 8-K filed byMulti- Market Radio on August 8, 1996).
99.15 Voting agreement, dated July 31, 1996, executed by J. Morton Davis and D. H. Blair Investment
Banking Corp. (Incorporated by reference to Exhibit 99.3 to the Form 8-K filed
by Multi-Market Radio on August 8, 1996).
</TABLE>
(b) Reports on Form 8-K
A report on Form 8-K was filed on April 18, 1996 under Item 5
thereof (other events) to disclose the execution of an Agreement and
Plan of Merger, dated April 15, 1996, among the Company, Multi-Market
Radio, Inc. and a wholly-owned subsidiary of SFX.
A report on Form 8-K was filed on May 9, 1996 under Item 5 thereof
(other events) to disclose the commencement of the tender offer and
consent solicitation for the company's outstanding 11.375% Senior
Subordinated Notes, the execution of the Amended and Restated Agreement
and Plan of Merger and the commencement of certain private placements
and certain financial information (including financial statements).
A report on Form 8-K was filed on May 24, 1996 under Item 5 (other
events) to disclose the receipt of commitment from its lender and the
execution of agreements relating to the Louisville Disposition.
A report on Form 8-K was filed on May 30, 1996 under Item 5 (other
events). The Form 8-K included certain historical and pro forma
financial statements.
A report on Form 8-K was filed on June 21, 1996 under Item 5
(other events). The Form 8-K included certain pro forma financial
statements.
- 23 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SFX BROADCASTING, INC.
Date: August 14 , 1996 By:/s/Howard Tytel
---------------
Howard J. Tytel
Executive Vice President and
Secretary
Date: August 14 , 1996 By:/s/D. Geoffrey Armstrong
------------------------
D. Geoffrey Armstrong
Vice President, Treasurer, and Chief
Financial Officer
- 24 -
CHANCELLOR RADIO BROADCASTING COMPANY
LOCAL MARKETING AGREEMENT
WITH
SFX BROADCASTING, INC.
FOR
WAPE-FM, JACKSONVILLE, FLORIDA
WFYV-FM, ATLANTIC BEACH, FLORIDA
<PAGE>
TABLE OF CONTENTS
1. Agreement Term............................................................2
---------------
2. Programmer's Purchase of Airtime and Provision of Programming.............2
-------------------------------------------------------------
3. Representations...........................................................3
----------------
4. Consideration.............................................................3
--------------
5. Collection of Accounts Receivable.........................................3
----------------------------------
6. Chancellor Control of the Stations........................................4
-----------------------------------
7. Programmer Responsibility.................................................5
--------------------------
8. Contracts.................................................................7
----------
9. Employees.................................................................7
----------
10. Public Affairs Programming................................................8
---------------------------
11. Additional License Obligations............................................8
------------------------------
12. Broadcast Stations Programming Policy Statement...........................9
-----------------------------------------------
13. Compliance with Copyright Act.............................................9
-----------------------------
14. Payola....................................................................9
-------
15. Sales....................................................................10
-----
16. Local Marketing Agreement Challenge......................................10
------------------------------------
17. Confidential Review......................................................10
--------------------
18. Major Defaults: Termination..............................................11
----------------------------
18.1. Programmer's Major Defaults.......................................11
----------------------------
18.2. Chancellor's Major Defaults.......................................11
----------------------------
18.3. Cure Periods......................................................12
-------------
18.4. Termination Upon Occurrence of Major Default......................12
---------------------------------------------
18.5. Termination Upon Failure of Consummation of Exchange Agreement....12
---------------------------------------------------------------
i
<PAGE>
19. Liabilities Upon Termination.........................................13
-----------------------------
20. No Format Changes....................................................14
-----------------
21. Chancellor's Indemnification.........................................14
-----------------------------
22. Programmer's Indemnification.........................................14
-----------------------------
23. Procedure for Indemnification........................................15
------------------------------
24. Dispute Over Indemnification.........................................16
-----------------------------
25. Programmer's Remedies for Operational Deficiencies...................16
--------------------------------------------------
26. Force Majeure........................................................16
-------------
27. Other Agreements.....................................................16
----------------
28. Assignment...........................................................17
----------
29. Entire Agreement.....................................................17
----------------
30. Taxes................................................................17
-----
31. Headings.............................................................17
--------
32. Governing Law........................................................17
-------------
33. Notices..............................................................17
-------
34. Severability.........................................................19
------------
35. Certifications.......................................................19
(a) Control of Stations.........................................19
-------------------
(b) Compliance with Ownership Rules.............................19
-------------------------------
36. No Joint Venture.....................................................19
----------------
37. Beneficiaries........................................................19
-------------
PAYMENT SCHEDULE..............................................................21
ii
<PAGE>
SCHEDULE B - EMPLOYEES........................................................22
ATTACHMENT I - BROADCAST STATIONS PROGRAMMING POLICY STATEMENT................23
I. No Plugola or Payola........................................23
II. Political Broadcasting......................................23
III. Required Announcements......................................23
IV. No Illegal Announcements....................................23
V. Chancellor Discretion Paramount.............................24
ATTACHMENT II - PAYOLA AFFIDAVIT..............................................25
iii
<PAGE>
LOCAL MARKETING AGREEMENT
THIS LOCAL MARKETING AGREEMENT ("LMA" or "Agreement"), is made as of July 31,
1996 by and between SFX BROADCASTING, INC., a Delaware corporation,
(collectively, "SFX" or "Programmer") and CHANCELLOR RADIO BROADCASTING
COMPANY, ("Chancellor") a Delaware corporation.
RECITALS
WHEREAS, SFX owns and operates radio stations WBAB-FM, Babylon, New
York; WBLI- FM, Patchogue, New York; WGBB-AM, Freeport, New York; and WHFM-FM,
Southampton, New York (the "Long Island Stations");
WHEREAS, Chancellor is a party to a certain Asset Purchase Agreement
("Florida Agreement") dated May 14, 1996 among Chancellor and Chancellor
Broadcasting Company and OmniAmerica Group, WAPE-FM License Partnership,
WFYV-FM License Partnership, WEAT-AM License Partnership, WEAT-FM License
Partnership, WXXL License Partnership, WOLL License Partnership and WJHM-FM
License Partnership (collectively "Omni") contemplating, inter alia, the
purchase by Chancellor of substantially all of Omni's assets used or useful in
the operation of Station WAPE-FM, Jacksonville, Florida, and Station WFYV-FM,
Atlantic Beach, Florida (collectively, the "Jacksonville Stations"), including
the related FCC broadcast licenses and authorizations.
WHEREAS, Chancellor and Omni have entered into a Local Marketing
Agreement ("Omni/Florida LMA") dated June 28, 1996, in which Omni wishes to
retain Chancellor to provide programming commencing August 1, 1996 for certain
of Omni's stations, including but not limited to the Jacksonville Stations,
pursuant to the terms and conditions set forth in the Omni/Florida LMA and in
conformity with Omni's stations' policies and practices and the Federal
Communications Commission's ("FCC") rules and regulations concerning such
arrangements;
WHEREAS, Omni has given its written consent to allow Chancellor to
enter into this Agreement with SFX with respect to the Jacksonville Stations;
WHEREAS, Chancellor wishes to retain SFX to provide programming for
the Jacksonville Stations pursuant to the terms and conditions set forth in
this Agreement and in conformity with the Jacksonville Stations' policies and
practices and the Federal Communications Commission's rules and regulations
concerning such arrangements;
WHEREAS, Chancellor will broadcast such programming and sell
advertising that is in conformance with the Jacksonville Stations' policies and
all FCC rules and regulations, including the requirement that the ultimate
control of the Jacksonville Stations be maintained by the owner of the
stations; and
<PAGE>
SFX and Chancellor
Jacksonville LMA
Page 2
- - - -------------------
WHEREAS, Chancellor and SFX have entered into an Asset Exchange
Agreement dated July 1, 1996 (the "Exchange Agreement"), which would qualify as
a tax free exchange of like-kind assets pursuant to Section 1031 of the
Internal Revenue Code of 1986, as amended, pursuant to which SFX has agreed to
transfer to Chancellor, and Chancellor has agreed to acquire from SFX,
substantially all of the assets and businesses of the Long Island Stations; and
Chancellor has agreed to transfer to SFX, and SFX has agreed to acquire from
Chancellor, substantially all of the assets and businesses of the Jacksonville
Stations.
NOW THEREFORE, for and in consideration of the mutual covenants herein
contained, the parties, intending to be legally bound, agree as follows:
1. Agreement Term.
---------------
The term of this Agreement will begin on August 1, 1996
("Commencement Date") and will continue until the Programmer acquires the
assets of the Jacksonville Stations and Chancellor acquires the assets of the
Long Island Stations in accordance with the terms of the Exchange Agreement,
unless earlier terminated in accordance with the provisions set forth herein.
2. Programmer's Purchase of Airtime and Provision of Programming.
--------------------------------------------------------------
(a) During the term of this Agreement, Programmer shall
transmit programming, including commercials, that it produces or owns to the
Jacksonville Stations twenty-four (24) hours per day Monday through Friday and
for forty-eight (48) hours during Saturday through Sunday, provided that
Chancellor may broadcast up to two (2) hours of programming for the
Jacksonville Stations which is aimed at serving the needs and interests of the
Jacksonville Stations' communities of license during the morning(s) of Saturday
and/or Sunday subject to Section 10 hereto.
(b) To facilitate delivery of programming by Programmer
hereunder, Chancellor hereby grants to Programmer the right for the term of
this Agreement to use substantially all of the equipment located in the
Jacksonville Stations' studios and currently used by Chancellor for
broadcasting programs on the Jacksonville Stations. In addition, Programmer
shall have, and Chancellor hereby grants to Programmer, a license to enter on
the premises currently occupied by the Jacksonville Stations for the purpose of
producing its programming hereunder; provided, however, that Chancellor shall
maintain, for its use, sufficient space at the Jacksonville Stations' studios
to enable Chancellor to conduct its operations and originate programming.
Accordingly, Programmer shall hold Chancellor harmless from all costs, fees and
expenses incurred with respect to any personal injury suffered by any employee
or agent of Programmer while on the property of
<PAGE>
SFX and Chancellor
Jacksonville LMA
Page 3
- - - ------------------
Chancellor. Programmer shall also be responsible for and shall reimburse
Chancellor for any damage to the property of Chancellor caused by Programmers'
employees or agents.
3. Representations.
----------------
Each of Chancellor and Programmer represent as to itself that
it is authorized to enter into this Agreement and that this Agreement
constitutes the legal, valid and binding obligation of such party, enforceable
against it in accordance with its terms. Programmer hereby represents and
warrants to Chancellor that Programmer is an experienced radio broadcast
station Chancellor and operator and is fully familiar with all pertinent legal
requirements, including but not limited to, the Communications Act of 1934, as
amended (the "Act"), and the Commission's rules, regulations and policies
governing the operation of radio broadcast stations. Programmer will comply
with all legal requirements, including but not limited to the Act and the
Commission's rules, regulations and policies.
4. Consideration.
--------------
During the term of this Agreement, Programmer shall pay
Chancellor the payments set forth on the Payment Schedule annexed hereto.
5. Collection of Accounts Receivable.
----------------------------------
(a) The accounts receivable of the Jacksonville Stations
generated prior to the Commencement Date (the "Pre-LMA Receivables") shall be
and remain the property of Chancellor. Within fifteen (15) days after the
Commencement Date, Chancellor shall furnish Chancellor with a list (certified
by the Chief Financial Officer of Chancellor to be a true and complete list) of
all accounts receivable of Chancellor which remain outstanding as of the
Commencement Date. Chancellor agrees that if, after the Commencement Date, it
shall receive payment, in respect to any Pre-LMA Receivable, Chancellor shall
remit to Chancellor, within five (5) business days after the end of each month,
any amounts received by Chancellor during the preceding month (whether or not
directed on their face to Chancellor), which are in payment for advertising
broadcast by the Jacksonville Stations prior to the Commencement Date.
(b) During the period starting on the Commencement Date and
ending one hundred twenty (120) days thereafter, Chancellor shall use
reasonable efforts, consistent with Chancellor's current billing and collection
practices and in the ordinary course of the business, to assist Chancellor in
the collection of any outstanding Pre-LMA Receivables; provided, however, that,
notwithstanding the foregoing, Chancellor shall be under no obligation to
commence litigation,
<PAGE>
SFX and Chancellor
Jacksonville LMA
Page 4
- - - ------------------
employ counsel or engage the services of a collection agency to effect
collection. Chancellor shall not make any compromise, adjustment, concession or
settlement of any Pre-LMA Receivable without Chancellor's express written
consent and Chancellor shall be under no obligation to compromise, adjust,
concede or settle any accounts receivable generated after the Commencement Date
or otherwise grant any credit or allowance to effect collection of a Pre-LMA
Receivable. Absent written evidence that an account debtor owing a Pre-LMA
Receivable is disputing in good faith any portion of such Pre-LMA Receivable,
any payments received by Chancellor after the Commencement Date from such
account debtor shall be presumed to represent payment on any undisputed portion
of such Pre-LMA Receivable which is then outstanding (with each such payment
received from such account debtor to be applied first to the most-aged Pre-LMA
Receivable then owing from such account debtor).
(c) Chancellor agrees to remit to Chancellor within 5
business days after the end of each month, any amounts received by Chancellor
during the preceding month (whether or not directed on their face to
Chancellor) which are in payment for advertising generated by the Stations
after the Commencement Date.
(d) Chancellor shall not set-off any claim or amount against
any of the Pre-LMA Receivables.
6. Chancellor Control of the Stations.
-----------------------------------
(a) Chancellor will have full authority, power and control
over the management and operations of the Jacksonville Stations during the term
of this Agreement. Chancellor will bear all responsibility for the Jacksonville
Stations' compliance with all applicable provisions of the Act, the rules,
regulations and policies of the FCC and all other applicable laws, including
without limitation, the retention of control over the policies, programming and
operation of the Jacksonville Stations, including the right to preempt
programming which in its good faith judgment it deems unsuitable or contrary to
the public interest. Chancellor shall be solely responsible for and pay in a
timely manner all real and personal property taxes, mortgage fees and expenses
and other real property costs, all studio and transmitter site leases, any
utilities (excluding telephone charges), and all costs and expenses for the
maintenance of all transmitter equipment. Programmer shall cooperate with and
assist Chancellor in complying with all FCC rules and regulations.
(b) Chancellor retains ultimate control over the Jacksonville
Stations and their premises. Accordingly, all employees of Programmer present
at the Jacksonville Stations or on their premises must comply with the policies
and rules promulgated by Chancellor. In no event shall Programmer, or
Programmer's employees, represent, depict, describe or portray Programmer as
<PAGE>
SFX and Chancellor
Jacksonville LMA
Page 5
- - - ------------------
Chancellor of the Jacksonville Stations. To this end, all employees of
Programmer, whose work involves the Jacksonville Stations, shall be informed as
to Chancellor's ultimate control over the Jacksonville Stations and
Programmer's subordinate capacity, and all printed materials and
promotional announcements shall accurately describe all of the roles and
responsibilities of Chancellor and Programmer.
(c) The Jacksonville Stations' transmission equipment shall
be maintained by Chancellor in a condition consistent with good engineering
practices and in compliance in all material respects with the Act and all other
applicable rules, regulations and technical standards of the FCC. All capital
expenditures reasonably required to maintain the technical quality of the
transmission equipment and its compliance with applicable laws and regulations
shall be made at the sole expense of Chancellor in a timely fashion.
(d) Chancellor shall employ at its expense a management-level
employee at the Jacksonville Stations and such other person for each Long
Island Station as necessary to fulfill Chancellor's duties hereunder and its
obligations under the FCC's rules. A manager shall direct the day-to-day
operations of each Long Island Station and shall report to and be accountable
to Chancellor. Chancellor shall be responsible for the salaries, taxes,
insurance and related costs for all personnel it employs at the Jacksonville
Stations.
(e) Chancellor shall pay all regulatory fees, file all
necessary applications, maintain the Jacksonville Stations' local public
inspection files within the Jacksonville Stations' communities of license and
shall prepare and place in such inspection file all required documents
including, but not limited to the Jacksonville Stations' quarterly issues and
program lists on a timely basis.
7. Programmer Responsibility.
--------------------------
(a) Programmer shall be solely responsible for all expenses
incurred in the origination and/or delivery of programming from any remote
location and for all operating expenses of the Jacksonville Stations (including
telephone expenses and expenses related to sales, marketing, promotion,
advertising, billing and collections, and traffic), except that Chancellor
shall be responsible for the costs as provided in Section 6 hereof. Programmer
shall cooperate fully with Chancellor in responding to any questions, comment,
inquiry or complaint from any third party, including any governmental authority
or agent thereof, that may relate to or arise from the Jacksonville Stations or
its operations, including the programming. In the event of Programmer's receipt
of any question, comment inquiry or complaint that may relate to or arise from
the Jacksonville Stations or its operations, Programmer shall promptly notify
Chancellor of the same.
<PAGE>
SFX and Chancellor
Jacksonville LMA
Page 6
- - - ------------------
(b) Programmer shall employ and be solely responsible for the
salaries, taxes, insurance and related costs for all personnel employed by
Programmer (including, without limitation, salespeople, traffic personnel,
board operators and programming staff).
(c) Programmer shall cause the Jacksonville Stations to
transmit any required tests of the Emergency Broadcast System or successor
Emergency Alert System at such times as are directed by Chancellor.
(d) Political Advertising and Announcements. Programmer shall
maintain and deliver to Chancellor all records and information required by the
FCC to be placed in the public inspection files of the Jacksonville Stations
pertaining to the broadcast of political programming and advertisements, in
accordance with the provisions of Sections 73.1940 and 73.3526 of the FCC's
rules and agrees to broadcast sponsored programming addressing political
issues, in accordance with the provisions of Section 73.1212 of the FCC's
rules.
1. Programmer's sale or use of commercial time on the
Jacksonville Stations shall conform to all federal and state laws governing the
sale of political advertising on radio stations. At least ninety (90) days
before the start of any primary or general election campaign, Programmer will
clear with Chancellor the rates to be charged political candidates for public
office and rate cards to be sure that the rates and the rate cards are in
conformance with all laws, including requirements for providing reasonable time
to state and local candidates (as determined by Chancellor).
2. When required by law, Programmer shall sell such
political advertising time only at the Stations' lowest unit rate. Within seven
(7) days after the broadcast of political advertising, Programmer shall review
the commercial spots that have aired on the Jacksonville Stations, so as to
insure that each political candidate was charged the lowest unit rate. In the
event a refund or credit is due, Programmer shall pay such refund or provide
such credits within seven (7) days. The Programmer recognizes candidates' need
to maximize their campaign funds, and thus will provide such rebates or credits
on a more expeditious basis as the election day approaches.
3. Within twenty-four (24) hours of any request to
purchase time on any Jacksonville Station on behalf of a candidate for public
office or to support or urge defeat of an issue on an election ballot,
Programmer will provide documentation of the request, and its disposition, to
Chancellor so that appropriate records can be placed in the Jacksonville
Station's public file.
4. In the event that Programmer fails to provide adequate
broadcast time for the broadcast of paid political programming or advertising by
political candidates, Chancellor
<PAGE>
SFX and Chancellor
Jacksonville LMA
Page 7
- - - ------------------
shall have the right to preempt commercial announcements supplied by Programmer
to make time available to these political candidates.
5. Programmer shall furnish within its programming, on
behalf of Chancellor, all of the Jacksonville Stations' identification
announcements required by the FCC's rules.
Programmer shall provide information with respect to any of its programming
which is responsive to the public needs and interests of the area served by the
Jacksonville Stations so as to assist Chancellor in the preparation of any
required programming reports, and provide other information to enable
Chancellor to prepare other records, reports and logs required by the FCC or
other local, state or federal governmental agencies.
8. Contracts.
----------
Programmer shall perform and discharge the obligations of
Chancellor from and after the Commencement Date under the contracts and
agreements listed in the Schedules to the Exchange Agreement as being assumed
by Programmer on the Commencement Date. In addition, Programmer shall perform
and discharge all obligations of the Jacksonville Stations under all trade
agreements from and after the Commencement Date. Programmer will not enter into
any third-party contracts, leases or agreements which will bind Chancellor in
any way except with Chancellor's prior written approval.
9. Employees.
----------
Schedule B hereto contains a listing of the name, salary or
compensation and job description of all employees of the Jacksonville Stations
as of May 15, 1996. Pursuant to Section 14.7 of the Exchange Agreement as of
the Commencement Date, the current Jacksonville Stations employees will become
employees of the Programmer; however, Programmer may terminate current
employees of the Jacksonville Stations without cause thirty (30) days from the
execution of the Exchange Agreement. If the number of terminated employees
exceeds ten (10) or in the aggregate the severance liability amount of the
terminated employees from the Jacksonville Stations exceeds One Hundred
Thousand Dollars ($100,000), then the Programmer shall be responsible to pay
for any severance amounts exceeding the first One Hundred Thousand Dollars
($100,000). Chancellor shall be responsible to pay for any severance amounts
associated with only the first ten (10) terminated employees, as designated by
Programmer, but in no event will Chancellor be liable for any severance amounts
exceeding One Hundred Thousand Dollars ($100,000). Chancellor agrees to
maintain at its own expense one management level employee and one other
employee for each Long Island Station.
<PAGE>
SFX and Chancellor
Jacksonville LMA
Page 8
- - - ------------------
Commencing subsequent to the execution of the LMAs, Chancellor shall
make available to each of the Jacksonville Stations' personnel during normal
business hours for Programmer to interview prior to the Commencement Date.
Programmer shall notify Chancellor of the names of employees to whom Programmer
shall offer employment (herein referred to as "Transferred Employees").
Chancellor hereby consents to Programmer making such offers of employment
relating to the Jacksonville Stations subject to the effectiveness of the LMAs
between the parties. Chancellor shall be responsible for all obligations or
liabilities to those employees not offered employment by Programmer, and
Programmer shall have no obligations with respect to those employees (herein
referred to as "Retained Employees").
No earlier than thirty (30) days after the execution of the Exchange
Agreement, Programmer shall submit confirmation letters to the Jacksonville
Stations' Management, on-air talent and other key employees which it intends to
offer employment, to which confirmation letters shall set forth the terms of
employment currently in effect between said employee and Chancellor, including,
but not limited to, matters concerning salary, bonuses, vacation time,
non-compete provisions (if any), benefits, termination rights, loans (if any)
and any other pertinent provisions thereof. Receipt of the confirmation letters
signed by the perspective management, on-air talent and other key employees is
a condition precedent to Programmer making any offers of continued employment.
10. Public Affairs Programming.
---------------------------
Notwithstanding any other provision of this Agreement,
Programmer recognizes that Chancellor has certain obligations to broadcast
programming to meet the needs and interests of the community of license for the
Jacksonville Stations. Chancellor shall have the right to air specific
programming on issues of importance to the local community. Nothing in this
Agreement shall abrogate the unrestricted authority of Chancellor to discharge
its obligations to the public and to comply with the law, rules and policies of
the FCC with respect to meeting the ascertained needs and interests of the
public. Accordingly, Chancellor may broadcast public affairs programming as
outlined in Section 2 hereof. Chancellor may air this programming in either one
two (2) hour block or any combination of half hour or full hour blocks of time
during the hours of 6 a.m. to 9 a.m. on Saturday and/or Sunday.
11. Additional License Obligations.
-------------------------------
Although both parties shall cooperate in the broadcast of
emergency information over the Stations, Chancellor shall also retain the right
to interrupt Programmer's programming in case of an emergency or for
programming which, in the reasonable good faith judgment of Chancellor, is of
overriding public importance. Chancellor shall also coordinate with Programmer
the
<PAGE>
SFX and Chancellor
Jacksonville LMA
Page 9
- - - ------------------
Jacksonville Stations' hourly station identification announcements to be
aired in accordance with FCC rules. Chancellor shall continue to maintain a
main studio, as that term is defined by the FCC, within each of the
Jacksonville Stations' principal community contours and shall staff it as
required by the FCC. Chancellor shall be responsible for the salaries, taxes,
insurance and related costs for all personnel it employs at the Jacksonville
Stations and shall maintain insurance at its present levels covering the
Jacksonville Stations' transmission facilities. In addition, Chancellor shall
pay any federal regulatory fees, maintain its local public inspection file
within the Jacksonville Stations' communities of license
and shall prepare and place in such public inspection file all required
documents including, but not limited to, its quarterly issues and program lists
on a timely basis. Chancellor shall also receive and respond to telephone
inquiries from the general public. Programmer shall provide Chancellor with
information with respect to certain of Programmer's programs which may be
included in Chancellor's quarterly issues and programs lists.
12. Broadcast Stations Programming Policy Statement.
------------------------------------------------
Chancellor has adopted and will enforce a Broadcast Stations
Programming Policy Statement (the "Policy Statement"), a copy of which appears
as Attachment I hereto and which may be amended to meet changing regulatory
requirements by Chancellor upon reasonable advance written notice to
Programmer. Programmer agrees and covenants to comply in all material respects
with the Policy Statement and with all rules and regulations of the FCC. If
Chancellor reasonably determines that a program, commercial or other material
supplied by Programmer does not comply with the Policy Statement, or if
Chancellor reasonably believes that some or all of a program, commercial or
other material is unsuitable or contrary to the public interest, it may suspend
or cancel such program, commercial or other material and shall provide written
notice to Programmer of such decision. Programmer shall provide programs only
in accordance with the Policy Statement and FCC requirements. All advertising
spots and promotional material or announcements shall comply with applicable
federal, state and local regulation and policies and the Policy Statement, and
shall be produced in accordance with quality standards established by
Chancellor.
13. Compliance with Copyright Act.
------------------------------
Programmer represents and warrants to Chancellor that
Programmer has full authority to broadcast its programming on the Jacksonville
Stations and the Programmer shall not broadcast any material in violation of
any law, rule, regulation or the Copyright Act. All music supplied by
Programmer shall be: (i) licensed by ASCAP, BMI or SESAC; (ii) in the public
domain; or (iii) cleared at the source by Programmer. Chancellor will maintain
as appropriate its own ASCAP, BMI and SESAC licenses for the performance of
Programmer's programs and Programmer shall reimburse Chancellor for the costs
of such licenses obtained by Chancellor within thirty (30) days
<PAGE>
SFX and Chancellor
Jacksonville LMA
Page 10
- - - ------------------
when paid. The right to use the programming and to authorize its use in any
manner shall be and remain vested in Programmer.
14. Payola.
-------
Programmer agrees that neither it nor its employees or agents
will accept any consideration, compensation, gift or gratuity of any kind
whatsoever, regardless of its value or form, including, but not limited to, a
commission, discount, bonus, material, supplies or other merchandise,
services or labor (collectively, "Consideration"), whether or not pursuant to
written contracts or agreements between Programmer and merchants or
advertisers, unless the third party providing such compensation, gift or
gratuity is identified in the program for which Consideration was provided as
having paid for or furnished such Consideration, in accordance with the
Communications Act and FCC requirements. Programmer agrees to execute and to
provide Chancellor with payola Affidavits from itself, and all of its employees
and agents who are involved with providing programming on the Jacksonville
Stations, at such times as Chancellor may reasonably request, substantially in
the form attached hereto as Attachment II.
15. Sales.
------
Programmer shall retain all revenues from the sale of
advertising time within the programming it provides to Chancellor and pay all
expenses attributable thereto. Programmer may sell advertising, consistent with
applicable rules, regulations and the Policy Statement, on the Jacksonville
Stations in combination with any other broadcast stations of its choosing.
Programmer shall be responsible for payment of the commissions due to any
national sales representative engaged by it for the purpose of selling national
advertising which is carried during the programming it provides to Chancellor.
Chancellor shall retain all revenues from the sale of the Jacksonville
Stations' advertising during the hours each week in which Chancellor airs its
own nonentertainment programming.
16. Local Marketing Agreement Challenge.
------------------------------------
If this Agreement is challenged at the FCC, counsel for
Chancellor and counsel for Programmer shall defend the Agreement and the
parties' performance thereunder throughout all FCC proceedings with Programmer
and Chancellor each being responsible for its own costs. If portions of this
Agreement do not receive the approval of the FCC staff, then the parties shall
reform the Agreement subject to their respective reasonable business judgment
and advise of counsel or, at
<PAGE>
SFX and Chancellor
Jacksonville LMA
Page 11
- - - ------------------
Chancellor's or Programmer's option, seek reversal of the staff decision and
approval from the full Commission on appeal.
17. Confidential Review.
--------------------
Prior to providing any programming by Programmer to Chancellor
under this Agreement, Programmer shall acquaint Chancellor with the nature and
type of the programming to be provided. Chancellor, solely for the purpose of
ensuring Programmer's compliance with the law, FCC rules and the Jacksonville
Stations' policies, shall be entitled to review and pre-empt at its discretion
from time to time on a confidential basis any programming material and any other
documents it may reasonably request, including all rate cards and disclosure
statements related to Programmer's political advertising. Programmer shall
promptly provide Chancellor with copies of all correspondence and complaints
received from the public as well as copies of all program logs and promotional
materials.
18. Major Defaults: Termination.
----------------------------
18.1. Programmer's Major Defaults. The occurrence of any of
the following, after the expiration of the applicable cure periods, if any, will
be deemed to be a "Major Default" by Programmer under this Agreement:
(a) Programmer's failure to timely pay any of the
consideration provided for in Section 4 and the Payment Schedule annexed hereto
or other payments required hereunder;
(b) Except as otherwise provided for in this Agreement, the
failure of Programmer to supply the programs for broadcast on the Jacksonville
Stations in accordance with Section 2 hereof;
(c) Any termination of this Agreement by Programmer other than
as permitted in Section 18.4 or 18.5; or
(d) In the event of a voluntary filing by Programmer (or
involuntary filing with respect to Programmer not vacated with ninety (90) days
after such filing) of a petition for reorganization or dissolution under
federal bankruptcy laws or under substantially equivalent state laws.
18.2. Chancellor's Major Defaults. The occurrence of any of
the following, after the expiration of the applicable cure periods, if any, will
be deemed to be a "Major Default" by
<PAGE>
SFX and Chancellor
Jacksonville LMA
Page 12
- - - ------------------
Chancellor under this Agreement:
(a) Except as otherwise provided for in this Agreement, the
failure of Chancellor to broadcast the programs supplied by Programmer in
accordance with Section 2 hereof;
(b) Any termination of this Agreement by Chancellor other than
as permitted in Section 18.4 or 18.5; or
(c) In the event of a voluntary filing by Chancellor (or
involuntary filing with respect to Chancellor not vacated with ninety (90) days
after such filing) of a petition for reorganization or dissolution under federal
bankruptcy laws or under substantially equivalent state laws.
18.3. Cure Periods. The cure periods before any event listed
in Section 18.1 or 18.2 shall become a Major Default are as follows:
(a) Payment by Programmer. The consideration to be paid to
Chancellor must be received by Chancellor within five (5) days after Chancellor
gives written notice of non-payment to Programmer.
(b) Certain Matters. There shall be no cure period for:
(i) a termination by Programmer described in Section
18.1(c); or
(ii) a termination by Chancellor described in Section
18.2(b) hereof.
(c) Programs and Broadcast Matters. With respect to
Programmer's failure to provide programs referred to in Section 18.1(b) hereof
or Chancellor's failure to broadcast programs referred to in Section 18.2(a)
hereof, the period allowed for cure shall be three (3) business days from the
giving of written notice of such failure to the defaulting party by the
non-defaulting party.
(d) Other Matters. With respect to all matters capable of
being cured other than those described in Sections 18.3(a), 18.3(b) or 18.3(c)
above, the cure period shall be ten (10) business days after written notice to
the defaulting party is given by the non-defaulting party or, with respect to
matters that through the exercise of reasonable diligence cannot be cured
within such ten (10) day period, such longer period not to exceed ninety (90)
days as is reasonably necessary to effect such cure through the exercise of
reasonable diligence.
<PAGE>
SFX and Chancellor
Jacksonville LMA
Page 13
- - - ------------------
18.4. Termination Upon Occurrence of Major Default. Upon the
--------------------------------------------
occurrence and continuation of a Major Default the non-defaulting party may
terminate this Agreement by giving written notice to the defaulting party
within sixty (60) days of such occurrence, provided that the non-defaulting
party has not also committed a Major Default hereunder which has not been
waived. Such written notice shall specify a termination date which is not less
than seven (7) days nor more than ninety (90) days from the date such notice is
given. In the event the non-defaulting party does not exercise such right of
termination by giving such written notice within such sixty (60) day period,
then the Major Default giving rise to such right of termination shall be deemed
waived and the Agreement shall continue in full force and effect.
18.5. Termination Upon Failure of Consummation of Exchange
----------------------------------------------------
Agreement. Notwithstanding any other provision hereof, this Agreement may be
terminated by either party at any time following termination of the Exchange
Agreement.
19. Liabilities Upon Termination.
-----------------------------
(a) Programmer shall be solely responsible for all of its
liabilities, debts and obligations incident to its purchase of broadcast time
hereunder, including, without limitation, accounts payable and unaired
advertisements, but not for Chancellor's federal, state, and local tax
liabilities associated with Programmer's payments to Chancellor as provided
herein. Upon termination pursuant to Sections 18.4 or 18.5 hereto, Chancellor
shall be under no further obligation to make available to Programmer any
broadcast time or broadcast transmission facilities, provided that Chancellor
agrees that it will cooperate reasonably with Programmer to discharge in
exchange for reasonable compensation any remaining obligations of Programmer in
the form of air time following the termination date. At the date of
termination, Programmer shall return to Chancellor any equipment or property of
the Jacksonville Stations used by Programmer, its employees or agents, in
substantially the same condition as such equipment existed on the Commencement
Date, shall restore Chancellor's technical facilities to substantially the same
condition as such facilities existed on the Commencement Date, ordinary wear
and tear excepted, shall reassign to Chancellor all contracts and agreements
relating to the Jacksonville Stations listed on the Schedules to the Exchange
Agreement which were assumed by Programmer upon the Commencement Date, and
shall otherwise take such actions to restore to the extent then practicable the
parties hereto to their respective positions prior to the Commencement Date.
(b) Upon termination of this Agreement pursuant to this
Section 18 or as a result of the expiration of the term of this Agreement other
than by the Closing under the Exchange Agreement, each party shall be free to
pursue any and all remedies available to it at law, in equity or otherwise. All
amounts accrued or payable to Chancellor up to the date of termination which
have
<PAGE>
SFX and Chancellor
Jacksonville LMA
Page 14
- - - ------------------
not been paid shall be immediately due and payable. Programmer shall, in
addition to its other legal and equitable rights and remedies under this
Agreement or under applicable law, be entitled immediately to cease providing
any further programs to be broadcast on the Jacksonville Stations, and all
amounts which have been prepaid to Chancellor for any partial month beyond the
termination shall be immediately due and payable to Programmer. Programmer shall
return all confidential information with respect to the Jacksonville Stations to
Chancellor. Programmer shall reassign all of Chancellor's accounts receivable to
Chancellor. Programmer shall remit to Chancellor all amounts collected with
respect to Chancellor's accounts receivable within five (5) business days of
termination hereunder.
Upon termination, Programmer shall be responsible for debts
and obligations resulting from the use of the Jacksonville Stations' air time
and equipment by Programmer including, without limitation, accounts payable and
net barter balances in excess of Fifty Thousand Dollars ($ 50,000), relating to
the period on and after the date of this Agreement and up to the termination of
this Agreement and shall be entitled to the revenues and other credits for that
period.
20. No Format Changes.
------------------
Until such time has elapsed pursuant to Section 22.11 to
terminate this Agreement, Programmer shall not materially change the
entertainment format of the Jacksonville Stations.
21. Chancellor's Indemnification.
-----------------------------
Chancellor shall indemnify, defend, hold and save Programmer
harmless from and against any and all claims, losses, costs, liabilities,
damages, FCC forfeitures, and expenses, including counsel fees, of every kind,
nature, and description, including libel, slander, illegal competition or trade
practices, or infringement of trade marks or program titles, violation of
rights of privacy, and infringement of copyrights and proprietary rights
arising out of:
(a) Chancellor's operation of the Jacksonville Stations (not
including the operation of the Jacksonville Stations by Programmer) under this
Agreement, and
(b) breach of any warranty, representation, covenant,
agreement or obligation of Chancellor contained in this Agreement.
22. Programmer's Indemnification.
-----------------------------
<PAGE>
SFX and Chancellor
Jacksonville LMA
Page 15
- - - ------------------
Programmer shall indemnify, defend, hold and save Chancellor
harmless from and against any and all claims, losses, costs, liabilities,
damages, FCC forfeitures, and expenses, including counsel fees, of every kind,
nature, and description, including libel, slander, illegal competition or trade
practices, or infringement of trade marks or program titles, violation of
rights of privacy, and infringement of copyrights and proprietary rights
arising out of:
(a) the programming furnished by Programmer under this
Agreement,
(b) the actions or failure to act of its employees or agents
under this Agreement and
(c) breach of any warranty, representation, covenant,
agreement or obligation of Programmer contained in this Agreement.
23. Procedure for Indemnification.
------------------------------
The party seeking indemnification under this paragraph
("Indemnitee") shall give the party from whom it seeks indemnification
("Indemnitor") prompt notice, as provided herein, of the assertion of such a
claim provided, however, that the failure to give notice of a claim within a
reasonable time shall only relieve the Indemnitor of liability to the extent it
is materially prejudiced thereby. Promptly after receipt of written notice, as
provided herein, of a claim by a person or entity not a party to this
Agreement, the Indemnitor shall assume the defense of such claim; provided,
however, that:
(a) If the Indemnitor fails, within a reasonable time after
receipt of notice of such claim, to assume the defense thereof, the Indemnitee
shall have the right to undertake the defense, compromise, and settlement of
such claim on behalf of and for the account and risk of Indemnitor, subject to
the right of the Indemnitor (upon notifying the Indemnitee of its election to
do so) to assume the defense of such claim at any time prior to the settlement,
compromise, judgment, or other final determination thereof;
(b) If in the reasonable judgment of the Indemnitee, based
upon the advise of its counsel, a direct or indirect conflict of interest
exists between the Indemnitee and Indemnitor, the Indemnitee shall (upon
notifying the Indemnitor of its election to do so) have the right to undertake
the defense, compromise, and settlement of such claim on behalf of and for the
account and risk of Indemnitor (it being understood and agreed that the
Indemnitor shall not be entitled to assume the defense of such claim);
<PAGE>
SFX and Chancellor
Jacksonville LMA
Page 16
- - - ------------------
(c) If the Indemnitee in its sole discretion elects, it shall
(upon notifying the Indemnitor of its election to do so) be entitled to employ
separate counsel and to participate in the defense of such claim, but the fee
and expenses of counsel so employed shall (except as contemplated by clauses
(a) and (b) above) be borne solely by Indemnitee;
(d) The Indemnitor shall not settle or compromise any claim
or consent to the entry of any judgment that does not include as an
unconditional term thereof the grant by the claimant or plaintiff to each
Indemnitee of a release from any and all liability in respect thereof; and
(e) The Indemnitor shall not settle or compromise any claim
in any manner, or consent to the entry of any judgment, that could reasonably
be expected to have a material adverse effect on the Indemnitee.
24. Dispute Over Indemnification.
-----------------------------
If upon presentation of a claim for indemnity hereunder, the
Indemnitor does not agree that all, or part, of such claim is subject to the
indemnification obligations imposed upon it pursuant to this Agreement, it
shall promptly so notify the Indemnitee. Thereupon, the parties shall attempt
to resolve their dispute, including where appropriate reaching an agreement as
to that portion of the claim, if any, which both concede is subject to
indemnification. To the extent that the parties are unable to reach some
compromise within thirty (30) days thereafter, the parties shall be free to
pursue all appropriate legal and equitable remedies.
25. Programmer's Remedies for Operational Deficiencies.
---------------------------------------------------
Except as set forth in this Section 25, and except for
reductions in power or interruptions occurring between the hours of 12:00
midnight and 6:00 a.m. as a result of maintenance or repairs or during such
periods that the Jacksonville Stations are operating from its authorized
auxiliary antenna, if any of the normal broadcast transmissions of the
Jacksonville Stations are interrupted, interfered with, or in any way impaired
with so that the Jacksonville Stations are not operating at full licensed power
and antenna height or are off the air, or in the event that Chancellor preempts
Chancellor's programming, Programmer shall be entitled to an equitable
reduction in the amount of its monthly fee which is proportionate to the period
of time that the Jacksonville Stations' operations are deficient, the
Jacksonville Stations' programming is preempted or the Jacksonville Stations
are off the air.
<PAGE>
SFX and Chancellor
Jacksonville LMA
Page 17
- - - ------------------
26. Force Majeure.
--------------
Any failure or impairment of the Jacksonville Stations'
facilities or any delay or interruption in the broadcast of programs, or
failure at any time to furnish facilities, in whole or in part, for broadcast
due to Acts of God, strikes, lockouts, material or labor restrictions by any
governmental authority, civil riot, floods and any other cause not reasonably
within the control of Chancellor (including any obligation of Chancellor to
reduce power or suspend operation to avoid occupational exposure to harmful RF
radiation), shall not constitute a breach of this Agreement and Chancellor will
not be liable to Programmer.
27. Other Agreements.
-----------------
During the term of this Agreement, Chancellor will not enter
into any other local marketing, program provision, local management or similar
agreement with any third party with respect to the Jacksonville Stations.
28. Assignment.
-----------
This Agreement shall be binding upon and inure to the benefit
of the parties hereto, their successors and assigns, including specifically any
purchaser of the Jacksonville Stations from Chancellor. Neither party may
assign its rights without the prior written consent of the other party which
consent shall not be unreasonably withheld.
29. Entire Agreement.
-----------------
This Agreement, and the Attachments hereto, embody the entire
agreement and understanding of the parties and supersede any and all prior
agreements, arrangements and understandings relating to matters provided for
herein. No amendment, waiver of compliance with any provision or condition
hereof, or consent pursuant to this Agreement will be effective unless
evidenced by an instrument in writing signed by the parties.
30. Taxes.
------
Chancellor and Programmer shall each pay its own ad valorem
taxes, if any, which may be assessed on such party's respective personal
property for the periods that such items are owned by such party. Each party
shall be responsible for any sales tax imposed on advertising aired during the
programming provided by that party.
<PAGE>
SFX and Chancellor
Jacksonville LMA
Page 18
- - - ------------------
31. Headings.
---------
The headings are for convenience only and will not control or
affect the meaning or construction of the provisions of this Agreement.
32. Governing Law.
--------------
The obligations of Chancellor and Programmer are subject to
applicable federal, state and local law, rules and regulations, including, but
not limited to, the Act and the Rules and Regulations of the FCC. The
construction and performance of the Agreement will be governed by the laws of
the State of Florida.
33. Notices.
--------
Any notice, demand or request required or permitted to be
given under the provisions of this Agreement shall be in writing and shall be
deemed to have been duly delivered and received on the date of personal
delivery; on the third day after deposit in the U.S. mail if mailed by
registered or certified mail, postage prepaid and return receipt requested; on
the day after delivery to a nationally recognized overnight courier service if
sent by an overnight delivery service for next morning delivery and shall be
addressed to the following addresses:
To Chancellor: Chancellor Broadcasting Company
12655 N. Central Expressway, Suite 321
Dallas, Texas 75243
Attention: Mr. Steven Dinetz
Telecopier number: (214) 239-0220
Copy to: Matthew L. Leibowitz, Esq.
Leibowitz & Associates
One S.E. Third Avenue, Suite 1450
Miami, FL 33131
Telephone number: (305) 530-1322
Telecopier number: (305) 530-9417
To Programmer: Robert F.X. Sillerman
SFX Broadcasting, Inc.
<PAGE>
SFX and Chancellor
Jacksonville LMA
Page 19
- - - ------------------
150 E. 58th Street
New York, NY 10155
Telecopier number: (212) 753-3188
Copy to: Richard A. Liese, Esq.
Chancellor Broadcasting, Inc.
150 E. 58th Street
New York, NY 10155
Telecopier number: (212) 753-3188
The date of any such notice and service thereof shall be
deemed to be:
(a) the day of delivery if hand delivered or delivered by
overnight courier;
(b) the day of delivery as indicated on the return receipt if
dispatched by mail, or
(c) the date of telecopy transmission as indicated on the
telecopier transmission report provided that any telecopy transmission shall
not be effective unless a paper copy sent by
overnight courier on the date of the telecopy transmission is delivered.
Either party may change its address for the purpose of notice
by giving notice of such change in accordance with the provisions of this
paragraph.
34. Severability.
-------------
If any provision of this Agreement or the application thereof
to any person or circumstances shall be invalid or unenforceable to any extent,
the remainder of this Agreement and the application of such provision to other
persons or circumstances shall not be affected thereby and shall be enforced to
the greatest extent permitted by law.
35. Certifications.
---------------
(a) Control of Stations. Chancellor hereby verifies that it
will maintain control of the Jacksonville Stations and their facilities,
including specifically control over the Jacksonville Stations' finances,
personnel and programming during the term of this Agreement.
(b) Compliance with Ownership Rules. Programmer hereby
verifies that the arrangement contemplated by this Agreement complies with the
provisions of Section 73.3555(a)
<PAGE>
SFX and Chancellor
Jacksonville LMA
Page 20
- - - ------------------
of the rules and regulations of the FCC.
36. No Joint Venture.
-----------------
The parties agree that nothing herein shall constitute a
joint venture or partnership between them.
37. Beneficiaries.
--------------
Nothing in this Agreement, express or implied, is intended to
confer on any person other than the parties hereto and their respective
successors and assigns any rights, remedies, obligations, or liabilities under
or by reason of this Agreement.
<PAGE>
SFX and Chancellor
Jacksonville LMA
Page 21
- - - ------------------
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
CHANCELLOR RADIO BROADCASTING COMPANY
By: ______________________________
Eric W. Neumann
Sr. Vice President of Finance
SFX BROADCASTING, INC.
By: ______________________________
Robert F. X. Sillerman
Executive Chairman & CEO
<PAGE>
SFX and Chancellor
Jacksonville LMA
Page 22
- - - ------------------
PAYMENT SCHEDULE
In exchange for the air time supplied to Programmer pursuant to this
Agreement, Programmer shall pay SFX Three Hundred Seventy Five Thousand Dollars
($375,000) per month until the Jacksonville Stations LMA goes into effect. Once
the Jacksonville Stations LMA goes into effect, the amounts payable to SFX
shall be reduced to Twenty Five Thousand Dollars ($25,000) per month. If the
Jacksonville Stations LMA is implemented before November 1, 1996, the monthly
payment obligation after November 1, 1996 shall be zero dollars ($0.00). In the
event that the Jacksonville Stations LMA is never entered into, the monthly
payments will remain at Three Hundred Seventy Five Thousand Dollars ($375,000)
per month. The first monthly payment to SFX is due and payable on July 1, 1996,
and each successive payment is due on the first day of each month thereafter.
The monthly fee shall be reduced pro rata for any partial month at the
beginning or end of the term of this Agreement.
<PAGE>
SFX and Chancellor
Jacksonville LMA
Page 23
- - - ------------------
SCHEDULE B
EMPLOYEES
<PAGE>
SFX and Chancellor
Jacksonville LMA
Page 24
- - - ------------------
ATTACHMENT I
BROADCAST STATIONS PROGRAMMING POLICY STATEMENT
Programmer agrees to cooperate with Chancellor in the broadcasting of
programs of the highest possible standard of excellence and for this purpose to
observe the following regulations in the preparation, writing and broadcasting
of its programs. Further Programmer agrees that all material broadcast on the
Jacksonville Stations shall comply with all federal, state and local applicable
laws, rules and regulation.
I. No Plugola or Payola.
---------------------
The broadcast of any material for which any money, service or
other valuable consideration is directly or indirectly paid, or promised to or
charged or accepted by, the Programmer, from any person, shall be prohibited,
unless, at the time the same is broadcast, it is announced as paid for or
furnished by such person.
II. Political Broadcasting.
-----------------------
Within thirty (30) days of the Commencement Date, Programmer
shall provide Chancellor with a written political advertising disclosure
statement which fully and accurately discloses how the Programmer sells
programming and advertising time and which makes parties purchasing political
programming and advertising time fully aware of the lowest unit charge
provisions of Section 315 of the Act. In addition, at least thirty (30) days
before the start of any primary or election campaign, Programmer will clear
with the Jacksonville Stations' general managers the rates Programmer will
charge for the time to be sold to candidates to make certain that the rate
charges is in conformance with the applicable law and Stations policy.
III. Required Announcements.
-----------------------
Programmer shall broadcast (i) an announcement in a form
satisfactory to Chancellor at the beginning of each hour to identify the
Jacksonville Stations and (ii) any other announcements that may be required by
law, regulation or Chancellor's Stations policy.
IV. No Illegal Announcements.
-------------------------
No announcements, broadcasts or promotions prohibited by
federal, state or local law shall be made over the Jacksonville Stations. This
prohibition specifically includes, but is not
<PAGE>
SFX and Chancellor
Jacksonville LMA
Page 25
- - - ------------------
limited to, any and all programming or other broadcast material concerning
tobacco or alcohol related products which are unlawful. The airing of any
broadcast material concerning contests, lotteries or games must be conducted in
accordance with allapplicable law, including FCC rules and regulations. Any
obscene, indecent, or fraudulent programming is prohibited. All sponsored
programming or other broadcast material must be identified in accordance with
applicable law, including FCC rules and regulations.
V. Chancellor Discretion Paramount.
--------------------------------
In accordance with Chancellor's responsibility under the
Communications Act of 1934, as amended, and the Rules and Regulations of the
Federal Communications Commission, Chancellor reserves the right to reject or
terminate any advertising proposed to be presented or being presented over the
Jacksonville Stations, which is in conflict with Jacksonville Stations'
policies or which Chancellor or its general manager's reasonable judgement
would not serve the public interest.
In any case where questions of policy or interpretation arise,
Programmer should submit the same to Chancellor for decision before making any
commitments in connection therewith.
<PAGE>
SFX and Chancellor
Jacksonville LMA
Page 26
- - - -----------------
ATTACHMENT II
PAYOLA AFFIDAVIT
City of_____________________________)
County of___________________________) ss.:
State of____________________________)
I,_________________________, having first been duly sworn, hereby
state that I have read and will comply with the provisions of Section 317 and
507 of the Communications Act of 1934, as amended, copies of which are attached
hereto, I also have read and will comply with the provisions of the Commission's
Sponsorship Identification Rule (73.1212), a copy of which is attached hereto.
I also will comply with the policy of this Station, _________________
(insert call letters here), which prohibits every employee
having any voice in the selection of broadcast matter from (a) engaging in any
outside business or economic activity which would create a conflict of interest
in the selection of broadcast matter; (b) accepting any favors, loans,
entertainment or other consideration from persons seeking the airing of any
broadcast matter in return thereof, and (c) promoting over the air (except by
means of an appropriate commercial announcement) any activity or matter in which
the employee has a direct or indirect financial interest.
I understand that receiving or agreeing to receive anything of value
from a third party for the broadcast of any program material over the Stations
is a crime, unless the agreed payment is disclosed to the Stations before
broadcast of the program material. This crime, commonly called "payola", is
punishable by one year in prison and a fine of up to $10,000.
During the past year, I have not been promised or paid anything of
value directly or indirectly by a third party for the broadcast of any
programming material over the Stations.
_____________________________________
Affiant
<PAGE>
SFX and Chancellor
Jacksonville LMA
Page 27
- - - -----------------
The foregoing instrument was acknowledged before me this _____________
day of ______________________, 1996 by _______________________________________,
who is personally known to me or who has produced as identification.
___________________________________
Notary Public
My commission expires: _____________________________________
CHANCELLOR RADIO BROADCASTING COMPANY
LOCAL MARKETING AGREEMENT
WITH
WBLI, INC.
WBLI-FM, INC.
WHFM, INC.
WBAB, INC.
WGBB, INC.
FOR
WBAB-FM, BABYLON, NEW YORK
WBLI-FM, PATCHOGUE, NEW YORK
WGBB-AM, FREEPORT, NEW YORK
WHFM-FM, SOUTHAMPTON, NEW YORK
<PAGE>
TABLE OF CONTENTS
1. Agreement Term...........................................................2
2. Programmer's Purchase of Airtime and Provision of Programming............2
3. Representations..........................................................2
4. Consideration............................................................3
5. Collection of Accounts Receivable........................................3
6. SFX Control of the Stations..............................................4
7. Programmer Responsibility................................................5
8. Contracts................................................................6
9. Employees................................................................7
10. Public Affairs Programming...............................................8
11. Additional License Obligations...........................................8
12. Broadcast Stations Programming Policy Statement..........................8
13. Compliance with Copyright Act............................................9
14. Payola...................................................................9
15. Sales....................................................................9
16. Local Marketing Agreement Challenge.....................................10
17. Confidential Review.....................................................10
18. Major Defaults: Termination.............................................10
18.1. Programmer's Major Defaults. ...................................10
18.2. SFX's Major Defaults.............................................11
18.3. Cure Periods.....................................................11
18.4. Termination Upon Occurrence of Major Default.....................12
18.5. Termination Upon Failure of Consummation of Exchange Agreement...12
i
<PAGE>
19. Liabilities Upon Termination. .......................................12
20. No Format Changes....................................................13
21. SFX's Indemnification................................................13
22. Programmer's Indemnification.........................................14
23. Procedure for Indemnification........................................14
24. Dispute Over Indemnification.........................................15
25. Programmer's Remedies for Operational Deficiencies...................15
26. Force Majeure........................................................16
27. Other Agreements.....................................................16
28. Assignment...........................................................16
29. Entire Agreement.....................................................16
30. Taxes................................................................16
31. Headings.............................................................17
32. Governing Law........................................................17
33. Notices..............................................................17
34. Severability.........................................................18
35. Certifications.......................................................18
(a) Control of Stations.........................................18
(b) Compliance with Ownership Rules.............................19
36. No Joint Venture.....................................................19
37. Beneficiaries........................................................19
PAYMENT SCHEDULE..............................................................22
ii
<PAGE>
SCHEDULE B - EMPLOYEES........................................................24
ATTACHMENT I - BROADCAST STATIONS PROGRAMMING POLICY STATEMENT................25
I. No Plugola or Payola........................................25
II. Political Broadcasting......................................25
III. Required Announcements......................................25
IV. No Illegal Announcements....................................25
V. SFX Discretion Paramount....................................26
ATTACHMENT II - PAYOLA AFFIDAVIT..............................................27
iii
<PAGE>
LOCAL MARKETING AGREEMENT
THIS LOCAL MARKETING AGREEMENT ("LMA" or "Agreement"), made as of July 1, 1996
by and between WBLI, Inc., a New York corporation, WBLI-FM, Inc., a Delaware
corporation, WHFM, Inc., a New York Corporation, WBAB, Inc., a New York
corporation, and WGBB, Inc., a New York corporation (collectively, "SFX" or
"Owner" or "Licensee") and CHANCELLOR RADIO BROADCASTING COMPANY, ("Chancellor"
or "Programmer") a Delaware corporation.
RECITALS
WHEREAS, SFX owns and operates radio stations WBAB-FM, Babylon, New
York; WBLI- FM, Patchogue, New York; WGBB-AM, Freeport, New York; and WHFM-FM,
Southampton, New York (the "Long Island Stations");
WHEREAS, Chancellor is a party to a certain Asset Purchase Agreement
("Purchase Agreement") dated May 14, 1996 among Chancellor and Chancellor
Broadcasting Company and OmniAmerica Group, WAPE-FM License Partnership, WFYV-FM
License Partnership, WEAT-AM License Partnership, WEAT-FM License Partnership,
WXXL License Partnership, WOLL License Partnership and WJHM-FM License
Partnership (collectively "Omni") contemplating, inter alia, the purchase by
Chancellor of substantially all of Omni's assets used or useful in the operation
of Station WAPE-FM, Jacksonville, Florida, and Station WFYV-FM, Atlantic Beach,
Florida (collectively, the "Jacksonville Stations"), including the related FCC
broadcast licenses and authorizations. That Purchase Agreement is hereafter
referred to as the "Florida Agreement".
WHEREAS, SFX wishes to retain Chancellor to provide programming for the
Stations pursuant to the terms and conditions set forth in this Agreement and in
conformity with the Stations' policies and practices and the Federal
Communications Commission's ("FCC") rules and regulations concerning such
arrangements;
WHEREAS, Chancellor will broadcast such programming and sell
advertising that is in conformance with the Stations' policies and all FCC rules
and regulations, including the requirement that the ultimate control of the
Stations be maintained by SFX; and
WHEREAS, Chancellor and SFX have entered into an Asset Exchange
Agreement dated July 1, 1996 (the "Exchange Agreement"), which would qualify as
a tax free exchange of like-kind assets pursuant to Section 1031 of the Internal
Revenue Code of 1986, as amended, pursuant to which SFX has agreed to transfer
to Chancellor, and Chancellor has agreed to acquire from SFX, substantially all
of the assets and businesses of the Long Island Stations; and Chancellor has
agreed to transfer to SFX, and SFX has agreed to acquire from Chancellor,
substantially all of the assets and businesses of the Jacksonville Stations.
<PAGE>
SFX and Chancellor
Local Marketing Agreement
Page 2
- - - -------------------------
NOW THEREFORE, for and in consideration of the mutual covenants herein
contained, the parties, intending to be legally bound, agree as follows:
1. Agreement Term.
---------------
The term of this Agreement will begin on July 1, 1996
("Commencement Date") and will continue until the Programmer acquires the assets
of the Long Island Stations and the Owner acquires the assets of the
Jacksonville Stations in accordance with the terms of the Exchange Agreement,
unless earlier terminated in accordance with the provisions set forth herein.
2. Programmer's Purchase of Airtime and Provision of Programming.
--------------------------------------------------------------
(a) During the term of this Agreement, Programmer shall
transmit programming, including commercials, that it produces or owns to the
Long Island Stations twenty-four (24) hours per day Monday through Friday and
for forty-eight (48) hours during Saturday through Sunday, provided that SFX may
broadcast up to two (2) hours of programming for the Long Island Stations which
is aimed at serving the needs and interests of the Long Island Stations'
communities of license during the morning(s) of Saturday and/or Sunday subject
to Section 10 hereto.
(b) To facilitate delivery of programming by Programmer
hereunder, SFX hereby grants to Programmer the right for the term of this
Agreement to use substantially all of the equipment located in the Stations'
studios and currently used by SFX for broadcasting programs on the Stations. In
addition, Programmer shall have, and SFX hereby grants to Programmer, a license
to enter on the premises currently occupied by the Stations for the purpose of
producing its programming hereunder; provided, however, that SFX shall maintain,
for its use, sufficient space at the Stations' studios to enable SFX to conduct
its operations and originate programming.
Accordingly, Programmer shall hold SFX harmless from all costs, fees and
expenses incurred with respect to any personal injury suffered by any employee
or agent of Programmer while on the property of SFX. Programmer shall also be
responsible for and shall reimburse SFX for any damage to the property of SFX
caused by Programmers' employees or agents.
3. Representations.
----------------
Each of SFX and Programmer represent as to itself that it is
authorized to enter into this Agreement and that this Agreement constitutes the
legal, valid and binding obligation of such party, enforceable against it in
accordance with its terms. Programmer hereby represents and
<PAGE>
SFX and Chancellor
Local Marketing Agreement
Page 3
- - - -------------------------
warrants to SFX that Programmer is an experienced radio broadcast station owner
and operator and is fully familiar with all pertinent legal requirements,
including but not limited to, the Communications Act of 1934, as amended (the
"Act"), and the Commission's rules, regulations and policies governing the
operation of radio broadcast stations. Programmer will comply with all legal
requirements, including but not limited to the Act and the Commission's rules,
regulations and policies.
4. Consideration.
--------------
During the term of this Agreement, Programmer shall pay SFX
the payments set forth on the Payment Schedule annexed hereto.
5. Collection of Accounts Receivable.
----------------------------------
(a) The accounts receivable of the Long Island Stations
generated prior to the Commencement Date (the "Pre-LMA Receivables") shall be
and remain the property of SFX. Within fifteen (15) days after the Commencement
Date, SFX shall furnish Chancellor with a list (certified by the Chief Financial
Officer of SFX to be a true and complete list) of all accounts receivable of SFX
which remain outstanding as of the Commencement Date. Chancellor agrees that if,
after the Commencement Date, it shall receive payment, in respect to any Pre-LMA
Receivable, Chancellor shall remit to SFX, within five (5) business days after
the end of each month, any amounts received by Chancellor during the preceding
month (whether or not directed on their face to SFX), which are in payment for
advertising broadcast by the Station prior to the Commencement Date.
(b) During the period starting on the Commencement Date and
ending one hundred twenty (120) days thereafter, Chancellor shall use reasonable
efforts, consistent with SFX's current billing and collection practices and in
the ordinary course of the business, to assist SFX in the collection of any
outstanding Pre-LMA Receivables; provided, however, that, notwithstanding the
foregoing, Chancellor shall be under no obligation to commence litigation,
employ counsel or engage the services of a collection agency to effect
collection. Chancellor shall not make any compromise, adjustment, concession or
settlement of any Pre-LMA Receivable without SFX's express written consent and
Chancellor shall be under no obligation to compromise, adjust, concede or settle
any accounts receivable generated after the Commencement Date or otherwise grant
any credit or allowance to effect collection of a Pre-LMA Receivable. Absent
written evidence that an account debtor owing a Pre-LMA Receivable is disputing
in good faith any portion of such Pre-LMA Receivable, any payments received by
Chancellor after the Commencement Date from such account debtor shall be
presumed to represent payment on any undisputed portion of such Pre-LMA
<PAGE>
SFX and Chancellor
Local Marketing Agreement
Page 4
- - - -------------------------
Receivable which is then outstanding (with each such payment received from such
account debtor to be applied first to the most-aged Pre-LMA Receivable then
owing from such account debtor).
(c) SFX agrees to remit to Chancellor within 5 business days
after the end of each month, any amounts received by SFX during the preceding
month (whether or not directed on their face to Chancellor) which are in payment
for advertising generated by the Stations after the Commencement Date.
(d) Chancellor shall not set-off any claim or amount against
any of the Pre-LMA Receivables.
6. SFX Control of the Stations.
----------------------------
(a) SFX will have full authority, power and control over the
management and operations of the Long Island Stations during the term of this
Agreement. SFX will bear all responsibility for the Long Island Stations'
compliance with all applicable provisions of the Act, the rules, regulations and
policies of the FCC and all other applicable laws, including without limitation,
the retention of control over the policies, programming and operation of the
Long Island Stations, including the right to preempt programming which in its
good faith judgment it deems unsuitable or contrary to the public interest. SFX
shall be solely responsible for and pay in a timely manner all real and personal
property taxes, mortgage fees and expenses and other real property costs, all
studio and transmitter site leases, any utilities (excluding telephone charges),
and all costs and expenses for the maintenance of all transmitter equipment.
Programmer shall cooperate with and assist SFX in complying with all FCC rules
and regulations.
(b) SFX retains ultimate control over the Long Island Stations
and their premises. Accordingly, all employees of Programmer present at the Long
Island Stations or on their premises must comply with the policies and rules
promulgated by SFX. In no event shall Programmer, or Programmer's employees,
represent, depict, describe or portray Programmer as the Licensee of the Long
Island Stations. To this end, all employees of Programmer, whose work involves
the Long Island Stations, shall be informed as to SFX's ultimate control over
the Long Island Stations and Programmer's subordinate capacity, and all printed
materials and promotional announcements shall accurately describe all of the
roles and responsibilities of SFX and Programmer.
(c) The Long Island Stations' transmission equipment shall be
maintained by SFX in a condition consistent with good engineering practices and
in compliance in all material respects with the Act and all other applicable
rules, regulations and technical standards of the FCC. All capital expenditures
reasonably required to maintain the technical quality of the transmission
<PAGE>
SFX and Chancellor
Local Marketing Agreement
Page 5
- - - -------------------------
equipment and its compliance with applicable laws and regulations shall be made
at the sole expense of SFX in a timely fashion.
(d) SFX shall employ at its expense a management-level
employee at the Long Island Stations and such other person for each Long Island
Station as necessary to fulfill SFX's duties hereunder and its obligations under
the FCC's rules. A manager shall direct the day-to-day operations of each Long
Island Station and shall report to and be accountable to SFX. SFX shall be
responsible for the salaries, taxes, insurance and related costs for all
personnel it employs at the Long Island Stations.
(e) SFX shall pay all regulatory fees, file all necessary
applications, maintain the Long Island Stations' local public inspection files
within the Long Island Stations' communities of license and shall prepare and
place in such inspection file all required documents including, but not limited
to the Long Island Stations' quarterly issues and program lists on a timely
basis.
7. Programmer Responsibility.
--------------------------
(a) Programmer shall be solely responsible for all expenses
incurred in the origination and/or delivery of programming from any remote
location and for all operating expenses of the Long Island Stations (including
telephone expenses and expenses related to sales, marketing, promotion,
advertising, billing and collections, and traffic), except that SFX shall be
responsible for the costs as provided in Section 6 hereof. Programmer shall
cooperate fully with SFX in responding to any questions, comment, inquiry or
complaint from any third party, including any governmental authority or agent
thereof, that may relate to or arise from the Long Island Stations or its
operations, including the programming. In the event of Programmer's receipt of
any question, comment inquiry or complaint that may relate to or arise from the
Long Island Stations or its operations, Programmer shall promptly notify SFX of
the same.
(b) Programmer shall employ and be solely responsible for the
salaries, taxes, insurance and related costs for all personnel employed by
Programmer (including, without limitation, salespeople, traffic personnel, board
operators and programming staff).
(c) Programmer shall cause the Long Island Stations to
transmit any required tests of the Emergency Broadcast System or successor
Emergency Alert System at such times as are directed by SFX.
(d) Political Advertising and Announcements. Programmer shall
maintain and deliver to SFX all records and information required by the FCC to
be placed in the public inspection
<PAGE>
SFX and Chancellor
Local Marketing Agreement
Page 6
- - - -------------------------
files of the Long Island Stations pertaining to the broadcast of political
programming and advertisements, in accordance with the provisions of Sections
73.1940 and 73.3526 of the FCC's rules and agrees to broadcast sponsored
programming addressing political issues, in accordance with the provisions of
Section 73.1212 of the FCC's rules.
1. Programmer's sale or use of commercial time on
the Long Island Stations shall conform to all federal and state laws governing
the sale of political advertising on radio stations. At least ninety (90) days
before the start of any primary or general election campaign, Programmer will
clear with Licensee the rates to be charged political candidates for public
office and rate cards to be sure that the rates and the rate cards are in
conformance with all laws, including requirements for providing reasonable time
to state and local candidates (as determined by the Licensee).
2. When required by law, Programmer shall sell such
political advertising time only at the Stations' lowest unit rate. Within seven
(7) days after the broadcast of political advertising, Programmer shall review
the commercial spots that have aired on the Long Island Stations, so as to
insure that each political candidate was charged the lowest unit rate. In the
event a refund or credit is due, Programmer shall pay such refund or provide
such credits within seven (7) days. The Programmer recognizes candidates' need
to maximize their campaign funds, and thus will provide such rebates or credits
on a more expeditious basis as the election day approaches.
3. Within twenty-four (24) hours of any request to
purchase time on any Long Island Station on behalf of a candidate for public
office or to support or urge defeat of an issue on an election ballot,
Programmer will provide documentation of the request, and its disposition, to
Licensee so that appropriate records can be placed in the Long Island Station's
public file.
4. In the event that Programmer fails to provide
adequate broadcast time for the broadcast of paid political programming or
advertising by political candidates, Licensee shall have the right to preempt
commercial announcements supplied by Programmer to make time available to these
political candidates.
5. Programmer shall furnish within its programming,
on behalf of SFX, all of the Long Island Stations' identification announcements
required by the FCC's rules. Programmer shall provide information with respect
to any of its programming which is responsive to the public needs and interests
of the area served by the Long Island Stations so as to assist SFX in the
preparation of any required programming reports, and provide other information
to enable SFX to prepare other records, reports and logs required by the FCC or
other local, state or federal governmental agencies.
<PAGE>
SFX and Chancellor
Local Marketing Agreement
Page 7
- - - -------------------------
8. Contracts.
----------
Programmer shall perform and discharge the obligations of SFX
from and after the Commencement Date under the contracts and agreements listed
in the Schedules to the Exchange Agreement as being assumed by Programmer on the
Commencement Date. In addition, Programmer shall perform and discharge all
obligations of the Long Island Stations under all trade agreements from and
after the Commencement Date. Programmer will not enter into any third-party
contracts, leases or agreements which will bind SFX in any way except with SFX's
prior written approval.
9. Employees.
----------
Schedule B hereto contains a listing of the name, salary or
compensation and job description of all employees of the Long Island Stations as
of June 17, 1996. Pursuant to Section 14.7 of the Exchange Agreement as of the
Commencement Date, the current Long Island Stations employees will become
employees of the Programmer; however, Programmer may terminate current employees
of the Long Island Stations without cause thirty (30) days from the execution of
the Exchange Agreement. If the number of terminated employees exceeds ten (10)
or in the aggregate the severance liability amount of the terminated employees
from the Long Island Stations exceeds One Hundred Thousand Dollars ($100,000),
then the Programmer shall be responsible to pay for any severance amounts
exceeding the first One Hundred Thousand Dollars ($100,000). Owner shall be
responsible to pay for any severance amounts associated with only the first ten
(10) terminated employees, as designated by Programmer, but in no event will
Owner be liable for any severance amounts exceeding One Hundred Thousand Dollars
($100,000). Owner agrees to maintain at its own expense one management level
employee and one other employee for each Long Island Station.
Commencing subsequent to the execution of the LMAs, Owner shall make
available to each of the Long Island Stations' personnel during normal business
hours for Programmer to interview prior to the Commencement Date. Programmer
shall notify Owner of the names of employees to whom Programmer shall offer
employment (herein referred to as "Transferred Employees"). Owner hereby
consents to Programmer making such offers of employment relating to the Long
Island Stations subject to the effectiveness of the LMAs between the parties.
Owner shall be responsible for all obligations or liabilities to those employees
not offered employment by Programmer, and Programmer shall have no obligations
with respect to those employees (herein referred to as "Retained Employees").
No earlier than thirty (30) days after the execution of the Exchange
Agreement, Programmer
<PAGE>
SFX and Chancellor
Local Marketing Agreement
Page 8
- - - -------------------------
shall submit confirmation letters to the Long Island Stations' Management,
on-air talent and other key employees which it intends to offer employment, to
which confirmation letters shall set forth the terms of employment currently in
effect between said employee and Owner, including, but not limited to, matters
concerning salary, bonuses, vacation time, non-compete provisions (if any),
benefits, termination rights, loans (if any) and any other pertinent provisions
thereof. Receipt of the confirmation letters signed by the perspective
management, on-air talent and other key employees is a condition precedent to
Programmer making any offers of continued employment.
10. Public Affairs Programming.
---------------------------
Notwithstanding any other provision of this Agreement,
Programmer recognizes that SFX has certain obligations to broadcast programming
to meet the needs and interests of the community of license for the Long Island
Stations. SFX shall have the right to air specific programming on issues of
importance to the local community. Nothing in this Agreement shall abrogate the
unrestricted authority of SFX to discharge its obligations to the public and to
comply with the law, rules and policies of the FCC with respect to meeting the
ascertained needs and interests of the public. Accordingly, SFX may broadcast
public affairs programming as outlined in Section 2 hereof. SFX may air this
programming in either one two (2) hour block or any combination of half hour or
full hour blocks of time during the hours of 6 a.m. to 9 a.m. on Saturday and/or
Sunday.
11. Additional License Obligations.
-------------------------------
Although both parties shall cooperate in the broadcast of
emergency information over the Stations, SFX shall also retain the right to
interrupt Programmer's programming in case of an emergency or for programming
which, in the reasonable good faith judgment of SFX, is of overriding public
importance. SFX shall also coordinate with Programmer the Long Island Stations'
hourly station identification announcements to be aired in accordance with FCC
rules. SFX shall continue to maintain a main studio, as that term is defined by
the FCC, within each of the Long Island Stations' principal community contours
and shall staff it as required by the FCC. SFX shall be responsible for the
salaries, taxes, insurance and related costs for all personnel it employs at the
Long Island Stations and shall maintain insurance at its present levels covering
the Long Island Stations' transmission facilities. In addition, SFX shall pay
any federal regulatory fees, maintain its local public inspection file within
the Long Island Stations' communities of license and shall prepare and place in
such public inspection file all required documents including, but not limited
to, its quarterly issues and program lists on a timely basis. SFX shall also
receive and respond to telephone inquiries from the general public. Programmer
shall provide SFX with information with respect to certain of Programmer's
programs which may be included in SFX's quarterly issues and programs
<PAGE>
SFX and Chancellor
Local Marketing Agreement
Page 9
- - - -------------------------
lists.
12. Broadcast Stations Programming Policy Statement.
------------------------------------------------
SFX has adopted and will enforce a Broadcast Stations
Programming Policy Statement (the "Policy Statement"), a copy of which appears
as Attachment I hereto and which may be amended to meet changing regulatory
requirements by SFX upon reasonable advance written notice to Programmer.
Programmer agrees and covenants to comply in all material respects with the
Policy Statement and with all rules and regulations of the FCC. If SFX
reasonably determines that a program, commercial or other material supplied by
Programmer does not comply with the Policy Statement, or if SFX reasonably
believes that some or all of a program, commercial or other material is
unsuitable or contrary to the public interest, it may suspend or cancel such
program, commercial or other material and shall provide written notice to
Programmer of such decision. Programmer shall provide programs only in
accordance with the Policy Statement and FCC requirements. All advertising spots
and promotional material or announcements shall comply with applicable federal,
state and local regulation and policies and the Policy Statement, and shall be
produced in accordance with quality standards established by SFX.
13. Compliance with Copyright Act.
------------------------------
Programmer represents and warrants to SFX that Programmer has
full authority to broadcast its programming on the Long Island Stations and the
Programmer shall not broadcast any material in violation of any law, rule,
regulation or the Copyright Act. All music supplied by Programmer shall be: (i)
licensed by ASCAP, SESAC or BMI; (ii) in the public domain; or (iii) cleared at
the source by Programmer. SFX will maintain as appropriate its own ASCAP, BMI
and SESAC licenses for the performance of Programmer's programs and Programmer
shall reimburse SFX for the costs of such licenses obtained by SFX within thirty
(30) days when paid. The right to use the programming and to authorize its use
in any manner shall be and remain vested in Programmer.
14. Payola.
-------
Programmer agrees that neither it nor its employees or agents
will accept any consideration, compensation, gift or gratuity of any kind
whatsoever, regardless of its value or form, including, but not limited to, a
commission, discount, bonus, material, supplies or other merchandise, services
or labor (collectively, "Consideration"), whether or not pursuant to written
contracts or agreements between Programmer and merchants or advertisers, unless
the third party providing such compensation, gift or gratuity is identified in
the program for which Consideration was provided as
<PAGE>
SFX and Chancellor
Local Marketing Agreement
Page 10
- - - -------------------------
having paid for or furnished such Consideration, in accordance with the
Communications Act and FCC requirements. Programmer agrees to execute and to
provide SFX with payola Affidavits from itself, and all of its employees and
agents who are involved with providing programming on the Long Island Stations,
at such times as SFX may reasonably request, substantially in the form attached
hereto as Attachment II.
15. Sales.
------
Programmer shall retain all revenues from the sale of
advertising time within the programming it provides to SFX and pay all expenses
attributable thereto. Programmer may sell advertising, consistent with
applicable rules, regulations and the Policy Statement, on the Long Island
Stations in combination with any other broadcast stations of its choosing.
Programmer shall be responsible for payment of the commissions due to any
national sales representative engaged by it for the purpose of selling national
advertising which is carried during the programming it provides to SFX. SFX
shall retain all revenues from the sale of the Long Island Stations' advertising
during the hours each week in which SFX airs its own nonentertainment
programming.
16. Local Marketing Agreement Challenge.
------------------------------------
If this Agreement is challenged at the FCC, counsel for SFX
and counsel for Programmer shall defend the Agreement and the parties'
performance thereunder throughout all FCC proceedings with Programmer and SFX
each being responsible for its own costs. If portions of this Agreement do not
receive the approval of the FCC staff, then the parties shall reform the
Agreement subject to their respective reasonable business judgment and advise of
counsel or, at SFX's or Programmer's option, seek reversal of the staff decision
and approval from the full Commission on appeal.
17. Confidential Review.
Prior to providing any programming by Programmer to SFX under
this Agreement, Programmer shall acquaint SFX with the nature and type of the
programming to be provided. SFX, solely for the purpose of ensuring Programmer's
compliance with the law, FCC rules and the Long Island Stations' policies, shall
be entitled to review and pre-empt at its discretion from time to time on a
confidential basis any programming material and any other documents it may
reasonably request, including all rate cards and disclosure statements related
to Programmer's political advertising. Programmer shall promptly provide SFX
with copies of all correspondence and
<PAGE>
SFX and Chancellor
Local Marketing Agreement
Page 11
- - - -------------------------
complaints received from the public as well as copies of all program logs and
promotional materials.
18. Major Defaults: Termination.
----------------------------
18.1. Programmer's Major Defaults. The occurrence of any
----------------------------
of the following, after the expiration of the applicable cure periods, if any,
will be deemed to be a "Major Default" by Programmer under this Agreement:
(a) Programmer's failure to timely pay any of the
consideration provided for in Section 4 and the Payment Schedule annexed hereto
or other payments required hereunder;
(b) Except as otherwise provided for in this Agreement, the
failure of Programmer to supply the programs for broadcast on the Long Island
Stations in accordance with Section 2 hereof;
(c) Any termination of this Agreement by Programmer other than
as permitted in Section 18.4 or 18.5; or
(d) In the event of a voluntary filing by Programmer (or
involuntary filing with respect to Programmer not vacated with ninety (90) days
after such filing) of a petition for reorganization or dissolution under federal
bankruptcy laws or under substantially equivalent state laws.
18.2. SFX's Major Defaults. The occurrence of any of the
---------------------
following, after the expiration of the applicable cure periods, if any, will be
deemed to be a "Major Default" by SFX under this Agreement:
(a) Except as otherwise provided for in this Agreement, the
failure of SFX to broadcast the programs supplied by Programmer in accordance
with Section 2 hereof;
(b) Any termination of this Agreement by SFX other than as
permitted in Section 18.4 or 18.5; or
(c) In the event of a voluntary filing by SFX (or involuntary
filing with respect to SFX not vacated with ninety (90) days after such filing)
of a petition for reorganization or dissolution under federal bankruptcy laws or
under substantially equivalent state laws.
18.3. Cure Periods. The cure periods before any event listed
------------
in Section 18.1 or 18.2
<PAGE>
SFX and Chancellor
Local Marketing Agreement
Page 12
- - - -------------------------
shall become a Major Default are as follows:
(a) Payment by Programmer. The consideration to be paid to SFX
must be received by SFX within five (5) days after SFX gives written notice of
non-payment to Programmer.
(b) Certain Matters. There shall be no cure period for:
(i) a termination by Programmer described in Section
18.1(c); or
(ii) a termination by SFX described in Section 18.2(b)
hereof.
(c) Programs and Broadcast Matters. With respect to
Programmer's failure to provide programs referred to in Section 18.1(b) hereof
or SFX's failure to broadcast programs referred to in Section 18.2(a) hereof,
the period allowed for cure shall be three (3) business days from the giving of
written notice of such failure to the defaulting party by the non-defaulting
party.
(d) Other Matters. With respect to all matters capable of
being cured other than those described in Sections 18.3(a), 18.3(b) or 18.3(c)
above, the cure period shall be ten (10) business days after written notice to
the defaulting party is given by the non-defaulting party or, with respect to
matters that through the exercise of reasonable diligence cannot be cured within
such ten (10) day period, such longer period not to exceed ninety (90) days as
is reasonably necessary to effect such cure through the exercise of reasonable
diligence.
18.4. Termination Upon Occurrence of Major Default. Upon
---------------------------------------------
the occurrence and continuation of a Major Default the non-defaulting party may
terminate this Agreement by giving written notice to the defaulting party within
sixty (60) days of such occurrence, provided that the non-defaulting party has
not also committed a Major Default hereunder which has not been waived. Such
written notice shall specify a termination date which is not less than seven (7)
days nor more than ninety (90) days from the date such notice is given. In the
event the non-defaulting party does not exercise such right of termination by
giving such written notice within such sixty (60) day period, then the Major
Default giving rise to such right of termination shall be deemed waived and the
Agreement shall continue in full force and effect.
18.5. Termination Upon Failure of Consummation of Exchange
----------------------------------------------------
Agreement. Notwithstanding any other provision hereof, this Agreement may be
terminated by either party at any time following termination of the Exchange
Agreement.
19. Liabilities Upon Termination.
-----------------------------
<PAGE>
SFX and Chancellor
Local Marketing Agreement
Page 13
- - - -------------------------
(a) Programmer shall be solely responsible for all of its
liabilities, debts and obligations incident to its purchase of broadcast time
hereunder, including, without limitation, accounts payable and unaired
advertisements, but not for SFX's federal, state, and local tax liabilities
associated with Programmer's payments to SFX as provided herein. Upon
termination pursuant to Sections 18.4 or 18.5 hereto, SFX shall be under no
further obligation to make available to Programmer any broadcast time or
broadcast transmission facilities, provided that SFX agrees that it will
cooperate reasonably with Programmer to discharge in exchange for reasonable
compensation any remaining obligations of Programmer in the form of air time
following the termination date. At the date of termination, Programmer shall
return to SFX any equipment or property of the Long Island Stations used by
Programmer, its employees or agents, in substantially the same condition as such
equipment existed on the Commencement Date, shall restore SFX's technical
facilities to substantially the same condition as such facilities existed on the
Commencement Date, ordinary wear and tear excepted, shall reassign to SFX all
contracts and agreements relating to the Long Island Stations listed on the
Schedules to the Exchange Agreement which were assumed by Programmer upon the
Commencement Date, and shall otherwise take such actions to restore to the
extent then practicable the parties hereto to their respective positions prior
to the Commencement Date.
(b) Upon termination of this Agreement pursuant to this
Section 18 or as a result of the expiration of the term of this Agreement other
than by the Closing under the Exchange Agreement, each party shall be free to
pursue any and all remedies available to it at law, in equity or otherwise. All
amounts accrued or payable to SFX up to the date of termination which have not
been paid shall be immediately due and payable. Programmer shall, in addition to
its other legal and equitable rights and remedies under this Agreement or under
applicable law, be entitled immediately to cease providing any further programs
to be broadcast on the Long Island Stations, and all amounts which have been
prepaid to SFX for any partial month beyond the termination shall be immediately
due and payable to Programmer. Programmer shall return all confidential
information with respect to the Long Island Stations to the SFX. Programmer
shall reassign all of SFX's accounts receivable to SFX. Programmer shall remit
to SFX all amounts collected with respect to SFX's accounts receivable within
five (5) business days of termination hereunder.
Upon termination, Programmer shall be responsible for debts
and obligations resulting from the use of the Long Island Stations' air time and
equipment by Programmer including, without limitation, accounts payable and net
barter balances in excess of Fifty Thousand Dollars ($ 50,000), relating to the
period on and after the date of this Agreement and up to the termination of this
Agreement and shall be entitled to the revenues and other credits for that
period.
20. No Format Changes.
------------------
<PAGE>
SFX and Chancellor
Local Marketing Agreement
Page 14
- - - -------------------------
Until such time has elapsed pursuant to Section 22.11 to
terminate this Agreement, Programmer shall not materially change the
entertainment format of the Long Island Stations.
21. SFX's Indemnification.
----------------------
SFX shall indemnify, defend, hold and save Programmer harmless
from and against any and all claims, losses, costs, liabilities, damages, FCC
forfeitures, and expenses, including counsel fees, of every kind, nature, and
description, including libel, slander, illegal competition or trade practices,
or infringement of trade marks or program titles, violation of rights of
privacy, and infringement of copyrights and proprietary rights arising out of:
(a) SFX's operation of the Long Island Stations (not including
the operation of the Long Island Stations by Programmer) under this Agreement,
and
(b) breach of any warranty, representation, covenant,
agreement or obligation of SFX contained in this Agreement.
22. Programmer's Indemnification.
-----------------------------
Programmer shall indemnify, defend, hold and save SFX harmless
from and against any and all claims, losses, costs, liabilities, damages, FCC
forfeitures, and expenses, including counsel fees, of every kind, nature, and
description, including libel, slander, illegal competition or trade practices,
or infringement of trade marks or program titles, violation of rights of
privacy, and infringement of copyrights and proprietary rights arising out of:
(a) the programming furnished by Programmer under this
Agreement,
(b) the actions or failure to act of its employees or agents
under this Agreement and
(c) breach of any warranty, representation, covenant,
agreement or obligation of Programmer contained in this Agreement.
23. Procedure for Indemnification.
------------------------------
The party seeking indemnification under this paragraph
("Indemnitee") shall give the party from whom it seeks indemnification
("Indemnitor") prompt notice, as provided herein, of the
<PAGE>
SFX and Chancellor
Local Marketing Agreement
Page 15
- - - -------------------------
assertion of such a claim provided, however, that the failure to give notice of
a claim within a reasonable time shall only relieve the Indemnitor of liability
to the extent it is materially prejudiced thereby. Promptly after receipt of
written notice, as provided herein, of a claim by a person or entity not a party
to this Agreement, the Indemnitor shall assume the defense of such claim;
provided, however, that:
(a) If the Indemnitor fails, within a reasonable time after
receipt of notice of such claim, to assume the defense thereof, the Indemnitee
shall have the right to undertake the defense, compromise, and settlement of
such claim on behalf of and for the account and risk of Indemnitor, subject to
the right of the Indemnitor (upon notifying the Indemnitee of its election to do
so) to assume the defense of such claim at any time prior to the settlement,
compromise, judgment, or other final determination thereof;
(b) If in the reasonable judgment of the Indemnitee, based
upon the advise of its counsel, a direct or indirect conflict of interest exists
between the Indemnitee and Indemnitor, the Indemnitee shall (upon notifying the
Indemnitor of its election to do so) have the right to undertake the defense,
compromise, and settlement of such claim on behalf of and for the account and
risk of Indemnitor (it being understood and agreed that the Indemnitor shall not
be entitled to assume the defense of such claim);
(c) If the Indemnitee in its sole discretion elects, it shall
(upon notifying the Indemnitor of its election to do so) be entitled to employ
separate counsel and to participate in the defense of such claim, but the fee
and expenses of counsel so employed shall (except as contemplated by clauses (a)
and (b) above) be borne solely by Indemnitee;
(d) The Indemnitor shall not settle or compromise any claim or
consent to the entry of any judgment that does not include as an unconditional
term thereof the grant by the claimant or plaintiff to each Indemnitee of a
release from any and all liability in respect thereof; and
(e) The Indemnitor shall not settle or compromise any claim in
any manner, or consent to the entry of any judgment, that could reasonably be
expected to have a material adverse effect on the Indemnitee.
24. Dispute Over Indemnification.
-----------------------------
If upon presentation of a claim for indemnity hereunder, the
Indemnitor does not agree that all, or part, of such claim is subject to the
indemnification obligations imposed upon it pursuant to this Agreement, it shall
promptly so notify the Indemnitee. Thereupon, the parties shall
<PAGE>
SFX and Chancellor
Local Marketing Agreement
Page 16
- - - -------------------------
attempt to resolve their dispute, including where appropriate reaching an
agreement as to that portion of the claim, if any, which both concede is subject
to indemnification. To the extent that the parties are unable to reach some
compromise within thirty (30) days thereafter, the parties shall be free to
pursue all appropriate legal and equitable remedies.
25. Programmer's Remedies for Operational Deficiencies.
---------------------------------------------------
Except as set forth in this Section 25, and except for
reductions in power or interruptions occurring between the hours of 12:00
midnight and 6:00 a.m. as a result of maintenance or repairs or during such
periods that the Long Island Stations are operating from its authorized
auxiliary antenna, if any of the normal broadcast transmissions of the Long
Island Stations are interrupted, interfered with, or in any way impaired with so
that the Long Island Stations are not operating at full licensed power and
antenna height or are off the air, or in the event that SFX preempts
Chancellor's programming, Programmer shall be entitled to an equitable reduction
in the amount of its monthly fee which is proportionate to the period of time
that the Long Island Stations' operations are deficient, the Long Island
Stations' programming is preempted or the Long Island Stations are off the air.
26. Force Majeure.
--------------
Any failure or impairment of the Long Island Stations'
facilities or any delay or interruption in the broadcast of programs, or failure
at any time to furnish facilities, in whole or in part, for broadcast due to
Acts of God, strikes, lockouts, material or labor restrictions by any
governmental authority, civil riot, floods and any other cause not reasonably
within the control of SFX (including any obligation of SFX to reduce power or
suspend operation to avoid occupational exposure to harmful RF radiation), shall
not constitute a breach of this Agreement and SFX will not be liable to
Programmer.
27. Other Agreements.
-----------------
During the term of this Agreement, SFX will not enter into any
other local marketing, program provision, local management or similar agreement
with any third party with respect to the Long Island Stations.
28. Assignment.
-----------
<PAGE>
SFX and Chancellor
Local Marketing Agreement
Page 17
- - - -------------------------
This Agreement shall be binding upon and inure to the benefit
of the parties hereto, their successors and assignees, including specifically
any purchaser of the Long Island Stations from SFX. Neither party may assign its
rights without the prior written consent of the other party which consent shall
not be unreasonably withheld.
29. Entire Agreement.
-----------------
This Agreement, and the Attachments hereto, embody the entire
agreement and understanding of the parties and supersede any and all prior
agreements, arrangements and understandings relating to matters provided for
herein. No amendment, waiver of compliance with any provision or condition
hereof, or consent pursuant to this Agreement will be effective unless evidenced
by an instrument in writing signed by the parties.
30. Taxes.
------
SFX and Programmer shall each pay its own ad valorem taxes, if
any, which may be assessed on such party's respective personal property for the
periods that such items are owned by such party. Each party shall be responsible
for any sales tax imposed on advertising aired during the programming provided
by that party.
31. Headings.
---------
The headings are for convenience only and will not control or
affect the meaning or construction of the provisions of this Agreement.
32. Governing Law.
--------------
The obligations of SFX and Programmer are subject to
applicable federal, state and local law, rules and regulations, including, but
not limited to, the Act and the Rules and Regulations of the FCC. The
construction and performance of the Agreement will be governed by the laws of
the State of New York.
33. Notices.
--------
Any notice, demand or request required or permitted to be
given under the provisions of this Agreement shall be in writing and shall be
deemed to have been duly delivered and received
<PAGE>
SFX and Chancellor
Local Marketing Agreement
Page 18
- - - -------------------------
on the date of personal delivery; on the third day after deposit in the U.S.
mail if mailed by registered or certified mail, postage prepaid and return
receipt requested; on the day after delivery to a nationally recognized
overnight courier service if sent by an overnight delivery service for next
morning delivery and shall be addressed to the following addresses:
To Programmer: Chancellor Broadcasting Company
12655 N. Central Expressway, Suite 321
Dallas, Texas 75243
Attention: Mr. Steven Dinetz
Telecopier number: (214) 239-0220
Copy to: Matthew L. Leibowitz, Esq.
Leibowitz & Associates
One S.E. Third Avenue, Suite 1450
Miami, FL 33131
Telephone number: (305) 530-1322
Telecopier number: (305) 530-9417
To SFX: Robert F.X. Sillerman
SFX Broadcasting, Inc.
150 E. 58th Street
New York, NY 10155
Telecopier number: (212) 753-3188
Copy to: Richard A. Liese, Esq.
SFX Broadcasting, Inc.
150 E. 58th Street
New York, NY 10155
Telecopier number: (212) 753-3188
The date of any such notice and service thereof shall be
deemed to be:
(a) the day of delivery if hand delivered or delivered by
overnight courier;
<PAGE>
SFX and Chancellor
Local Marketing Agreement
Page 19
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(b) the day of delivery as indicated on the return receipt if
dispatched by mail, or
(c) the date of telecopy transmission as indicated on the
telecopier transmission report provided that any telecopy transmission shall not
be effective unless a paper copy sent by overnight courier on the date of the
telecopy transmission is delivered.
Either party may change its address for the purpose of notice
by giving notice of such change in accordance with the provisions of this
paragraph.
34. Severability.
-------------
If any provision of this Agreement or the application thereof
to any person or circumstances shall be invalid or unenforceable to any extent,
the remainder of this Agreement and the application of such provision to other
persons or circumstances shall not be affected thereby and shall be enforced to
the greatest extent permitted by law.
35. Certifications.
---------------
(a) Control of Stations. SFX hereby verifies that it will
maintain control of the Long Island Stations and their facilities, including
specifically control over the Long Island Stations' finances, personnel and
programming during the term of this Agreement.
(b) Compliance with Ownership Rules. Programmer hereby
verifies that the arrangement contemplated by this Agreement complies with the
provisions of Section 73.3555(a) of the rules and regulations of the FCC.
36. No Joint Venture.
-----------------
The parties agree that nothing herein shall constitute a joint
venture or partnership between them.
37. Beneficiaries.
--------------
Nothing in this Agreement, express or implied, is intended to
confer on any person other than the parties hereto and their respective
successors and assigns any rights, remedies, obligations, or liabilities under
or by reason of this Agreement.
<PAGE>
SFX and Chancellor
Local Marketing Agreement
Page 20
- - - -------------------------
<PAGE>
SFX and Chancellor
Local Marketing Agreement
Page 21
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
CHANCELLOR RADIO BROADCASTING COMPANY
By: ______________________________
Steven Dinetz
President
WBLI, Inc.
By: ______________________________
Robert F. X. Sillerman
Executive Chairman & CEO
WBLI-FM, Inc.
By: ______________________________
Robert F. X. Sillerman
Executive Chairman & CEO
<PAGE>
SFX and Chancellor
Local Marketing Agreement
Page 22
- - - -------------------------
WHFM, Inc.
By: ______________________________
Robert F. X. Sillerman
Executive Chairman & CEO
WBAB, Inc.
By: ______________________________
Robert F. X. Sillerman
Executive Chairman & CEO
WGBB, Inc.
By: ______________________________
Robert F. X. Sillerman
Executive Chairman & CEO
<PAGE>
SFX and Chancellor
Local Marketing Agreement
Page 23
- - - -------------------------
PAYMENT SCHEDULE
In exchange for the air time supplied to Programmer pursuant to this
Agreement, Programmer shall pay SFX Three Hundred Seventy Five Thousand Dollars
($375,000) per month until the Jacksonville Stations LMA goes into effect. Once
the Jacksonville Stations LMA goes into effect, the amounts payable to SFX shall
be reduced to Twenty Five Thousand Dollars ($25,000) per month. If the
Jacksonville Stations LMA is implemented before November 1, 1996, the monthly
payment obligation after November 1, 1996 shall be zero dollars ($0.00). In the
event that the Jacksonville Stations LMA is never entered into, the monthly
payments will remain at Three Hundred Seventy Five Thousand Dollars ($375,000)
per month. The first monthly payment to SFX is due and payable on July 1, 1996,
and each successive payment is due on the first day of each month thereafter.
The monthly fee shall be reduced pro rata for any partial month at the beginning
or end of the term of this Agreement.
Long Island LMA & Facility Fee
Monthly LMA Fee - Jul $ 375,000
Monthly LMA Fee - Aug $ 25,000
Monthly LMA Fee - Sep $ 25,000
Monthly LMA Fee - Oct $ 25,000
Monthly LMA Fee - Nov $ 0
Technical:
Salaries - Engineers/Managers $ 6,567
Utilities - Transmitter Sites $ 12,300
Maintenance - Transmitter Sites $ 3,108
Leases - Transmitter Sites $ 3,275
Total Technical $ 25,250
General & Administrative:
Salaries - Receptionist $ 1,917
Payroll - 8.5% Average $ 558
Health Insurance estimate $ 750
Office/Studio Rent $ 1,258
Office/Studio Maintenance $ 3,958
<PAGE>
SFX and Chancellor
Local Marketing Agreement
Page 24
- - - -------------------------
Office/Studio Utilities $ 0
Office/Studio Tax $ 0
Property Tax $ 8,567
General Insurance $ 7,167
Workmans Comp (3 employees est.) $ 200
Total General and Administrative $ 24,375
Monthly Facility Fee $ 49,625
Annualized Facility Fee $ 595,498
<PAGE>
SFX and Chancellor
Local Marketing Agreement
Page 25
- - - -------------------------
SCHEDULE B
EMPLOYEES
<PAGE>
SFX and Chancellor
Local Marketing Agreement
Page 26
- - - -------------------------
ATTACHMENT I
BROADCAST STATIONS PROGRAMMING POLICY STATEMENT
Programmer agrees to cooperate with SFX in the broadcasting of programs
of the highest possible standard of excellence and for this purpose to observe
the following regulations in the preparation, writing and broadcasting of its
programs. Further Programmer agrees that all material broadcast on the Long
Island Stations shall comply with all federal, state and local applicable laws,
rules and regulation.
I. No Plugola or Payola.
---------------------
The broadcast of any material for which any money, service or
other valuable consideration is directly or indirectly paid, or promised to or
charged or accepted by, the Programmer, from any person, shall be prohibited,
unless, at the time the same is broadcast, it is announced as paid for or
furnished by such person.
II. Political Broadcasting.
-----------------------
Within thirty (30) days of the Commencement Date, Programmer
shall provide SFX with a written political advertising disclosure statement
which fully and accurately discloses how the Programmer sells programming and
advertising time and which makes parties purchasing political programming and
advertising time fully aware of the lowest unit charge provisions of Section 315
of the Act. In addition, at least thirty (30) days before the start of any
primary or election campaign, Programmer will clear with the Long Island
Stations' general managers the rates Programmer will charge for the time to be
sold to candidates to make certain that the rate charges is in conformance with
the applicable law and Stations policy.
III. Required Announcements.
-----------------------
Programmer shall broadcast (i) an announcement in a form
satisfactory to SFX at the beginning of each hour to identify the Long Island
Stations and (ii) any other announcements that may be required by law,
regulation or SFX's Stations policy.
IV. No Illegal Announcements.
-------------------------
No announcements, broadcasts or promotions prohibited by
federal, state or local law shall be made over the Long Island Stations. This
prohibition specifically includes, but is not limited
<PAGE>
SFX and Chancellor
Local Marketing Agreement
Page 27
- - - -------------------------
to, any and all programming or other broadcast material concerning tobacco or
alcohol related products which are unlawful. The airing of any broadcast
material concerning contests, lotteries or games must be conducted in accordance
with all applicable law, including FCC rules and regulations. Any obscene,
indecent, or fraudulent programming is prohibited. All sponsored programming or
other broadcast material must be identified in accordance with applicable law,
including FCC rules and regulations.
V. SFX Discretion Paramount.
-------------------------
In accordance with SFX's responsibility under the
Communications Act of 1934, as amended, and the Rules and Regulations of the
Federal Communications Commission, SFX reserves the right to reject or terminate
any advertising proposed to be presented or being presented over the Long Island
Stations, which is in conflict with Long Island Stations' policies or which SFX
or its general manager's reasonable judgement would not serve the public
interest.
In any case where questions of policy or interpretation arise,
Programmer should submit the same to SFX for decision before making any
commitments in connection therewith.
<PAGE>
SFX and Chancellor
Local Marketing Agreement
Page 28
- - - -------------------------
ATTACHMENT II
PAYOLA AFFIDAVIT
City of_____________________________)
County of___________________________) ss.:
State of____________________________)
I,_________________________, having first been duly sworn, hereby
state that I have read and will comply with the provisions of Section 317 and
507 of the Communications Act of 1934, as amended, copies of which are attached
hereto, I also have read and will comply with the provisions of the Commission's
Sponsorship Identification Rule (73.1212), a copy of which is attached hereto.
I also will comply with the policy of this Station, ________________
(insert call letters here), which prohibits every employee
having any voice in the selection of broadcast matter from (a) engaging in any
outside business or economic activity which would create a conflict of interest
in the selection of broadcast matter; (b) accepting any favors, loans,
entertainment or other consideration from persons seeking the airing of any
broadcast matter in return thereof, and (c) promoting over the air (except by
means of an appropriate commercial announcement) any activity or matter in which
the employee has a direct or indirect financial interest.
I understand that receiving or agreeing to receive anything of value
from a third party for the broadcast of any program material over the Stations
is a crime, unless the agreed payment is disclosed to the Stations before
broadcast of the program material. This crime, commonly called "payola", is
punishable by one year in prison and a fine of up to $10,000.
During the past year, I have not been promised or paid anything of
value directly or indirectly by a third party for the broadcast of any
programming material over the Stations.
_____________________________________
Affiant
<PAGE>
SFX and Chancellor
Local Marketing Agreement
Page 29
- - - -------------------------
The foregoing instrument was acknowledged before me this _____________
day of ______________________, 1996 by _____________________________________,
who is personally known
to me or who has produced as identification.
___________________________________
Notary Public
My commission expires: _____________________________________
TIME BROKERAGE AGREEMENT
Time Brokerage Agreement ("Agreement") dated as of , 1996, by and
between SFX Broadcasting of Texas (KTCK) Licensee, Inc. and SFX Broadcasting of
Texas (KTCK), Inc. ("Licensee"), the licensee of Radio Station KTCK, Dallas,
Texas (the "Station"), and KRBE Co. ("Broker").
WHEREAS, Licensee has available broadcasting time and is engaged in
the business of radio broadcasting on the Station;
WHEREAS, Broker desires to avail itself of Station's broadcast time
for the presentation of programming service, including the sale of advertising
time; and
WHEREAS, Broker and Licensee have entered into an Asset Purchase
Agreement ("Purchase Agreement"), whereby Broker has contracted to purchase the
Station's assets.
NOW, THEREFORE, for and in consideration of the mutual covenants
herein contained, the parties hereto have agreed and do agree as follows:
1. FACILITIES. Licensee agrees to make broadcasting transmission on
its main channel available to Broker to broadcast on the Station, or cause to be
broadcast, for up to twenty-four hours per day, seven (7) days per week
provided, however, that Licensee reserves the right to retain two (2) hours per
broadcast
<PAGE>
week during the hours of 6 a.m. to 8 a.m. Sunday for broadcast of its own public
affairs programs.
2. PAYMENTS. Broker hereby agrees to pay Licensee for the broadcast of
the programs hereunder the amounts specified in Attachment I on or prior to the
dates specified in Attachment I. The failure of Licensee to demand or insist
upon prompt payment in accordance herewith shall not constitute a waiver of its
right to do so. Broker shall receive a payment credit for any time period
preempted by Licensee, such credit to be determined by multiplying the monthly
payment by the ratio of the amount of time preempted or not accepted to the
total number of broadcast hours produced by Broker each month.
3. TERM. The term of this Agreement shall begin on June 24, 1996
("Effective Date"), and shall continue until May 31, 1997, provided that this
Agreement shall terminate either upon consummation of the sale of the Station to
Broker pursuant to the Purchase Agreement or as otherwise provided herein. In
the event that the Purchase Agreement has not been closed prior to the end of
the term of this Agreement, the parties, in their discretion, may elect to
negotiate an extension of this Agreement for an additional term upon terms and
conditions to be agreed upon at that time.
4. PROGRAMS. Broker shall furnish or cause to be furnished the
artistic personnel and material for the programs as provided by this Agreement
and all programs shall be in good taste and in accordance with Federal
Communications Commission (the "FCC") requirements. All programs shall be
prepared and presented in conformity with the regulations prescribed in
Attachment II
<PAGE>
hereto. All advertising spots and promotional material or announcements shall
comply with all applicable federal, state and local regulations and policies and
shall be produced in accordance with quality standards established by Broker.
5. LICENSEE OPERATIONAL RESPONSIBILITY. Licensee shall be responsible
for the maintenance of Licensee's studio and the maintenance and operation of
the Station's transmission systems, transmitter building, antenna towers, and
the real property upon which the transmitter building and antenna tower are
located. Licensee shall be responsible for the Station's compliance with all
applicable provisions of the Communications Act of 1934, as amended, the rules,
regulations, and policies of the FCC, and all other applicable laws. Licensee
shall maintain all licenses, permits, and other authorizations as are necessary
for the operation of the Station (including all FCC licenses, permits, and
authorizations), in full force and effect during the term of this Agreement or
until the consummation of the sale of the Station pursuant to the Purchase
Agreement unimpaired by any acts or omissions of Licensee. Licensee shall engage
its own general manager, who shall be responsible for overseeing the operation
and programming of the Station, and one other non-managerial employee. Licensee
shall be responsible for the salaries, taxes, insurance, and related costs for
the Station's general manager and one non-managerial employee. Licensee shall
make its transmitters, transmitter building, and towers available to Broker, at
no additional charge, for placement of any equipment
<PAGE>
Broker reasonably deems necessary to allow it to broadcast Broker's programming
on the Station.
5.1 INTERRUPTION OF NORMAL OPERATIONS. If the Station suffers loss or
damage of any nature to its transmission facilities which results in the
interruption of service or the inability of the Station to operate with its
maximum authorized facilities, Licensee shall immediately notify Broker, and
shall undertake such repairs as necessary to restore the full-time operation of
the Station with its maximum authorized facilities within seven days from the
occurrence of such loss or damage.
6. HANDLING OF MAIL. Except as required to comply with Commission
rules and policies, including those regarding the maintenance of the public
inspection file (which shall at all times remain the responsibility of
Licensee), Licensee shall not be required to receive or handle mail, cables
telegraph or telephone calls in connection with programs broadcast hereunder
unless Licensee at the request of Broker has agreed in writing to do so. Broker
shall promptly forward to Licensee any mail which it may receive from any
government agency.
7. PROGRAMMING AND OPERATIONS STANDARDS. Broker agrees to abide by the
standards set forth in Attachment II in its programming and operations. Broker
further agrees that if, in the sole judgment of Licensee or the Station General
Manager, Broker does not comply with said standards, Licensee may suspend or
cancel any program not in compliance without any reduction or offset in payments
due Licensee under this Agreement.
8. RESPONSIBILITY FOR EMPLOYEES AND EXPENSES. Broker shall employ and
be responsible for the salaries, taxes, insurance and
<PAGE>
related costs for all personnel used in the production of programs supplied to
the Station and all other costs incurred by Broker in the production of the
programs (including salespeople, traffic personnel, board operators and
programming staff). Broker shall be responsible for all expenses incurred in the
origination and/or delivery of its programming from any location to the
Station's transmitter sites and for any publicity or promotional expenses
incurred by Broker. Broker shall pay for all telephone calls associated with
program production and listener responses, for all fees to ASCAP, BMI and SESAC,
and for any other copyright fees attributable to its programming broadcast on
the Station.
9. ASSIGNMENT OF CONTRACTS. On the Effective Date, Licensee shall
assign to Broker all contracts for the sale of time on the Station (the "Time
Sales Agreement") together with those contracts, leases and other agreements
identified on Schedule 1 (collectively, the "Contracts"). Licensee has provided
Broker with true and complete copies, including amendments, of the Contracts
(other than the Time Sales Agreement). Except as denoted on Schedule 1, the
Contracts are freely assignable. If Licensee has been unable to obtain any
consent required to permit the valid assignment of a Contract to Broker prior to
the Effective Date, Licensee may elect to act as Broker's agent in connection
with such Contract and the parties shall cooperate to cause Broker to receive
the benefit of such Contract in exchange for performance by Broker of all
Licensee's obligations under such Contract (and Broker shall pay to Licensee all
amounts due under such Contract on or after the Effective
<PAGE>
Date for services provided by Licensee). If this Agreement terminates other than
as a result of the Closing (as defined in the Purchase Agreement), Broker shall
assign to Licensee and Licensee shall assume the Contracts listed on Schedule 1
and any New Contracts that are still in effect on the date of such termination
or expiration.
10. PRORATION. Except as expressly provided herein, (i) the operation
of the Station and the income and normal operating expenses other than Accounts
Receivable as hereinafter defined, including without limitation assumed
liabilities and prepaid expenses, attributable thereto through the Effective
Date shall be for the account of Licensee and thereafter for the account of
Broker and (ii) expenses for goods or services received both before and after
the Effective Date, power and utilities charges, taxes (other than Licensee's or
Broker's income taxes), frequency discounts, Time Sales Agreements, Contracts
and rents and similar prepaid and deferred items shall be prorated between
Licensee and Broker as of the Effective Date (the "Effective Date Adjustment").
A final accounting of the Effective Date Adjustments shall be made by Broker
with the cooperation of Licensee during the sixty (60) days after the Effective
Date, and the sum due from one party to the other pursuant to this Section 8
zshall be paid in cash from Broker to Licensee, or from Licensee to Broker, as
the case may be, by company check. With respect to the preceding, Licensee shall
be responsible for paying its employees' sales commissions arising and accruing
prior to the Effective Date, but Broker shall reimburse Licensee for such sales
commissions to the extent that the revenue from such sales
<PAGE>
relates to advertising or programming broadcast on or after the Effective Date
and received by Broker.
11. ACCOUNTS RECEIVABLE. On the Effective Date, Licensee will deliver
to Broker a list of Licensee's accounts receivable arising from the operation of
the Station prior to the Effective Date (the "Receivables"). All amounts
collected on account of the Accounts Receivable shall belong to and be retained
by Broker. Broker shall also be entitled to all revenue from the sale, during
the term of this Agreement, of advertising or program time on the Station.
12. OPERATION OF STATION. Notwithstanding anything to the contrary in
this Agreement, Licensee shall have full authority and power over the operation
of the Station during the period of this Agreement. Licensee shall retain
control over the policies, programming and operations of the Station, including,
without limitation, the right to decide whether to accept or reject any
programming or advertisements, the right to preempt any programs in order to
broadcast a program deemed to be by Licensee of greater national, regional, or
local interest, and the right to take any other actions necessary to comply with
the laws of the United States; the State of Texas; the rules, regulations, and
policies of the Commission (including the prohibition on unauthorized transfers
of control). Licensee shall at all times be solely responsible for meeting all
of the FCC's requirements with respect to public service programming, for
maintaining the political and public inspection files and the Station log, and
for the preparation of programs/issues lists. Broker shall, upon request by
Licensee, provide Licensee with information with
<PAGE>
respect to such of Broker's programs which are responsive to public needs and
interest so as to assist Licensee in the preparation of required programming
reports, and will provide upon request other information to enable Licensee to
prepare other records, reports and logs required by the Commission or other
local, state or federal governmental agencies.
13. LICENSE TO USE STATION'S FACILITIES. Effective as of the Effective
Date, Licensee grants Broker an exclusive right to use all of the studio and
office space and other facilities (the "Station Facilities") used exclusively by
the Station. Broker shall not remove from the Station Facilities or modify any
Station Equipment in the Station Facilities owned by or leased or licensed to
Licensee without Licensee's prior written consent. Broker shall use due care in
the use of any property of Licensee. Broker shall indemnify Licensee for any
damage (normal wear and tear expected) to Licensee's property caused by Broker
or any employee, contractor, agent or guest of Broker.
14. LICENSE OF INTELLECTUAL PROPERTY. Effective as of the Effective
Date, Licensee licenses to Broker the exclusive right to use (or to the extent
Licensee does not hold exclusive rights, the non-exclusive right to use) all
intellectual property owned by or licensed to Licensee and used in the operation
of the Station (including, but not limited to call signs and goodwill) (the "IP
License"). In the event of termination of this Agreement, the IP License shall
terminate and Broker shall assign to Licensee at no cost its intellectual
property used in the operation of the Station.
<PAGE>
15. SPECIAL EVENTS. Licensee reserves the right, in its discretion, to
preempt any of the broadcasts of the programs referred to herein, and to use
part or all of the time contracted for herein by Broker for the broadcast of
events of special importance. In all such cases, Licensee will use its best
efforts to give Broker reasonable notice of its intention to preempt such
broadcast or broadcasts, and, in the event of such preemption, Broker shall
receive a payment credit for the broadcasts so omitted.
16. FORCE MAJEURE. Any failure or impairment of the Station Facilities
or any delay or interruption in broadcasting programs, or the failure at any
time to furnish facilities, in whole or in part, for broadcasting, due to acts
of God, strikes, or threats thereof, force majeure, or to causes beyond the
control of Licensee, shall not constitute a breach of this Agreement, and
Licensee will not be liable to Broker, except to the extent of allowing in each
such case an appropriate payment credit for time not provided or broadcasts not
carried based upon a pro rata adjustment to amounts due as specified in
Attachment II calculated upon the length of time during which the failure or
impairment exists or continues.
17. PAYOLA. Broker agrees that it will not accept any compensation or
any kind of gift or gratuity of any kind whatsoever, regardless of its value or
form, including, but not limited to, a commission, discount, bonus, materials,
supplies or other merchandise, services or labor, whether or not pursuant to
written contracts or agreements between Broker and merchants or advertisers,
unless the payer is identified in the program as
<PAGE>
having paid for or furnished such consideration in accordance with FCC
requirements. Broker further agrees that no commercial message plugs or undue
reference shall be made in programming presented over the Station to any
business venture or profit-making activity or other interest (other than
non-commercial advertisements for bona fide charities, church activities or
other public service activities) without such broadcast being announced as
sponsored in accordance with the Commission's requirements.
18. INDEMNIFICATION; WARRANTY. Broker will indemnify and hold Licensee
harmless against all liability for libel, slander, illegal competition or trade
practice, infringement of trademarks, trade names, or program titles, violation
of rights of privacy, and infringement of copyrights and proprietary rights
resulting from the broadcast of programming furnished by Broker. Further, Broker
warrants that the broadcasting of its programs will not violate any rights of
others and Broker agrees to hold Licensee, the Station, and their respective
officers, directors, agents, stockholders, employees, and subsidiaries, harmless
from any and all claims, damages, liability, costs and expenses, including
reasonable attorneys' fees, arising from the broadcasting of (i) the production
and/or broadcasting of the programs; (ii) any misrepresentation or breach of
warranty of Broker contained in this Agreement; and (iii) any breach of
covenant, agreement, or obligation of Broker contained in this Agreement.
Licensee reserves the right to refuse to broadcast any and all programs
containing matter which is, or in the opinion of Licensee may be, or which a
third-party claims to be,
<PAGE>
violative of any of their rights or which may constitute a personal attack as
the term is and has been defined by the Commission. Broker's obligation to hold
Licensee harmless against the liabilities specified above shall survive any
termination of this Agreement until the expiration of all applicable statutes of
limitation.
19. LICENSEE'S INDEMNIFICATION; WARRANTY. Licensee shall indemnify,
defend, and hold harmless Broker from and against any and all claims, losses,
costs, liabilities, damages, FCC forfeitures, and expenses, including reasonable
counsel fees, of every kind, nature, and description arising out of (i)
Licensee's broadcasts under this Agreement; (ii) any misrepresentation or breach
of warranty of Licensee contained in this Agreement; and (iii) any breach of any
covenant agreement, or obligation of Licensee contained in this Agreement.
Licensee's obligation to hold Broker harmless against the liabilities specified
above shall survive any termination of this Agreement until the expiration of
all applicable statutes of limitation.
20. PROCEDURE FOR INDEMNIFICATION. The following procedure shall
apply: (1) Whenever a claim for indemnification shall arise under Section 18 or
Section 19 hereof, the party entitled to indemnification (the "Indemnified
Party") shall promptly and in no event later than fifteen (15) days after
receipt of such a claim, give written notice to the party from whom
indemnification is sought (the "Indemnifying Party") setting forth in reasonable
detail, to the extent available, the facts concerning the nature of such claim
and the basis upon which the Indemnified Party believes that it is entitled to
indemnification hereunder,
<PAGE>
provided that the Indemnified Party's failure to do so shall not preclude it
from seeking indemnification hereunder unless such failure has materially
prejudiced the Indemnifying Party's ability to defend such claim. (2) In the
event of any claim for indemnification hereunder resulting from or in connection
with any claim, action, suit or legal proceedings brought by a third party, the
Indemnifying Party shall be entitled, at its sole expense; either: (a) to
participate therein, or (b) to assume the entire defense thereof with counsel
who is selected by it and who is reasonably satisfactory to the Indemnified
Party provided that: (i) the Indemnifying Party agrees in writing that it does
not and will not contest its responsibility for indemnifying the Indemnified
Party in respect of such claim or proceeding, and (ii) no settlement shall be
made without the prior written consent of the Indemnified Party which shall not
be unreasonably withheld (except that no such consent shall be required if the
claimant is entitled under the settlement to only monetary damages to be paid
solely by the Indemnifying Party). If, however, (y) the claim, action, suit or
proceeding would, if successful, result in the imposition of damages for which
the Indemnifying Party would not be solely responsible hereunder, or (z)
representation of both parties by the same counsel would otherwise be
inappropriate due to actual or potential differing interests between them, then
the Indemnifying Party shall not be entitled to assume the entire defense and
each party shall be entitled to retain counsel (in the case of Clause ((ii)(y))
of this sentence, at their own expense) who shall cooperate with one another in
defending against such action, claim or proceeding.
<PAGE>
(3) If the Indemnifying Party does not choose to defend against a claim, action,
suit or legal proceeding by a third party, the Indemnified Party may defend
against such claim, action, suit or proceeding in such manner as it deems
reasonably appropriate or settle such claim, action, suit or proceeding (after
giving notice thereof to the Indemnifying Party) on such terms as the
Indemnified Party may deem reasonably appropriate, and the Indemnified Party
shall be entitled to periodic reimbursement of expenses incurred in connection
therewith and prompt indemnification from the Indemnifying Party, including
reasonable attorneys' fees, in accordance with this Article. (4) The
Indemnifying Party will not, without the Indemnified Party's written consent,
settle or compromise any claim or consent to any entry of judgment which does
not include, as an unconditional term thereof, the giving by the claimant to the
Indemnified Party of a release from all liability with respect to such claim.
Neither Broker nor Licensee shall be deemed to have notice of any claim by
reason of any knowledge acquired on or prior to the Closing Date by an employee
of the Station unless express evidence is available establishing actual notice
to either party.
21. REGULATORY CHANGE. In the event of a material change or
clarification in FCC rules, policies or precedent that would cause this
Agreement to be in violation thereof and such change is not the subject of an
appeal or further administrative review, the parties will use their respective
best efforts and negotiate in good faith to modify this Agreement to comply with
the change or clarification in FCC rules, policies, or precedent so as to
<PAGE>
continue this Agreement in substantially the same form without material economic
detriment to either party.
22. TERMINATION. In addition to other remedies, whether pursuant to
this agreement or otherwise, this Agreement may be terminated as set forth below
by either Licensee or Broker by written notice to the other party if the party
seeking to terminate is not then in material default or breach hereto, upon the
occurrence of any of the following:
(a) this Agreement is declared invalid or illegal in whole or
substantial part by a ruling, order, or decree of an administrative agency or
court of competent jurisdiction and such ruling, order or decree has become
final and no longer subject to further administrative or judicial review and the
parties cannot, after using their respective best efforts and negotiating in
good faith for a period of sixty (60) days, modify this Agreement to make the
invalid or illegal portions comply with such ruling, order, or decree;
(b) if Section 21 become applicable and the parties are unable to
agree on a mutually-acceptable modification of this Agreement within sixty (60)
days thereafter;
(c) the other party is in material breach of its obligations hereunder
and has failed to cure such breach within (i) forty-eight (48) hours after
receiving written notice of any violation of any FCC rule or regulation, or (ii)
ten (10) days after receiving written notice from the non-breaching party of any
other breach (except for breaches of
<PAGE>
Broker's monetary obligations under Section 2, which must be cured within
seventy-two (72) hours); provided, however, that if such breach is one that with
reasonable diligence cannot be cured within ten (10) days, but could be cured
within an additional thirty (30) days, and the breaching party diligently
attempts to cure the breach, then the non-breaching party shall not be able to
terminate for that breach until such additional thirty (30) day period has
elapsed without a cure (it being understood that this proviso shall not apply to
breaches of Broker's monetary obligations under Section 2);
(d) the other party is in material breach of its obligations under the
Purchase Agreement and such breach has not been cured within the period
specified for cure of such breach in the Purchase Agreement;
(e) the mutual consent of both parties; or
(f) automatically upon consummation of the sale of the Station
pursuant to the Purchase Agreement or upon termination of the Purchase
Agreement.
23. BROKER'S RIGHT TO CURE. In addition to any other rights or
remedies available to Broker, whether pursuant to this Agreement or otherwise,
in the event Licensee fails properly to maintain the Station's transmission
facilities or otherwise fails to perform its obligations hereunder, Broker shall
be entitled, but not required, following reasonable notice to Licensee, to
perform such maintenance and repairs and take such other actions as are
necessary for Broker's use of the Station's facilities as contemplated herein.
<PAGE>
24. REPRESENTATIONS AND WARRANTIES.
24.1 MUTUAL REPRESENTATIONS AND WARRANTIES. Each of Licensee and
Broker represents to the other that it is legally qualified, empowered, and able
to enter into this Agreement, and that the execution, delivery and performance
hereof shall not constitute a breach or violation of any agreement, contract or
other obligation to which it is subject or by which it is bound.
24.2 LICENSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS. Licensee
makes the following further representations, warranties and covenants:
24.2.1. AUTHORIZATIONS. Licensee owns and holds all licenses and other
permits and authorizations necessary for the operation of the Station as
presently contemplated (including licenses, permits and authorizations issued by
the Commission), and such licenses, permits and authorizations will be in full
force and effect for the entire term, unimpaired by any acts or omissions of
Licensee, its principals, employees or agents. There is not now pending or, to
Licensee's best knowledge, threatened, any action by the Commission or other
party to revoke, cancel, suspend, refuse to renew or modify adversely any of
such licenses, permits or authorizations, and, to Licensee's best knowledge, no
event has occurred that allows or, after notice or lapse of time or both, would
allow, the revocation or termination of such licenses, permits or authorizations
or the imposition of any restriction thereon of such a nature that may limit the
operation of the Station as presently conducted. Licensee has no reason to
believe that any such license, permit or authorization will not be renewed
during the term of this
<PAGE>
Agreement in its ordinary course. To the best of its knowledge Licensee is not
in violation of any statute, ordinance, rule, regulation, order or decree of any
federal, state, local or foreign governmental agency, court or authority having
jurisdiction over it or over any part of its operations or assets, which default
or violation would have an adverse effect on Licensee or its assets or on its
ability to perform this Agreement.
24.2.2. FILINGS. All reports and applications required to be filed
with the FCC (including ownership reports and renewal applications) or any other
governmental agency, department or body in respect of the Station have been, and
in the future will be, filed in a timely manner and are and will be true and
complete and accurately present the information contained therein. All such
reports and documents, to the extent required to be kept in the public
inspection files of the Station, are and will be kept in such files. Upon
request by Licensee, Broker shall provide in a timely manner any such
information in its possession which will enable Licensee to prepare, file or
maintain the records and reports required by the FCC.
24.2.3. FACILITIES. The Station's facilities will be maintained at the
expense of Licensee and will comply and be operated, in all material respects,
in accordance with the maximum facilities permitted by the FCC authorizations
for the Station and with good engineering standards necessary to deliver a high
quality technical signal to the area served by the Station, and with all
applicable laws and regulations (including
<PAGE>
the requirements of the Communications Act and the rules, regulations, policies
and procedures of the FCC promulgated thereunder). All capital expenditures
reasonably required to maintain the quality of the Station's signal shall be
made promptly at the expense of Licensee.
24.2.4. TITLE TO PROPERTIES. At Closing Licensee will have good and
marketable title to all of the assets and properties used in the operation of
the Station, free and clear of any liens, claims or security interests. Licensee
will not dispose of, transfer, assign or pledge any such asset, except with the
prior written consent of Broker, if such action would affect adversely
Licensee's performance hereunder or the business and operations of Broker
permitted hereby.
24.2.5. PAYMENT OF OBLIGATIONS. Licensee has no debts, obligations or
liabilities which would adversely affect Licensee's performance hereunder or the
business and operations of the Broker permitted hereby. Licensee shall pay in a
timely fashion all of its debts, assessments and obligations, including without
limitation tax liabilities and payments attributable to the operations of the
Station, as they come due from and after the Effective Date of this Agreement.
24.2.6. INSURANCE. Licensee will maintain in full force and effect
throughout the term of this Agreement insurance with responsible and reputable
insurance companies or associations covering such risks (including fire and
other risks insured against by extended coverage, public liability insurance,
insurance for claims against personal injury or death or property damage and
such other insurance as may be required by law) and in
<PAGE>
such amounts and on such terms as is conventionally carried by broadcasters
operating radio stations with facilities comparable to those of the Station. Any
insurance proceeds received by Licensee in respect of damaged property will be
used to repair or replace such property so that the operations of the Station
conform with this Agreement.
25. MODIFICATION AND WAIVER. No modification or waiver of any
provision of this Agreement shall in any event be effected unless the same shall
be in writing and signed by the party adversely affected by the waiver or
modification, and then such waiver and consent shall be effective only in the
specific instance and for the purpose for which given.
26. NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of
Licensee or Broker in exercising any right or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of Licensee and Broker herein
provided are cumulative and are not exclusive of any right or remedies which it
may otherwise have.
27. CONSTRUCTION. This Agreement shall be construed in accordance with
the laws of the State of Texas, and the obligations of the parties hereto are
subject to all federal, state or municipal laws or regulations now or hereafter
in force and to the regulations of the Commission and all other governmental
bodies or authorities presently or hereafter to be constituted.
<PAGE>
28. HEADINGS. The headings contained in this Agreement are included
for convenience only and no such heading shall in any way alter the meaning of
any provision.
29. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including, without limitation, any assignee of the Commission license for the
Station. Except in the case of an assignment to an affiliate of a party to this
Agreement, this Agreement shall not be assigned without the consent of the other
party.
30. COUNTERPART SIGNATURES. This Agreement may be signed in one or
more counterparts, each of which shall be deemed a duplicate original, binding
on the parties hereto notwithstanding that the parties are not signatory to the
original or the same counterpart. This Agreement shall be binding as of the date
on which the executed counterparts are exchanged by the parties.
31. NOTICES. Any notice required hereunder shall be in writing and any
payment, notice or other communications shall be deemed given when delivered
personally, or mailed by certified mail or Federal Express, postage prepaid,
with return receipt requested, and addressed as follows:
If to Licensee, to:
D. Geoffrey Armstrong, COO
SFX Broadcasting, Inc.
600 Congress Avenue, Suite 1270
Austin, Texas 78701
Facsimile No.: (512) 477-7388
with a copy (which shall not constitute notice) to:
Richard A. Liese, Esq.
<PAGE>
SFX Broadcasting, Inc.
150 E. 58th Street, 19th Floor
New York, N.Y. 10155
Facsimile No.:(212)753-3188
If to Broker, to:
David E. Kennedy, President
Susquehanna Radio Corp.
140 E. Market Street
York, PA 17401
with a copy (which shall not constitute notice) to:
Craig W. Bremer, General Counsel
Susquehanna Pfaltzgraff Co.
140 E. Market Street
York, PA 17401
32. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
between the parties and there are no other agreements, representations,
warranties, or understandings, oral or written, between them with respect to the
subject matter hereof. No alterations, modifications or changes of this
Agreement shall be valid unless by like written instrument.
33. SEVERABILITY. The event that any of the provisions contained in
this Agreement is held to be invalid, illegal or unenforceable shall not affect
any other provision hereof, and this Agreement shall be construed as if such
invalid, illegal or unenforceable provisions had not been contained herein.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SFX BROADCASTING OF TEXAS
(KTCK) LICENSEE, INC.
By:___________________________
Title:
<PAGE>
SFX BROADCASTING OF TEXAS
(KTCK), INC.
By: __________________________
Title:
KRBE CO.
By:___________________________
Title:
<PAGE>
TIME BROKERAGE AGREEMENT
ATTACHMENT I
MONTHLY PAYMENT SCHEDULE DURING TERM OF TIME BROKERAGE AGREEMENT
----------------------------------------------------------------
1. Broker shall pay to Licensee, pursuant to the terms of Section 2,
$55,000 per month. Such payment shall be due and payable in advance on the first
business day of the month to which such payment relates.
2. Broker shall also reimburse Licensee for all of its ordinary and
customary expenses incurred after the Effective Date (excluding only any capital
expense at the transmitter sites in excess of Two Thousand Dollars ($2,000), and
Licensee's federal, state and local income taxes) incurred in operating the
Station (the "Operating Expenses"), including but not limited to, maintenance of
the tower and transmitter equipment, rent and utilities at Licensee's studio
facilities and federal, state and local taxes (but not Licensee's income taxes).
3. For any month in which this Agreement is not in force during the
entire month, Broker's reimbursement obligation shall be prorated accordingly.
<PAGE>
TIME BROKERAGE AGREEMENT
ATTACHMENT II
Broker agrees to cooperate with Licensee in the broadcasting of
programs of the highest possible standard of excellence and for this purpose to
observe the following regulations in the preparation, writing and
broadcasting of its programs:
I. RELIGIOUS PROGRAMMING. The subject of religion and references to
particular faiths, tenants, and customs shall be treated with respect at all
times. Programs shall not be used as medium for attack on any faith,
denomination, or sect or upon any individual or organization.
II. CONTROVERSIAL ISSUES. Any discussion of controversial issues or
public importance shall be reasonably balanced with the presentation of
contrasting viewpoints in the course of overall programming; no attacks on the
honesty, integrity, or like personal qualities of any person or group of persons
shall be made during the discussion of controversial issues of public
importance; and during the course of political campaigns, programs are not to be
used as a forum for editorializing about individual candidates. If such events
occur, Licensee may require that responsive programming be aired.
III. NO PLUGOLA OR PAYOLA. The mention of any business activity or
"plug" for any commercial, professional, or other related endeavor, except where
contained in an actual commercial message of a sponsor, is prohibited.
IV. NO LOTTERIES. Announcements giving any information about lotteries
or games prohibited by federal or state law or regulation are prohibited.
<PAGE>
V. ELECTION PROCEDURES. At least sixty (60) days before any primary or
regular election, Broker will clear with Licensee's General Manager the rate
Broker will charge for the time to be sold to candidates for public office
and/or their supporters to make certain that the rate charged conforms to all
applicable laws and Station policy.
VI. SPOT COMMERCIAL LIMITATIONS. With respect to any given segment of
air time hereunder, the amount of spot commercial matter shall, under normal
circumstances, not exceed 20 minutes during any sixty minute segment. Broker
will provide, for attachment to the Station logs, a list of all commercial
announcements carried during its programming.
VII. REQUIRED ANNOUNCEMENTS. Broker shall broadcast (a) an
announcement in a form satisfactory to Licensee at the beginning of each hour to
identify Station KTCK, (b) an announcement at the beginning and end of each
segment of Brokered programming to indicate that program time has been purchased
by Broker, and (c) any other announcement that may be required by law,
regulation, or Station policy.
VIII. CREDIT TERMS ADVERTISING. Pursuant to rules of the Federal Trade
Commission, any advertising of credit terms shall be made over the Station in
accordance with all applicable federal and state laws, including Regulations Z
and M.
IX. COMMERCIAL RECORDKEEPING. With the exception of normal broadcast
sales Broker shall not receive any consideration in money, goods, services, or
otherwise, directly or indirectly (including to relatives) from any person or
company for the presentation of any programming over the Station without
<PAGE>
reporting the same in advance to and receiving the prior written consent of
Licensee's General Manager. No commercial messages ("plugs") or undo references
shall be made in programming presented over the Station to any business venture,
profit making activity, or other interest (other than noncommercial
announcements for bona fide charities, church activities, or other public
service activities) in which Broker (or anyone else) is directly or indirectly
interested without the same having been approved in advance by Licensee's
General Manager and such broadcast being announced and logged and sponsored.
X. NO ILLEGAL ANNOUNCEMENTS. No announcements or promotion prohibited
by federal or state law or regulation of any lottery or game shall be made over
the Station. Any game, contest, or promotion relating to or to be presented over
the Station must be fully stated and explained in advance to Licensee at
Licensee's request, which reserves the right in its sole discretion to reject
any game, contest, or promotion.
XI. LICENSEE DISCRETION PARAMOUNT. In accordance with the licensee's
responsibility under the Communications Act of 1934, as amended, and the rules
and regulations of the Federal Communications Commission, Licensee reserves the
right to reject or terminate any advertising proposed to be presented or being
presented over the Station which is in conflict with Station policy or which in
the reasonable judgment of Licensee or its General Manager/Chief Engineer would
not serve the public interest.
XII. PROGRAMMING IN WHICH BROKER HAS A FINANCIAL INTEREST. Broker
shall advise the General Manager of the Station with
<PAGE>
respect to any programming (including commercial(s) concerning goods or services
in which Broker has a material financial interest. Any announcements for such
goods and services shall clearly identify Broker's financial interest.
XIII. PROGRAMMING PROHIBITIONS. Broker shall not broadcast any of the
following programs or announcements:
A. FALSE CLAIMS. False or unwarranted claims for any product or
service.
B. UNFAIR IMITATION. Infringements of another advertiser's rights
through plagiarism or unfair imitation or either program idea or copy, or any
other unfair competition.
C. COMMERCIAL DISPARAGEMENT. Any disparagement of competitors or
competitive goods.
D. PROFANITY. Any programs or announcements that are slanderous,
obscene, profane, vulgar, repulsive or offensive, either in theme or treatment.
E. PRICE DISCLOSURE. Any price mentions except as permitted by
Licensee's policies current at the time.
F. UNAUTHENTICATED TESTIMONIALS. Any testimonials which cannot be
authenticated.
G. DESCRIPTIONS OF BODILY FUNCTIONS. Any continuity which
describes in a repellent manner internal bodily functions or symptomatic results
or internal disturbances, and no reference to matters which are not considered
acceptable topics in social groups.
H. CONFLICT ADVERTISING. Any advertising matter or announcement
which may, in the reasonable opinion of Licensee, be
<PAGE>
injurious or prejudicial to the interests of the public, the Station, or honest
advertising and reputable business in general.
I. FRAUDULENT OR MISLEADING ADVERTISEMENT. Any advertisement
matter, announcement, or claim which Broker knows to be fraudulent, misleading,
or untrue.
Licensee may waive any of the foregoing regulations in specific
instances if, in its reasonable opinion, good broadcasting in the public
interest will be served thereby.
In any case where questions of policy or interpretation arise,
Broker shall submit the same to Licensee for decision before making any
commitments in connection therewith.
<PAGE>
TIME BROKERAGE AGREEMENT
ATTACHMENT III
State of ____________________
State of ____________________
ANTI-PAYOLA/PLUGOLA AFFIDAVIT
________(Name)_________, being first duly sworn, deposes and says as
follows:
1. He is (Position) for WARM Broadcasting Company, Inc. ("Broker").
2. He has acted in the above capacity since (date) .
3. No matter has been broadcast by Station ____ for which service, money
or other valuable consideration has been directly or indirectly paid,
or promised to, or charged, or accepted, by him from any person, which
matter at the time so broadcast has not been announced or otherwise
indicated as paid for or furnished by such person.
4. So far as he is aware, no matter has been broadcast by Station ____
for which service, money, or other valuable consideration has been
directly or indirectly paid, or promised to, or charged, or accepted
by Station ____ by the Broker, or by any independent contractor
engaged by
<PAGE>
the Broker in furnishing programs, from any person, which matter at
the time so broadcast has not been announced or otherwise indicated as
paid for or furnished by such person.
5. In the future, he will not pay, promise to pay, request, or receive
any service, money, or any other valuable consideration, direct or
indirect, from a third-party, in exchange for the influencing of, or
the attempt to influence, the preparation or presentation broadcast
matter on Station KTCK.
6. Except as may be reflected in paragraph 7 hereof, neither he, his
spouse nor any member of his immediate family has any present direct
or indirect ownership interest in any entity engaged in the following
business or activities (other than an investment or a corporation
whose stock is publicly held), serves an officer or director of
whether with or without compensation, or serve as an employee of, any
entity engaged in the following business or Activities:
1. The publishing of music;
2. The production, distribution (including wholesale and retail
sales outlets), manufacture or exploitation of music, films,
tapes, recordings or
<PAGE>
electrical transcriptions of any program material intended for
radio broadcast use;
3. The exploitation, promotion, or management of persons rendering
artistic, production, and/or other services in the entertainment
field;
4. The ownership or operation of one or more radio or television
stations;
5. The wholesale or retail sale of records intended for public
purchase;
6. The sale of advertising time other than on Station ____ or any
other station owned by the Broker.
7. A full disclosure of any such interest referred to in paragraph
6, above, is as follows:
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
-------------------------------
Affiant
Subscribed and sworn to before me
<PAGE>
this ___ day of __________, 1996.
- - - ------------------------------
Notary Public
My Commission expires:________
LOCAL MARKETING AGREEMENT
This LOCAL MARKETING AGREEMENT (this "Agreement") is entered into
this 28th day of June, 1996, by and between SFX BROADCASTING OF SOUTH
CAROLINA, INC., a Delaware Corporation ("Programmer"), and HMW COMMUNICATIONS,
INC., a Delaware Corporation ("Licensee"), licensee of Radio Station WHSL-FM,
High Point, North Carolina (the "Station").
WITNESSETH:
WHEREAS, Licensee holds a license from the Federal Communications
Commission ("FCC" or "Commission") authorizing it to operate the Station;
WHEREAS, Licensee is engaged in the business of radio broadcasting on
the Station, and has available for sale broadcast time on the Station;
WHEREAS, Licensee and Programmer are parties to that certain Joint
Sales Agreement dated January 18, 1996 ("JSA") providing for the sale by
Programmer of commercial advertising time inventory on the Station; and
WHEREAS, Programmer desires to purchase time on the Station for the
broadcast of programming on the Station and to sell all of the commercial
advertising time inventory of the Station.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto have agreed and do agree as follows:
1. Time Sale.
----------
Subject to the provisions of this Agreement, Licensee agrees
to make the Station's broadcasting transmission facilities available to
Programmer for broadcast of Programmer's programs on the Station originating
either from Programmer's studios or from Licensee's studios. The Station's
time made available to Programmer is described in Exhibit A hereto. Programmer
will use its best efforts to provide programming which fills the Station's
time made available hereunder.
2. Payments.
---------
Programmer hereby agrees to pay Licensee compensation for
the broadcast of Programmer's programming in the amounts and at the times set
forth in Exhibit B hereto.
<PAGE>
- 2 -
3. Term.
-----
The term of this Agreement shall commence as of July 1, 1996
and shall continue until (a) the date of closing of the sale of the assets of
the Station (the "Closing") contemplated in the Asset Purchase Agreement by
and between HMW Communications, Inc. and SFX Broadcasting, Inc., dated January
18, 1996 (as amended, the "Asset Purchase Agreement"); or (b) upon the earlier
termination of the Asset Purchase Agreement in accordance with its terms.
4. Programs.
---------
Programmer shall furnish or cause to be furnished the
artistic personnel and materials for its programming. Programmer represents
and warrants that all of the programming, advertising and promotional material
it broadcasts on the Station shall be in accordance with the rules,
regulations, policies and procedures of the Commission and the Communications
Act of 1934, as amended (the "Communications Act"), and the reasonable
standards established by Licensee.
5. Accounts Receivable.
--------------------
The parties agree that accounts receivable for performed
advertising contracts identified and valued as of the date hereof shall be
collected by Programmer and distributed between Programmer and Licensee in the
manner described in Paragraph 5 of the JSA, which is incorporated herein by
reference. All accounts receivable of Programmer created on or after the date
hereof shall be and remain the sole property of Programmer. Programmer shall
be responsible for the collection of such accounts receivable and shall retain
ownership of such accounts upon termination of this Agreement.
6. Station Facilities.
-------------------
(a) Licensee Responsibility. Licensee shall be responsible
for, and pay in a timely manner, all costs associated with owning and
controlling the Station, including, but not limited to, electricity, telephone
at the studio and transmitter sites, insurance, taxes, maintenance and
engineering of the Licensee's studio, and all engineering costs associated
with maintenance and operation of the transmitter, transmitter building,
tower, antenna system and the real property upon which the tower is located.
Licensee shall be responsible for the Station's compliance with all applicable
provisions of the Communications Act, the rules, regulations, policies and
procedures of the FCC, and all other applicable laws. Licensee represents that
it now holds all permits and authorizations set forth on Schedule 9.4 to the
Asset Purchase Agreement. Licensee will continue to hold such permits and
authorizations throughout the life of this Agreement. Licensee represents that
there is not now pending or to Licensee's knowledge, threatened, any action by
the FCC or other party to revoke, cancel, suspend, refuse to renew, or modify
adversely any of the licenses, permits or authorizations held by Licensee.
Licensee shall make its transmitter, transmitter building and tower site
available to Programmer, at no additional charge, for the placement and use of
broadcast
<PAGE>
- 3 -
equipment Programmer reasonably deems necessary to fulfill its
responsibilities under this Agreement.
(b) Broadcast Output. Licensee represents that the Station's
facilities and equipment do and will comply and are and will be operated in
accordance with industry practice and comply in all material respects with all
applicable rules and regulations of the FCC and the terms of the Station's FCC
licenses. Licensee is not in material violation of any statute, ordinance,
rule, regulation, order or decree of any federal, state, local or foreign
governmental agency, court or authority having jurisdiction over it or over
any part of its operations or assets, which material default or violation
would have a material adverse effect on Licensee or its assets or on its
ability to perform this Agreement. During the term hereof, Licensee agrees to
operate the Station in all respects in accordance with FCC rules and
regulations.
(c) Maintenance. Any maintenance work, other than emergency
repairs, which prevent the operation of the Station at full power and maximum
facility, shall not be scheduled without giving at least FORTY-EIGHT (48)
hours notice to Programmer, unless Programmer waives such notice.
7. Handling Of Mail And Complaints.\
--------------------------------
Programmer shall promptly forward to Licensee any mail which
it may receive from any agency of government or any correspondence from
members of the public relating to the Station or to any of Programmer's
programming broadcast on the Station.
8. Programming And Operations Standards.
-------------------------------------
Programmer recognizes that the Licensee has full authority
and a duty to control the operation of the Station. The parties agree that
Licensee's authority includes, but is not limited to, the right to reject or
refuse such portions of Programmer's programming which Licensee reasonably
believes to be contrary to the public interest. Should Licensee reject any of
Programmer's programming pursuant to this paragraph, the payments,
reimbursements and fees provided for hereunder shall be pro rated accordingly.
9. Responsibility For Employees And Expenses.
------------------------------------------
Programmer shall employ and be responsible for the salaries,
commissions, taxes, insurance and all other related costs for all of its
employees, agents, contractors and personnel involved in the production and
broadcast of its programming, including air personalities, salespersons, sales
representatives, consultants, traffic personnel, board operators and other
programming staff members. Programmer shall reimburse Licensee and indemnify
and hold Licensee harmless for music licensing fees required to be paid to
ASCAP, BMI and SESAC, and for any other copyright or program rights fees
attributable to programming broadcast on the Station.
<PAGE>
- 4 -
10. Advertising And Programming Revenues.
-------------------------------------
Programmer shall retain all revenues from the sale of
advertising time on the programming it broadcasts on the Station. Programmer
will provide, make available to and shall sell time to political candidates
from the time it purchases from Licensee in strict compliance with the
Communications Act, the rules, regulations, policies and procedures of the
Commission.
11. Operation Of Station.
---------------------
Notwithstanding anything to the contrary in this Agreement,
Licensee shall have full authority and power over the operation of the Station
during the term of this Agreement. Licensee shall be responsible for all
programming it furnishes for broadcast on the Station and for the payment of
the salaries of all of its employees, all of whom shall report solely to and
be accountable solely to the Licensee. The Licensee's General Manager shall
direct the day-to-day operation of the Station, and the Licensee's Chief
Operator shall oversee and direct the engineering and technical operation of
the Station. Licensee shall retain the right to interrupt and discontinue
Programmer's programming at any time if Licensee determines the programming is
not in the public interest or violates this Agreement, or in case of an
emergency or EBS/EAS system activation, or for the purpose of providing
programming which Licensee in its sole discretion determines to be of greater
national, regional or local importance, whereupon, the payments,
reimbursements and fees provided for by Exhibit B hereof shall be reduced by a
percentage amount equal to the percentage that the amount of Programmer's
programming that is not carried bears to the total programming time allowed
Programmer pursuant to Exhibit A hereof. Programmer shall properly prepare and
promptly provide to Licensee (a) all its contracts, agreements and requests
for time for political programming or programming addressing controversial
issues of public importance; (b) all records, complaints and reports of every
kind whatsoever which may be required by the FCC to be maintained or filed
with the FCC by the Station as a result of Programmer's programming over the
Station; and (c) full information with respect to Programmer's programs and
public service announcements which are responsive to issues of public concern
in sufficient detail to enable Licensee to timely prepare all appropriate or
necessary records and reports required by the Commission and its rules and
policies concerning the Station's operations. Programmer will properly prepare
and furnish to Licensee such information, records and reports relating to
Programmer's programming, sales or employment practices at the Station in
sufficient detail as is necessary to enable Licensee to comply with all rules
and policies of the FCC or any other government agency.
12. Station Identification.
-----------------------
Licensee will be responsible for ensuring the proper
broadcast of station identification announcements. However, Programmer will
provide appropriate station identification announcements which comply with FCC
requirements in a form acceptable to Licensee.
<PAGE>
- 5 -
13. Right To Use The Programs.
--------------------------
The right to use Programmer's programs and to authorize
their use in any manner and in any media whatsoever shall be, and remain,
vested in Programmer.
14. Payola/Plugola.
---------------
Programmer agrees that neither it nor its agents, employees,
consultants or personnel will accept any consideration, compensation, gift or
gratuity of any kind whatsoever, regardless of its value or form, including,
but not limited to, a commission, discount, bonus, material, supplies or other
merchandise, services or labor (collectively "Consideration"), whether or not
pursuant to written contracts or agreements between Programmer and merchants
or advertisers, unless the payer is identified in the program for which
Consideration was provided as having paid for or furnished such Consideration,
in accordance with the Communications Act and FCC requirements.
15. Compliance With Law.
--------------------
Programmer agrees that, throughout the term of this
Agreement, Programmer will comply with all laws, rules, regulations, policies
and procedures including, but not limited to, the FCC's technical, political
broadcasting, obscenity and indecency regulations, fair trade practice
regulations, lottery broadcast regulations, sponsorship identification rules,
sales practice regulations, applicable to the operations of the Station, and
all FCC rules applicable to programming agreements of this kind. Programmer
acknowledges that Licensee has not urged, advised or consented to or agreed in
any way whatsoever to the use of any unfair business practice.
16. Indemnification.
----------------
(a) Programmer's Indemnification. Programmer shall indemnify
and hold Licensee harmless for any material loss, damage or injury of any kind
sustained by Licensee resulting from Programmer's breach of this Agreement,
from any programming material broadcast by Programmer on the Station, from the
sale of or attempt by Programmer to sell advertising or program time on the
Station, and from any material act or omission of any kind whatsoever by
Programmer.
(b) Licensee's Indemnification. Licensee shall indemnify and
hold Programmer harmless for any material loss, damage or injury of any kind
sustained by Programmer resulting from Licensee's breach of this Agreement,
from the broadcast of programming on the Station furnished by Licensee, from
the sale of or attempt by Licensee to sell advertising or program time on the
Station (except the instant sale provided for in this Agreement to
Programmer), and from any material act or omission of any kind whatsoever by
Licensee.
(c) Survival. Neither Licensee nor Programmer shall be
entitled to indemnification pursuant to this section unless such claim for
indemnification is asserted in writing delivered
<PAGE>
- 6 -
to the other party. The representations and covenants of Licensee and
Programmer and their obligation to indemnify and hold each other harmless as
set forth in this Agreement shall survive any termination of this Agreement
and shall continue until the expiration of one year from the date of
termination of this Agreement.
17. Termination And Remedies Upon Default.
--------------------------------------
(a) Termination. In addition to other remedies available at
law or equity, this Agreement may be terminated as set forth below by either
Licensee or Programmer by written notice to the other if the party seeking to
terminate is not then in material default or breach thereof, upon the
occurrence of any of the following:
(i) This Agreement is declared invalid or illegal
in whole or material part by an order or decree of the FCC or any other
administrative agency or court of competent jurisdiction, including but not
limited to U.S. Bankruptcy Court, and such order or decree has become final
and no longer subject to further administrative or judicial review;
(ii) The other party is in material breach of its
obligations hereunder and has failed to cure such breach within THIRTY (30)
days of notice from the nonbreaching party;
(iii) The mutual consent of both parties;
(iv) There has been a change in FCC rules, policies
or case law precedent that would cause this Agreement or any provision thereof
to be in violation thereof and such change is not the subject of an appeal or
further administrative review.
Upon termination of this Agreement according to the provisions of
this paragraph, the payments, reimbursements and fees provided for hereunder
shall be prorated to the effective date of termination. Licensee shall
cooperate reasonably with the Programmer to the extent permitted to enable
Programmer to fulfill advertising or other programming contracts then
outstanding, in which event Licensee shall receive as compensation for the
carriage of such advertising or programming that which otherwise would have
been paid to Programmer hereunder.
(b) Programmer's Additional Remedies For Licensee's
Technical Operation Deficiencies. In addition to Programmer's right to
terminate for reasons set forth in Paragraph (a) above, if the Station suffers
any damage to its transmission facilities which results in the inability of
the Station to operate with its presently authorized facilities and Licensee
has not restored full-time operation of the Station with its presently
authorized facilities within FOURTEEN (14) days of any such occurrence,
Programmer may give notice to Licensee of Programmer's termination of this
Agreement in which event this Agreement shall terminate upon the giving of
such notice, any other provision of this Agreement notwithstanding. For each
day that the Station is not operating at authorized facilities, the payments
due pursuant to Exhibit B hereof shall be reduced by a
<PAGE>
- 7 -
percentage amount equal to the percentage that the amount of time of reduced
power operation bears to the number of hours Programmer may broadcast pursuant
to Exhibit A hereof.
(c) Programmer's Additional Termination Rights.
Notwithstanding anything herein to the contrary and in addition to
Programmer's termination rights in Paragraphs (a) and (b) above, Programmer
shall have the right to terminate this Agreement (i) upon SIXTY (60) days
prior notice, or (ii) upon the event that Licensee makes a general assignment
for the benefit of creditors, files or has filed against it a petition for
bankruptcy, reorganization or an arrangement for the benefit of creditors, or
for the appointment of a receiver, trustee or similar creditors'
representative for the property or assets of Licensee under any federal or
state insolvency law, which if filed against Licensee, has not been dismissed
within SIXTY (60) days thereof.
(d) Licensee's Additional Termination Rights.
Notwithstanding anything herein to the contrary and in addition to Licensee's
termination rights in Paragraph (a) above, Licensee shall have the right to
terminate this Agreement (i) upon SIXTY (60) days prior notice, or (ii) upon
the event that Programmer makes a general assignment for the benefit of
creditors, files or has filed against it a petition for bankruptcy,
reorganization or an arrangement for the benefit of creditors, or for the
appointment of a receiver, trustee or similar creditors' representative for
the property or assets of Programmer under any federal or state insolvency
law, which if filed against Programmer, has not been dismissed within SIXTY
(60) days thereof.
18. Force Majeure.
--------------
Subject to any credits owed to Programmer, neither
Programmer nor Licensee shall incur any liability to each other or any other
party because of Programmer's failure to sell airtime or deliver programming
or commercial matter or Licensee's failure to broadcast any or all programming
or commercial matter provided to Licensee pursuant to this Agreement because
of: (a) failure of facilities; or (b) causes beyond the control of the party
so failing to broadcast or deliver; provided, however, that Programmer's
failure to sell airtime or deliver programming or commercial matter on account
of any of the foregoing circumstances shall not release Programmer from its
obligation to make the payments required in Exhibit B hereof during the term
of this Agreement.
19. Notices.
--------
All notices and other communications permitted or required
under this Agreement shall be in writing, including by telecopy, and shall be
deemed effectively given or delivered when dispatched by facsimile
transmission upon personal delivery or twenty-four (24) hours after delivery
to a courier service which guarantees overnight delivery or three (3) days
after deposit with the U.S. Post Office, by registered or certified mail,
postage prepaid, and, in the case of courier or mail delivery, addressed as
follows (or at such other address for a party as shall be specified by like
notice):
<PAGE>
- 8 -
IF TO LICENSEE:
HMW Communications, Inc.
Attn: Eric C. Neuman, Vice President
200 Crescent Court, Suite 1600
Dallas, TX 75201
Fax: (214) 740-7355
IF TO PROGRAMMER:
SFX Broadcasting of South Carolina, Inc.
Attn: Richard A. Liese, Vice President
150 East 58th Street -- 19th Floor
New York, NY 10155
Fax: (212) 753-3188
20. Modification and Waiver.
------------------------
No modification or waiver of any provision of this Agreement
shall in any event be affected unless the same shall be in writing and signed
by the party adversely affected by the waiver or modification, and then such
waiver and consent shall be effective only in the specific instance and for
the purpose for which given.
21. Corporate Authority; Construction.
----------------------------------
The undersigned signatories to this Agreement personally
represent and warrant that they have full authority to execute this Agreement
on behalf of the respective parties. This Agreement shall be construed in
accordance with the laws of the State of North Carolina, and the obligations
of the parties hereto are subject to all federal, state and local laws and
regulations now or hereafter in force and to the rules, regulations, policies
and procedures of the Commission and all other government entities or
authorities presently or hereafter to be constituted.
22. Headings.
---------
The headings contained in this Agreement are included for
convenience only and no such heading shall in any way alter the meaning of any
provision.
23. Counterpart Signatures.
-----------------------
This Agreement may be signed in counterpart originals, which
collectively shall have the same legal effect as if all signatures had
appeared on the same physical document. This Agreement may be signed and
exchanged by facsimile transmission, with the same legal effect as if the
signatures had appeared in original handwriting on the same physical document.
<PAGE>
- 9 -
24. No Partnership Or Joint Venture Credited.
-----------------------------------------
Programmer is acting as an independent contractor hereunder
and nothing in this Agreement shall be construed to make Licensee and
Programmer partners or joint venturers or to make Licensee or Programmer the
agent of the other or to afford any rights to any third party other than as
expressly provided herein.
25. Assignment; Binding Agreement.
------------------------------
Neither Programmer nor Licensee may assign this Agreement
without the prior approval of the other party which shall not be unreasonably
withheld or delayed. The party shall communicate its position on any proposed
assignment within FOURTEEN (14) days after receipt of written notice of the
proposed assignment. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and permitted assigns.
26. Severability.
-------------
In the event any term or provision of this Agreement is
declared to be invalid or illegal for any reason, this Agreement shall remain
in full force and effect and the same shall be interpreted as though such
invalid and illegal provision were not a part hereof. The remaining provisions
shall be construed to preserve the intent and purpose of this Agreement and
the parties shall negotiate in good faith to modify the provisions held to be
invalid or illegal to preserve each party's anticipated benefits thereunder.
27. Entire Agreement.
-----------------
This Agreement supersedes any prior agreements between the
parties, other than the Asset Purchase Agreement, and the selected portion of
the JSA referred to in Paragraph 5 hereinabove, and contains all of the terms
agreed upon with respect to the subject matter hereof. This Agreement may not
be altered or amended except by an instrument in writing signed by the party
against whom enforcement of any such change is sought.
28. Certifications.
---------------
Licensee hereby certifies that for the term of this
Agreement it shall maintain ultimate control over the Station's facilities,
including control over the Station's finances, personnel and programming, and
nothing herein shall be interpreted as depriving Licensee of the power or
right of such ultimate control.
Programmer hereby certifies that this Agreement complies
with the restrictions on ownership of media set out in the Commission's rules
and regulations.
<PAGE>
- 10 -
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the day and year written above.
PROGRAMMER:
By: /s/ D. Geoffrey Armstrong
---------------------------------------
D. Geoffrey Armstrong
Executive Vice President and COO
SFX Broadcasting of South Carolina, Inc.
LICENSEE:
By: /s/ Eric C. Neuman
-----------------------------------------
Eric C. Neuman, Vice President
HMW Communications, Inc.
<PAGE>
EXHIBIT A
PROGRAMMING
Subject to all other provisions of this Agreement, Programmer will
have the right to broadcast on the Station up to TWENTY-FOUR (24) hours of
programming each day during the term of this Agreement. Licensee reserves two
(2) hours of Station's time for its own use at a mutually agreeable time on
Sunday morning.
<PAGE>
EXHIBIT B
COMPENSATION PAYMENT SCHEDULE
During each Month (as defined below) of the term of the Agreement,
commencing in July, 1996, Programmer agrees to pay Licensee on the twentieth
(20th) business day after the end of each calendar month, a payment figure to
be calculated as follows: (a) an operating expense payment for the
reimbursement of all of Licensee's verifiable operating expenses of the
Station, including without limitation the costs specified in Paragraphs 6 and
9 of this Agreement (the "Operating Expense Payment"); and (b) an additional
thirty-seven thousand, five hundred dollars ($37,500.00) per month (the "LMA
Fee Payment"). Payment of all amounts due under this Schedule for any partial
Month of this Agreement shall be prorated on a daily basis. Should this
Agreement terminate upon the sale of the assets of the Station to Programmer
in accordance with Paragraph 3(a) herein, the final Operating Expense Payment
and LMA Fee Payment will be made at the Closing.
For the purposes of this Schedule, a "Month" means a calendar month.
Licensee will furnish to Programmer documentation necessary to
substantiate the Operating Expense Payment.
<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
EXHIBIT 11.1
Statement Regarding Calculation of Per Share Earnings
(Dollars in thousands, Except for per share amounts)
<TABLE>
<CAPTION>
Three Months Ended June 30,
1996 1995
--------------- ----------------
<S> <C> <C>
Primary and Fully Diluted:
Average shares outstanding...................................................... 7,437,642 5,749,999
Net effect of dilutive stock options - based on the treasury stock method
using average market price..................................................... -- 226,059
--------------- ----------------
Total...................................................................... 7,437,642 5,976,058
=============== ================
Net loss........................................................................ $ (42,074) $ (2,550)
Less: preferred stock dividends and accretion................................... 831 73
--------------- ----------------
Net loss attributable to common shareholders.................................... (42,905) (2,623)
=============== ================
Net loss per common shares...................................................... $ (5.77) $ (0.44)
=============== ================
Six Months Ended June 30,
1996 1995
--------------- ----------------
Primarly and Fully Diluted:
Average shares outstanding...................................................... 7,447,929 5,749,999
Net effect of dilutive stock options - based on the treasury stock method
using average market price...................................................... -- 196,252
--------------- ----------------
Total...................................................................... 7,447,929 5,946,251
=============== ================
Net loss........................................................................ $ (43,059) $ (3,071)
Less: preferred stock dividends and accretion................................... 967 144
--------------- ----------------
Net loss attributable to common shareholders.................................... (44,026) (3,215)
=============== ================
Net loss per common share....................................................... $ (5.91) $ (0.54)
=============== ================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
SFX Broadcasting Inc. Financial Data Schedule
Article 5 of Regulation S-X
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 378,794,000
<SECURITIES> 0
<RECEIVABLES> 24,801,000
<ALLOWANCES> 1,104,000
<INVENTORY> 0
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152,928,000
0
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</TABLE>
