SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): October 29, 1996
----------------------------
SFX BROADCASTING, INC.
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(Exact name of registrant as specified in charter)
Delaware 0-22486 13-3649750
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(State or Other (Commission File No.) (IRS Employer
Jurisdiction Identification No.)
of Incorporation)
150 East 58th Street, 19th Floor, New York, New York 10155
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 407-9191
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N/A
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(Former name or former address, if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS
Supplement No. 1 to the Joint Proxy Statement/Prospectus of SFX Broadcasting,
Inc. and Multi-Market Radio, Inc.
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On October 29, 1996, SFX Broadcasting, Inc. (the "Company") mailed to the
holders of its Class A Common Stock, par value $.01 per share, and its Class B
Common Stock, par value $.01 per share, Supplement No. 1, dated October 28,
1996, to the Joint Proxy Statement/Prospectus, dated October 4, 1996, of the
Company and Multi-Market Radio, Inc. ("Supplement No. 1"). Supplement No. 1
is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
--------
10.1 Asset Exchange Agreement among WHFS, Inc., Liberty
Broadcasting of Maryland Incorporated and SFX
Broadcasting, Inc.
10.2 Asset Purchase Agreement between Secret Communications
Limited Partnership and SFX Broadcasting, Inc.
10.3 Stock Purchase Agreement among Delsener/Slater
Enterprises, Ltd., Beach Concerts, Inc., Connecticut
Concerts, Incorporated, Broadway Concerts, Inc., Ardee
Productions, Ltd., Ardee Festivals NJ, Inc., In-House
Tickets, Inc., Exit 116 Revisited, Inc., Dumb Deal, Inc.,
Ron Delsener, Mitch Slater and SFX Broadcasting, Inc.
10.4 Purchase and Sale Agreement among WWYZ, Inc., Great
American Music Fest & Production Co. (collectively,
the "Companies"), each of the shareholders of the Companies
and SFX Broadcasting, Inc.
10.5 Amendment to Asset Purchase Agreement between Texas Coast
Broadcasters, Inc. and Multi-Market Radio, Inc.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Mohle, Adams, Till, Guidry and Wallace, LLP.
99.1 Supplement No. 1, dated October 28, 1996, to the
Joint Proxy Statement/Prospectus dated October 4, 1996
of the Company and Multi-Market Radio, Inc.
99.2. Press Release of SFX Broadcasting, Inc., dated September 26,
1996, with respect to the exchange of WHFS-FM for KTXQ-FM
and KRRW-FM.
99.3 Press Release of SFX Broadcasting, Inc., dated October
16,1996, with respect to the acquisition of certain radio
stations from Secret Communications Limited Partnership.
99.4 Press Release of SFX Broadcasting, Inc., dated October 16,
1996, with respect to the acquisition of Delsener/Slater
Enterprises, Ltd.
99.5 Press Release of SFX Broadcasting, Inc., dated October 24,
1996, with respect to the acquisition of WWYZ, Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereto duly authorized.
SFX BROADCASTING, INC.
By: /s/ Robert F.X. Sillerman
-----------------------------------
Name: Robert F.X. Sillerman
Title: Executive Chairman
Date: October 28, 1996
-2-
<PAGE>
EXHIBIT INDEX
EXHIBITS DESCRIPTION
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10.1 Asset Exchange Agreement among WHFS, Inc., Liberty
Broadcasting of Maryland Incorporated and SFX
Broadcasting, Inc.
10.2 Asset Purchase Agreement between Secret Communications
Limited Partnership and SFX Broadcasting, Inc.
10.3 Stock Purchase Agreement among Delsener/Slater
Enterprises, Ltd., Beach Concerts, Inc., Connecticut
Concerts, Incorporated, Broadway Concerts, Inc., Ardee
Productions, Ltd., Ardee Festivals NJ, Inc., In-House
Tickets, Inc., Exit 116 Revisited, Inc., Dumb Deal, Inc.,
Ron Delsener, Mitch Slater and SFX Broadcasting, Inc.
10.4 Purchase and Sale Agreement among WWYZ, Inc., Great
American Music Fest & Production Co. (collectively,
the "Companies"), each of the shareholders of the Companies
and SFX Broadcasting, Inc.
10.5 Amendment to Asset Purchase Agreement between Texas Coast
Broadcasters, Inc. and Multi-Market Radio, Inc.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Mohle, Adams, Till, Guidry and Wallace, LLP.
99.1 Supplement No. 1, dated October 28, 1996, to the
Joint Proxy Statement/Prospectus dated October 4, 1996
of the Company and Multi-Market Radio, Inc.
99.2. Press Release of SFX Broadcasting, Inc., dated September 26,
1996, with respect to the exchange of WHFS-FM for KTXQ-FM
and KRRW-FM.
99.3 Press Release of SFX Broadcasting, Inc., dated October
16,1996, with respect to the acquisition of certain radio
stations from Secret Communications Limited Partnership.
99.4 Press Release of SFX Broadcasting, Inc., dated October 16,
1996, with respect to the acquisition of Delsener/Slater
Enterprises, Ltd.
99.5 Press Release of SFX Broadcasting, Inc., dated October 24,
1996, with respect to the acquisition of WWYZ, Inc.
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ASSET EXCHANGE AGREEMENT
dated as of September 24, 1996
among
WHFS, INC.,
LIBERTY BROADCASTING OF MARYLAND INCORPORATED,
SFX BROADCASTING, INC.
and
CBS INC.
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<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
EXCHANGE OF ASSETS
------------------
1.1 Transfer of SFX Station Assets.............................. 1
1.2 SFX Excluded Assets......................................... 3
1.3 Transfer of CBS Stations Assets............................. 4
1.4 CBS Excluded Assets......................................... 6
ARTICLE 2
ASSUMPTION OF OBLIGATIONS
-------------------------
2.1 Assumption of Obligations by CBS............................ 6
2.2 SFX Retained Liabilities.................................... 7
2.3 Assumption of Obligations by SFX............................ 7
2.4 CBS Retained Liabilities.................................... 7
ARTICLE 3
PRORATION AND VALUATION
-----------------------
3.1 Proration of Income and Expenses............................ 8
3.2 Value of Exchanged Assets................................... 8
ARTICLE 4
CLOSING
-------
4.1 Closing..................................................... 9
<PAGE>
Contents, p. 2
Page
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ARTICLE 5
GOVERNMENTAL CONSENTS
---------------------
5.1 FCC Consent................................................. 10
5.2 FCC Applications............................................ 10
5.3 Compliance with HSRA........................................ 11
<PAGE>
Contents, p. 3
Page
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SFX AND SFX
---------------------------------------------
BROADCASTING
------------
6.1 Organization and Standing................................... 11
6.2 Authorization and Binding Obligation........................ 11
6.3 Absence of Conflicting Agreements or Required
Consents.................................................. 12
6.4 Government Authorizations................................... 12
6.5 Compliance with Regulations................................. 13
6.6 Taxes....................................................... 14
6.7 Personal Property........................................... 14
6.8 Real Property............................................... 15
6.9 Contracts................................................... 16
6.10 Sufficiency of Assets....................................... 16
6.11 Environmental; Industrial Hygiene and Safety................ 16
6.12 SFX Intellectual Property................................... 17
6.13 Financial Statements........................................ 17
6.14 Personnel................................................... 18
6.15 SFX Employee Benefit Plans.................................. 18
6.16 Litigation.................................................. 19
6.17 Compliance with Laws........................................ 19
6.18 Commissions or Finder's Fees................................ 20
6.19 Insurance................................................... 20
6.20 Undisclosed Obligations..................................... 20
6.21 No Material Adverse Change.................................. 20
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF CBS
-------------------------------------
7.1 Organization and Standing................................... 21
7.2 Authorization and Binding Obligations....................... 21
7.3 Absence of Conflicting Agreements or Required
Consents.................................................. 21
7.4 Government Authorizations................................... 22
7.5 Compliance with Regulations................................. 23
7.6 Taxes....................................................... 23
<PAGE>
Contents, p. 4
Page
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7.7 Personal Property........................................... 24
7.8 Real Property............................................... 24
7.9 Contracts................................................... 25
7.10 Sufficiency of Assets....................................... 26
7.11 Environmental; Industrial Hygiene and
Safety.................................................... 26
7.12 CBS Intellectual Property................................... 26
7.13 Financial Statements........................................ 27
7.14 Personnel................................................... 27
7.15 Employee Benefit Plans...................................... 28
7.16 Litigation.................................................. 28
7.17 Compliance with Laws........................................ 29
7.18 Commissions or Finder's Fees................................ 29
7.19 Insurance................................................... 29
7.20 Undisclosed Obligations..................................... 29
7.21 No Material Adverse Change.................................. 29
ARTICLE 8
COVENANTS OF SFX
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8.1 Records..................................................... 30
8.2 Employee Matters............................................ 30
8.3 Sales Representation Agreement.............................. 31
ARTICLE 9
COVENANTS OF CBS
----------------
9.1 Records..................................................... 31
9.2 Employee Matters............................................ 32
9.3 Sales Representative Agreement.............................. 33
ARTICLE 10
MUTUAL COVENANTS
----------------
<PAGE>
Contents, p. 5
Page
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10.1 Pre-Closing Covenants....................................... 33
10.2 Notification................................................ 37
10.3 No Inconsistent Action...................................... 37
10.4 Closing Covenant............................................ 37
10.5 Other Items................................................. 37
10.6 Conditions.................................................. 37
10.7 Confidentiality............................................. 38
10.8 Cooperation................................................. 38
10.9 Control of Stations......................................... 38
10.10 Consents to Assignment...................................... 38
10.11 Waiver of Compliance with Bulk Sales Law.................... 39
10.12 Accounts Receivable......................................... 39
10.13 Completion of Schedules..................................... 39
ARTICLE 11
CONDITIONS OF CLOSING BY CBS
----------------------------
11.1 Representations, Warranties and Covenants................... 40
11.2 Governmental Consents....................................... 41
11.3 Governmental Authorizations................................. 41
11.4 Adverse Proceedings......................................... 41
11.5 Legal Opinion............................................... 41
11.6 Board Approval.............................................. 41
11.7 Third-Party Consents........................................ 42
11.8 Closing Documents........................................... 42
11.9 Financing Statements........................................ 42
11.10 Environmental Condition..................................... 42
11.11 Due Diligence............................................... 42
ARTICLE 12
CONDITIONS OF CLOSING BY SFX AND SFX
------------------------------------
BROADCASTING
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12.1 Representations, Warranties and Covenants................... 43
12.2 Governmental Consents....................................... 43
<PAGE>
Contents, p. 6
Page
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12.3 Government Authorization.................................... 43
12.4 Adverse Proceedings......................................... 43
12.5 Legal Opinion............................................... 44
12.6 Third-Party Consents........................................ 44
12.7 Closing Documents........................................... 44
12.8 Financing Statements........................................ 44
12.9 Environmental Condition..................................... 44
12.10 Due Diligence............................................... 44
ARTICLE 13
EXPENSES; TRANSFER TAXES; AND FEES
----------------------------------
13.1 Expenses; Transfer Taxes.................................... 44
13.2 Appraisal Fee............................................... 45
ARTICLE 14
DOCUMENTS TO BE DELIVERED AT CLOSING
------------------------------------
14.1 SFX's Documents............................................. 45
14.2 CBS's Documents............................................. 46
ARTICLE 15
INDEMNIFICATION
---------------
15.1 SFX's Indemnities........................................... 47
15.2 CBS's Indemnities........................................... 48
15.3 Survival of Representations and Warranties.................. 48
15.4 Procedures.................................................. 49
15.5 Limits on and Conditions of Indemnification................. 50
ARTICLE 16
TERMINATION RIGHTS
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<PAGE>
Contents, p. 7
Page
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16.1 Termination................................................. 51
16.2 Liability................................................... 52
16.3 Unwind...................................................... 52
ARTICLE 17
MISCELLANEOUS PROVISIONS
------------------------
17.1 Specific Performance........................................ 52
17.2 Risk of Loss................................................ 52
17.3 Further Assurances.......................................... 53
17.4 Benefit and Assignment...................................... 53
17.5 Headings.................................................... 53
17.6 Governing Law............................................... 53
17.7 Notices..................................................... 53
17.8 Counterparts................................................ 54
17.9 No Third Party Beneficiaries................................ 54
17.10 Public Announcements........................................ 54
17.11 Exclusive Jurisdiction and Consent to Service
to Process................................................ 54
17.12 Severability................................................ 55
17.13 Amendments and Waivers...................................... 55
17.14 Certain Definitions and Usage............................... 55
17.15 Entire Agreement............................................ 56
Schedule 1.2.5 SFX Excluded Assets
Schedule 1.4.5 CBS Excluded Assets
Schedule 3.2 Value of Exchanged Assets
Schedule 6.3 No Conflicts, etc.
Schedule 6.4 SFX Station Licenses and FCC Matters
Schedule 6.7 SFX Tangible Personal Property
Schedule 6.8 SFX Real Estate and SFX Real Estate
Contracts
Schedule 6.9 SFX Contracts
Schedule 6.11 SFX Environmental Matters
Schedule 6.12 SFX Intellectual Property
Schedule 6.13 SFX Financial Statements
<PAGE>
Contents , p.4
Page
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Schedule 6.14 SFX Station Personnel, etc.
Schedule 6.15 SFX Employee Benefit Plans
Schedule 6.16 SFX Litigation
Schedule 6.17 SFX Compliance with Laws
Schedule 6.19 SFX Insurance Policies
Schedule 6.20 SFX Other Liabilities
Schedule 6.21 SFX Material Adverse Change
Schedule 7.3 No Conflicts, etc.
Schedule 7.4 CBS Stations Licenses and FCC Matters
Schedule 7.7 CBS Tangible Personal Property
Schedule 7.8 CBS Real Estate Contracts
Schedule 7.9 CBS Contracts
Schedule 7.11 CBS Environmental Matters
Schedule 7.12 CBS Intellectual Property
Schedule 7.13 CBS Financial Statements
Schedule 7.14 CBS Stations Personnel, etc.
Schedule 7.15 CBS Employee Benefit Plans
Schedule 7.16 CBS Litigation
Schedule 7.17 CBS Compliance with Laws
Schedule 7.19 CBS Insurance Policies
Schedule 7.20 CBS Other Liabilities
Schedule 7.21 CBS Material Adverse Change
Schedule 11.5 SFX Legal Opinion
Schedule 12.5 CBS Legal Opinion
<PAGE>
EXECUTION COPY
ASSET EXCHANGE AGREEMENT
------------------------
THIS ASSET EXCHANGE AGREEMENT (the "Agreement") is made and entered
into as of this 25th day of September, 1996, by and among WHFS, INC. and
LIBERTY BROADCASTING OF MARYLAND INCORPORATED, both of which are Maryland
corporations (collectively, "SFX"), and SFX BROADCASTING, INC., a Delaware
corporation ("SFX Broadcasting"), and all the foregoing corporations have their
principal place of business at 150 East 58th Street, New York, New York 10155,
and CBS INC. ("CBS"), a New York corporation with its principal place of
business at 51 West 52nd Street, New York, New York 10019-6188.
W I T N E S S E T H:
--------------------
WHEREAS, SFX owns and operates radio station WHFS-FM in Washington,
D.C. (the "SFX Station") pursuant to licenses issued by the Federal
Communications Commission ("FCC"); and
WHEREAS, CBS owns and operates radio station KTXQ-FM in Fort Worth,
Texas and KRRW(FM) in Dallas, Texas (collectively, the "CBS Stations") pursuant
to licenses issued by the FCC; and
WHEREAS, SFX and CBS desire to exchange certain assets of the SFX
Station for certain assets of the CBS Stations, on the terms and subject to the
conditions set forth herein; and
WHEREAS, the transaction contemplated by this Agreement is intended to
be a like-kind exchange of assets between SFX and CBS in accordance with the
provisions of Section 1031 of the Internal Revenue Code of 1986, as amended
(the "Code").
<PAGE>
2
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements hereinafter set forth, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE 1
EXCHANGE OF ASSETS
------------------
1.1 Transfer of SFX Station Assets. On the Closing Date, SFX shall
exchange, assign, transfer and convey to CBS, and CBS shall acquire and assume
from SFX, substantially all of the assets, properties, interests and rights of
SFX of whatsoever kind and nature, real and personal, tangible and intangible,
owned or leased by SFX, which are used or held for use primarily in the
operation of the SFX Station, and which, in the case of physical or tangible
assets and properties, are located at the SFX Station's broadcasting studios,
offices and transmitter site in Washington, D.C., as the same shall exist on
the Closing Date, including the following (but excluding the assets specified
in Section 1.2) (the "SFX Station Assets"):
1.1.1 all of SFX's rights in and to the licenses, permits and other
authorizations issued to SFX by any governmental authority and included in the
SFX Station Assets, including those issued by the FCC (the latter hereafter
referred to as the "SFX Station Licenses") described in Schedule 6.4 along with
renewals or modifications of such items between the date hereof and the Closing
Date as well as all of SFX's rights in and to the call letters "WHFS-FM";
1.1.2 all of SFX's owned real estate used or held for use primarily in
the operation of the SFX Station, including the land, building and fixtures,
more fully described in Section 6.8 and Schedule 6.8, together with any
additions thereto between the date hereof and the Closing Date (the "SFX Real
Estate");
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3
1.1.3 all equipment, office furniture and fixtures, office materials
and supplies, inventory, spare parts and other tangible personal property of
every kind and description, and SFX's rights therein, owned, leased or held by
SFX for use primarily in the operation of the SFX Station, together with any
replacements of equal quality thereof and additions thereto, made between the
date hereof and the Closing Date, and less any retirements or dispositions
thereof made between the date hereof and the Closing Date in the ordinary
course of business and consistent with past practices of SFX and in accordance
with this Agreement;
1.1.4 all of SFX's rights in and under certain contracts, agreements
or leases, written or oral, described in Schedules 6.8 and 6.9 (the "SFX
Contracts");
1.1.5 all of SFX's rights in and to the trademarks, trade names,
service marks, franchises, copyrights, including registrations and applications
for registration of any of them, jingles, logos and slogans or licenses to use
the same described in Schedule 6.12 (the "SFX Intellectual Property") and any
additions thereto between the date hereof and the Closing Date;
1.1.6 all of SFX's rights in and to the files, records, and books of
account, which are located at the premises of the SFX Station or are used or
held for use primarily in the operation of the SFX Station, including
programming information and studies, technical information and engineering
data, news and advertising studies or consulting reports, marketing and
demographic data, sales correspondence, lists of advertisers, promotional
materials, credit and sales reports and filings with the FCC, copies of all
written SFX Contracts to be assigned hereunder, employee records, logs and all
software programs used primarily in connection with the operation of the SFX
Station; and
1.1.7 all of SFX's rights under manufacturers' and
<PAGE>
4
vendors' warranties relating to items included in the SFX Station Assets and
all similar rights against third parties relating to items included in the SFX
Station Assets.
The SFX Station Assets shall be transferred to CBS free and clear of
all debts, security interests, mortgages, trusts, claims, pledges, conditional
sales agreements or other liens, liabilities and encumbrances whatsoever
("Liens").
1.2 SFX Excluded Assets. Notwithstanding anything to the contrary
contained herein, it is expressly understood and agreed that the SFX Station
Assets shall not include the following assets along with all rights, title and
interest therein (the "SFX Excluded Assets"):
1.2.1 all cash, cash equivalents or similar type investments of SFX,
such as certificates of deposit, Treasury bills and other marketable securities
on hand and/or in banks;
1.2.2 all of SFX's accounts receivable for services performed by SFX
in connection with its operation of the SFX Station prior to the Closing Date;
1.2.3 SFX's corporate seal, minute books, charter documents, corporate
stock record books and such other books and records as pertain to the
organization, existence or share capitalization of SFX and duplicate copies of
such records as are necessary to enable SFX to file its tax returns and reports
as well as any other records or materials relating to SFX generally and not
involving specific aspects of the SFX Station's operations;
1.2.4 the use of the name and mark SFX Broadcasting and any derivation
therefrom;
1.2.5 all other rights, interests or intangible assets of SFX which
are not used in or held for use primarily in the
<PAGE>
5
operation of the SFX Station or which are listed in Schedule 1.2.5; and
1.2.6 all profit sharing or cash or deferred (Section 401(k)) plans
and trusts and the assets thereof and any other employee benefit plan or
arrangement and the assets thereof, if any, maintained by SFX for the SFX
Station.
1.3 Transfer of CBS Stations Assets. On the Closing Date, CBS shall
exchange, transfer, assign and convey to SFX, and SFX shall acquire and assume
from CBS, substantially all of the assets, properties, interests and rights of
CBS of whatsoever kind and nature, real and personal, tangible and intangible,
owned or leased by CBS, which are used or held for use primarily in the
operation of the CBS Stations, and which, in the case of physical or tangible
assets and properties, are located at the CBS Stations' broadcasting studios,
offices and transmitter sites in Fort Worth and Dallas, Texas, as the same
shall exist on the Closing Date, including the following (but excluding the
assets specified in Section 1.4) (the "CBS Stations Assets"):
1.3.1 all of CBS's rights in and to the licenses, permits and other
authorizations issued to CBS by any governmental authority and included in the
CBS Stations Assets, including those issued by the FCC (the latter hereafter
referred to as the "CBS Stations Licenses") described in Schedule 7.4 along
with renewals or modifications of such items between the date hereof and the
Closing Date as well as all of CBS's rights in and to the call letters
"KKRW-FM";
1.3.2 all of CBS's rights to lease and use the real estate used or
held for use primarily in the operation of the CBS Stations, including the
land, building and fixtures, more fully described in Section 7.8 and Schedule
7.8, together with any additions thereto between the date hereof and the
Closing Date (the "CBS Real Estate");
1.3.3 all equipment, office furniture and fixtures, office materials
and supplies, inventory, spare parts and other tangible personal property of
every kind and description, and CBS's rights therein, owned, leased or held by
CBS for use primarily in the operation of the CBS Stations, together with any
replacements of equal quality thereof and additions thereto, made
<PAGE>
6
between the date hereof and the Closing Date, and less any retirements or
dispositions thereof made between the date hereof and the Closing Date in the
ordinary course of business and consistent with past practices of CBS and in
accordance with this Agreement;
1.3.4 all of CBS's rights in and under certain contracts, agreements
or leases, written or oral, described in Schedules 7.8 and 7.9 (the "CBS
Contracts");
1.3.5 all of CBS's rights in and to the trademarks, trade names,
service marks, franchises, copyrights, including registrations and applications
for registration of any of them, jingles, logos and slogans or licenses to use
the same described in Schedule 7.12 (the "CBS Intellectual Property") and any
additions thereto between the date hereof and the Closing Date;
1.3.6 all of CBS's rights in and to the files, records, and books of
account, which are located at the premises of the CBS Stations or are used or
held for use primarily in the operation of the CBS Stations, including
programming information and studies, technical information and engineering
data, news and advertising studies or consulting reports, marketing and
demographic data, sales correspondence, lists of advertisers, promotional
materials, credit and sales reports and filings with the FCC, copies of all
written CBS Contracts to be assigned hereunder, employee records, logs and all
software programs used primarily in connection with the operation of the CBS
Stations; and
1.3.7 all of CBS's rights under manufacturers' and vendors' warranties
relating to items included in the CBS Stations Assets and all similar rights
against third parties relating to items included in the CBS Stations Assets.
The CBS Stations Assets shall be transferred to SFX free and clear of
all Liens.
1.4 CBS Excluded Assets. Notwithstanding anything to the contrary
contained herein, it is expressly understood and agreed that the CBS Stations
Assets shall not include the following
APITAL PRINTING SYSTEMS]
<PAGE>
7
assets along with all rights, title and interest therein (the "CBS Excluded
Assets"):
1.4.1 all cash, cash equivalents or similar type investments of CBS,
such as certificates of deposit, Treasury bills and other marketable securities
on hand and/or in banks;
1.4.2 all of CBS's accounts receivable for services performed by CBS
in connection with its operation of the CBS Stations prior to the Closing Date;
1.4.3 CBS's corporate seal, minute books, charter documents, corporate
stock record books and such other books and records as pertain to the
organization, existence or share capitalization of CBS and duplicate copies of
such records as are necessary to enable CBS to file its tax returns and reports
as well as any other records or materials relating to CBS generally and not
involving specific aspects of the CBS Stations' operations;
1.4.4 the use of the name and mark CBS, CBS Broadcasting and any
derivation therefrom;
1.4.5 all other rights, interests or intangible assets of CBS which
are not used in or held for use primarily in the operation of the CBS Stations
or which are listed in Schedule 1.4.5; and
1.4.6 all profit sharing or cash or deferred (Section 401(k)) plans
and trusts and the assets thereof and any other employee benefit plan or
arrangement and the assets thereof, if any, maintained by CBS for the CBS
Stations.
ARTICLE 2
ASSUMPTION OF OBLIGATIONS
-------------------------
2.1 Assumption of Obligations by CBS. Subject to the provisions of
this Section 2.1 and Section 2.2, on the Closing Date, CBS shall assume and
undertake to pay, satisfy or discharge the liabilities, obligations and
commitments of SFX arising or to be performed on or after the Closing Date
under (i) the SFX
<PAGE>
8
Contracts listed in Schedules 6.8 and 6.9 and (ii) any other contracts entered
into between the date hereof and the Closing Date which CBS may in its sole
discretion expressly agree in writing to assume. All of the foregoing
liabilities and obligations shall be referred to herein collectively as the
"CBS Assumed Liabilities."
2.2 SFX Retained Liabilities. Except as expressly set forth in Section
2.1, CBS shall not assume or be deemed to assume, under this Agreement or
otherwise by reason of the transactions contemplated hereby, any liabilities,
obligations or commitments of SFX of any nature whatsoever. All of such
liabilities and obligations shall be referred to herein collectively as the
"SFX Retained Liabilities."
2.3 Assumption of Obligations by SFX. Subject to the provisions of
this Section 2.3 and Section 2.4, on the Closing Date, SFX shall assume and
undertake to pay, satisfy or discharge the liabilities, obligations and
commitments of CBS arising or to be performed on or after the Closing Date
under (i) the CBS Contracts listed in Schedules 7.8 and 7.9 and (ii) any other
contracts entered into between the date hereof and the Closing Date which SFX
may in its sole discretion expressly agree in writing to assume. All of the
foregoing liabilities and obligations shall be referred to herein collectively
as the "SFX Assumed Liabilities."
2.4 CBS Retained Liabilities. Except as expressly set forth in Section
2.3, SFX expressly does not, and shall not, assume or be deemed to assume,
under this Agreement or otherwise by reason of the transactions contemplated
hereby, any liabilities, obligations or commitments of CBS of any nature
whatsoever. All of such liabilities and obligations shall be referred to herein
collectively as the "CBS Retained Liabilities."
<PAGE>
9
ARTICLE 3
PRORATION AND VALUATION
-----------------------
3.1 Proration of Income and Expenses.
3.1.1 Except as otherwise provided herein, all income and expenses
arising from the conduct of the business and operations of the SFX Station and
the CBS Stations shall be prorated between CBS and SFX in accordance with
generally accepted accounting principles as of the Closing Date. Such
prorations shall include all real estate and other property taxes (but
excluding taxes arising by reason of the transfer of the SFX Station Assets and
CBS Stations Assets (collectively referred to as the "Station Assets") as
contemplated hereby, which, shall be paid as set forth in Article 13), business
and license fees, music and other license fees, wages and salaries of
employees, including accruals up to the Closing Date for bonuses, commissions,
sick pay and similar prepaid and deferred items (but excluding vacation which
shall be governed by Sections 8.2.3 and 9.2.3) attributable to the ownership
and operation of the SFX Station and the CBS Stations (collectively referred to
as the "Stations").
3.1.2 The prorations and adjustments contemplated by this Section, to
the extent practicable, shall be made on the Closing Date and the party owing
any net amount hereunder shall pay such amount to the other party on such date.
As to those prorations and adjustments not capable of being ascertained on the
Closing Date, an adjustment and proration shall be made within ninety (90)
calendar days of the Closing Date.
3.1.3 In the event of any disputes between the parties as to such
adjustments, the amounts not in dispute shall nonetheless be paid at the time
provided in Section 3.1.2 and such disputes shall be determined by an
independent certified public accountant mutually acceptable to the parties, and
the fees and expenses of such accountant shall be paid one-half by SFX and
one-half by CBS.
3.2 Value of Exchanged Assets. As set forth on Schedule 3.2 which
shall be agreed upon and delivered at the
<PAGE>
10
Closing, (a) the SFX Station Assets consisting of tangible personal property
are being exchanged for the CBS Stations Assets consisting of tangible personal
property; (b) the SFX Station Assets, if any, consisting of real property are
being exchanged for the CBS Stations Assets, if any, consisting of real
property; and (c) the SFX Station Assets consisting of intangible property are
being exchanged for the CBS Stations Assets consisting of intangible property.
The parties further agree that the values on the Closing Date of the respective
SFX Station Assets and the respective CBS Stations Assets will be based on an
appraisal of such assets by an independent valuation firm selected by CBS and
approved by SFX. The appraised values will be reflected on Schedule 3.2 and the
parties will not take any position inconsistent with such values and will
prepare and file all returns and reports relating to the exchange contemplated
by this Agreement, including all federal, state and local income tax returns,
in a manner which is consistent with Schedule 3.2.
ARTICLE 4
CLOSING
-------
4.1 Closing. Except as otherwise mutually agreed upon by SFX and CBS,
the consummation of the transactions contemplated herein (the "Closing") shall
occur within ten (10) business days after the FCC Consent (as defined in
Section 5.1) has been obtained (whether or not the order giving the FCC Consent
has become final) and the expiration of the applicable waiting period under the
HSRA (as defined in Section 5.3), or such other date as may be mutually agreed
to by the parties but in no event later than June 30, 1997 ("Closing Date").
The Closing shall be deemed effective as of 11:59 p.m. on the Closing Date. The
Closing shall be held at the offices of SFX in New York or at such other place
as the parties hereto may agree.
<PAGE>
11
ARTICLE 5
GOVERNMENTAL CONSENTS
---------------------
5.1 FCC Consent. It is specifically understood and agreed by CBS and
SFX that the Closing and the assignment of the SFX Station Licenses and the CBS
Stations Licenses (collectively referred to as the "Station Licenses") and the
transfer of the Station Assets is expressly conditioned on and is subject to
the prior consent and approval of the FCC (whether or not the order giving the
FCC Consent has become final) ("FCC Consent") without the imposition of any
conditions on the transfer of the Station Licenses which are materially adverse
to either party.
5.2 FCC Applications. Promptly upon the execution of this Agreement,
the parties shall proceed to prepare for filing the necessary FCC applications
for assignment of the Station Licenses (the "FCC Applications"), which shall be
filed no later than ten (10) business days after the date hereof. SFX and CBS
shall thereafter prosecute the FCC Applications with all reasonable diligence
and otherwise use their best efforts to obtain the grant of the FCC
Applications as expeditiously as practicable (but neither SFX nor CBS shall
have any obligation to satisfy complainants or the FCC by taking any steps
which would have a Material Adverse Effect (as defined in Section 17.14) on it
or any of its Affiliates (as defined in Section 17.14) or with respect to the
SFX Station Assets or the CBS Stations Assets, as applicable). If the FCC
Consent imposes any condition on either party hereto, such party shall use its
best efforts to comply with such condition; provided, however, that neither
party shall be required hereunder to comply with any condition which would have
a Material Adverse Effect on it or any of its Affiliates or with respect to the
SFX Station Assets or the CBS Stations Assets, as applicable. If
reconsideration or judicial review is sought with respect to the FCC Consent,
the party affected shall vigorously oppose such efforts for reconsideration or
judicial review; provided, however, that nothing herein shall be construed to
limit either party's right to terminate this Agreement pursuant to Article 16.
5.3 Compliance with HSRA. SFX and CBS shall make or cause to be made
in a timely fashion, and in any event within fifteen
<PAGE>
12
(15) business days after the date hereof, all filings which are required in
connection with the transactions contemplated hereby under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSRA"), and
shall furnish to the other party all information that the other reasonably
requests in connection with such filings. The parties shall promptly comply
with all requests for further documents and information made by any
governmental department or agency in connection with such filings and shall use
their best efforts to obtain early termination of all waiting periods under the
HSRA. The transfer of the Station Assets hereunder is conditioned upon the
expiration of the applicable waiting period under the HSRA without the
institution of any action with respect to the consummation of the transactions
contemplated hereunder.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SFX AND SFX BROADCASTING
----------------------------------------------------------
SFX and SFX Broadcasting hereby make the following representations and
warranties to CBS, each of which is true and correct on the date hereof, shall
remain true and correct for the period specified in Section 15.3, shall be
unaffected by any investigation heretofore or hereafter made by CBS, or any
notice to CBS other than in the schedules to this Agreement and shall survive
the Closing.
6.1 Organization and Standing. Each of SFX and SFX Broadcasting is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and is duly qualified to do business in the State
of Texas. SFX has the corporate power and authority to own, lease and operate
the SFX Station Assets and to carry on the business of the SFX Station as now
being conducted and as proposed to be conducted by SFX between the date hereof
and the Closing Date.
6.2 Authorization and Binding Obligation. SFX and SFX Broadcasting
have the corporate power and authority to enter into and perform this Agreement
and the transactions contemplated hereby, and SFX's and SFX Broadcasting's
execution, delivery and performance of this Agreement, and the transactions
contemplated
<PAGE>
13
hereby have been duly and validly authorized by all necessary corporate action
on their part. This Agreement has been duly executed and delivered by SFX and
SFX Broadcasting and this Agreement constitutes, and the agreements to be
executed in connection herewith will constitute, the valid and binding
obligation of SFX and SFX Broadcasting enforceable against SFX and SFX
Broadcasting in accordance with their terms.
6.3 Absence of Conflicting Agreements or Required Consents. Except as
set forth in Article 5 with respect to governmental consents, Schedules 6.8 and
6.9 with respect to consents required in connection with the assignment of
certain SFX Contracts and as set forth in Schedule 6.3 with respect to any
other consents, the execution, delivery and performance of this Agreement by
SFX and SFX Broadcasting: (a) do not require the consent of any third party;
(b) will not conflict with, result in a breach of, or constitute a violation of
or default under, the provisions of SFX's or SFX Broadcasting's articles of
incorporation or By-laws or any applicable law, judgment, order, injunction,
decree, rule, regulation or ruling of any governmental authority to which any
of SFX or SFX Broadcasting is a party or by which they or the SFX Station
Assets are bound; (c) will not, either alone or with the giving of notice or
the passage of time, or both, conflict with, constitute grounds for termination
of or result in a breach of the terms, conditions or provisions of, or
constitute a default under, any SFX Contract, agreement, instrument, license or
permit to which SFX, SFX Broadcasting or the SFX Station Assets are now
subject; and (d) will not result in the creation of any Lien on any of the SFX
Station Assets.
6.4 Government Authorizations. Schedule 6.4 contains a true and
complete list of the SFX Station Licenses and other material licenses, permits
or other authorizations from governmental and regulatory authorities which are
required for the lawful conduct of the business and operations of the SFX
Station in the manner and to the full extent it is presently conducted. SFX is
the authorized legal holder of the SFX Station Licenses and other licenses,
permits and authorizations listed in Schedule 6.4, none of which is subject to
any restrictions or conditions which would limit in any respect the full
operation of the SFX Station as now operated. Except as set forth in Schedule
6.4, there are no applications, complaints or
<PAGE>
14
proceedings pending or, to the best of SFX's knowledge, threatened as of the
date hereof before the FCC relating to the business or operations of the SFX
Station other than applications, complaints or proceedings which affect the
broadcasting industry generally. SFX has delivered to CBS true and complete
copies of the SFX Station Licenses, including any and all amendments and other
modifications thereto. The SFX Station Licenses and the other licenses, permits
or other authorizations from governmental and regulatory authorities listed in
Schedule 6.4 are in good standing, are in full force and effect and are
unimpaired by any act or omission of SFX or its officers, directors or
employees; and the operation of the SFX Station is in accordance with the SFX
Station Licenses and the underlying construction permits. No proceedings are
pending or, to the knowledge of SFX, are threatened which may result in the
revocation, modification, non-renewal or suspension of the SFX Station
Licenses, the denial of any pending applications, the issuance of any cease and
desist order, the imposition of any administrative actions by the FCC with
respect to the SFX Station Licenses or which may affect SFX's ability to
continue to operate the SFX Station as it is currently operated. The SFX
Station is licensed by the FCC to operate, and is operating, with maximum
facilities for its class. The SFX Station is not short-spaced, on a
grandfathered basis or otherwise, to any existing station, outstanding
construction permit or pending application therefor, or to any existing or
proposed broadcast radio allotment. SFX has not received any complaint that the
SFX Station is causing objectionable interference to the transmissions of any
other broadcast station or communications facility. To the best of SFX's
knowledge, no other broadcast station or communications facility is causing
objectionable interference to the Station's transmissions or the public's
reception of such transmissions. SFX has no reason to believe that the SFX
Station Licenses will not be renewed in the ordinary course. All material
reports, forms and statements required to be filed by SFX with the FCC with
respect to the SFX Station since the grant of the last renewal of the SFX
Station Licenses have been filed and are substantially complete and accurate.
To the best of SFX's knowledge, there are no facts which, under the
Communications Act of 1934, as amended, or the existing rules and regulations
of the FCC, would disqualify SFX as an assignor of the SFX Station Licenses or
an assignee of the CBS Stations Licenses.
<PAGE>
15
6.5 Compliance with Regulations. The operation of the SFX Station and
all of the SFX Station Assets are in compliance with (i) all applicable
engineering standards required to be met under applicable FCC rules, and (ii)
all other applicable federal, state and local rules, regulations, requirements
and policies, including all applicable painting and lighting requirements of
the FCC and the Federal Aviation Administration and ANSI Radiation Standards
C95.1 - 1982 to the extent required to be met under applicable FCC rules and
regulations, and there are no existing claims known to SFX to the contrary.
6.6 Taxes. All federal, state and local income, franchise, sales, use,
property, excise, payroll and other tax returns and reports required to be
filed by law where the failure to file such returns on a duly and timely basis
could result in a Lien on the SFX Station Assets or the imposition on CBS of
any liability for taxes or assessments have been duly and timely filed in the
proper form with the appropriate governmental authority. All taxes, fees and
assessments of whatever nature due or payable pursuant to such returns or
otherwise have been paid, except for such amounts as are being contested
diligently, in the appropriate forum and in good faith, where the failure to
pay or contest such amounts could result in a Lien on the SFX Station Assets or
the imposition on CBS of any liability for any taxes or assessments. There are
no tax audits pending and no outstanding agreements or waivers extending the
statutory period of limitations applicable to any federal, state or local
income tax return for any period, the result of which could result in a Lien on
the SFX Station Assets or the imposition on CBS of any liability for any taxes
or assessments. There are no governmental investigations or other legal,
administrative or tax proceedings pursuant to which SFX is or could be made
liable for any taxes, penalties, interest or other charges, the liability for
which could extend to CBS as transferee of the SFX Station Assets, or which
could result in a Lien on the SFX Station Assets and, to the best of SFX's
knowledge, no event has occurred that could impose on CBS any liability for any
taxes, penalties or interest due or to become due from SFX.
6.7 Personal Property. Schedule 6.7 contains a list of all tangible
personal property and assets owned or held by SFX and used primarily in the
conduct of the business and operations of
<PAGE>
16
the SFX Station. Except as disclosed in Schedule 6.7, and except as may be
subject to lease agreements of SFX listed on Schedule 6.9, SFX owns and has,
and will have on the Closing Date, good and marketable title to all such
property (and to all other tangible personal property and assets to be
transferred to CBS hereunder), and none of such property is, or at the Closing
will be, subject to any Lien. All of the items of the tangible personal
property and assets included in the SFX Station Assets are in good operating
condition (ordinary wear and tear excepted) and are available for immediate use
in the conduct of the business and operations of the SFX Station. The technical
equipment, constituting a part of the tangible personal property transferred
hereunder, has been maintained in accordance with industry practice and is in
good operating condition (ordinary wear and tear excepted) and complies with
all applicable rules and regulations of the FCC and the terms of the SFX
Station Licenses.
6.8 Real Property.
6.8.1 Schedule 6.8 contains a complete and accurate list of all real
property owned and leased by SFX which is used primarily by the SFX Station and
all agreements, leases and contracts of SFX relating to the towers,
transmitter, booster, studio site and offices of the SFX Station (collectively
the "SFX Real Estate Contracts") and a list of the applicable leases.
6.8.2 The SFX Real Estate Contracts listed on Schedule 6.8 constitute
valid and binding obligations of SFX and, to the best of SFX's knowledge, of
all other persons purported to be parties thereto and are in full force and
effect as of the date hereof and will on the Closing Date constitute valid and
binding obligations of SFX and, to the best of SFX's knowledge, of all other
persons purported to be parties thereto and shall be in full force and effect.
SFX is not in default under any of such SFX Real Estate Contracts and has not
received or given written notice of any default thereunder from or to any of
the other parties thereto and will not have received any such notice at or
prior to the Closing. To the best of SFX's knowledge, there are no present
disputes or claims with respect to offsets or defenses by either landlord or
tenant against the other under any such lease. SFX has delivered to CBS true
and complete
<PAGE>
17
copies of all SFX Real Estate Contracts.
6.8.3 SFX has and shall convey to CBS good and insurable fee simple
title to the owned SFX Real Estate free and clear of any Liens. Each parcel of
SFX Real Estate has all appropriate easements and access required to ensure
uninterrupted use thereof. All buildings, structures, improvements and fixtures
comprising part of the real properties owned or leased by SFX in the operation
of the SFX Station are in good operating condition (ordinary wear and tear
excepted).
6.9 Contracts. Schedule 6.9 lists the SFX Contracts as of the date of this
Agreement which are to be assumed by CBS as of the Closing Date. Those SFX
Contracts requiring the consent of a third party to assignment which SFX and
CBS agree are critical to the consummation of the transactions contemplated
hereby are identified as "SFX Material Contracts" and are so marked on Schedule
6.9. Except as noted in Schedule 6.9, SFX has delivered to CBS true and
complete copies of all written SFX Contracts, including any and all amendments
and other modifications to such SFX Contracts, and written summaries of all
oral SFX Contracts. All such SFX Contracts are valid, binding and enforceable
by SFX in accordance with their respective terms. SFX has complied with all
such SFX Contracts and is not in default under any of such SFX Contracts, and
to the best of SFX's knowledge, no other contracting party is in default under
any of such SFX Contracts. No other party to any such SFX Contract has made or
asserted, or, to the best of SFX's knowledge has, any defense, setoff or
counterclaim under any such SFX Contract, no such other party has exercised any
option granted to it to cancel or terminate its agreement, to shorten the term
of its agreement, or to renew or extend the term of its agreement and SFX has
not received any notice to that effect. Schedule 6.9 also contains a true and
complete current trade barter summary with respect to the SFX Station,
including applicable asset and liability balances with respect thereto (which
trade barter summary shall be updated as of the Closing).
6.10 Sufficiency of Assets. The SFX Station Assets and all other rights to
be conveyed to CBS hereunder are sufficient to carry on the conduct of the
operation of the SFX Station as presently conducted.
<PAGE>
18
6.11 Environmental; Industrial Hygiene and Safety. SFX has complied and is
in compliance with the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. ss.ss. 9601 et seq. ("CERCLA"),
Toxic Substances Control Act, 15 U.S.C. ss.ss. 2601 et seq. ("TSCA"), the
Resource Conservation and Recovery Act of 1976, 42 U.S.C. ss.ss. 6901 et seq.
as amended ("RCRA"), the Occupational Safety and Health Act of 1970, 19 U.S.C.
ss.651 et seq. as amended ("OSHA"), and all other federal, state and local
environmental, industrial hygiene and safety laws, rules and regulations
applicable to the SFX Station and its operations, including the FCC's
guidelines regarding RF radiation. SFX has not unlawfully disposed of any
hazardous waste (as defined below) or hazardous substance including
Polychlorinated Byphenyls ("PCBs") in connection with the operation of the SFX
Station. Except as set forth on Schedule 6.11, the technical equipment included
in the SFX Station Assets does not contain any PCBs. No hazardous waste has
been disposed of by SFX, and to the best of SFX's knowledge, no hazardous waste
has been disposed of by any other person, on the SFX Real Estate. As used in
this Agreement, the term "hazardous waste" shall mean as defined in RCRA and in
the equivalent state statute under Texas law. Except as set forth on Schedule
6.11, there are no underground tanks at the SFX Station. Except as set forth on
Schedule 6.11, there is no asbestos insulation or other asbestos-containing
materials at the SFX Station.
6.12 SFX Intellectual Property. Schedule 6.12 is a true and complete list
of all SFX Intellectual Property applied for, issued to or owned by SFX or
under which SFX is a licensee, and used or held for use primarily in the
conduct of the business and operations of the SFX Station referred to in
Section 1.1.5 (but excluding those included in the SFX Excluded Assets and
referred to in Section 1.2). Except as set forth on Schedule 6.12, there are no
agreements with third parties which limit or restrict the right of the SFX
Station to use or register any of the SFX Intellectual Property. The SFX
Station is not being operated in a manner that infringes any trademark,
copyright or other intellectual property right of any third party or otherwise
violates the rights of any third party, and no claim has been made or, to the
best of SFX's knowledge, threatened, alleging any such violation. To the best
of SFX's knowledge, there has been no violation by others of any right of SFX
in any of the SFX
<PAGE>
19
Intellectual Property. Except as set forth on Schedule 6.12, all registrations
for the SFX Intellectual Property are valid and in good standing. True and
complete copies of all documents relating to the SFX Intellectual Property have
been delivered or made available to CBS.
6.13 Financial Statements. Set forth in Schedule 6.13 are complete copies
of the unaudited statements of operating income for the SFX Station for the
periods from January 1, 1995 to December 31, 1995 and January 1, 1996 through
June 30, 1996, and the unaudited balance sheets for the SFX Station dated as of
December 31, 1995 and June 30, 1996 (the "SFX Financial Statements"). The SFX
Financial Statements for the 1996 periods are subject to certain normal
year-end adjustments. The SFX Financial Statements are true and correct in all
material respects and have been prepared in accordance with the books and
records of SFX and in accordance with the policies and procedures of SFX
applicable thereto, consistently applied, which differ from generally accepted
accounting principles in the respects set forth in Schedule 6.13. The SFX
Financial Statements fairly present in all material respects the financial
condition and results of operations of the SFX Station for the periods
indicated.
6.14 Personnel.
6.14.1 Schedule 6.14 contains a true and complete list of all persons
employed at the SFX Station, including a description of material compensation
arrangements (other than employee benefit plans set forth in Schedule 6.15) and
a list of other terms of any and all agreements affecting such persons. SFX has
not received notification that any of the current key employees of SFX at the
SFX Station presently plan to terminate their employment, whether by reason of
the transactions contemplated hereby or otherwise.
6.14.2 SFX is not a party to any contract with any labor organization,
nor has SFX agreed to recognize any union or other collective bargaining unit,
nor has any union or other collective bargaining unit been certified as
representing any of SFX's employees at the SFX Station. SFX has no knowledge of
any organizational effort currently being made or threatened by or on
<PAGE>
20
behalf of any labor union with respect to any of SFX's employees at the SFX
Station.
6.14.3 Except as disclosed in Schedule 6.14, SFX has complied with all
laws relating to the employment of labor, including the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and those laws relating to
wages, hours, collective bargaining, unemployment insurance, workers'
compensation, equal employment opportunity and payment and withholding of taxes
in connection with the operation of the SFX Station.
6.15 SFX Employee Benefit Plans. Schedule 6.15 contains a true and
complete list of each written and unwritten pension, retirement,
profit-sharing, deferred compensation bonus, incentive, performance, stock
option, medical, hospitalization, vision, dental or other health, life,
disability, severance, termination or other employee benefit plan, program,
arrangement, agreement, policy or understanding applicable to the employees of
the SFX Station (each, a "SFX Employee Benefit Plan"). Each SFX Employee
Benefit Plan complies in all material respects, and has been operated and
administered in all material respects in accordance with, all applicable
requirements of all laws and regulations of any public body or authority,
including the Consolidated Omnibus Budget Reconciliation Act ("COBRA") and the
regulations thereunder, and no "reportable event", "prohibited transaction" (as
such terms are defined in ERISA and the Code, as applicable) or termination has
occurred with respect to any SFX Employee Benefit Plan. All contributions
required under applicable law or the terms of the SFX Employee Benefit Plans
have been made within the time prescribed. CBS shall have no obligations or
liabilities under such SFX Employee Benefit Plans on or after the Closing Date
and any benefits due to any employee of the SFX Station under such SFX Employee
Benefit Plans shall be the sole responsibility of SFX.
6.16 Litigation. Except as set forth in Schedule 6.16, as of the date
hereof, SFX is subject to no judgment, award, order, writ, injunction,
arbitration decision or decree affecting the conduct of the business of the SFX
Station or the SFX Station Assets, and there is no litigation, investigation or
proceeding pending or, to the best of SFX's knowledge, threatened, against
<PAGE>
21
SFX with respect to the SFX Station in any federal, state or local court, or
before any administrative agency or arbitrator (including any proceeding which
seeks the forfeiture of, or opposes the renewal of, the SFX Station Licenses),
or before any other tribunal duly authorized to resolve disputes, or which
seeks to enjoin or prohibit, or otherwise questions the validity of, any action
taken or to be taken pursuant to or in connection with this Agreement. In
particular, but without limiting the generality of the foregoing, there are no
applications, complaints or proceedings pending or, to the best of SFX's
knowledge, threatened before the FCC or any other governmental organization
with respect to the business or operations of the SFX Station other than
applications, complaints or proceedings which affect the broadcasting industry
generally.
6.17 Compliance With Laws. Except as set forth in Schedule 6.17, SFX has
not received any notice asserting any non-compliance by it in connection with
the business or operation of the SFX Station with any applicable statute, rule
or regulation, whether federal, state or local. SFX is not in default with
respect to any judgment, order, injunction or decree of any court,
administrative agency or other governmental authority or any other tribunal
duly authorized to resolve disputes in connection with the business or
operation of the SFX Station. SFX is in compliance with all laws, regulations
and governmental orders applicable to the conduct of the business or operation
of the SFX Station, and its present use of the SFX Station Assets does not
violate any of such laws, regulations or orders.
6.18 Commissions or Finder's Fees. None of SFX, SFX Broadcasting, their
affiliates nor any person or entity acting on behalf of any of the foregoing
has agreed to pay a commission, finder's fee or similar payment in connection
with this Agreement or any matter related hereto to any person or entity.
6.19 Insurance. SFX currently maintains in full force and effect the
property damage, liability and other insurance coverages with respect to the
SFX Station Assets which are listed on Schedule 6.19.
6.20 Undisclosed Obligations. Except as reflected in the SFX Financial
Statements or as disclosed on Schedule 6.20 or on
<PAGE>
22
any other Schedule to this Agreement, SFX does not have any liability or
obligation of any kind with respect to the SFX Station or the SFX Station
Assets, whether accrued, absolute, fixed or contingent, known or unknown, other
than liabilities and obligations not being assumed by CBS.
6.21 No Material Adverse Change. Except as set forth on Schedule 6.21,
since June 30, 1996, there has been no change in circumstances which has had a
Material Adverse Effect on the SFX Station, nor to the best knowledge of SFX is
any such change threatened, nor has there been any damage, destruction or loss
which could reasonably be expected to have a Material Adverse Effect on the SFX
Station, whether or not covered by insurance.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF CBS
-------------------------------------
CBS hereby makes the following representations and warranties to SFX and
SFX Broadcasting, each of which is true and correct on the date hereof, shall
remain true and correct for the period specified in Section 15.3, shall be
unaffected by any investigation heretofore or hereafter made by SFX or SFX
Broadcasting, or any notice to SFX or SFX Broadcasting other than in the
Schedules to this Agreement and shall survive the Closing.
7.1 Organization and Standing. CBS is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York,
is duly qualified to do business in the State of Texas, and has the corporate
power and authority to own, lease and operate the CBS Stations Assets and to
carry on the business of the CBS Stations as now being conducted and as
proposed to be conducted by CBS between the date hereof and the Closing Date.
7.2 Authorization and Binding Obligation. Subject to the approval of the
Westinghouse Electric Corporation ("WELCO") and CBS Boards, CBS has the
corporate power and authority to enter into and perform this Agreement and the
transactions contemplated hereby, and CBS's execution, delivery and performance
of this Agreement, and the transactions contemplated hereby have been
<PAGE>
23
duly and validly authorized by all necessary corporate action on its part. This
Agreement has been duly executed and delivered by CBS and this Agreement
constitutes, and the agreements to be executed in connection herewith will
constitute, the valid and binding obligation of CBS enforceable against CBS in
accordance with their terms.
7.3 Absence of Conflicting Agreements or Required Consents. Except for the
approval of the WELCO and CBS Boards and as set forth in Article 5 with respect
to governmental consents, Schedules 7.8 and 7.9 with respect to consents
required in connection with the assignment of certain CBS Contracts and as set
forth in Schedule 7.3 with respect to any other consents, the execution,
delivery and performance of this Agreement by CBS: (a) do not require the
consent of any third party; (b) will not conflict with, result in a breach of,
or constitute a violation of or default under, the provisions of CBS's articles
of incorporation or By-laws or any applicable law, judgment, order, injunction,
decree, rule, regulation or ruling of any governmental authority to which CBS
is a party or by which it or the CBS Stations Assets are bound; (c) will not,
either alone or with the giving of notice or the passage of time, or both,
conflict with, constitute grounds for termination of or result in a breach of
the terms, conditions or provisions of, or constitute a default under, any CBS
Contract, agreement, instrument, license or permit to which CBS or the CBS
Stations Assets are now subject; and (d) will not result in the creation of any
Lien on any of the CBS Stations Assets.
7.4 Government Authorizations. Schedule 7.4 contains a true and complete
list of the CBS Stations Licenses and other material licenses, permits or other
authorizations from governmental and regulatory authorities which are required
for the lawful conduct of the business and operations of the CBS Stations in
the manner and to the full extent it is presently conducted. CBS is the
authorized legal holder of the CBS Stations Licenses and other licenses,
permits and authorizations listed in Schedule 7.4, none of which is subject to
any restrictions or conditions which would limit in any respect the full
operation of the Station as now operated. Except as set forth in Schedule 7.4,
there are no applications, complaints or proceedings pending or, to the best of
CBS's knowledge,
<PAGE>
24
threatened as of the date hereof before the FCC relating to the business or
operations of the CBS Stations other than applications, complaints or
proceedings which affect the broadcasting industry generally. CBS has delivered
to SFX a true and complete copy of the CBS Stations Licenses, including any and
all amendments and other modifications thereto. The CBS Stations Licenses and
the other licenses, permits or other authorizations from governmental and
regulatory authorities listed in Schedule 7.4 are in good standing, are in full
force and effect and are unimpaired by any act or omission of CBS or its
officers, directors or employees; and the operation of the CBS Stations is in
accordance with the CBS Stations Licenses and the underlying construction
permits. No proceedings are pending or, to the knowledge of CBS, are threatened
which may result in the revocation, modification, non-renewal or suspension of
the CBS Stations Licenses, the denial of any pending applications, the issuance
of any cease and desist order, the imposition of any administrative actions by
the FCC with respect to the CBS Stations Licenses or which may affect CBS's
ability to continue to operate the CBS Stations as it is currently operated.
The CBS Stations is licensed by the FCC to operate, and is operating, with
maximum facilities for its class. The CBS Stations is not short-spaced, on a
grandfathered basis or otherwise, to any existing station, outstanding
construction permit or pending application therefor, or to any existing or
proposed broadcast radio allotment. CBS has not received any complaint that the
CBS Stations is causing objectionable interference to the transmissions of any
other broadcast station or communications facility. To the best of CBS's
knowledge, no other broadcast station or communications facility is causing
objectionable interference to the CBS Stations' transmissions or the public's
reception of such transmissions. CBS has no reason to believe that the CBS
Stations Licenses will not be renewed in the ordinary course. All material
reports, forms and statements required to be filed by CBS with the FCC with
respect to the CBS Stations since the grant of the last renewal of the CBS
Stations Licenses have been filed and are substantially complete and accurate.
To the best of CBS's knowledge, there are no facts which, under the
Communications Act of 1934, as amended, or the existing rules and regulations
of the FCC, would disqualify CBS as an assignor of the CBS Stations Licenses or
an assignee of the SFX Station Licenses.
<PAGE>
25
7.5 Compliance with Regulations. The operation of the CBS Stations and all
of the CBS Stations Assets are in compliance with (i) all applicable
engineering standards required to be met under applicable FCC rules, and (ii)
all other applicable federal, state and local rules, regulations, requirements
and policies, including all applicable painting and lighting requirements of
the FCC and the Federal Aviation Administration and ANSI Radiation Standards
C95.1 - 1982 to the extent required to be met under applicable FCC rules and
regulations, and there are no existing claims known to CBS to the contrary.
7.6 Taxes. All federal, state and local income, franchise, sales, use,
property, excise, payroll and other tax returns and reports required to be
filed by law where the failure to file such returns on a duly and timely basis
could result in a Lien on the CBS Stations Assets or the imposition on SFX of
any liability for taxes or assessments have been duly and timely filed in the
proper form with the appropriate governmental authority. All taxes, fees and
assessments of whatever nature due or payable pursuant to such returns or
otherwise have been paid, except for such amounts as are being contested
diligently, in the appropriate forum and in good faith, where the failure to
pay or contest such amounts could result in a Lien on the CBS Stations Assets
or the imposition on SFX of any liability for any taxes or assessments. There
are no tax audits pending and no outstanding agreements or waivers extending
the statutory period of limitations applicable to any federal, state or local
income tax return for any period, the result of which could result in a Lien on
the CBS Stations Assets or the imposition on SFX of any liability for any taxes
or assessments. There are no governmental investigations or other legal,
administrative or tax proceedings pursuant to which CBS is or could be made
liable for any taxes, penalties, interest or other charges, the liability for
which could extend to SFX as transferee of the CBS Stations Assets, or which
could result in a Lien on the CBS Stations Assets and, to the best of CBS's
knowledge, no event has occurred that could impose on SFX any liability for any
taxes, penalties or interest due or to become due from CBS.
7.7 Personal Property. Schedule 7.7 contains a list of all tangible
personal property and assets owned or held by CBS and used primarily in the
conduct of the business and operations of
<PAGE>
26
the CBS Stations. Except as disclosed in Schedule 7.7, and except as may be
subject to lease agreements of CBS listed on Schedule 7.9, CBS owns and has,
and will have on the Closing Date, good and marketable title to all such
property (and to all other tangible personal property and assets to be
transferred to CBS hereunder), and none of such property is, or at the Closing
will be, subject to any Lien. All of the items of the tangible personal
property and assets included in the CBS Stations Assets are in good operating
condition (ordinary wear and tear excepted) and are available for immediate use
in the conduct of the business and operations of the CBS Stations. The
technical equipment, constituting a part of the tangible personal property
transferred hereunder, has been maintained in accordance with industry practice
and is in good operating condition (ordinary wear and tear excepted) and
complies with all applicable rules and regulations of the FCC and the terms of
the CBS Stations Licenses.
7.8 Real Property.
7.8.1 Schedule 7.8 contains a complete and accurate list of all real
property leased by CBS which is used primarily by the CBS Stations and all
agreements, leases and contracts of CBS relating to the towers, transmitter,
booster, studio site and offices of the CBS Stations (collectively the "CBS
Real Estate Contracts") and a list of the applicable leases.
7.8.2 The CBS Real Estate Contracts listed on Schedule 7.8 constitute
valid and binding obligations of CBS and, to the best of CBS's knowledge, of
all other persons purported to be parties thereto and are in full force and
effect as of the date hereof and will on the Closing Date constitute valid and
binding obligations of CBS and, to the best of CBS's knowledge, of all other
persons purported to be parties thereto and shall be in full force and effect.
CBS is not in default under any of the CBS Real Estate Contracts and has not
received or given written notice of any default thereunder from or to any of
the other parties thereto and will not have received any such notice at or
prior to the Closing. To the best of CBS's knowledge, there are no present
disputes or claims with respect to offsets or defenses by either landlord or
tenant against the other under any such lease. CBS has delivered to SFX true
and complete copies of all
<PAGE>
27
CBS Real Estate Contracts.
7.8.3 Each parcel of CBS Real Estate has all appropriate easements and
access required to ensure uninterrupted use thereof. All buildings, structures,
improvements and fixtures comprising part of the real properties owned or
leased by CBS in the operation of the CBS Stations are in good operating
condition (ordinary wear and tear excepted).
7.9 Contracts. Schedule 7.9 lists the CBS Contracts as of the date of this
Agreement which are to be assumed by SFX as of the Closing Date. Those CBS
Contracts requiring the consent of a third party to assignment which CBS and
SFX agree are critical to the consummation of the transactions contemplated
hereby are identified as "CBS Material Contracts" and are so marked on Schedule
7.9. Except as noted in Schedule 7.9, CBS has delivered to SFX true and
complete copies of all written CBS Contracts, including any and all amendments
and other modifications to such CBS Contracts, and written summaries of all
oral CBS Contracts. All such CBS Contracts are valid, binding and enforceable
by CBS in accordance with their respective terms. CBS has complied with all
such CBS Contracts and is not in default under any of such CBS Contracts, and
to the best of CBS's knowledge, no other contracting party is in default under
any of such CBS Contracts. No other party to any such CBS Contract has made or
asserted, or, to the best of CBS's knowledge has, any defense, setoff or
counterclaim under any such CBS Contract, no such other party has exercised any
option granted to it to cancel or terminate its agreement, to shorten the term
of its agreement, or to renew or extend the term of its agreement and CBS has
not received any notice to that effect. Schedule 7.9 also contains a true and
complete current trade barter summary with respect to the CBS Stations,
including applicable asset and liability balances with respect thereto (which
trade barter summary shall be updated as of the Closing).
7.10 Sufficiency of Assets. The CBS Stations Assets and all other rights
to be conveyed to SFX hereunder are sufficient to carry on the conduct of the
operation of the CBS Stations as presently conducted.
7.11 Environmental; Industrial Hygiene and Safety. CBS has
<PAGE>
28
complied and is in compliance with CERCLA, TSCA, RCRA, OSHA and all other
federal, state and local environmental, industrial hygiene and safety laws,
rules and regulations applicable to the CBS Stations and their operation,
including the FCC's guidelines regarding RF radiation. CBS has not unlawfully
disposed of any hazardous waste or hazardous substance including PCBs in
connection with the operation of the CBS Stations. Except as set forth on
Schedule 7.11, the technical equipment included in the CBS Stations Assets does
not contain any PCBs. No hazardous waste has been disposed of by CBS, and to
the best of CBS's knowledge, no hazardous waste has been disposed of by any
other person, on the CBS Real Estate. Except as set forth on Schedule 7.11,
there are no underground tanks at the CBS Stations. Except as set forth on
Schedule 7.11, there is no asbestos insulation or other asbestos-containing
materials at the CBS Stations.
7.12 CBS Intellectual Property. Schedule 7.12 is a true and complete list
of all CBS Intellectual Property applied for, issued to or owned by CBS or
under which CBS is a licensee, and used or held for use primarily in the
conduct of the business and operations of the CBS Stations referred to in
Section 1.3.5 (but excluding those included in the Excluded Assets and referred
to in Section 1.4). Except as set forth on Schedule 7.12, there are no
agreements with third parties which limit or restrict the right of the CBS
Stations to use or register any of the CBS Intellectual Property. The CBS
Stations is not being operated in a manner that infringes any trademark,
copyright or other intellectual property right of any third party or otherwise
violates the rights of any third party, and no claim has been made or, to the
best of CBS's knowledge, threatened alleging any such violation. To the best of
CBS's knowledge, there has been no violation by others of any right of CBS in
any of the CBS Intellectual Property. Except as set forth on Schedule 7.12, all
registrations for the CBS Intellectual Property are valid and in good standing.
True and complete copies of all documents relating to the CBS Intellectual
Property have been delivered or made available to SFX.
7.13 Financial Statements. Set forth in Schedule 7.13 are complete copies
of the unaudited statements of operating income for the CBS Stations for the
periods from January 1, 1995 to
<PAGE>
29
December 31, 1995 and January 1, 1996 through June 30, 1996, and the unaudited
balance sheets for the CBS Stations dated as of December 31, 1995 and June 30,
1996 (the "CBS Financial Statements"). The CBS Financial Statements have been
prepared on a historic basis and do not include the effect of the
Westinghouse/CBS acquisition. The CBS Financial Statements for the 1996 periods
are subject to certain normal year-end adjustments. The CBS Financial
Statements are true and correct in all material respects and have been prepared
in accordance with the books and records of CBS and in accordance with the
policies and procedures of CBS applicable thereto, which differ from generally
accepted accounting principles in the respects set forth in Schedule 7.13. The
CBS Financial Statements fairly present in all material respects the financial
condition and results of operations of the CBS Stations for the periods
indicated.
7.14 Personnel.
7.14.1 Schedule 7.14 contains a true and complete list of all persons
employed at the CBS Stations, including a description of material compensation
arrangements (other than employee benefit plans set forth in Schedule 7.15) and
a list of other terms of any and all agreements affecting such persons. CBS has
not received notification that any of the current key employees of CBS at the
CBS Stations presently plan to terminate their employment, whether by reason of
the transactions contemplated hereby or otherwise.
7.14.2 CBS is not a party to any contract with any labor organization,
nor has CBS agreed to recognize any union or other collective bargaining unit,
nor has any union or other collective bargaining unit been certified as
representing any of CBS's employees at the CBS Stations. CBS has no knowledge
of any organizational effort currently being made or threatened by or on behalf
of any labor union with respect to any of CBS's employees at the CBS Stations.
7.14.3 Except as disclosed in Schedule 7.14.3, CBS has complied with
all laws relating to the employment of labor, including ERISA, and those laws
relating to wages, hours, collective bargaining, unemployment insurance,
workers'
<PAGE>
30
compensation, equal employment opportunity and payment and withholding of taxes
in connection with the operation of the CBS Stations.
7.15 Employee Benefit Plans. Schedule 7.15 contains a true and complete
list of each written and unwritten pension, retirement, profit-sharing,
deferred compensation bonus, incentive, performance, stock option, medical,
hospitalization, vision, dental or other health, life, disability, severance,
termination or other employee benefit plan, program, arrangement, agreement,
policy or understanding applicable to the employees of the CBS Stations (each,
a "CBS Employee Benefit Plan"). Each CBS Employee Benefit Plan complies in all
material respects, and has been operated and administered in all material
respects in accordance with, all applicable requirements of all laws and
regulations of any public body or authority, including COBRA and the
regulations thereunder, and no "reportable event", "prohibited transaction" (as
such terms are defined in ERISA and the Code, as applicable) or termination has
occurred with respect to any CBS Employee Benefit Plan. All contributions
required under applicable law or the terms of the CBS Employee Benefit Plans
have been made within the time prescribed. SFX shall have no obligations or
liabilities under such CBS Employee Benefit Plans on or after the Closing Date
and any benefits due to any employee of the CBS Stations under such CBS
Employee Benefit Plans shall be the sole responsibility of CBS.
7.16 Litigation. Except as set forth in Schedule 7.16, as of the date
hereof, CBS is subject to no judgment, award, order, writ, injunction,
arbitration decision or decree affecting the conduct of the business of the CBS
Stations or the CBS Stations Assets, and there is no litigation, investigation
or proceeding pending or, to the best of CBS's knowledge, threatened, against
CBS with respect to the CBS Stations in any federal, state or local court, or
before any administrative agency or arbitrator (including any proceeding which
seeks the forfeiture of, or opposes the renewal of, the CBS Stations Licenses),
or before any other tribunal duly authorized to resolve disputes, or which
seeks to enjoin or prohibit, or otherwise questions the validity of, any action
taken or to be taken pursuant to or in connection with this Agreement. In
particular, but without limiting the generality of the foregoing, there are no
applications,
<PAGE>
31
complaints or proceedings pending or, to the best of CBS's knowledge,
threatened before the FCC or any other governmental organization with respect
to the business or operations of the CBS Stations other than applications,
complaints or proceedings which affect the broadcasting industry generally.
7.17 Compliance With Laws. Except as set forth in Schedule 7.17, CBS has
not received any notice asserting any non-compliance by it in connection with
the business or operation of the CBS Stations with any applicable statute, rule
or regulation, whether federal, state or local. CBS is not in default with
respect to any judgment, order, injunction or decree of any court,
administrative agency or other governmental authority or any other tribunal
duly authorized to resolve disputes in connection with the business or
operation of the CBS Stations. CBS is in compliance with all laws, regulations
and governmental orders applicable to the conduct of the business or operation
of the CBS Stations, and its present use of the CBS Stations Assets does not
violate any of such laws, regulations or orders.
7.18 Commissions or Finder's Fees. Neither CBS nor any person or entity
acting on its behalf has agreed to pay a commission, finder's fee or similar
payment in connection with this Agreement or any matter related hereto to any
person or entity.
7.19 Insurance. CBS currently maintains in full force and effect the
property damage, liability and other insurance coverages with respect to the
CBS Stations Assets which are listed on Schedule 7.19.
7.20 Undisclosed Obligations. Except as reflected in the CBS Financial
Statements or as disclosed on Schedule 7.20 or on any other Schedule to this
Agreement, CBS does not have any liability or obligation of any kind with
respect to the CBS Stations or the CBS Stations Assets, whether accrued,
absolute, fixed or contingent, known or unknown, other than liabilities and
obligations not being assumed by SFX.
7.21 No Material Adverse Change. Except as set forth on Schedule 7.21,
since June 30, 1996, there has been no change in circumstances which has had a
Material Adverse Effect on the CBS
<PAGE>
32
Stations, nor to the best knowledge of CBS is any such change threatened, nor
has there been any damage, destruction or loss which could reasonably be
expected to have a Material Adverse Effect on the CBS Stations, whether or not
covered by insurance.
ARTICLE 8
COVENANTS OF SFX
----------------
8.1 Records. SFX, for a period of seven (7) years following the Closing
Date, shall make available during normal business hours for audit and
inspection by CBS and its representatives for any reasonable purpose all
records, files, documents and correspondence transferred to it hereunder in
connection with the CBS Stations with respect to taxes, regulation and
litigation; provided, however, that SFX may dispose of or destroy any such
records, files, documents and correspondence during such period after giving
CBS sixty (60) days' written notice to permit CBS, at its expense, to examine,
duplicate or take possession of such records, files, documents and
correspondence. During such period, SFX shall make available to CBS at CBS's
expense upon reasonable written request, and consistent with the business
requirements of SFX, personnel of SFX to assist CBS in locating and obtaining
records and files with respect to the CBS Stations for periods prior to the
Closing Date.
8.2 Employee Matters.
8.2.1 On the Closing Date, SFX shall offer employment at will to all
but up to five (5) of the employees of the CBS Stations employed on that date
by CBS, including each employee on an approved leave of absence ("CBS Leave of
Absence Employee") (collectively, "New Employees of SFX"). The employment for
employees of the CBS Stations actively employed on the Closing Date who receive
offers of employment will commence on the Closing Date and the employment for
CBS Leave of Absence Employees who receive offers of employment will commence
on the dates that such leaves terminate. SFX shall notify CBS of those
employees to whom it will so offer employment at least thirty (30) days prior
to the Closing Date. CBS shall be responsible
<PAGE>
33
for severance payments which may be applicable under its employee benefit plans
to any employees to whom SFX is not so required to offer employment.
8.2.2 CBS shall be responsible for all salary and benefits of the
employees of the CBS Stations for the period prior to the Closing Date and all
salary and benefits of each CBS Leave of Absence Employee until such CBS Leave
of Absence Employee returns to work after the Closing Date and is offered
employment pursuant to Section 8.2.1 with SFX. All employees of the CBS
Stations except CBS Leave of Absence Employees shall cease active participation
in all of CBS's employee benefit plans on the Closing Date, in accordance with
the terms of such plans.
8.2.3 All New Employees of SFX shall receive credit for eligibility
and vesting purposes (but not for the purpose of benefit accrual) for years of
service with CBS under all employee benefit plans and programs maintained for
employees of SFX (excluding severance). CBS shall cause its employee benefit
plans to grant each New Employee of SFX credit for service with SFX for the
purposes of eligibility and vesting (but not for the purpose of benefit
accrual). During the remainder of the calendar year in which the Closing
occurs, all New Employees of SFX shall be eligible to take whatever remaining
vacation they had with CBS as of the Closing Date. CBS shall pay the amount of
such vacation liability to SFX on the Closing Date.
8.3 Sales Representation Agreement. SFX agrees to terminate its national
sales representation agreement with McGavren Guild effective as of the Closing
Date.
ARTICLE 9
COVENANTS OF CBS
----------------
9.1 Records. CBS, for a period of seven (7) years following the Closing
Date, shall make available during normal business hours for audit and
inspection by SFX and its representatives for any reasonable purpose all
records, files, documents and correspondence transferred to it hereunder in
connection with the SFX Station with respect to taxes, regulation
<PAGE>
34
and litigation; provided, however, that CBS may dispose of or destroy any such
records, files, documents and correspondence during such period after giving
SFX sixty (60) days' written notice to permit SFX, at its expense, to examine,
duplicate or take possession of such records, files, documents and
correspondence. During such period, CBS shall make available to SFX at SFX's
expense upon reasonable written request, and consistent with the business
requirements of CBS, personnel of CBS to assist SFX in locating and obtaining
records and files with respect to the SFX Station for periods prior to the
Closing Date.
9.2 Employee Matters.
9.2.1 On the Closing Date, CBS shall offer employment at will to all
but up to five (5) of the employees of the SFX Station employed on that date by
SFX, including each employee on an approved leave of absence ("SFX Leave of
Absence Employee") (collectively, "New Employees of CBS"). The employment for
employees of the SFX Station actively employed on the Closing Date who receive
offers of employment will commence on the Closing Date and the employment for
SFX Leave of Absence Employees who receive offers of employment will commence
on the dates that such leaves terminate. CBS shall notify SFX of those
employees to whom it will so offer employment at least thirty (30) days prior
to the Closing Date. SFX shall be responsible for severance payments which may
be applicable under its employee benefit plans to any employees to whom CBS is
not so required to offer employment.
9.2.2 SFX shall be responsible for all salary and benefits of the
employees of the SFX Station for the period prior to the Closing Date and all
salary and benefits of each SFX Leave of Absence Employee until such SFX Leave
of Absence Employee returns to work after the Closing Date and is offered
employment pursuant to Section 9.2.1 with CBS. All employees of the SFX Station
except SFX Leave of Absence Employees shall cease active participation in all
of SFX's employee benefit plans on the Closing Date, in accordance with the
terms of such plans.
9.2.3 All New Employees of CBS shall receive credit for eligibility
and vesting purposes (but not for the purpose of
<PAGE>
35
benefit accrual) for years of service with SFX under all employee benefit plans
and programs maintained for employees of CBS (excluding severance). SFX shall
cause its employee benefit plans to grant each New Employee of CBS credit for
service with CBS for the purposes of eligibility and vesting (but not for the
purpose of benefit accrual). During the remainder of the calendar year in which
the Closing occurs, all New Employees of CBS shall be eligible to take whatever
remaining vacation they had with SFX as of the Closing Date. SFX shall pay the
amount of such vacation liability to CBS on the Closing Date.
9.3 Sales Representative Agreement. CBS agrees to terminate its national
sales representation agreement with CBS Radio Representatives effective as of
the Closing Date.
ARTICLE 10
MUTUAL COVENANTS
----------------
10.1 Pre-Closing Covenants. SFX and CBS covenant and agree with respect to
the SFX Station and CBS Stations, respectively, that between the date hereof
and the Closing Date, except as expressly permitted by this Agreement or with
the prior written consent of the other party, they shall act in accordance with
the following:
10.1.1 Each party shall conduct the business and operations of its
Station(s) in the ordinary and prudent course of business, and shall use all
reasonable efforts, consistent with its past practices, (i) to preserve the
ongoing operations and assets of its Station(s), (ii) to preserve the goodwill
and business of the advertisers, suppliers and others having business relations
with its Station(s), (iii) to retain the services of the employees of its
Station(s), and (iv) to maintain the independent identity of its Station(s).
Neither party shall:
(i) sell or dispose of or commit to sell or dispose of any of its
Station Assets;
<PAGE>
36
(ii) enter into any commitment for capital expenditures for which the
other party would be liable after the Closing Date;
(iii) sell broadcast time on a prepaid basis (other than in the course
of existing Station credit practices) or introduce any deeply discounted
promotions for the sale of advertising time at its Station(s);
(iv) enter into any collective bargaining or, negotiation (the status
of which will be regularly communicated to the other party) or otherwise, make
any commitment or incur any liability to any labor organization relating to any
Station employee (to the extent the foregoing does not violate applicable law);
(v) grant or agree to grant any general increases in the rates of
salaries or compensation payable to employees of its Station(s) (except for
increases substantially in accordance with existing employment practice);
(vi) grant or agree to grant any specific bonus or increase to any
executive or management employee of its Station(s) (except for increases
substantially in accordance with existing employment practice);
(vii) provide for any new pension, retirement or other employment
benefits for employees of its Station(s) or any increases in any existing
benefits (except for increases substantially in accordance with existing
employment practice);
(viii) modify, change or terminate any of the SFX Contracts or the SFX
Real Estate Contracts, in the case of SFX, or any of the CBS Contracts or the
CBS Real Estate Contracts, in the case of CBS;
(ix) introduce any material changes in the broadcast hours or in the
format of its Station(s) or any other material change in the programming
policies of its Station(s); or
(x) enter into any transaction or make or enter into any contract or
commitment which by reason of its size or otherwise is not in the ordinary
course of business.
<PAGE>
37
10.1.2 Each party shall operate its Station(s) in accordance with FCC
rules and regulations and its Station Licenses and with all other laws,
regulations, rules and orders, and shall not cause or permit by any act, or
failure to act, its Station Licenses to expire, be surrendered, adversely
modified, or otherwise terminated, or the FCC to institute any proceedings for
the suspension, revocation or adverse modification of its Station Licenses, or
fail to prosecute with due diligence any pending applications to the FCC.
10.1.3 Should any fact relating to either party which would cause the
FCC to deny its consent to the transactions contemplated by this Agreement come
to either party's attention, such party will promptly notify the other party
thereof and will use all reasonable efforts to take such steps as may be
necessary to remove any such impediment to the transactions contemplated by
this Agreement; provided, however, that the transactions contemplated by the
Agreement and Plan of Merger dated as of June 20, 1996, among WELCO, Infinity
Broadcasting Corporation and R Acquisition Corp., pursuant to which Infinity
will become a wholly owned subsidiary of Westinghouse, including pending
filings seeking FCC and other regulatory approval or clearance thereof, shall
not be considered an impediment as contemplated in this Section 10.1.3.
10.1.4 Each party will provide the other party prompt written notice
of any change in any of the information contained in the representations and
warranties made in Article 6 or 7 or any Schedules referred to herein or
attached hereto.
10.1.5 Each party shall give or cause its Station(s) to give the other
party's counsel, accountants, engineers and other representatives, at the other
party's reasonable request, full and reasonable access during normal business
hours to all of such party's personnel, properties, books, Contracts, reports
and records including financial information and tax returns relating to its
Station(s), to all real estate, buildings and equipment relating to its
Station(s), and to the employees of its Station(s) in order that the other
party may have full opportunity to make such investigation as it desires of the
affairs of its Station(s) and to furnish the other party with information, and
copies of all documents and agreements including
<PAGE>
38
financial and operating data and other information concerning the financial
condition, results of operations and business of its Station(s), that the other
party may reasonably request in connection with the preparation of audited and
unaudited Station- level financial statements. Both parties agree that any
audits shall be at the sole expense and staffing of the party requesting such
audits. Each party shall have the right to perform a Phase 1 environmental
audit with respect to the real estate and operations of the other party's
Station(s), and the industrial hygiene and safety condition thereof. In the
event that the party performing the audit believes that any further
environmental investigation is required as a result of the conclusions of any
Phase 1 environmental audit report, the parties will consult with each other
and mutually agree on the scope of any additional environmental investigation.
The rights of each party under this Section 10.1.5 shall not be exercised in
such a manner as to interfere unreasonably with the business of the other
party's Station(s).
10.1.6 Within fifteen (15) days of the end of each month, each party
shall deliver to the other party an unaudited statement of revenue and expenses
of its Station(s) and a balance sheet for the month then ended (collectively,
the "Interim Financial Statements"). The Interim Financial Statements shall be
prepared in accordance with practices consistent with those followed in the
preparation of the SFX Financial Statements and the CBS Financial Statements,
as applicable, delivered pursuant to Sections 6.13 and 7.13, respectively. Such
Interim Financial Statements shall be true and complete in all material
respects and fairly present in all material respects the financial condition
and results of operation of each party's Station(s) for the periods covered by
such statements. Each party shall furnish to the other party any and all
information customarily prepared by such party concerning the financial
condition of its Station(s) that the other party may reasonably request.
10.1.7 Each party shall use all reasonable efforts (but shall not be
required to make any payment) to obtain any third party consents necessary for
the assignment of its Contracts to the other party, provided that no payment
shall be made by the Station(s) of the party seeking such consent, and no
Contract shall be modified to increase the amount payable
<PAGE>
39
thereunder or to otherwise modify the terms thereof in a manner adverse to such
Station(s), in order to obtain any such consent without first obtaining the
written consent of the other party.
10.1.8 Each party shall also use its best efforts to cause advertisers
on its Station(s) to use the air time available under trade and barter
contracts and agreements prior to the Closing Date and will not enter into any
new barter agreements at its Station(s) unless it discharges or satisfies over
90% of the liability contained in the existing agreements for such advertisers
prior to the Closing Date or receives the permission of the other party. Each
party will also confirm in writing with the existing clients of its Station(s)
prior to the Closing Date their trade balances contained on the trade report
for its Station(s) in order to verify the accuracy of the balances. Trade
agreements that have expired or will expire prior to the Closing Date shall not
be extended without the approval of the other party. Each party will also use
its best efforts to bring its Station's overall trade position to zero prior to
the Closing Date.
10.2 Notification.
10.2.1 Each party shall notify the other party of any material
litigation, arbitration or administrative proceeding pending or, to its
knowledge, threatened against the other party which challenges the transactions
contemplated hereby.
10.2.2 Each party shall promptly notify the other party if the normal
broadcast transmissions of its Station(s) are interrupted, interfered with or
in any way impaired, and shall provide the other party with prompt written
notice of the problem and the measures being taken to correct such problem. If
any such Station is not restored so that operation is resumed to full licensed
power and antenna height within five (5) days of such event, or if more than
three (3) such events occur within any thirty (30) day period, or if the
applicable Station shall be off the air for more than seventy-two (72)
consecutive hours, then the other party shall have the right to terminate this
Agreement.
10.3 No Inconsistent Action. Neither party shall take any action which is
materially inconsistent with its obligations
<PAGE>
40
under this Agreement.
10.4 Closing Covenant. On the Closing Date, each party shall transfer,
convey, assign and deliver to the other party its Station Assets and each party
shall assume its Assumed Liabilities as provided in Articles 1 and 2.
10.5 Other Items. Except as otherwise specifically contemplated by this
Agreement, until the Closing Date, each party shall (i) maintain in full force
and effect such property damages, liability and other insurance coverage with
respect to its Station Assets as it currently has in effect, and (ii) maintain
its inventory levels (including office supplies, spare parts, tubes, equipment
and the like) at levels consistent with the normal and ordinary course of
operation of its Station(s).
10.6 Conditions. If any event should occur, either within or without the
control of any party hereto, which would prevent fulfillment of the conditions
upon the obligations of any party hereto to consummate the transactions
contemplated by this Agreement, the parties hereto shall use their best efforts
to cure the event as expeditiously as possible.
10.7 Confidentiality. CBS and SFX shall each keep confidential all
information obtained by it with respect to the other party in connection with
this Agreement and the transactions contemplated hereby and will use such
information solely in connection with the transactions contemplated hereby,
pursuant to the terms and conditions of the Confidentiality Agreement between
them dated September 20, 1996 (the "Confidentiality Agreement"). If the
transactions contemplated hereby are not consummated for any reason, the
parties shall continue to be bound by such Confidentiality Agreement, and each
party shall return to the other party, without retaining a copy thereof, any
schedules, documents or other written information obtained from the other party
in connection with this Agreement and the transactions contemplated hereby.
10.8 Cooperation. CBS and SFX shall cooperate fully with each other in
taking any actions, including actions to obtain the required consent of any
governmental instrumentality or any third
<PAGE>
41
party necessary or helpful to accomplish the transactions contemplated by this
Agreement; provided, however, that no party shall be required to take any
action which would have a Material Adverse Effect upon it or any of its
Affiliates or with respect to the SFX Station or the CBS Stations, as
applicable. Each party shall also make available to the other party after the
Closing Date, upon reasonable request, such of its personnel who were employees
of the other party's Station(s) prior to the Closing Date whose assistance or
participation is reasonably requested by the other party in anticipation of,
preparation for or the prosecution or defense of existing or future litigation,
tax returns or other matters relating to the period prior to the Closing Date.
10.9 Control of Stations. Neither party shall, directly or indirectly,
control, supervise or direct the operations of the other party's Station(s).
Such operations, including complete control and supervision of all station
programs, employees and policies, shall be the sole responsibility of the party
owning such Station(s).
10.10 Consents to Assignment. To the extent that any Contract (other than
a Material Contract) identified in the Schedules is not capable of being sold,
assigned, transferred, delivered or subleased without the waiver or consent of
any third person (including a government or governmental unit), or if such
sale, assignment, transfer, delivery or sublease or attempted sale, assignment,
transfer, delivery or sublease would constitute a breach thereof or a violation
of any law or regulation, this Agreement and any assignment executed pursuant
hereto shall not constitute a sale, assignment, transfer, delivery or sublease
or an attempted sale, assignment, transfer, delivery or sublease thereof. In
those cases where consents, assignments, releases and/or waivers have not been
obtained at or prior to the Closing Date to the transfer and assignment to the
other party of the Contracts, this Agreement and any assignment executed
pursuant hereto, to the extent permitted by law, shall constitute an equitable
assignment by the assigning party to the other party of all of the assigning
party's rights, benefits, title and interest in and to the Contracts, and where
necessary or appropriate, the other party shall be deemed to be the assigning
party's agent for the purpose of completing, fulfilling and discharging all of
the
<PAGE>
42
assigning party's rights and liabilities arising after the Closing Date under
such Contracts. The assigning party shall use all reasonable efforts to provide
the other party with the benefits of such Contracts (including permitting the
other party to enforce any rights of the assigning party arising under such
Contracts), and the other party shall, to the extent the assigning party is
provided with the benefits of such Contracts, assume, perform and in due course
pay and discharge all debts, obligations and liabilities of the assigning party
under such Contracts.
10.11 Waiver of Compliance with Bulk Sales Law. Each party waives
compliance by the other party with the provisions of any "bulk sales" law
applicable to the transactions contemplated hereby; provided, that each party
agrees to indemnify the other party pursuant to Section 15 for such
noncompliance.
10.12 Accounts Receivable.
10.12.1 Both parties acknowledge that all accounts receivable of the
other party for services performed by such other party in connection with the
operation of its Station(s) prior to the Closing Date ("Closing Accounts
Receivable"), shall remain the property of the other party.
10.12.2 After the Closing Date and until such time as an account
receivable has aged for 120 days, SFX and CBS shall each use reasonable efforts
to collect, in the manner regularly pursued by SFX and CBS in the ordinary
course of their business, such of the other party's Closing Accounts Receivable
as are collectible. SFX and CBS will each furnish to the other party a complete
list of the other party's Closing Accounts Receivable within twenty (20) days
after the Closing Date. Any funds received after the Closing Date by either
party with respect to the other party's Closing Accounts Receivables shall be
forwarded directly to SFX or CBS as applicable, for deposit and processing. If
any Closing Accounts Receivable are received by SFX or CBS in combination with
accounts receivable arising after the Closing Date, SFX or CBS will deposit
such funds into its own account and remit such portions of the funds received
applicable to the other party's Closing Accounts Receivable along with backup
documentation by the 15th day of the following month. Each party
<PAGE>
43
will supply the other party with a Closing Accounts Receivable aging report for
such other party's Closing Accounts Receivable on a monthly basis to track the
remaining outstanding Closing Accounts Receivable of such other party until
both parties mutually agree to discontinue such reports. Neither SFX nor CBS
shall be required or authorized to institute any litigation or employ counsel
or to utilize any means of collection outside of the ordinary course of
business with respect to any of the other party's Closing Accounts Receivable,
respectively, unless authorized in writing by the other party. All payments
received from account debtors on account of Closing Accounts Receivable shall
be applied to the account debtor's oldest accounts receivable first, except to
the extent that an account debtor shall specify that its payments relate to a
specific invoice. Both parties will make reasonable efforts to handle ongoing
customers in a manner that helps to insure the continuity of such customer's
business with the other party's Station(s).
10.13 Completion of Schedules. As soon as practicable after the date
hereof (and in any event by October 1, 1996), each party shall deliver to the
other party a complete set of the schedules contemplated by this Agreement.
ARTICLE 11
CONDITIONS OF CLOSING BY CBS
----------------------------
The obligations of CBS hereunder are, at its option, subject to
satisfaction, at or prior to the Closing Date, of each of the following
conditions:
11.1 Representations, Warranties and Covenants.
11.1.1 All representations and warranties of SFX and SFX Broadcasting
made in this Agreement, or in any Schedule or document delivered pursuant
hereto, shall be true and complete in all material respects as of the date
hereof and on and as of the Closing Date as if made on and as of that date
(unless an earlier date is expressly provided for therein), except for changes
expressly permitted or contemplated by the terms of this Agreement.
<PAGE>
44
11.1.2 All of the terms, covenants and conditions to be complied with
and performed by SFX and SFX Broadcasting on or prior to Closing Date shall
have been complied with or performed in all material respects.
11.1.3 CBS shall have received a certificate, dated as of the Closing
Date, executed by an officer of SFX and SFX Broadcasting, to the effect that
the conditions set forth in Sections 11.1.1 and 11.1.2 have been satisfied.
11.2 Governmental Consents. The conditions specified in Sections 5.1, 5.2
and 5.3 shall have been satisfied.
11.3 Governmental Authorizations. SFX shall be the holder of the SFX
Station Licenses and all other material licenses, permits and other
authorizations listed in Schedule 6.4, and there shall not have been any
modification of any of such licenses, permits and other authorizations which
has a Material Adverse Effect on the SFX Station or the conduct of its business
and operations. No proceeding shall be pending which seeks or the effect of
which reasonably could be to revoke, cancel, fail to renew, suspend or modify
materially and adversely the SFX Station Licenses or any other material
licenses, permits or other authorizations of the SFX Station.
11.4 Adverse Proceedings. No suit, action, claim or governmental
proceeding shall be pending against, and no order, decree or judgment of any
court, agency or other governmental authority shall have been rendered against,
any party hereto which would render it unlawful, as of the Closing Date, to
effect the transactions contemplated by this Agreement in accordance with its
terms.
11.5 Legal Opinion. SFX shall have delivered to CBS a written opinion of
its in-house corporate counsel, dated as of the Closing Date, with respect to
the matters set forth in Schedule 11.5, in a form satisfactory to CBS and SFX.
11.6 Board Approval. The WELCO and CBS Boards shall have authorized the
transactions to be consummated by CBS at the Closing.
<PAGE>
45
11.7 Third-Party Consents. SFX shall have obtained and shall have
delivered to CBS all third-party consents to the SFX Material Contracts.
11.8 Closing Documents. SFX shall have delivered or caused to be delivered
to CBS, on the Closing Date, all deeds, bills of sale, endorsements, assignment
and other instruments of conveyance and transfer reasonably satisfactory in
form and substance to CBS, effecting the sale, transfer, assignment and
conveyance of the SFX Station Assets to CBS and the assumption of the SFX
Assumed Liabilities, including each of the documents required to be delivered
pursuant to Article 14.
11.9 Financing Statements. SFX shall have delivered to CBS releases under
the Uniform Commercial Code of any financing statements filed against any of
the SFX Station Assets in the jurisdictions in which the SFX Station Assets are
and have been located since such SFX Station Assets were acquired by SFX.
11.10 Environmental Condition. CBS shall have been satisfied in its
reasonable discretion that any environmental conditions identified in the Phase
1 environmental audit report with respect to the SFX Real Estate and operations
of the SFX Station, and the environmental and industrial hygiene and safety
condition of the SFX Real Estate and operations of the SFX Station, shall have
been or are scheduled to be satisfactorily remediated.
11.11 Due Diligence. (a) On or Prior to October 10, 1996. CBS shall have
been satisfied that its due diligence review of the SFX Station, the SFX
Station Assets and the CBS Assumed Liabilities shall not have revealed any fact
or circumstance which shall have caused CBS to believe in good faith that
proceeding with the transactions contemplated hereby would adversely affect
CBS; provided, however, that this condition shall irrevocably be deemed
satisfied for all purposes hereunder if CBS shall not have described any such
facts and circumstances in reasonable detail in writing to SFX on or prior to
October 10, 1996.
(b) Prior to October 16, 1996. CBS shall have been satisfied that its
due diligence review of the SFX Schedules (and
<PAGE>
46
the underlying agreements, documents and other information referred to or
directly supporting the information set forth in the SFX Schedules) shall not
have revealed facts and circumstances that are materially different, taken as a
whole, from the facts and circumstances as known to CBS on the date hereof and
that such differences could reasonably be expected to materially adversely
affect the SFX Station Assets, or that any such difference so identified shall
have been or shall be resolved to the reasonable satisfaction of CBS; provided,
however, that this condition shall irrevocably be deemed satisfied for all
purposes hereunder with respect to any such differences that CBS shall not have
described in reasonable detail in writing to SFX prior to October 16, 1996.
ARTICLE 12
CONDITIONS OF CLOSING BY SFX AND SFX BROADCASTING
-------------------------------------------------
The obligations of SFX and SFX Broadcasting hereunder are, at its option,
subject to satisfaction, at or prior to the Closing Date, of each of the
following conditions:
12.1 Representations, Warranties and Covenants.
12.1.1 All representations and warranties of CBS made in this
Agreement, or in any Schedule or document delivered pursuant hereto, shall be
true and complete in all material respects as of the date hereof and on and as
of the Closing Date as if made on and as of that date (unless an earlier date
is expressly provided for therein), except for changes expressly permitted or
contemplated by the terms of this Agreement.
12.1.2 All of the terms, covenants and conditions to be complied with
and performed by CBS on or prior to the Closing Date shall have been complied
with or performed in all material respects.
12.1.3 SFX shall have received a certificate, dated as of the Closing
Date, executed by an officer of CBS, to the effect that the conditions set
forth in Sections 12.1.1 and 12.1.2 have been satisfied.
<PAGE>
47
12.2 Governmental Consents. The conditions specified in Sections 5.1, 5.2
and 5.3 shall have been satisfied.
12.3 Government Authorizations. CBS shall be the holder of the CBS
Stations Licenses and all other material licenses, permits and other
authorizations listed in Schedule 7.4, and there shall not have been any
modification of any of such licenses, permits and other authorizations which
has a Material Adverse Effect on the CBS Stations or the conduct of its
business and operations. No proceeding shall be pending which seeks or the
effect of which reasonably could be to revoke, cancel, fail to renew, suspend
or modify materially and adversely the CBS Stations Licenses or any other
material licenses, permits or other authorizations of the CBS Stations.
12.4 Adverse Proceedings. No suit, action, claim or governmental
proceeding shall be pending against, and no other, decree or judgment of any
court, agency or other governmental authority shall have been rendered against,
any party hereto which would render it unlawful, as of the Closing Date, to
effect the transactions contemplated by this Agreement in accordance with its
terms.
12.5 Legal Opinion. CBS shall have delivered to SFX an opinion of its
counsel, an employee of CBS, dated as of the Closing Date, with respect to the
matters set forth in Schedule 12.5 in a form satisfactory to CBS and SFX.
12.6 Third-Party Consents. CBS shall have obtained and shall have
delivered to SFX all third-party consents to the CBS Material Contracts.
12.7 Closing. CBS shall have delivered or caused to be delivered to SFX,
on the Closing Date, all deeds, bills of sale, endorsements, assignment and
other instruments of conveyance and transfer reasonably satisfactory in form
and substance to SFX, effecting the sale, transfer, assignment and conveyance
of the CBS Stations Assets to SFX and the assumption by CBS of the CBS Assumed
Liabilities, including each of the documents required to be delivered pursuant
to Article 14.
12.8 Financing Statements. CBS shall have delivered to SFX
<PAGE>
48
releases under the Uniform Commercial Code of any financing statements filed
against any of the CBS Stations Assets in the jurisdictions in which the CBS
Stations Assets are and have been located since such CBS Stations Assets were
acquired by CBS.
12.9 Environmental. SFX shall have been satisfied in its reasonable
discretion that any environmental conditions identified in the Phase 1
environmental audit report with respect to the CBS Real Estate and operations
of the CBS Stations, and the environmental and industrial hygiene and safety
condition of the CBS Real Estate and operations of the CBS Stations, shall have
been or are scheduled to be satisfactorily remediated.
12.10 Due Diligence. (a) On or Prior to October 10, 1996. SFX shall have
been satisfied that its due diligence review of the CBS Stations, the CBS
Stations Assets and the SFX Assumed Liabilities shall not have revealed any
fact or circumstance which shall have caused SFX to believe in good faith that
proceeding with the transactions contemplated hereby would adversely affect
SFX; provided, however, that this condition shall irrevocably be deemed
satisfied for all purposes hereunder if SFX shall not have described any such
facts and circumstances in reasonable detail in writing to CBS on or prior to
October 10, 1996.
(b) Prior to October 16, 1996. SFX shall have been satisfied that its
due diligence review of the CBS Schedules (and the underlying agreements,
documents and other information referred to or directly supporting the
information set forth in the CBS Schedules) shall not have revealed facts and
circumstances that are materially different, taken as a whole, from the facts
and circumstances as known to SFX on the date hereof and that such differences
could reasonably be expected to materially adversely affect the CBS Stations
Assets, or that any such difference so identified shall have been or shall be
resolved to the reasonable satisfaction of SFX; provided, however, that this
condition shall irrevocably be deemed satisfied for all purposes hereunder with
respect to any such differences that SFX shall not have described in reasonable
detail in writing to CBS prior to October 16, 1996.
<PAGE>
49
ARTICLE 13
EXPENSES; TRANSFER TAXES; AND FEES
----------------------------------
13.1 Expenses; Transfer Taxes. Except as set forth in Section 13.2, each
party hereto shall be solely responsible for all costs and expense incurred by
it in connection with the negotiation, preparation and performance of and
compliance with the terms of this Agreement, including all recordation,
transfer and documentary taxes and fees, and any excise, sales or use taxes,
associated with transferring its Station Assets in accordance with this
Agreement, and any filing or grant fees imposed by any governmental authority,
the consent of which is required to the transactions contemplated hereby.
13.2 Appraisal Fee. The appraisal fee of the independent valuation firm
selected in accordance with Section 3.2 shall be borne equally by CBS and SFX.
ARTICLE 14
DOCUMENTS TO BE DELIVERED AT CLOSING
------------------------------------
14.1 SFX's Documents. At the Closing, SFX and SFX Broadcasting shall
deliver or cause to be delivered to CBS the following:
14.1.1 Bill of sale, general warranty deed, assignments and other good
and sufficient instruments of conveyance, transfer and assignment, all in form
and substance reasonably satisfactory to counsel for CBS, as shall be effective
to vest in CBS or its permitted assignees, good and marketable title in and to
the SFX Station Assets transferred pursuant to this Agreement in accordance
with the terms of this Agreement;
14.1.2 Certified resolutions of the Boards of Directors of SFX and SFX
Broadcasting approving the execution and delivery of this Agreement and each of
the other documents and authorizing the consummation of the transactions
contemplated hereby and thereby;
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50
14.1.3 A certificate, dated the Closing Date, by SFX and SFX
Broadcasting in the form described in Section 11.1.3;
14.1.4 At the time and place of Closing, originals or copies of all
program, operations, transmissions, or maintenance logs and all other records
required to be maintained by the FCC with respect to the SFX Station, including
the SFX's Station's public file, shall be left at the SFX Station and thereby
delivered to CBS;
14.1.5 An assignment and assumption agreement or agreements reasonably
satisfactory in form and substance to counsel to CBS effecting the assumption
of the SFX Assumed Liabilities;
14.1.6 Certificates of Good Standing for SFX and SFX Broadcasting from
the States of Delaware and Texas certified as of a date not more than thirty
(30) days before the Closing Date;
14.1.7 The opinion of SFX's counsel referenced in Section ll.5; and
14.1.8 Such additional information and materials as CBS shall have
reasonably requested.
14.2 CBS's Documents. At the Closing, CBS shall deliver or cause to be
delivered to SFX and SFX Broadcasting the following:
14.2.1 Bill of sale, assignments and other good and sufficient
instruments of conveyance, transfer and assignment, all in form and substance
reasonably satisfactory to counsel for SFX, as shall be effective to vest in
SFX or its permitted assignees, good and marketable title in and to the CBS
Stations Assets transferred pursuant to this Agreement in accordance with the
terms of this Agreement;
14.2.2 Certified resolutions of the Board of Directors of CBS and
WELCO approving the execution and delivery of this Agreement and each of the
other documents and agreements referred to herein and authorizing the
consummation of the transactions contemplated hereby and thereby;
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51
14.2.3 A certificate, dated the Closing Date, by CBS in the form
described in Section 12.1.3;
14.2.4 At the time and place of Closing, CBS's originals or copies of
all program, operations, transmissions, or maintenance logs and all other
records required to be maintained by the FCC with respect to the CBS Stations,
including the CBS Stations' public file, shall be left at the CBS Stations and
thereby delivered to SFX;
14.2.5 An assignment and assumption agreement or agreements reasonably
satisfactory in form and substance to counsel to SFX effecting the assumption
of the CBS Assumed Liabilities;
14.2.6 Certificates of Good Standing for CBS from the States of New
York and Texas dated not more than thirty (30) days before the Closing Date;
14.2.7 The opinion of CBS's counsel referenced in Section 12.5; and
14.2.8 Such additional information and materials as SFX shall have
reasonably requested.
ARTICLE 15
INDEMNIFICATION
---------------
15.1 SFX's Indemnities. SFX and SFX Broadcasting hereby agree to
indemnify, defend and hold harmless CBS, its Affiliates and their respective
officers and directors (the "CBS Indemnitees") with respect to any and all
demands, claims, actions, suits, proceedings, assessments, judgments, costs,
losses, damages, liabilities and expenses (including interest, penalties, court
costs and reasonable attorneys' fees)
<PAGE>
52
(collectively "Damages") asserted against, resulting from, imposed upon or
incurred by the CBS Indemnitees directly or indirectly relating to or arising
out of:
15.1.1 The breach by SFX or SFX Broadcasting of any of their
representations or warranties, or failure by SFX or SFX Broadcasting to perform
any covenants, conditions or agreements of SFX or SFX Broadcasting set forth in
this Agreement;
15.1.2 The SFX Assumed Liabilities;
15.1.3 The SFX Retained Liabilities;
15.1.4 Any employee benefit plan maintained by SFX;
15.1.5 Any failure by SFX to comply with any "bulk sales" law
applicable to the transactions contemplated hereby; and
15.1.6 Any and all claims, liabilities or obligations of any nature,
absolute or contingent, relating to the business and operation of the SFX
Station prior to the Closing Date.
15.2 CBS's Indemnities. CBS hereby agrees to indemnify, defend and hold
harmless SFX, SFX Broadcasting, their Affiliates and their respective officers
and directors (the "SFX Indemnitees") with respect to any and all Damages
asserted against, resulting from, imposed upon or incurred by the SFX
Indemnitees directly or indirectly relating to or arising out of:
15.2.1 The breach by CBS of any of its representations, warranties, or
failure by CBS to perform any covenants, conditions or agreements of CBS set
forth in this Agreement;
15.2.2 The CBS Assumed Liabilities;
15.2.3 The CBS Retained Liabilities;
15.2.4 Any employee benefit plan maintained by CBS;
15.2.5 Any failure by CBS to comply with any "bulk
<PAGE>
53
sales" law applicable to the transactions contemplated hereby; and
15.2.6 Any and all claims, liabilities or obligations of any nature,
absolute or contingent, relating to the business and operation of the CBS
Stations prior to the Closing Date.
15.3 Survival of Representations and Warranties. The representations and
warranties contained herein shall survive the Closing for a period of two (2)
years following the Closing Date, except for the representation and warranty
with respect to taxes set forth in Sections 6.6 and 7.6, which shall survive
until the expiration of any statutes of limitations applicable with respect to
such taxes, and the representations and warranties with respect to title set
forth in Sections 6.7, 6.8.3, 7.7 and 7.8.3 and the environmental
representations in Sections 6.11 and 7.11 which shall survive the Closing for
five years, and upon the expiration of such periods shall lapse and be of no
further effect unless a specific claim shall have been made or an action shall
have been commenced before such date.
15.4 Procedures.
15.4.1 Promptly after the receipt by either party (the "Indemnified
Party") of notice of (a) any claim or (b) the commencement of any action or
proceeding which may entitle such party to indemnification under this Section,
such party shall give the other party (the "Indemnifying Party") written notice
of such claim or the commencement of such action or proceeding and shall permit
the Indemnifying Party to assume the defense of any such claim or any
litigation resulting from such claim.
15.4.2 If the Indemnifying Party assumes the defense of any such claim
or litigation resulting therefrom, the obligations of the Indemnifying Party as
to such claim shall be limited to taking all steps necessary in the defense or
settlement of such claim or litigation resulting therefrom and to holding the
Indemnified Party harmless from and against any Damages caused by or arising
out of any settlement approved by the Indemnifying Party or any judgment in
connection with such claim or litigation resulting therefrom; however, the
Indemnified Party may participate, at its expense, in the defense of such
<PAGE>
54
claim or litigation provided that the Indemnifying Party shall direct and
control the defense of such claim or litigation. The Indemnified Party shall
cooperate and make available all books and records reasonably necessary and
useful in connection with the defense. The Indemnifying Party shall not, in the
defense of such claim or any litigation resulting therefrom, consent to entry
of any judgment, except with the written consent of the Indemnified Party, or
enter into any settlement, except with the written consent of the Indemnified
Party, which does not include as an unconditional term thereof the giving by
the claimant or the plaintiff to the Indemnified Party of a release from all
liability in respect of such claim or litigation.
15.4.3 If the Indemnifying Party shall not assume the defense of any
such claim or litigation resulting therefrom within 45 days after notice
thereof from the Indemnified Party, the Indemnified Party may, but shall have
no obligation to, defend against such claim or litigation in such manner as it
may deem appropriate, and the Indemnified Party may compromise or settle such
claim or litigation without the Indemnifying Party's consent. The Indemnifying
Party shall promptly reimburse the Indemnified Party for the amount of all
expenses, legal or otherwise, incurred by the Indemnified Party in connection
with the defense against or settlement of such claim or litigation. If no
settlement of the claim or litigation is made, the Indemnifying Party shall
promptly reimburse the Indemnified Party for the amount of any judgment
rendered with respect to such claim or in such litigation and of all expenses,
legal or otherwise, incurred by the Indemnified Party in the defense against
such claim or litigation.
15.5 Limits on and Conditions of Indemnification.
15.5.1 Threshold Amount. Neither party shall be liable to the other
party for any Damages under this Agreement resulting from the falsity or breach
of any of the representations or warranties set forth in Articles 6 or 7,
except to the extent that the aggregate amount of such Damages exceeds the
amount of $100,000 (the "Threshold Amount"); provided, however, that once such
aggregate has been exceeded, such party shall be liable for the amount of all
Damages, including the Threshold Amount.
<PAGE>
55
15.5.2 Consequential Damages. Neither party shall be liable to or
indemnify the other party for Damages arising out of any loss or interruption
of business, profits, business opportunities or goodwill, loss of use of
facilities, cost of capital, claims of customers, or any other indirect,
special or consequential damages or any cost or expense related to such
Damages. The limitation against liability contained herein shall apply whether
the action in which recovery of Damages is sought is based on contract, tort
(including sole, concurrent or other negligence and strict liability), statute
or otherwise. To the extent permitted by law, any statutory remedies which are
inconsistent with the provisions of these terms are waived.
15.5.3 Other Limitations. Neither party shall be liable to or
indemnify the other party for Damages to the extent that the same are: (a)
caused, contributed to or exacerbated by the other party; or (b) recovered from
any third party (including any insurance proceeds).
15.5.4 Exclusive Remedy. The remedies provided for under this Article
15 and Section 17.1 shall be the exclusive remedies of the parties with respect
to the matters covered by this Agreement. Neither party shall be entitled to a
rescission of this Agreement.
15.5.5 Assignment of Claims. In the event that any of the Damages for
which an Indemnifying Party is responsible or allegedly responsible hereunder
are recoverable or potentially recoverable against any third party at the time
when payment is due under this Article 15, then, the Indemnified Party shall
assign any and all rights that it may have that are related in any fashion to
the Damages or the facts or circumstances giving rise thereto to the
Indemnifying Party as a condition to any payment due under this Article 15, or,
if such rights are not assignable under applicable law or otherwise, the
Indemnified Party hereunder shall attempt in good faith to collect any and all
damages and losses on account thereof from such third party for the benefit of,
and at the expense and direction of, the Indemnifying Party.
<PAGE>
56
ARTICLE 16
TERMINATION RIGHTS
------------------
16.1 Termination.
16.1.1 This Agreement may be terminated by either CBS or SFX, if the
party seeking to terminate is not in material default or breach of this
Agreement, upon written notice to the other upon the occurrence of any of the
following (so long as such party seeking termination is not itself at such time
in material breach of its representations, warranties, covenants or agreements
set forth herein):
(a) if any condition set forth herein to the obligations of the
party seeking to terminate has not been satisfied or waived on or
prior to the Closing Date; or
(b) if the FCC denies the FCC Application of such party or
designates it for a trial-type hearing; or
(c) if the Closing shall not have occurred by June 30, 1997; or
(d) if any of the conditions described in Section 10.2.2 which
permit termination shall occur; or
(e) if there shall be in effect any judgment, final decree or
order that would prevent or make unlawful the Closing of the
transactions contemplated by this Agreement.
16.1.2 This Agreement may be terminated by mutual agreement of the
parties hereto.
16.2 Liability. The termination of this Agreement under Section 16.1 shall
not relieve any party of any liability for breach of this Agreement prior to
the date of termination.
16.3 Unwind. In the event that the FCC requires the parties to unwind the
transactions contemplated hereby after the Closing has occurred, the parties
will mutually agree on the arrangements necessary to put the parties in the
positions they
<PAGE>
57
were in prior to the Closing.
ARTICLE 17
MISCELLANEOUS PROVISIONS
------------------------
17.1 Specific Performance. SFX and CBS each recognize and acknowledge
that, in the event that either party shall fail to perform its obligations to
consummate the transactions contemplated hereby, money damages alone will not
be adequate to compensate such party for its injury. SFX and CBS, therefore,
each agree and acknowledge that, in the event of their failure to perform their
obligation to consummate the transactions contemplated hereby, the other party
shall be entitled, in addition to any action for monetary damages, and in
addition to any other rights and remedies on account of such failure, to
specific performance of the terms of this Agreement and of the other party's
obligation to consummate the transactions contemplated hereby. If any action is
brought by either party to enforce this Agreement, the other party shall waive
the defense that there is an adequate remedy at law.
17.2 Risk of Loss. The risk of loss or damage to any of the SFX Station
Assets prior to the Closing Date shall be upon SFX. In consultation with CBS,
SFX shall repair, replace and restore any such damaged or lost SFX Station
Asset to its prior condition as soon as possible and in no event later than the
Closing Date. The risk of loss or damage to any of the CBS Stations Assets
prior to the Closing Date shall be upon CBS. In consultation with SFX, CBS
shall repair, replace and restore any such damaged or lost CBS Stations Asset
to its prior condition as soon as possible and in no event later than the
Closing Date.
17.3 Further Assurances. After the Closing, each party shall, from time to
time, at the request of and without further cost or expense to the other party,
execute and deliver such other instruments of conveyance and transfer and take
such other actions as may reasonably be requested in order to more effectively
consummate the transactions contemplated hereby to vest in such party good and
marketable title to the assets being transferred hereunder, and each party
shall from time to time, at
<PAGE>
58
the request of and without further cost or expense to the other party, execute
and deliver such other instruments and take such other actions as may
reasonably be requested in order to more effectively relieve such party of any
obligations being assumed by the other party hereunder.
17.4 Benefit and Assignment. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. No party may voluntarily or involuntarily
assign its interest under this Agreement without the prior written consent of
the other party, except for any assignment to an Affiliate of either party in
which case SFX or CBS, as the case may be, shall remain fully obligated under
this Agreement as an assignor.
17.5 Headings. The table of contents and headings set forth in this
Agreement are for convenience only and will not control or affect the meaning
or construction of the provisions of this Agreement.
17.6 Governing Law. The construction and performance of this Agreement
shall be governed by the laws of the State of New York without giving effect to
the choice of law provisions thereof.
17.7 Notices. Any notice, demand or request required or permitted to be
given under the provisions of this Agreement shall be in writing and shall be
deemed to have been duly delivered and received on the date of personal
delivery or on the third day after deposit in the U.S. mail, if mailed by
registered or certified mail, postage prepaid and return receipt requested, or
on the day after delivery to a nationally recognized overnight courier service
for next morning delivery, or by fax transmission with confirmed receipt by the
other party, and shall be addressed
<PAGE>
59
to the following addresses, or to such other address as any party may request,
pursuant to this Section 17.7:
To SFX or SFX
Broadcasting: SFX Broadcasting, Inc.
150 East 58th Street - 19th Floor
New York, New York 10155
Attention: Robert F. X. Sillerman
Copy to: SFX Broadcasting, Inc.
150 East 58th Street - 19th Floor
New York, New York 10155
Attention: Richard A. Liese, Esq.
To CBS: CBS Inc.
10220 River Road
Potomac, Maryland 20854
Attention: Dan Mason
Copy to: CBS Inc.
51 West 52nd Street
New York, New York 10019-6188
Attention: Law Department,
M. P. Messinger
17.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which
together will constitute one and the same instrument.
17.9 No Third Party Beneficiaries. Nothing herein expressed or implied is
intended or shall be construed to confer upon or give to any person or entity
other than the parties hereto and their successors or permitted assigns, any
rights or remedies under or by reason of this Agreement.
17.10 Public Announcements. SFX, SFX Broadcasting and CBS shall consult
with each other before issuing any press releases or otherwise making any
public statements with respect to this Agreement and the transactions
contemplated hereby and shall not issue any such press release or make any
public statement without the consent of the other, except as may be required by
law.
<PAGE>
60
17.11 Exclusive Jurisdiction and Consent to Service of Process. The
parties agree that any legal action, suit or proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby, shall be
instituted in a Federal or state court sitting in New York, New York, which
shall be the exclusive jurisdiction and venue of said legal proceedings and
each party hereto waives any objection which such party may now or hereafter
have to the laying of venue of any such action, suit or proceeding, and
irrevocably submits to the jurisdiction of any such court in any such action,
suit or proceeding. Any and all service of process and any other notice in any
such action, suit or proceeding shall be effective against such party (or the
subsidiary of such party) when transmitted in accordance with Section 17.7.
Nothing contained herein shall be deemed to affect the right of any party
hereto to serve process in any manner permitted by law.
17.12 Severability. The parties agree that if one or more provisions
contained in this Agreement shall be deemed or held to be invalid, illegal or
unenforceable in any respect under any applicable law, this Agreement shall be
construed with the invalid, illegal or unenforceable provision deleted, and the
validity, legality and enforceability of the remaining provisions contained
herein shall not be affected or impaired thereby.
17.13 Amendments and Waivers. No amendment, waiver of compliance with any
provision or condition hereof or consent pursuant to this Agreement shall be
effective unless evidenced by an instrument in writing signed by the party
against whom enforcement of any waiver, amendment, change, extension or
discharge is sought.
17.14 Certain Definitions and Usage. For all purposes of this Agreement,
except as otherwise expressly provided, the following terms have the following
meanings:
"Affiliate" means an entity that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, any party.
"Material Adverse Effect" means a material adverse effect on, or
material adverse change in, (i) the SFX
<PAGE>
61
Station Assets or CBS Stations Assets, taken as a whole, (ii) the
business, results of operations or financial or other condition of the SFX
Station or the CBS Stations, or (ii) the ability of SFX or CBS to perform
their respective obligations under this Agreement. "person" means any
individual, corporation, partnership, firm, joint venture, association,
unincorporated organization, or other entity.
When a reference is made in this Agreement to an Article, Section or
Schedule, such reference shall be to an Article, Section or Schedule of this
Agreement unless otherwise indicated. Whenever the words "included", "includes"
or "including" are used in this Agreement, they shall be deemed to be followed
by the words "without limitation". All accounting terms not defined in this
Agreement shall have the meanings determined by generally accepted accounting
principles as in effect from time to time. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such term, and references to a person
are also to its permitted successors and assigns.
17.15 Entire Agreement. This Agreement and the Schedules hereto and the
ancillary documents provided for herein embody the entire agreement and
understanding of the parties hereto relating to the matters provided for herein
and supersede any and all prior agreements, arrangements and understandings
relating to the matters provided for herein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
WHFS, INC.
By: /s/ Robert F.X. Sillerman
-------------------------------------------
Name: Robert F.X. Sillerman
Title: President
<PAGE>
62
LIBERTY BROADCASTING OF MARYLAND
INCORPORATED
By: /s/ Robert F.X. Sillerman
-------------------------------------------
Name: Robert F.X. Sillerman
Title: President
SFX BROADCASTING, INC.
By: /s/ Robert F.X. Sillerman
-------------------------------------------
Name: Robert F.X. Sillerman
Title: Chairman of the Board and
Chief Executive Officer
CBS INC.
By: /s/ Dan Mason
-------------------------------------------
Name: Dan Mason
Title: President
ASSET PURCHASE AGREEMENT
BETWEEN
SECRET COMMUNICATIONS LIMITED PARTNERSHIP
AND
SFX BROADCASTING, INC.
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE I
PURCHASE AND SALE OF PURCHASED ASSETS...............................1
1.1. Purchase and Sale of Purchased Assets........................1
1.2. Excluded Assets..............................................3
1.3. Purchase Price...............................................4
1.4. Assumption of Liabilities....................................4
1.5. Excluded Liabilities.........................................4
1.6. Closing Date; Deliveries.....................................5
1.7. Further Assurances...........................................5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER............................6
2.1. Organization of Seller.......................................6
2.2. Subsidiaries and Investments.................................6
2.3. Authority of Seller..........................................6
2.4. Financial Statements.........................................7
2.5. Operations Since Balance Sheet Date..........................8
2.6. Taxes........................................................8
2.7. Availability of Assets.......................................9
2.8. Governmental Permits.........................................9
2.9. Real Property...............................................10
2.10. Real Property Leases........................................11
2.11. Condemnation................................................12
2.12. Personal Property...........................................12
2.13. Personal Property Leases....................................12
2.14. Intellectual Property.......................................12
2.15. Title to Purchased Assets...................................13
2.16. Contracts...................................................13
2.17. Status of Contracts.........................................14
2.18. No Violation, Litigation or Regulatory Action...............15
2.19. Hazardous Materials.........................................15
2.20. Finder......................................................16
2.21. No Interference.............................................16
2.22. Foreign Investment in Real Property Tax Act.................16
2.23. Bankruptcy..................................................16
2.24. Employee Benefit Plans......................................17
2.25. Exchange Agreement..........................................17
i
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PAGE
----
2.26. Full Disclosure.............................................18
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER............................18
3.1. Organization of Buyer.......................................18
3.2. Authority of Buyer..........................................18
3.3. Absence of Knowledge as to Certain Facts....................19
3.4. Financial Capability........................................19
3.5. No Finder...................................................19
ARTICLE IV
ACTION PRIOR TO THE CLOSING DATE...................................19
4.1. Investigation of the Stations by Buyer......................19
4.2. Preserve Accuracy of Representations and Warranties.........20
4.3. FCC Consent; Improvements Act Approval; Other
Consents and Approvals....................................20
4.4. Operations Prior to the Closing Date........................21
4.5. Delivery of Schedules.......................................23
ARTICLE V
ADDITIONAL AGREEMENTS..............................................24
5.1. Taxes; Sales, Use and Transfer Taxes; Title Insurance.......24
5.2. Audit of Financial Statements of Stations...................25
5.3. Covenant Not to Compete...................................25
5.4. Collection of Receivables...................................26
5.5. Employees and Employee Benefit Plans......................27
5.6. Relocation of Pittsburgh Antennae and Studio.................28
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.......................29
6.1. No Misrepresentation or Breach of Covenants and
Warranties................................................29
6.2. Opinion of Counsel for Seller...............................29
6.3. Partnership Action..........................................29
6.4. No Restraint or Litigation..................................29
ii
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PAGE
----
6.5. FCC Consent.................................................29
6.6. Necessary Consents..........................................30
6.7. FIRPTA Certificate..........................................30
6.8. Exchange Transaction.........................................30
6.9. Completion of Audit..........................................30
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER......................30
7.1. No Misrepresentation or Breach of Covenants and
Warranties................................................30
7.2. Opinion of Counsel for Buyer................................31
7.3. Corporate Action............................................31
7.4. No Restraint................................................31
7.5. FCC Consent.................................................31
7.6. Exchange Transaction........................................31
ARTICLE VIII
INDEMNIFICATION....................................................31
8.1. Indemnification by Seller...................................31
8.2. Indemnification by Buyer....................................32
8.3. Limitations of Indemnification Obligations..................32
8.4. Notice of Claims............................................34
8.5. Third Party Claims..........................................34
8.6. Exclusive Remedy............................................35
ARTICLE IX
TERMINATION........................................................36
9.1. Termination.................................................36
9.2. Notice of Termination.......................................37
ARTICLE X
GENERAL PROVISIONS.................................................37
10.1. No Announcement............................................37
10.2. Confidential Nature of Information.........................37
10.3. Governing Law; Submission to Jurisdiction..................38
10.4. Notices....................................................39
10.5. Successors and Assigns.....................................40
iii
<PAGE>
PAGE
----
10.6. Access to Records after Closing............................41
10.7. Entire Agreement; Amendments...............................41
10.8. Interpretation; Disclosure Schedules.......................41
10.9. Waivers....................................................42
10.10. Expenses...................................................42
10.11. Partial Invalidity.........................................42
10.12. Execution in Counterparts..................................42
10.13. Definitions................................................43
10.14. Allocation of Purchase Price...............................47
10.15. Specific Performance; Other Rights and Remedies............47
10.16. Risk of Loss...............................................47
10.17. Assignment of Rights Under Exchange Agreement..............48
iv
<PAGE>
EXHIBIT DESCRIPTION
- ------- -----------
A Escrow Agreement
B Undertaking and Assumption
C Bill of Sale and Assignment
SCHEDULE DESCRIPTION
- -------- -----------
1.2(k) -- Excluded Software
2.3 -- Conflicts; Consents of Seller
2.4(a)&(b) -- Financial Statements
2.5 -- Changes in Operations
2.7 -- Unavailable Assets
2.8 -- Governmental Permits
2.9 -- Real Property
2.10 -- Real Property Leases
2.12 -- Personal Property
2.13 -- Personal Property Leases
2.14 -- Intellectual Property
2.15 -- Title to Property
2.16 -- Contracts
2.17 -- Status of Contracts
2.18 -- Legal Proceedings
2.19 -- Environmental Matters
2.24 -- Employee Benefit Plans
3.2 -- Conflicts; Consents of Buyer
3.3 -- Absence of Knowledge of Certain Facts
4.4(b) -- Conduct of Business
6.6 -- Necessary Consents
v
<PAGE>
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of October 15, 1996
between Secret Communications Limited Partnership, a Delaware limited
partnership ("Seller"), and SFX Broadcasting, Inc., a Delaware corporation
("Buyer").
W I T N E S S E T H :
---------------------
WHEREAS, Seller is the licensee of and operates radio stations WTAM-AM and
WLTF-FM in Cleveland, Ohio, WFBQ-FM, WRZX-FM and WNDE-AM in Indianapolis,
Indiana and WDVE-FM and WXDX-FM in Pittsburgh, Pennsylvania (the "Owned
Stations") and, upon the consummation of the transactions contemplated by the
Asset Exchange Agreement (the "Exchange Agreement") dated as of May 31, 1996 by
and among Seller, Nationwide Communications, Inc. and Entercom (as defined
below), Seller will become the licensee of and have the right to operate radio
stations WDSY-FM and WJJJ-FM (formerly WNRQ-FM) in Pittsburgh, Pennsylvania
(the "Purchased Stations") (the Owned Stations and the Purchased Stations being
collectively referred to herein as the "Stations");
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, substantially all of the assets, properties and business relating
to the Stations, all on the terms and subject to the conditions set forth
herein; and
WHEREAS, concurrently with the execution and delivery of this Agreement,
Buyer, Seller and The First National Bank of Chicago (the "Escrow Agent") have
executed and delivered the Escrow Agreement dated the date hereof (the "Escrow
Agreement") in the form of Exhibit A, and Buyer has delivered to the Escrow
Agent a letter of credit with a drawable balance of $15,000,000 to be held by
the Escrow Agent pursuant to the terms and conditions of the Escrow Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, it is hereby agreed between Seller and Buyer as follows:
-1-
<PAGE>
ARTICLE I
PURCHASE AND SALE OF PURCHASED ASSETS
-------------------------------------
1.1. PURCHASE AND SALE OF PURCHASED ASSETS. Upon the terms and subject to
the conditions of this Agreement, on the Closing Date, Seller shall sell,
transfer, assign, convey and deliver to Buyer, and Buyer shall purchase from
Seller, free and clear of all Encumbrances (except for Permitted Encumbrances),
all of the assets, properties and business (excepting only the Excluded Assets)
of every kind and description, wherever located, real, personal or mixed,
tangible or intangible, owned or held by Seller relating to the Stations as the
same shall exist on the Closing Date (herein collectively called the "Purchased
Assets"), including, without limitation, all right, title and interest of
Seller in, to and under:
(a) The broadcast licenses for the Stations (including the right to
use the call letters "WTAM-AM", "WLTF-FM", "WFBQ-FM", "WRZX-FM", "WNDE-AM",
"WDVE-FM", "WXDX-FM", "WDSY-FM" and "WJJJ-FM") issued by the FCC and all other
Governmental Permits listed in Schedule 2.8;
(b) The Owned Real Property listed in Schedule 2.9;
(c) The real property leases and leasehold improvements listed or
described in Schedule 2.10;
(d) All machinery, equipment (including computers and office
equipment), auxiliary and translator facilities, transmitting towers,
transmitters, broadcast equipment, antennae, inventory (including all records,
tapes, recordings, compact discs and music cassettes), vehicles, furniture and
other personal property of the Stations listed or referred to in Schedule 2.12;
(e) The personal property leases listed in Schedule 2.13;
(f) All trademarks, trade names, service marks and copyrights (and all
goodwill associated therewith), registered or unregistered, of Seller relating
to the Stations, and the applications for registration thereof and the
licenses relating to any of the foregoing listed in Schedule 2.14;
-2-
<PAGE>
(g) The contracts, agreements or understandings listed or described in
Schedule 2.16;
(h) All advertising customer lists, mailing lists, processes, trade
secrets, know-how and other proprietary or confidential information used in or
relating to the Stations;
(i) All of Seller's rights, claims or causes of action against third
parties arising under warranties from manufacturers, vendors and others in
connection with the Purchased Assets;
(j) All jingles, slogans and promotional materials used in or relating
to the Stations; and
(k) All books and records (including all computer programs) of Seller
relating to the assets, business and operations of the Stations, including,
without limitation, all files, logs, programming information and studies and
news and advertising studies.
1.2. EXCLUDED ASSETS. Notwithstanding the foregoing, the Purchased Assets
shall not include the following (herein referred to as the "Excluded Assets"):
(a) All cash and cash equivalents (including any marketable securities
or certificates of deposit) of Seller or Entercom relating to the Stations and
all notes and accounts receivable or other evidences of indebtedness owed to
Seller or its Affiliates or Entercom or its Affiliates relating to the
Stations;
(b) All notes and accounts receivable or other evidences of
indebtedness owed to Seller by any of its Affiliates;
(c) All claims, rights and interests of Seller in and to any refunds
for federal, state or local franchise, income or other Taxes or fees of any
nature whatsoever for periods prior to the Closing Date;
(d) Except as otherwise provided in Section 1.1(i), any of Seller's
rights, claims or causes of action against third parties relating to the
assets, properties, business or
-3-
<PAGE>
operations of the Stations arising out of transactions occurring prior to the
Closing Date;
(e) All bonds, contracts or policies of insurance and prepaid
insurance with respect to such contracts or policies;
(f) All records prepared in connection with the sale of the Stations,
including bids received from others and analyses relating to the Stations and
the Purchased Assets;
(g) The partnership name of Secret;
(h) All records and documents relating to Excluded Assets or to
liabilities other than Assumed Liabilities;
(i) Seller's employee benefit agreements, plans or arrangements
maintained by Seller on behalf of persons employed by Seller;
(j) All rights, claims or causes of action against third Persons
relating to the assets, business or operation of the Stations which may arise
in connection with the discharge by Seller of the Excluded Liabilities;
(k) Software programs and other assets at Seller's principal executive
offices set forth on Schedule 1.2(k) used to provide certain financial and
accounting services for the Stations;
(l) All rights of Seller under the Exchange Agreement and all related
agreements not otherwise assigned to Buyer herein; and
(m) Any of Seller's rights under or pursuant to this Agreement or the
other agreements with Buyer contemplated hereby.
1.3. PURCHASE PRICE. The purchase price for the Purchased Assets (the
"Purchase Price") shall be equal to $300,000,000; provided, that if Aggregate
1996 Broadcast Cash Flow of the Stations is less than $13,374,000, then the
Purchase Price shall be equal to $291,000,000.
1.4. ASSUMPTION OF LIABILITIES. On the Closing Date, Buyer shall deliver
to Seller an undertaking and assumption, in
-4-
<PAGE>
the form of Exhibit B, pursuant to which Buyer shall assume and be obligated
for, and shall agree to pay, perform, defend and discharge in accordance with
their terms, all liabilities and obligations of Seller arising after the
Closing Date under (i) the Seller Agreements, (ii) the leases, contracts and
other agreements not required by the terms of Section 2.16 to be listed in a
Schedule to this Agreement and (iii) the leases, contracts and other agreements
entered into by Seller with respect to the Stations after the date hereof
consistent with the terms of this Agreement, except, in each case, to the
extent such liabilities and obligations have accrued prior to the Closing Date.
All of the foregoing liabilities and obligations to be assumed by Buyer
hereunder (excluding any Excluded Liabilities) are referred to herein as the
"Assumed Liabilities."
1.5. EXCLUDED LIABILITIES. Buyer shall not assume or be obligated to pay,
perform or otherwise discharge any liability or obligation of Seller not
expressly assumed by Buyer pursuant to the undertaking and assumption referred
to in Section 1.4 (all such liabilities and obligations not being assumed being
herein called the "Excluded Liabilities") and, notwithstanding anything to the
contrary in Section 1.4, none of the following shall be "Assumed Liabilities"
for purposes of this Agreement:
(i) any liabilities in respect of any Taxes of Seller for which
Seller is liable pursuant to Section 5.1(a);
(ii) any intercompany payables and other liabilities or obligations
of Seller to any of its Affiliates;
(iii) any costs and expenses incurred by Seller incident to its
negotiation and preparation of this Agreement and its performance and
compliance with the agreements and conditions contained herein;
(iv) any liabilities or obligations in respect of any Excluded
Assets; or
(v) any liabilities arising from the operation of the Stations prior
to the Closing regardless of whether operated by Seller or any predecessor
owner of the Station.
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<PAGE>
1.6. CLOSING DATE; DELIVERIES. (a) The Closing shall be consummated at
10:00 A.M., local time, on the tenth business day after the FCC Consent shall
become a Final Order at the offices of Buyer, 150 East 58th Street, New York,
New York 10155 or at such other place, time and date as shall be agreed upon by
Buyer and Seller (the date and time on which the Closing is actually held being
hereinafter referred to as the "Closing Date").
(b) On the Closing Date, Seller shall deliver to Buyer (i) a bill of
sale and assignment, in the form of Exhibit C, of all of the Purchased Assets
and (ii) all of the documents, instruments and opinions required to be
delivered by Seller pursuant to Article VI.
(c) On the Closing Date, Buyer shall (i) deliver to Seller (A) by bank
wire transfer of immediately available funds to an account number to be
designated by Seller in writing at least two business days prior to Closing an
amount equal to the Purchase Price and (B) all of the documents, instruments
and opinions required to be delivered by Buyer pursuant to Section 1.4 and
Article VII.
1.7. FURTHER ASSURANCES. On the Closing Date, Seller shall (a) deliver to
Buyer such other bills of sale, deeds, endorsements, assignments and other good
and sufficient instruments of conveyance and transfer as Buyer may reasonably
request or as may be otherwise reasonably necessary to vest in Buyer all the
right, title and interest of Seller in, to or under any or all of the Purchased
Assets and (b) take all steps as may be reasonably necessary to put Buyer in
actual possession and control of all the Purchased Assets. From time to time
following the Closing, Seller shall execute and deliver, or cause to be
executed and delivered, to Buyer such other instruments of conveyance and
transfer as Buyer may reasonably request or as may be otherwise necessary to
more effectively convey and transfer to, and vest in, Buyer and put Buyer in
possession of, any part of the Purchased Assets, and, in the case of licenses,
certificates, approvals, authorizations, agreements, contracts, leases,
easements and other commitments included in the Purchased Assets which cannot
be transferred or assigned effectively without the consent of third parties
which consent has not been obtained prior to the Closing, to cooperate with
Buyer at its reasonable request in endeavoring to obtain such consent.
-6-
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, Seller represents and warrants
to Buyer and agrees as follows:
2.1. ORGANIZATION OF SELLER. Seller is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is duly qualified and in good standing as a foreign limited
partnership in the States of Indiana, Ohio and Pennsylvania. Seller has full
partnership power and authority, or will have full partnership power and
authority upon consummation of the transactions contemplated by the Exchange
Agreement (the "Exchange Transaction"), to own or lease and to operate and use
the Purchased Assets and to carry on the business of the Stations as now
conducted.
2.2. SUBSIDIARIES AND INVESTMENTS. Seller does not, directly or
indirectly, own, of record or beneficially, any outstanding voting securities
or other equity interests in any corporation, partnership, joint venture or
other entity which is involved in or relates to the Stations.
2.3. AUTHORITY OF SELLER. Seller has the partnership power and authority
to execute, deliver and perform, or will have the partnership power and
authority upon consummation of the Exchange Transaction to perform, this
Agreement and all of the other agreements and instruments to be executed and
delivered by Seller to Buyer pursuant hereto (collectively, the "Seller
Ancillary Agreements").
The execution, delivery and performance of this Agreement and the Seller
Ancillary Agreements by Seller have been duly authorized and approved by all
necessary partnership action on behalf of Seller and its general partners. This
Agreement is, and each Seller Ancillary Agreement when executed and delivered
by Seller and the other parties thereto will be, a legal, valid and binding
agreement of Seller enforceable in accordance with its respective terms,
subject to bankruptcy, insolvency, reorganization, moratorium and similar laws
of general application
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relating to or affecting creditors' rights and general equity principles.
Except as set forth in Schedule 2.3, neither the execution and delivery
by Seller of this Agreement or any of the Seller Ancillary Agreements or the
consummation by Seller of any of the transactions contemplated hereby or
thereby nor compliance by Seller with or fulfillment by Seller of the terms,
conditions and provisions hereof or thereof will:
(a) result in a breach of the terms, conditions or provisions of, or
constitute a default, an event of default or an event creating rights of
acceleration, termination or cancellation or a loss of rights under, or result
in the creation or imposition of any Encumbrance upon any of the Purchased
Assets under, the partnership agreement of Seller, any Seller Agreement or any
judgment, order, award or decree to which Seller is a party or any of the
Purchased Assets is subject or by which Seller is bound or any Requirements of
Law affecting Seller or the Purchased Assets; or
(b) require the approval, consent, authorization or act of, or the
making by Seller of any declaration, filing or registration with, any Person,
except for such of the foregoing as are necessary pursuant to the Improvements
Act or the Communications Act.
2.4. FINANCIAL STATEMENTS. (a) Schedule 2.4(a) contains (i) the unaudited
balance sheets of the Owned Stations as of December 31, 1995 and the related
statements of income for the year then ended and (ii) the unaudited balance
sheets (the "Balance Sheet") of the Owned Stations as of August 31, 1996 (the
"Balance Sheet Date") and the related statement of income for the eight months
then ended. Such balance sheets and statements of income have been prepared in
accordance with generally accepted accounting principles and present fairly the
financial position and results of operations of the Owned Stations as of their
respective dates and for the respective periods covered thereby subject to the
absence of footnotes and statements of cash flows and to normal year-end
adjustments.
(b) Schedule 2.4(b) contains the unaudited statements of income of the
Purchased Stations for the three month period ended August 31, 1996. The
statements of income for the three
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month period ended August 31, 1996 present fairly the results of operations of
the Purchased Stations for the period covered thereby subject to the absence of
footnotes, balance sheet and statement of cash flows and normal year-end
adjustments.
(c) Schedule 2.4(c) contains (i) the balance sheet of the Purchased
Stations as of September 30, 1995 (the "Purchased Stations Balance Sheet" and
the unaudited statements of income for the twelve months then ended and (ii)
the unaudited statements of income for the eight months ended May 31, 1996, in
each case in the form provided to Seller by Entercom pursuant to the Exchange
Agreement. To the knowledge of Seller, except as set forth therein, the balance
sheets as of September 30, 1995 and the statements of income for the twelve
months then ended and the statements of income for the eight months ended May
31, 1996 present fairly the financial position and results of operations of the
Purchased Stations as of such dates and for the period covered thereby subject
to the absence of footnotes and statements of cash flows and normal year-end
adjustments.
2.5. OPERATIONS SINCE BALANCE SHEET DATE. Except as set forth in Schedule
2.5(b), since the Balance Sheet Date, Seller has conducted the business of the
Owned Stations and, to the knowledge of Seller, the business of the Purchased
Stations has only been conducted, in the ordinary course. Without limiting the
generality of the foregoing, since the Balance Sheet Date, except as set forth
in such Schedule, Seller has not, in respect of the Owned Stations and, to the
knowledge of Seller, the Purchased Stations:
(i) sold, leased (as lessor), transferred or otherwise disposed of
(including any transfers from Seller to any of its Affiliates), or
mortgaged or pledged, or imposed or suffered to be imposed any Encumbrance
on, any of the assets reflected on the Balance Sheet or the Purchased
Stations Balance Sheet or any assets acquired after the Balance Sheet Date
relating to the Stations, other than personal property having an aggregate
value of less than $50,000 sold or otherwise disposed of in the ordinary
course of the business of the Stations which would not reasonably be
expected to have a material adverse effect on the business or operations
of the Stations and except for Permitted Encumbrances;
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(ii) created, incurred, or assumed, or agreed to create,
incur, or assume, any indebtedness for borrowed money (other than
money borrowed or advances from any of its Affiliates in the ordinary
course of the business of the Stations) or entered into (as lessee)
any capitalized leases; or
(iii) granted or instituted any material increase in any rate
of salary or compensation of any employee of the Stations or any
profit sharing, bonus, incentive, deferred compensation, insurance,
pension, retirement, medical, hospital, disability, welfare or other
employee benefit plan.
2.6. TAXES. (a) Seller has, in respect of the Owned Stations, either filed
or obtained extensions for filing pursuant to applicable law all Tax Returns
due on or prior to the date of this Agreement and has paid or made provision
for the payment of all Taxes which have become due pursuant to such Tax Returns
or pursuant to any assessments which have become payable and which are not
being contested in good faith. All monies required to be withheld by Seller
from employees of the Owned Stations for income Taxes, social security and
other payroll Taxes have been collected or withheld, and either paid to the
respective governmental agencies, set aside in accounts for such purpose, or
accrued, reserved against and entered upon the books of Seller.
(b) In respect of the Purchased Stations, to the knowledge of Seller,
either Seller or Entercom has filed or obtained extensions for filing pursuant
to applicable law all Tax Returns due on or prior to the date of this Agreement
and either Seller or Entercom has paid or made provision for the payment of all
Taxes which have become due pursuant to such Tax Returns or pursuant to any
assessments which have become payable and which are not being contested in good
faith. To the knowledge of Seller, monies required to be withheld from
employees of the Purchased Stations for income Taxes, social security and other
payroll Taxes have been collected or withheld, and either paid to the
respective governmental agencies, set aside in accounts of Seller or Entercom
for such purpose, or accrued, reserved against and entered upon the books of
Seller or Entercom. To the knowledge of Seller, no Taxing authority has
asserted in writing against Seller or Entercom any deficiency or claim for
additional
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Taxes in respect of the Purchased Stations which is currently pending.
2.7. AVAILABILITY OF ASSETS. Except as set forth in Schedule 2.7 and
except for the Excluded Assets, the Purchased Assets constitute all the assets
used in the conduct of the business of the Stations (including, without
limitation, all books, records, computers and computer programs and data
processing systems). All tangible Purchased Assets are in good repair and
operating condition, ordinary wear and tear excepted, and have been maintained
in accordance with industry practice and comply with all applicable rules and
regulations of the FCC and the terms of the FCC Authorizations. Except as set
forth in Schedule 2.7, the Purchased Assets are sufficient to operate the
Stations as they are now operated. EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES MADE IN THIS AGREEMENT, ALL OF THE TANGIBLE PURCHASED ASSETS ARE
SOLD TO BUYER "AS IS" WITHOUT ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS
FOR INTENDED USE OR OTHERWISE.
2.8. GOVERNMENTAL PERMITS. Seller owns, holds or possesses, or upon
consummation of the Exchange Transaction will own, hold or possess, the FCC
Authorizations and all other governmental licenses, franchises, permits,
privileges, immunities, approvals and other authorizations which are necessary
to entitle it to own or lease, operate and use the Purchased Assets and to
carry on and conduct the business of the Stations as currently conducted
(herein collectively called "Governmental Permits"), except for such
Governmental Permits which the failure to so own, hold or possess would not
have a material adverse effect on the operations and financial condition of the
Stations taken as a whole. Schedule 2.8 sets forth a list and brief description
of each such Governmental Permit held by Seller as of the date of this
Agreement with respect to the Owned Station and each such Governmental Permit
disclosed to Seller by Entercom pursuant to the Exchange Agreement or otherwise
with respect to the Purchased Stations, except for such incidental licenses,
permits and other authorizations which would be readily obtainable by any
qualified applicant without undue burden in the event of any lapse,
termination, cancellation or forfeiture thereof. Schedule 2.8 includes a list
of all FCC Authorizations with respect to the Owned Stations and, to the
knowledge of Seller, all FCC Authorizations with respect to the Purchased
Stations.
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Except as set forth in Schedule 2.8, (i) Seller has fulfilled and
performed its obligations under each of such Governmental Permits, and no event
has occurred or condition or state of facts exists which constitutes or, after
notice or lapse of time or both, would constitute a breach or default under any
such Governmental Permit, (ii) no notice of cancellation, of default or of any
dispute concerning any Governmental Permit, or of any event, condition or state
of facts described in the preceding clause (i), has been received by Seller,
(iii) each of the Governmental Permits is valid, subsisting and in full force
and effect and, subject to the receipt of the FCC Consent and consummation of
the Exchange Transaction, may be assigned and transferred to Buyer in
accordance with this Agreement and will continue in full force and effect
thereafter, in each case without (A) the occurrence of any breach, default or
forfeiture of rights thereunder or (B) the consent, approval, or act of, or the
making of any filing with, any governmental body, regulatory commission or
other party (other than the FCC as contemplated by Section 4.3); and (iv) the
Stations are being operated in accordance with the FCC Authorizations. Except
as set forth in Schedule 2.8, Seller is not aware of any reason why the FCC
Authorizations would not be renewed in the ordinary course for a full term
without material qualifications or of any reason why any of the FCC
Authorizations might be revoked. No renewal of any FCC Authorization would
constitute a major environmental action under the rules of the FCC. There are
no facts which, under the Communications Act or the existing rules of the FCC,
would disqualify Seller from assigning the FCC Authorizations or from
consummating the transactions contemplated herein within the times contemplated
herein. Seller maintains appropriate public inspection files at the Owned
Stations' studios, and to the knowledge of Seller, appropriate public
inspection files are maintained at the Purchased Stations' studio, in
accordance with FCC rules.
2.9. REAL PROPERTY. Schedule 2.9 contains a brief description of each
parcel of real property owned by Seller and used in or relating to the Owned
Stations (the "Owned Real Property") (showing the record title holder,
location, and any indebtedness secured by a mortgage or other lien thereon) and
of each option, right or contract to purchase held by Seller to acquire any
real property for use in connection with the Owned Stations. Seller will not be
acquiring title to any real property, or any options to acquire title to real
property, upon
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consummation of the Exchange Transaction. The Owned Real Property is zoned for
the purposes for which it is currently being used by Seller. Except as set
forth in Schedule 2.9, to the knowledge of Seller, there are no structural
defects in the buildings, structures and improvements located on the Owned Real
Property. The roofs of such buildings are in good condition and repair, and all
plumbing equipment, heating, ventilating and air conditioning equipment,
electrical wiring, and water and sewage systems located on the Owned Real
Property are operating properly, ordinary wear and tear excepted and normal
maintenance requirements excluded. There are no encroachments upon the Owned
Real Property by any buildings, structures or improvements located on adjoining
real estate. None of the buildings, structures or improvements (including,
without limitation, any guy wires or guy anchors) constructed on the Owned Real
Property encroach upon adjoining real estate, and all such buildings,
structures and improvements are constructed in conformity with or are
"grandfathered" with respect to all "setback" lines, easement and other
restrictions or rights of record, or that have been established by any
applicable building or safety code or zoning ordinance. To the knowledge of
Seller, any such "grandfathered" approvals shall survive indefinitely the
transfer of the Owned Real Property to Buyer and no utility lines serving the
Owned Real Property pass over the lands of others except where appropriate
easements have been obtained. The Owned Real Property, together with all leases
of real property set forth in Schedule 2.10 (the "Leased Real Property"), are
sufficient to operate the Stations as they are now operated.
2.10. REAL PROPERTY LEASES. Schedule 2.10 sets forth a list and brief
description of each lease or similar agreement under which (i) Seller is lessee
of, or holds or operates, or upon the consummation of the Exchange Transaction
will be lessee of, or hold or operate, any real property owned by any third
party and used in or relating to the Stations or (ii) Seller is the lessor of
any of the Owned Real Property. To the knowledge of Seller, the Leased Real
Property is zoned for the purposes for which it is currently being used by
Seller. To the knowledge of Seller, except as set forth in Schedule 2.10, there
are no structural defects in the buildings, structures and improvements located
on the Leased Real Property. To the knowledge of Seller, the roofs of such
buildings are in good condition and repair, and all plumbing equipment,
heating, ventilating and air conditioning equipment, electrical wiring, and
water and sewage systems
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located on the Leased Real Property are operating properly, ordinary wear and
tear excepted and normal maintenance requirements excluded. To the knowledge of
Seller, there are no encroachments upon the Leased Real Property by any
buildings, structures or improvements located on adjoining real estate. To the
knowledge of Seller, none of the buildings, structures or improvements
(including, without limitation, any guy wires or guy anchors) constructed on
the Leased Real Property encroach upon adjoining real estate, and, to the
knowledge of Seller, all such buildings, structures and improvements are
constructed in conformity with or are "grandfathered" with respect to all
"setback" lines, easements and other restrictions or rights of record, or that
have been established by any applicable building or safety code or zoning
ordinance. To the knowledge of Seller, any such "grandfathered" approvals shall
survive indefinitely the transfer of the Leased Real Property to Buyer and no
utility lines serving the Leased Real Property pass over the lands of others
except where appropriate easements have been obtained. To the knowledge of
Seller, the Leased Real Property, together with any real property owned by
Entercom relating to the Purchased Stations, is sufficient to operate the
Purchased Station as now operated.
2.11. CONDEMNATION. As of the date of the Agreement, (a) neither the whole
nor any part of any real property owned, leased, used or occupied by Seller, or
to be owned, leased or occupied by Seller upon consummation of the Exchange
Transaction, in connection with the Stations is subject to any pending suit for
condemnation or other taking by any public authority and (b) to the knowledge
of Seller, no such condemnation or other taking is threatened.
2.12. PERSONAL PROPERTY. Schedule 2.12 contains (i) the existing records
as of June 30, 1996 of all machinery, equipment, vehicles, furniture and other
personal property owned by Seller having an original cost of $5,000 or more and
used in or relating to the business of the Owned Stations and (ii) the list of
material items of fixed assets and equipment of the Purchased Stations
furnished to Seller by Entercom as part of the Exchange Agreement.
2.13. PERSONAL PROPERTY LEASES. Schedule 2.13 contains a list of each
lease or other agreement or right, whether written or oral, under which Seller
is lessee of, or holds or
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operates any machinery, equipment, vehicle or other tangible personal property
owned by a third party and used in or relating to the business of the Stations
and which is not terminable by Seller without penalty on 60 days' notice or
less and which provides for annual rentals in excess of $6,000.
2.14. INTELLECTUAL PROPERTY. Schedule 2.14 contains a list of: (i) all
trademarks, service marks, trade names and copyrights related to the Owned
Stations and, to the knowledge, of Seller, all trademarks, service marks, trade
names and copyrights related to the Purchased Stations, for which registrations
have been issued to Seller, in the case of the Owned Stations, or
Entercom, in the case of the Purchased Stations, or applications for
registrations have been made by Seller, in the case of the Owned Stations, or
Entercom, in the case of the Purchased Stations, and (ii) all licenses,
agreements or other arrangements under which Seller, in connection with the
Stations, has the right, or upon the consummation of the Exchange Transaction
will have the right, to use any trademark, service mark, trade name or
copyright (other than such as are included in the Seller Agreements). No
proceedings have been instituted, are pending or, to the knowledge of Seller,
are threatened which challenge the validity of the ownership or use by Seller
of any trademarks, service marks, trade names or copyrights related to the
Owned Stations and, to the knowledge of Seller, no such proceedings have been
instituted, are pending or are threatened which challenge the validity of the
ownership or right of use to be obtained by Seller upon consummation of the
Exchange Transaction with respect to any trademarks, service marks, trade names
or copyrights related to the Purchased Stations. Except as set forth in
Schedule 2.14, Seller has not licensed anyone to use any trademarks, service
marks, trade names or copyrights relating to the Stations, and to the knowledge
of Seller, there has been no infringement by any Person of any trademarks,
service marks, trade names or copyrights owned or used by it, or which it will
own or have the right to use upon consummation of the Exchange Transaction,
relating to the Stations. Except as set forth in Schedule 2.14, to the
knowledge of Seller, the operations of the Stations do not infringe upon the
trademarks, service marks, trade names or copyrights of any other Person.
2.15. TITLE TO PURCHASED ASSETS. Except as set forth in Schedule 2.15,
Seller owns all Owned Real Property, free and clear of all Encumbrances except
Permitted Encumbrances, and
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Seller has, or upon the consummation of the Exchange Transaction will have,
good and marketable title to all of the other tangible Purchased Assets, free
and clear of all Encumbrances except for Permitted Encumbrances. Upon delivery
to Buyer on the Closing Date of the bill of sale and assignment contemplated by
Section 1.6(b), Seller will thereby transfer to Buyer good and marketable title
to such other tangible Purchased Assets and all intellectual property relating
to the Stations owned by Seller listed in Schedule 2.14, subject to no
Encumbrances, except for Permitted Encumbrances.
2.16. CONTRACTS. Except as set forth in Schedule 2.16 or any other
Schedule hereto, as of the date of this Agreement, Seller is not and, upon the
consummation of the Exchange Transaction, will not be, with respect to the
Stations, a party to or bound by:
(a) Any contract for the purchase or sale of real property;
(b) Any contract for the purchase, rental or use of any radio
programming or programming services which is not terminable by Seller without
penalty on 60 days' notice or less, provides for performance over a period of
more than 90 days and which involves the payment after the date hereof of more
than $50,000;
(c) Any contract for the purchase of merchandise, supplies or personal
property or for the receipt of services (other than services referred to in
clause (b) above) which is not terminable by Seller on 60 days' notice or less
and involves the payment after the date hereof of more than $25,000;
(d) Any employment contract, consulting agreement or collective
bargaining agreement;
(e) Any contract for the sale of broadcast time for advertising which
was not made in the ordinary course of the business of the Stations (including
any contracts where the advertising sold is not at prices and on terms
consistent with the usual and customary practices of the Station);
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(f) Any guarantee by Seller of the obligations of customers,
suppliers, officers, directors, employees, Affiliates or others; or
(g) Any other contract which is material to the business of the Owned
Stations or the Purchased Stations, as the case may be.
2.17. STATUS OF CONTRACTS. Except as set forth in Schedule 2.17 or in any
other Schedule hereto, each of the leases, contracts and other agreements
listed in Schedules 2.10, 2.13, 2.14 and 2.16 (the "Seller Agreements")
constitutes, or upon consummation of the Exchange Transaction will constitute,
a valid and binding obligation of Seller and, to the knowledge of Seller, the
other parties thereto (subject to bankruptcy, insolvency, reorganization or
other laws relating to or affecting the enforcement of creditors' rights and
general equity principles) and is, or upon consummation of the Exchange
Transaction will be, in full force and effect and (except as set forth in
Schedule 2.3 and except for those Seller Agreements which by their terms will
expire prior to the Closing Date or will be otherwise terminated prior to the
Closing Date in accordance with the provisions thereof) may be transferred to
Buyer pursuant to this Agreement and will continue in full force and effect
thereafter, in each case without breaching the terms thereof or resulting in
the forfeiture or impairment of any rights thereunder and without the consent,
approval or act of, or the making of any filing with, any other party. With
respect to the Seller Agreements relating to the Owned Stations, Seller has
fulfilled and performed its obligations under such Seller Agreements, and
Seller is not in, or, to the knowledge of Seller, alleged to be in, breach or
default under any such Seller Agreement and, to the knowledge of Seller, no
other party to any such Seller Agreement is in breach or default thereunder,
and to the knowledge of Seller, no event has occurred and no condition or state
of facts exists which, with the passage of time or the giving of notice or
both, would constitute such a default or breach by Seller or by any such other
party. With respect to the Seller Agreements relating to the Purchased
Stations, (i) each of Seller and, to the knowledge of Seller, Entercom has
fulfilled and performed in all material respects its respective obligations, if
any, under each such Seller Agreement, (ii) neither Seller nor, to the
knowledge of Seller, Entercom is in, or alleged to be in, material breach or
material default under any such Seller Agreement, (iii) to the
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knowledge of Seller, no other party to any such Seller Agreement is in material
breach nor material default thereunder, and (iv) no event has occurred and no
condition or state of facts exists which, with the passage of time or giving of
notice or both, would constitute such a default or breach by Seller or, to the
knowledge of Seller, Entercom or by any such other party. Seller has not and,
to the knowledge of Seller, Entercom has not granted any material waiver or
forbearance with respect to any of the Seller Agreements. Complete and correct
copies of each of the Seller Agreements have heretofore been, or will within
seven days hereof be, made available to Buyer by Seller.
2.18. NO VIOLATION, LITIGATION OR REGULATORY ACTION. Except as set forth
in Schedule 2.18 or in any other Schedule hereto:
(a) Seller has complied with all material Requirements of Laws which
are applicable to the Purchased Assets or the business of the Stations
(including those requiring the availability of spare parts);
(b) As of the date of this Agreement, there are no lawsuits, claims,
suits, proceedings or investigations pending against Seller or, to the
knowledge of Seller, threatened against Seller, in respect of the Stations or,
to the knowledge of Seller, pending or threatened against Entercom in respect
of the Purchased Stations; and
(c) As of the date of this Agreement, there is no action, suit or
proceeding pending against Seller or, to the knowledge of Seller, threatened
against Seller which questions the legality or propriety of the transactions
contemplated by this Agreement.
2.19. HAZARDOUS MATERIALS. Except as permitted by or consistent with
applicable Environmental Laws or as set forth in Schedule 2.19:
(a) Seller's use of the Owned Real Property and the Leased Real
Property relating to the Stations is in compliance with all Environmental Laws;
(b) Seller has never generated, transported, used, stored or disposed
of on any Owned Real Property or the Leased
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Real Property any Hazardous Material and, to Seller's knowledge, there has
never been any Hazardous Material generated, transported, used, stored or
disposed of on any Owned Real Property or the Leased Real Property;
(c) no Hazardous Material has ever been spilled, released or disposed
of on, under or about any Owned Real Property or Leased Real Property by Seller
or, to Seller's knowledge, has ever come to be located in the soil or
groundwater of any Owned Real Property or Leased Real Property; and
(d) no underground storage tanks, or underground piping associated
with such tanks, are located on or under any Owned Real Property or, to the
knowledge of Seller, any Leased Real Property.
Except as set forth in Schedule 2.19, Seller has never and, to the
knowledge of Seller, Entercom has not entered into or been subject to any
judgment, consent decree, compliance order, or administrative order with
respect to any environmental matter or received any request for information,
notice, demand letter, administrative inquiry, or formal or informal complaint
or claim with respect to any environmental matter or the enforcement of any
Environmental Law, in each case involving the Owned Real Property or the Leased
Real Property.
2.20. FINDER. Neither Seller nor any party acting on its behalf has paid
or become obligated to pay any fee or commission to any broker, finder or
intermediary for or on account of the transactions contemplated by this
Agreement other than to Star Media Group, Inc., whose fees or commissions, to
the extent payable, shall be paid by or on behalf of Seller.
2.21. NO INTERFERENCE. To the knowledge of Seller, the Stations are not
causing interference in violation of FCC rules to the transmission of any other
broadcast station or communications facility and, since August 1, 1994 Seller
has not received any complaints with respect thereto. To the knowledge of
Seller, no other broadcast station or communications facility is causing
interference in violation of FCC rules to the Stations' transmissions or the
public's reception of such transmissions.
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2.22. FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT. Seller is not a
"foreign person" within the meaning of Section 1445 of the Code.
2.23. BANKRUPTCY. No insolvency proceedings of any character, including,
without limitation, bankruptcy, receivership, reorganization, composition or
arrangement with creditors, voluntary or involuntary, of Seller, are pending
or, to the knowledge of Seller, threatened against Seller or its general
partners, and neither Seller nor either of its general partners has made any
assignment for the benefit of creditors or taken any action in contemplation of
or which would constitute the basis for the institution of such insolvency
proceedings.
2.24. EMPLOYEE BENEFIT PLANS. Except as set forth in Schedule 2.24, with
respect to the employees of the Stations, there are no employee or retiree
benefit or compensation plans within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
compensation, bonus, incentive, deferral, equity based, severance, termination,
retention, change in control, employment or other similar program, agreement,
arrangement, trust or other funding arrangement, whether or not subject to the
provisions of ERISA, to which Seller is bound, or will be bound upon
consummation of the Exchange Transaction, or that is or has been established or
maintained or in respect of which Seller has ever had an obligation to
contribute, or will have an obligation to contribute upon consummation of the
Exchange Transaction. Seller has neither incurred nor reasonably expects to
incur (either directly or indirectly, including as a result of any
indemnification obligation) any liability that could become a liability of
Buyer or, following Closing, remain a liability of the Stations under or
pursuant to Title I or IV of ERISA or the penalty, excise tax or joint and
several liability provisions of the Code relating to employee benefit plans and
no event, transaction or condition has occurred or exists which could result in
any such liability. Each plan, program, agreement, arrangement, trust or other
funding arrangement listed in Schedule 2.24 has been operated and administered
in all material respects in accordance with all Requirements of Law, including
but not limited to ERISA and the Code.
2.25. EXCHANGE AGREEMENT. Seller has entered into the Exchange Agreement
with Entercom and Nationwide Communications,
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Inc. pursuant to which Seller, upon the consummation of the transactions
contemplated by the Exchange Agreement, will acquire the assets defined therein
as the "Pittsburgh Assets" and will assume the liabilities of Entercom with
respect to the ownership and operations of the Purchased Stations set forth in
Section 3.2 of the Exchange Agreement. As contemplated by the Exchange
Agreement, Seller and Entercom have entered into a Time Brokerage and
Programming Acquisition Agreement dated as of May 31, 1996 (the "Purchased
Stations Time Brokerage Agreement" with respect to the Purchased Stations.
Complete copies of the Exchange Agreement and the Purchased Stations Time
Brokerage Agreement have been made available to Buyer by Seller. Seller and, to
the knowledge of Seller, the other parties to the Exchange Agreement have made
the requisite filings under the Improvements Act with respect to the
transactions contemplated by the Exchange Agreement and the applicable waiting
periods under the HSR Act have expired.
2.26. FULL DISCLOSURE. To the knowledge of Seller, neither this Agreement
nor any certificate delivered pursuant hereto contains any untrue statement of
a material fact or omits any statement of a material fact necessary to make any
statement contained herein or therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
As an inducement to Seller to enter into this Agreement and to consummate
the transactions contemplated hereby, Buyer hereby represents and warrants to
Seller and agrees as follows:
3.1. ORGANIZATION OF BUYER. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Buyer
has full corporate power and authority to own or lease and to operate and use
its properties and assets and to carry on its business as now conducted.
3.2. AUTHORITY OF BUYER. Buyer has the corporate power and authority to
execute, deliver and perform this Agreement and all of the other agreements and
instruments to be
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executed and delivered by Buyer pursuant hereto (collectively, the "Buyer
Ancillary Agreements").
The execution, delivery and performance of this Agreement and the
Buyer Ancillary Agreements by Buyer have been duly authorized and approved by
all necessary corporate action on behalf of Buyer. This Agreement is, and each
Buyer Ancillary Agreement when executed and delivered by Buyer and the other
parties thereto will be, the legal, valid and binding agreement of Buyer
enforceable in accordance with its respective terms, subject to bankruptcy,
insolvency, moratorium and similar laws of general application relating to or
affecting creditors' rights and general equity principles.
Except as set forth in Schedule 3.2, neither the execution and
delivery of this Agreement or any Buyer Ancillary Agreement by Buyer or the
consummation by Buyer of any of the transactions contemplated hereby or thereby
nor compliance by Buyer with or fulfillment by Buyer of the terms, conditions
and provisions hereof or thereof will:
(a) result in a breach of the terms, conditions or provisions of, or
constitute a default, an event of default or an event creating rights of
acceleration, termination or cancellation or a loss of rights under, the
charter or By-laws of Buyer or any material agreement, judgment, order, award
or decree to which Buyer is a party or any of its properties is subject or by
which Buyer is bound or any Requirements of Law affecting Buyer; or
(b) require the approval, consent, authorization or act of, or the
making by Buyer of any declaration, filing or registration with, any Person,
except for such of the foregoing as are necessary pursuant to the Improvements
Act or the Communications Act.
3.3. ABSENCE OF KNOWLEDGE AS TO CERTAIN FACTS. Except as set forth in
Schedule 3.3, Buyer has no knowledge of any fact which could, under the
Communications Act, the existing rules, regulations and practices of the FCC or
otherwise disqualify Buyer as an assignee of the FCC Authorizations or as the
owner and operator of the Stations or the Purchased Assets.
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3.4. FINANCIAL CAPABILITY. Buyer has or on the Closing Date will have
sufficient financial capabilities to pay the Purchase Price in accordance with
this Agreement.
3.5. NO FINDER. Neither Buyer nor any party acting on its behalf has paid
or become obligated to pay any fee or commission to any broker, finder or
intermediary for or on account of the transactions contemplated by this
Agreement.
ARTICLE IV
ACTION PRIOR TO THE CLOSING DATE
--------------------------------
The respective parties hereto covenant and agree to take the following
actions between the date hereof and the Closing Date:
4.1. INVESTIGATION OF THE STATIONS BY BUYER. From the date hereof until
the Closing Date, upon the request of Buyer, Seller shall afford, and prior to
the consummation of the Exchange Transaction Seller will use its reasonable
efforts to cause Entercom to afford, to the officers, employees and authorized
representatives of Buyer (including, without limitation, independent public
accountants and attorneys) reasonable access during normal business hours upon
reasonable advance notice to the offices, properties, employees and business
and financial records (including computer files, retrieval programs and similar
documentation) of the Stations to the extent Buyer shall reasonably deem
necessary or desirable and shall furnish to Buyer or its authorized
representatives such additional information concerning the Purchased Assets and
the Stations as shall be reasonably requested; provided, however, that Seller
shall not be required to violate any obligation of confidentiality to which it
is subject in discharging its obligations pursuant to this Section 4.1, it
being agreed by Seller that Seller will give notice to Buyer whenever
information is being withheld from Buyer pursuant to this proviso and will
describe for Buyer the basis on which such information is being withheld. Buyer
agrees that such investigation shall be conducted in such a manner as not to
interfere unreasonably with the operations of Seller. If in the course of any
investigation pursuant to this Section 4.1, Buyer's officers, employees or
authorized representatives discover any breach of any representa-
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tion or warranty contained in this Agreement, or any circumstance or condition
that upon Closing would constitute such a breach, Buyer covenants that it will
promptly so inform Seller.
4.2. PRESERVE ACCURACY OF REPRESENTATIONS AND WARRANTIES. From the date
hereof until the Closing Date, except for actions permitted or required to be
taken by Seller pursuant to Section 4.4 each of the parties hereto shall
refrain from taking any action which would render any representation or
warranty contained in Article II or III inaccurate as of the Closing Date. Each
party shall promptly notify the other of any action, suit or proceeding that
shall be instituted or threatened against such party to restrain, prohibit or
otherwise challenge the legality of any transaction contemplated by this
Agreement. Seller shall promptly notify Buyer of any lawsuit, claim, proceeding
or investigation that may be threatened, brought, asserted or commenced against
Seller which would have been listed in Schedule 2.18 if such lawsuit, claim,
proceeding or investigation had arisen prior to the date hereof.
4.3. FCC CONSENT; IMPROVEMENTS ACT APPROVAL; OTHER CONSENTS AND APPROVALS.
(a) Within 10 business days of the date hereof, Buyer and Seller shall file
with the FCC applications requesting its consent to the assignment of the FCC
Authorizations (and any extensions or renewals thereof) from Seller to Buyer.
Buyer and Seller will cooperate in the preparation of such applications and
will diligently take, or cooperate in the taking of, all necessary, desirable
and proper steps, provide any additional information reasonably required and
otherwise use their reasonable best efforts to obtain promptly the requested
consent, approval and waiver of the FCC. Any fees assessed by the FCC incident
to the filing of such applications shall be paid 50% by Buyer and 50% by
Seller. Seller and Buyer shall each make available to the other, promptly after
the filing thereof, copies of all reports filed on or prior to the Closing Date
with the FCC by Seller or Buyer, as the case may be, in respect of the
Stations.
(b) As promptly as practicable after the date hereof, Buyer and Seller
shall file with the Federal Trade Commission and the Antitrust Division of the
Department of Justice the notifications and other information required to be
filed by such party under the Improvements Act, or any rules and regulations
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promulgated thereunder, with respect to the transactions contemplated hereby.
Each of Buyer and Seller covenants to file as promptly as practicable such
additional information as may be requested to be filed by such party. Each of
Buyer and Seller warrants that all such filings by it, as of the date filed,
will be true and accurate and in accordance with the requirements of the
Improvements Act and any such rules and regulations. Each of Buyer and Seller
agrees to make available to the other such information as each of them may
reasonably request relative to its business, assets and property as may be
required by each of them to file any additional information requested by such
agencies under the Improvements Act and such rules and regulations. Each party
hereto shall promptly inform the other of any material communication from the
Federal Trade Commission, the Department of Justice or any other governmental
authority regarding any of the transactions contemplated hereby. Each party
hereto will advise the other promptly in respect of any understandings,
undertakings or agreements (oral or written) that such party proposes to make
or enter into with the Federal Trade Commission, the Department of Justice or
any other governmental authority in connection with the transactions
contemplated hereby. The cost of the filing fees payable under the Improvements
Act in connection with the notifications and information described in this
Section 4.3(b) shall be paid 50% by Buyer and 50% by Seller.
(c) Buyer and Seller shall each use their reasonable best efforts
promptly to obtain all consents and amendments from parties to the Seller
Agreements and all consents, amendments or permits from governmental
authorities, which are required by the terms thereof or this Agreement for the
due and punctual consummation of the transactions contemplated by this
Agreement; provided, that neither Buyer nor Seller shall have any obligation to
offer or pay any consideration in order to obtain any such consents or
amendments.
4.4. OPERATIONS PRIOR TO THE CLOSING DATE. (a) From the date hereof until
the Closing Date, Seller shall operate and carry on the business of the Owned
Stations, and use its best efforts to cause the Purchased Stations to be
operated and carried on, only in the ordinary course and substantially as
currently operated. Consistent with the foregoing, Seller shall keep and
maintain the Purchased Assets in good operating condition and repair and shall
use its reasonable efforts consistent
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with good business practice to preserve the goodwill of the customers and
others having business relations with the Stations.
(b) Notwithstanding Section 4.4(a), except as expressly contemplated
by this Agreement, except as set forth in Schedule 4.4(b) or except with the
express prior written approval of Buyer, Seller shall not:
(i) make any material change in the business or the operations
of the Stations;
(ii) make any capital expenditure relating to the Stations, or
enter into any contract or commitment therefor, in excess of $50,000
in the aggregate, other than capital expenditures required pursuant
to Section 4.4(c)(v);
(iii) sell, lease, transfer or otherwise dispose of or mortgage
or pledge, or impose or suffer to be imposed any Encumbrance on, any
of the Purchased Assets, other than (A) minor amounts of personal
property having an aggregate value of less than $50,000 sold or
otherwise disposed of in the ordinary course of the business of the
Stations which would not reasonably be expected to have a material
adverse effect on the business or operations of the Stations, (B)
minor amounts of personal property which are replaced due to defect
or obsolescence with personal property of substantially the same
nature and of equal or greater quality in the ordinary course of the
business of the Stations and (C) Permitted Encumbrances;
(iv) enter into any agreement providing for annual payments by
the Stations in excess of $25,000, other than agreements entered into
in the ordinary course of business;
(v) institute any general increase in the compensation of the
employees of any Station except as and to the extent reflected in the
1996 budgets of the Stations previously made available to Buyer or as
required under any existing employment agreement;
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(vi) grant any bonus to any executive employee of any Station
except as and to the extent reflected in the 1996 budgets of the
Stations previously made available to Buyer or as required by any
existing employment agreement or bonus plan; or
(vii) make any material changes in the hours of broadcast of any
Station or in the format or programming policies of any Station.
(c) From the date hereof until the Closing Date, Seller shall:
(i) operate the Owned Stations, and use its reasonable best
efforts to cause the Purchased Stations to be operated, in all
material respects in accordance with the FCC's rules and regulations
and the FCC Authorizations and shall not fail to prosecute with due
diligence any pending application to the FCC, including, without
limitation, the renewal applications relating to the FCC
Authorizations for the Owned Stations, and shall not cause or permit
by any act, or failure to act, any of the FCC Authorizations to
expire, be surrendered, adversely modified, or otherwise terminated,
or the FCC to institute any proceeding for the suspension, revocation
or material adverse modification of any of the FCC Authorizations;
(ii) maintain insurance policies on the Owned Stations and the
related Purchased Assets, and use its reasonable best efforts to
cause insurance policies to be maintained on the Purchased Stations
and the related Purchased Assets, on terms and conditions and with
insurers substantially identical to or better than those in effect
immediately prior to the date hereof;
(iii) if the broadcast transmissions of the Stations from their
main broadcast antennae at authorized power are interrupted or
impaired, use its reasonable best efforts to restore transmissions at
full authorized power as soon as reasonably possible;
(iv) protect and defend the FCC Authorizations, broadcast
coverage area and signal integrity relating
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to each of the Owned Stations and use its reasonable best efforts to
cause the protection and defense of the FCC Authorizations, broadcast
coverage area and signal integrity relating to the Purchased
Stations;
(v) make all capital expenditures contemplated by the capital
budget of each of the Owned Stations;
(vi) spend in the aggregate substantially all of the amounts for
promotion and expense contemplated in the 1996 budget of the Stations
previously made available to Buyer and in the 1997 budget to be
prepared by Seller;
(vii) not modify, waive or amend any provision of or right under
the Exchange Agreement without the prior written consent of Buyer;
(viii) use its reasonable best efforts to consummate the
Exchange Transaction and proceed diligently to exercise its rights
with respect to the Purchased Stations; and
(ix) keep its books and accounts, records and files relating to
the Stations in the ordinary course of business and in a manner
consistent with past practice.
4.5. DELIVERY OF SCHEDULES. Seller has heretofore delivered to Buyer
drafts of the Schedules referred to herein. As soon as practicable after the
date hereof, but not later than October 22, 1996, Seller shall deliver to Buyer
the Schedules referred to herein.
ARTICLE V
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ADDITIONAL AGREEMENTS
---------------------
5.1. TAXES; SALES, USE AND TRANSFER TAXES; TITLE INSURANCE. (a) Seller
shall be liable for and shall pay all Taxes (whether assessed or unassessed)
applicable to the Stations or the Purchased Assets, in each case attributable
to periods (or portions thereof) ending on or prior to the Closing Date. Buyer
shall be liable for and shall pay all Taxes (whether assessed or unassessed)
applicable to the Stations or the Purchased Assets, in each case attributable
to periods (or portions thereof) beginning after the Closing Date. For purposes
of this Section 5.1(a), any period beginning before and ending after the
Closing Date shall be treated as two partial periods, one ending on the Closing
Date and the other beginning after the Closing Date; provided, however, that
Taxes (such as property Taxes) imposed on a periodic basis shall be allocated
on a daily basis. Notwithstanding the preceding sentence, if the transactions
contemplated by this Agreement result in the reassessment of the value of any
of the Purchased Assets for property Tax purposes, or the imposition of any
property Taxes on such Purchased Assets at a rate which is different than the
rate that would have been imposed if such transactions had not occurred, then
(y) the portion of such property Taxes for the portion of the period ending on
the Closing Date shall be determined on a daily basis, using the assessed value
and Tax rate that would have applied had such transactions not occurred, and
(z) the portion of such property Taxes for the portion of such period beginning
after the Closing Date shall be the total property Taxes for the period minus
the amount described in clause (y) of this sentence.
(b) Notwithstanding Section 5.1(a), any sales, use or other transfer
Taxes payable by reason of transfer and conveyance of the Purchased Assets
hereunder shall be payable by Buyer and any documentary stamp or transfer Taxes
payable by reason of the real estate or interests therein included in the
Purchased Assets shall be paid by Seller. The costs of any commitments for
title insurance and surveys for the Owned Real Property and all fees relating
to any filing with any governmental or regulatory body required for transfer
and conveyance of the Purchased Assets hereunder shall be paid by Buyer.
(c) Seller or Buyer, as the case may be, shall provide reimbursement
for any Tax paid by one party all or a portion of
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which is the responsibility of the other party in accordance with the terms of
this Section 5.1. Within a reasonable time prior to the payment of any said
Tax, the party paying such Tax shall give notice to the other party of the Tax
payable and the portion which is the liability of each party, although failure
to do so will not relieve the other party from its liability hereunder.
(d) Each party shall promptly notify the other in writing upon receipt
by such party or any of its Affiliates of notice of any pending or threatened
federal, state, local or foreign Tax audits, examinations or assessments which
may materially affect the Tax liabilities for which the other party would be
required to indemnify such party pursuant to Section 5.1(a). The party that
would be responsible for the relevant Taxes under Section 5.1(a) shall have the
sole right to control any Tax audit or administrative or court proceeding
relating to taxable periods ending at the time of or before the Closing Date,
and to employ counsel of its choice at its expense. In the case of a taxable
period beginning before and ending after the Closing Date, Seller shall be
entitled to participate at its expense in any Tax audit or administrative or
court proceeding relating in whole or in part to Taxes attributable to the
portion of such period ending on the Closing Date and, with the written consent
of Buyer, and at Seller's sole expense, may assume the entire control of such
audit or proceeding. Neither party nor any of its Affiliates may settle any Tax
claim for any taxable year or period ending at or before the Closing Date (or
for the portion of any taxable year or period ending on the Closing Date) which
may be the subject of indemnification by the other party under Section 5.1(a)
without the prior written consent of the other party.
(e) Any payments made pursuant to this Section 5.1 shall be treated
for income tax purposes by Buyer and Seller as an adjustment to the Purchase
Price.
5.2. AUDIT OF FINANCIAL STATEMENTS OF STATIONS. Seller shall cooperate and
use its reasonable best efforts to cause Entercom and each of Seller's and
Entercom's independent accountants to cooperate with Buyer, at Buyer's expense,
in order to enable Buyer to have its independent accountants prepare audited
financial statements for the Stations. Without limiting the generality of the
foregoing, Seller agrees that it will (i) consent to the use of such audited
financial statements in any
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registration statement or other document filed by Buyer (or any of its
subsidiaries) under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, and (ii) execute and deliver, and cause its
partners and officers to execute and deliver, such "representation" letters as
are customarily delivered in connection with audits and as Buyer's independent
accountants may reasonably request under the circumstances.
5.3. COVENANT NOT TO COMPETE. In furtherance of the sale of the Purchased
Assets to Buyer hereunder by virtue of the transactions contemplated hereby and
more effectively to protect the value and goodwill of the Stations, Seller
covenants and agrees that it will not directly or indirectly (whether as
principal, agent, independent contractor, partner or otherwise) own, manage,
operate, control or otherwise carry on for a period beginning on the Closing
Date and ending on the second anniversary thereafter, a radio station business
in the Cleveland, Ohio, Indianapolis, Indiana or Pittsburgh, Pennsylvania radio
markets, each as determined by The Arbitron Company.
Notwithstanding the foregoing, nothing set forth in Section 5.5 shall
prohibit Seller from owning not in excess of 25% in the aggregate of any class
of capital stock of any corporation if such stock is publicly traded and listed
on any national or regional stock exchange or quoted on the Nasdaq Stock
Market.
5.4. COLLECTION OF RECEIVABLES. (a) The notes and accounts receivable of
the Stations generated prior to the Closing Date (the "Pre-closing
Receivables") shall be and remain the property of Seller. Within 10 days after
the Closing Date, Seller shall furnish Buyer with a list (certified by the
President or Chief Financial Officer of a general partner of Seller to be a
true and complete list) of all notes and accounts receivable of Seller which
were outstanding as of the Closing. Buyer agrees that it shall remit to Seller
any payments it receives in respect of any Pre-closing Receivable (net of
agency commissions) no later than the 10th day of the month following receipt
thereof and shall deliver to Seller concurrently with such remittance a report
showing the status of collection of the Pre-closing Receivables.
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(b) During the period commencing on the Closing Date and ending on the
120th day after the Closing Date, Buyer shall use reasonable efforts,
consistent with Seller's current billing and collection practices and in the
ordinary course of the business of the Stations, to effect the collection of
any outstanding Pre-closing Receivables; provided, however, that,
notwithstanding the foregoing, Buyer shall be under no obligation to commence
litigation, employ counsel or engage the services of a collection agency to
effect collection. Buyer shall not make any compromise, adjustment, concession
or settlement of any Pre-closing Receivable without Seller's express written
consent and Buyer shall be under no obligation to compromise, adjust, concede
or settle any accounts receivable generated after the Closing or otherwise
grant any credit or allowance to effect collection of a Pre-closing Receivable.
Absent written evidence that an account debtor owing a Pre-closing Receivable
is disputing in good faith any portion of such Pre-closing Receivable, any
payments received by Buyer after Closing from such account debtor shall be
presumed to represent payment on any undisputed portion of such Pre-closing
Receivable which is then outstanding (with each such payment received from such
account debtor to be applied first to the most-aged Pre-closing Receivable then
owing from such account debtor).
(c) Except as contemplated by Section 5.4(b), Seller agrees to remit
to Buyer, not later than 10 days after receipt thereof, any payment received by
Seller after the Closing Date in respect of an account receivable of Buyer or
the Stations generated after the Closing. In the event Seller receives any such
payment and, in lieu of remitting the same to Buyer in accordance with the
preceding sentence, elects to apply it to the payment of a Pre-closing
Receivable owing from the account debtor from whom it has been received, Seller
will so notify Buyer in writing of such election.
5.5. EMPLOYEES AND EMPLOYEE BENEFIT PLANS. (a) On the Closing Date, the
employment by Seller of each Station employee shall be terminated and Buyer
shall offer employment to each such employee at the rate of pay at which such
employee is being compensated immediately prior to the Closing Date. A Station
employee who is not actively at work on the Closing Date on account of illness,
disability, other than long-term disability, or approved temporary leave of
absence and who shall offer to return to work at such time as shall be
consistent with the
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reason for such employee's absence from active employment shall be offered
employment by Buyer in a substantially similar position and at substantially
the same rate of pay, as in effect at the time such employee's active
employment ceased.
(b) Effective as of the Closing Date, Buyer shall cause each Station
employee who accepts employment with Buyer (a "Transferred Employee" to be
covered under a group health plan, as defined in Section 607(1) of ERISA, which
does not contain any exclusion or limitation with respect to any preexisting
condition for which Seller's group health plan provides benefits. Buyer, at its
discretion, shall either provide medical, dental and disability plans which
provide substantially similar benefits as those benefits provided to Station
employees immediately prior to the Closing Date under plans maintained by
Seller, or will provide medical, dental and disability benefits to all
Transferred Employees that are the same or similar to those provided to other
similarly situated employees of Buyer. A Transferred Employee's service with
Seller shall be taken into account for the purpose of determining eligibility
for participation under any employee welfare benefit plan maintained by Buyer
in which such Transferred Employee participates. Any eligible expenses incurred
by a Transferred Employee between January 1, 1997 and the Closing Date shall be
accepted by Buyer's health and dental plans for the purposes of satisfying such
employee's individual or family deductible or coinsurance requirement and
satisfaction of maximum out of pocket provisions for the Buyer's plan year
ending December 31, 1997. Any medical, dental, or disability claims and
expenses incurred by Transferred Employees on or after the Closing Date shall
be considered subject to the terms and conditions of the benefit plans provided
to Transferred Employees by Buyer.
(c) Buyer, as successor employer for federal, state and local
withholding and employment Taxes, shall assume Seller's responsibilities as
predecessor employer for filing all federal, state and local withholding income
Tax and employment Tax Returns and to furnish for the 1997 calendar year Forms
W-2 and similar forms relating to all Transferred Employees for the calendar
year in which the Closing Date occurs that are due after the Closing Date.
Buyer shall assume such responsibility in accordance with the alternative
procedure described in section 5 of Revenue Procedure 84-77 and, for the
calendar year in which the Closing Date occurs, shall assume Seller's
obligations to furnish Forms
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W-2 to all Transferred Employees. Seller shall comply with all of the
requirements set forth in such alternative procedure that are imposed on a
predecessor employer and Buyer shall comply with all of the requirements set
forth in such procedure that are imposed on a successor employer. Seller shall
provide information and data to Buyer upon request with respect to the wages of
Station employees and related payroll Taxes for the calendar year in which the
Closing Date occurs through the last regular wage payment prior to the Closing
Date in order for Buyer to file timely and proper Tax Returns and forms for the
calendar year in which the Closing Date occurs.
(d) A Transferred Employee's service with Seller or any predecessor of
Seller shall be taken into account and treated as service with Buyer for the
purposes of determining eligibility to participate and benefit entitlement
under any applicable severance or vacation benefit programs provided by Buyer.
5.6. RELOCATION OF PITTSBURGH ANTENNAE AND STUDIO. (a) Seller is in the
process of arranging for the relocation of the antennae for the Purchased
Stations to a tower to be constructed by Crown Towers and Entercom and is
negotiating the terms of an antennae site lease. Seller will continue its
efforts in this regard; provided that if such relocation has not occurred prior
to the Closing, Seller's obligations thereafter regarding such relocation shall
be limited to reimbursing Buyer for the reasonable costs and expenses incurred
by Buyer to complete such relocation, but in no event shall Seller be obligated
to reimburse Buyer for more then the amount by which $750,000 exceeds the
amount expended by Seller in its relocation efforts prior to the Closing.
(b) Seller is also in the process of arranging for the relocation of
the studios for the Purchased Stations to 200 Fleet Street, Pittsburgh,
Pennsylvania and is negotiating the terms of a studio lease. Seller will
continue its efforts in this regard until the Closing Date. Buyer agrees that
if the Closing occurs, Buyer will reimburse Seller for the reasonable costs and
expenses incurred by Seller prior to the Closing in connection with such
relocation, but in no event shall Buyer be obligated to reimburse Seller for
more than $1,000,000.
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ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
--------------------------------------------
The obligations of Buyer to effect the Closing in accordance with this
Agreement shall, at the option of Buyer, be subject to the satisfaction, on or
prior to the Closing Date, of the following conditions:
6.1. NO MISREPRESENTATION OR BREACH OF COVENANTS AND WARRANTIES. There
shall have been no material breach by Seller in the performance of any of its
covenants and agreements herein; each of the representations and warranties of
Seller contained or referred to herein shall be true and correct in all
material respects on the Closing Date as though made on the Closing Date
(except to the extent that they expressly speak as of a specific date or time
other than the Closing Date, in which case they need only have been true and
correct in all material respects as of such specified date or time), except to
the extent any inaccuracy or breach results from any transaction specifically
permitted by this Agreement, any transaction expressly consented to in writing
by Buyer or any transaction permitted by Section 4.4; and there shall have been
delivered to Buyer a certificate or certificates to such effect dated the
Closing Date, signed by and on behalf of Seller by the President or any Vice
President of a general partner of Seller.
6.2. OPINION OF COUNSEL FOR SELLER. Counsel for Seller (which may include
in-house counsel) shall have delivered to Buyer an opinion, dated the Closing
Date, in form and substance reasonably satisfactory to Buyer and its counsel.
6.3. PARTNERSHIP ACTION. Seller shall have taken all partnership action
necessary to approve the transactions contemplated by this Agreement.
6.4. NO RESTRAINT OR LITIGATION. Any applicable waiting period under the
Improvements Act shall have expired or have been terminated and no injunction
or restraining order shall have been issued by any court of competent
jurisdiction and be in effect which restrains or prohibits any material
transaction contemplated hereby.
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6.5. FCC CONSENT. The FCC Consent shall have been granted, without any
condition or qualification which has a materially adverse effect on the
operations and financial condition of the Owned Stations or the Purchased
Station (it being agreed that an EEO reporting obligation shall not constitute
such a condition or qualification), and shall have become a Final Order with
respect to each Station.
6.6. NECESSARY CONSENTS. Seller shall have received consents, in form and
substance reasonably satisfactory to Buyer, to the assignment to Buyer of the
Seller Agreements specified in Schedule 6.6.
6.7. FIRPTA CERTIFICATE. There shall have delivered to Buyer a certificate
to the effect that Seller is not a "foreign person" within the meaning of
Section 1445 of the Code, dated the Closing Date signed by and on behalf of
Seller by the President or any Vice President of a general partner of Seller.
6.8. EXCHANGE TRANSACTION. The acquisition by Seller
of the Purchased Stations pursuant to the Exchange Agreement
shall have been consummated.
6.9. COMPLETION OF AUDIT. The audit of the financial
statements of the Stations referred to in Section 5.2 shall have
been completed.
Notwithstanding the failure of any one or more of the foregoing
conditions, Buyer may proceed with the Closing without satisfaction, in whole
or in part, of any one or more of such conditions and without written waiver.
To the extent that at the Closing Seller delivers to Buyer a written notice
specifying in reasonable detail the failure of any of such conditions or the
breach by Seller of any of the representations or warranties of Seller herein,
and Buyer nevertheless proceeds with the Closing, Buyer shall be deemed to have
waived for all purposes any rights or remedies it may have against Seller by
reason of the failure of any such conditions or the breach of any such
representations or warranties to the extent described in such notice.
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ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
---------------------------------------------
The obligations of Seller to effect the Closing in accordance with this
Agreement shall, at the option of Seller, be subject to the satisfaction on or
prior to the Closing Date, of the following conditions:
7.1. NO MISREPRESENTATION OR BREACH OF COVENANTS AND WARRANTIES. There
shall have been no material breach by Buyer in the performance of any of its
covenants and agreements herein; each of the representations and warranties of
Buyer contained or referred to in this Agreement shall be true and correct on
the Closing Date as though made on the Closing Date, except to the extent any
inaccuracy or breach results from any transactions specifically permitted by
this Agreement, any transaction expressly consented to in writing by Seller or
any transaction contemplated by this Agreement; and there shall have been
delivered to Seller a certificate or certificates to such effect, dated the
Closing Date and signed on behalf of Buyer by its President or any Vice
President.
7.2. OPINION OF COUNSEL FOR BUYER. Counsel for Buyer (which may include
in-house counsel) shall have delivered to Seller an opinion, dated the Closing
Date, in form and substance reasonably satisfactory to Seller and its counsel.
7.3. CORPORATE ACTION. The board of directors of Buyer shall have taken
all corporate action necessary to approve the transactions contemplated by this
Agreement.
7.4. NO RESTRAINT. Any applicable waiting period under the Improvements
Act shall have expired or been terminated and no injunction or restraining
order shall have been issued by any court of competent jurisdiction and be in
effect which restrains or prohibits any material transaction contemplated
hereby.
7.5. FCC CONSENT. The FCC Consent shall have been granted, without any
condition or qualification which is materially adverse to Seller, and shall
have become a Final Order.
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7.6. EXCHANGE TRANSACTION. The acquisition by Seller of the Purchased
Stations pursuant to the Exchange Agreement shall have been consummated.
Notwithstanding the failure of any one or more of the foregoing
conditions, Seller may proceed with the Closing without satisfaction, in whole
or in part, of any one or more of such conditions and without written waiver.
To the extent that at the Closing Buyer delivers to Seller a written notice
specifying in reasonable detail the failure of any of such conditions or the
breach by Buyer of any of the representations or warranties of Buyer herein,
and Seller nevertheless proceeds with the Closing, Seller shall be deemed to
have waived for all purposes any rights or remedies it may have against Buyer
by reason of the failure of any such conditions or the breach of any such
representations or warranties to the extent described in such notice.
ARTICLE VIII
INDEMNIFICATION
---------------
8.1. INDEMNIFICATION BY SELLER. Seller agrees to indemnify and hold
harmless Buyer from and against any and all Losses and Expenses incurred by
Buyer in connection with or arising from:
(i) any breach by Seller of, or any other failure of Seller to
perform, any of its covenants, agreements or obligations in this Agreement
or in any Seller Ancillary Agreement;
(ii) any breach of any warranty or the inaccuracy of any
representation of Seller contained or referred to in this Agreement or any
certificate delivered by or on behalf of Seller pursuant hereto; or
(iii) the failure of Seller to perform any of the Excluded
Liabilities.
8.2. INDEMNIFICATION BY BUYER. Buyer agrees to indemnify and hold harmless
Seller from and against any and all Losses and Expenses incurred by Seller in
connection with or arising from:
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(i) any breach by Buyer of, or other failure of Buyer to perform, any
of its covenants, agreements or obligations in this Agreement or any Buyer
Ancillary Agreement;
(ii) any breach of any warranty or the inaccuracy of any
representation of Buyer contained or referred to in this Agreement or in
any certificate delivered by or on behalf of Buyer pursuant hereto; or
(iii) the failure of Buyer to perform any of the Assumed Liabilities.
8.3. LIMITATIONS OF INDEMNIFICATION OBLIGATIONS. Anything contained in
this Agreement to the contrary notwithstanding:
(a) no amount shall be payable by an indemnifying party with respect
to any claim by an indemnified party for any Loss or Expense incurred in
connection with, resulting from or arising out of the breach of any warranty or
the inaccuracy of any representation contained in this Agreement if the
indemnifying party is first notified of such claim pursuant to Section 8.4 on
or after 18 months after the Closing Date (except with respect to (i) the
representation made in Section 2.6 as to which the indemnifying party must be
notified by the sixth anniversary of the Closing Date and (ii) the
representation made in Section 2.15 as to which no time limitation shall
apply); provided, however, that if the indemnifying party is first notified of
such a claim prior to the applicable notice period, such claim may continue to
be maintained until the final determination of such claim;
(b) the aggregate amount required to be paid by Seller pursuant to
Section 8.1 shall not, under any circumstances, exceed the Purchase Price;
(c) an indemnifying party shall not be required to provide
indemnification hereunder with respect to the Stations in any market (i.e.
Cleveland, Indianapolis or Pittsburgh) unless and until the aggregate amount of
Losses and Expenses incurred by the other party with respect to the Stations in
such market exceeds $50,000, in which case the indemnifying party shall be
required to provide indemnification for all Losses and Expenses
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incurred by the other party with respect to the Stations in such market payable
pursuant to this Article VIII; provided, that indemnification provided in
respect of failures described in Section 8.2(iii) shall be required without
regard to this Section 8.3(c);
(d) Buyer shall be obligated to prosecute diligently and in good faith
any claim for any Loss or Expense with any applicable insurer prior to
collecting any indemnification payment under this Article VIII, and shall only
be indemnified under this Article VIII to the extent that Buyer's Loss or
Expense exceeds the proceeds received by Buyer in respect of any such claim;
(e) in calculating the amount of any Loss or Expense there shall be
deducted the amount of any Tax benefit to the indemnified party (or any of its
Affiliates) with respect to such Loss or Expense (after giving effect to the
Tax effect of receipt of the indemnification payments);
(f) in any case where an indemnified party recovers from third parties
any amount in respect of a matter with respect to which an indemnifying party
has indemnified it pursuant to this Article VIII, such indemnified party shall
promptly pay over to the indemnifying party the amount so recovered (after
deducting therefrom the full amount of the expenses incurred by it in procuring
such recovery), but not in excess of the sum of (i) any amount previously so
paid by the indemnifying party to or on behalf of the indemnified party in
respect of such matter and (ii) any amount expended by the indemnifying party
in pursuing or defending any claim arising out of such matter;
(g) no party hereto shall be indemnified for special, exemplary or
consequential damages, including, without limitation, loss of future profit or
future revenue or interference with operations; and
(h) no party shall have any liability for any inaccuracy in or breach
of any representation or warranty by such party if the other party or any of
its officers, employees, counsel or other representatives had actual knowledge
on or before the Closing Date of the facts as a result of which such
representation or warranty was inaccurate or breached.
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8.4. NOTICE OF CLAIMS. (a) A party seeking indemnification hereunder shall
give to the indemnifying party a notice describing in reasonable detail the
facts giving rise to any claim for indemnification hereunder and shall include
in such notice (if then known) the amount or the method of computation of the
amount of such claim, and a reference to the provision of this Agreement or any
other agreement, document or instrument executed hereunder or in connection
herewith upon which such claim is based; provided, that a notice in respect of
any action at law or suit in equity by or against a third Person as to which
indemnification will be sought shall be given promptly after the action or suit
is commenced.
(b) The amount to which an indemnified party shall be entitled under
this Article VIII shall be determined: (i) by written agreement between Seller
and Buyer, (ii) by a final judgment or decree of any court of competent
jurisdiction or (iii) by any other means to which Seller and Buyer shall agree.
The judgment or decree of a court shall be deemed final when the time for
appeal, if any, shall have expired and no appeal shall have been taken or when
all appeals taken have been finally determined. The indemnified party shall
have the burden of proof in establishing the amount of the Loss and Expense
suffered by it.
8.5. THIRD PARTY CLAIMS. (a) Subject to Section 8.5(b), the indemnified
party shall have the right to conduct and control, through counsel of its
choosing, the defense, compromise or settlement of any third Person claim,
action or suit against such indemnified party as to which indemnification will
be sought by such indemnified party from any party hereunder, and in any such
case the indemnifying party shall cooperate in connection therewith and shall
furnish such records, information and testimony and attend such conferences,
discovery proceedings, hearings, trials and appeals as may be reasonably
requested by the indemnified party in connection therewith; provided, that the
indemnifying party may participate, through counsel chosen by it and at its own
expense, in the defense of any such claim, action or suit as to which the
indemnified party has so elected to conduct and control the defense thereof;
and provided, further, that the indemnified party shall not, without the
written consent of the indemnifying party (which written consent shall not be
unreasonably withheld), pay, compromise or settle any such claim, action or
suit, except that no such consent shall be required if, following a written
request from the indemnified party, the
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indemnifying party shall fail, within 14 days after the making of such request,
to acknowledge and agree in writing that, if such claim, action or suit shall
be adversely determined, such indemnifying party has an obligation to provide
indemnification hereunder to such indemnified party. Notwithstanding the
foregoing, the indemnified party shall have the right to pay, settle or
compromise any such claim, action or suit, provided that in such event the
indemnified party shall waive any right to indemnity therefor hereunder.
(b) If any third Person claim, action or suit against any indemnified
party is solely for money damages or, where Seller is the indemnifying party,
will have no continuing effect or any material adverse impact on the Stations
or the Purchased Assets, then the indemnifying party shall have the right to
conduct and control, through counsel of its choosing and at its expense, the
defense, compromise or settlement of any such third Person claim, action or
suit against the indemnified party as to which indemnification will be sought
from the indemnifying party if the indemnifying party has acknowledged and
agreed in writing that, if the same is adversely determined, the indemnifying
party has an obligation to provide indemnification to the indemnified party in
respect thereof, and in any such case the indemnified party shall cooperate in
connection therewith and shall furnish such records, information and testimony
and attend such conferences, discovery proceedings, hearings, trials and
appeals as may be reasonably requested by the indemnifying party in connection
therewith; provided, that the indemnified party may participate, through
counsel chosen by it and at its own expense, in the defense of any such claim,
action or suit as to which the indemnifying party has so elected to conduct and
control the defense thereof. Notwithstanding the foregoing, the indemnified
party shall have the right to pay, settle or compromise any such claim, action
or suit, provided that in such event the indemnified party shall waive any
right to indemnification therefor hereunder.
(c) If there are any conflicts between the provisions of this Section
8.5 and Section 5.1(d), the provisions of Section 5.1(d) shall control with
respect to Tax contests.
8.6. EXCLUSIVE REMEDY. Any other provision of this Agreement to the
contrary notwithstanding, from and after the Closing, the sole and exclusive
liability and responsibility of
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Seller to Buyer, or of Buyer to Seller, under or in connection with this
Agreement or the transactions contemplated hereby (including, without
limitation, for any breach or inaccuracy of any representation or warranty or
for any breach of any covenant or for any other reason), and the sole and
exclusive remedy of Buyer and Seller vis-a-vis each other with respect to any
of the foregoing, shall be as set forth in this Article VIII; provided,
however, that each party hereto shall retain all non-monetary equitable
remedies available to it in respect of any breach by any other party of any
covenant or other agreement of such other party contained in or made pursuant
to this Agreement and required to be performed after the Closing Date. To the
extent that a party hereto has any Loss or Expense for which it may assert
against the other party hereto any other right to indemnification, contribution
or recovery (whether under this Agreement, under common law or any statute or
otherwise), such party with such Loss or Expense hereby waives, releases and
agrees not to assert such right.
ARTICLE IX
TERMINATION
-----------
9.1. TERMINATION. (a) Notwithstanding anything contained in this Agreement
to the contrary, this Agreement may be terminated:
(i) at any time prior to the Closing by Buyer in the event of a
material breach by Seller of any of its agreements, representations or
warranties contained in this Agreement and the failure of Seller to cure
such breach within 14 days after receipt of notice from Buyer requesting
such to be cured;
(ii) at any time prior to the Closing by Seller in the event of a
material breach by Buyer of any of its agreements, representations or
warranties contained in this Agreement and the failure of Buyer to cure
such breach within 14 days after receipt of notice from Seller requesting
such to be cured;
(iii) at any time following the determination of Aggregate 1996
Broadcast Cash Flow of the Stations and
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on or prior to February 15, 1997 by Buyer or Seller if Aggregate 1996
Broadcast Cash Flow of the Stations is less than $12,671,000;
(iv) by the mutual consent of Buyer and of Seller;
(v) by Buyer or Seller if the Closing shall not have occurred on or
before September 30, 1997 (or such later date as may be agreed to by Buyer
and Seller);
(vi) at any time prior to the Closing by Buyer or Seller if any court
of competent jurisdiction in the United States or any United States
governmental or regulatory body shall have issued an order, decree or
ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated
hereby; or
(vii) at any time prior to the Closing by Buyer or Seller if the
Exchange Agreement is terminated.
(b) If the final Schedules to this Agreement delivered to Buyer by
Seller pursuant to Section 4.5 contain changes from the draft Schedules
heretofore delivered to Buyer that in the reasonable judgment of Buyer
represent a material adverse change from the information contained in such
draft Schedules, then Buyer may terminate this Agreement by notice to Seller
within seven days of receipt of such Schedules; provided, however, that under
no circumstances shall delivery by Seller of Schedules rejected by Buyer
pursuant to this Section 9.1(b) be deemed to constitute a willful breach of
this Agreement by Seller.
(c) Buyer shall have the right to perform an inspection of the
Stations and may terminate this Agreement by notice to Seller given on or
before October 22, 1996 if Buyer shall reasonably determine that the antennae
and broadcasting and transmission equipment of the Stations, taken as a whole,
are not in all material respects in good repair and operating condition,
ordinary wear and tear excepted.
(d) In the event that this Agreement shall be terminated pursuant to
this Article IX, all further obligations
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of the parties under this Agreement (other than Sections 10.1, 10.2 and 10.10)
shall be terminated without further liability of any party to the other,
provided that nothing herein shall relieve any party from liability for its
wilful breach of this Agreement.
9.2. NOTICE OF TERMINATION. Any party desiring to terminate this Agreement
pursuant to Section 9.1 shall give notice of such termination to the other
party to this Agreement.
ARTICLE X
GENERAL PROVISIONS
------------------
10.1. NO ANNOUNCEMENT. Neither Buyer nor Seller shall, without the
approval of the other, make any press release or other announcement concerning
the transactions contemplated by this Agreement, except as and to the extent
that any such party shall be so obligated by law or by the rules, regulations
or policies of any national securities exchange or association, in which case
the other party shall be advised and the parties shall use their best efforts
to cause a mutually agreeable release or announcement to be issued.
10.2. CONFIDENTIAL NATURE OF INFORMATION. Each party agrees that it will
treat in confidence all documents, materials and other information which it
shall have obtained regarding the other party during the course of the
negotiations leading to the consummation of the transactions contemplated
hereby (whether obtained before or after the date of this Agreement), the
investigation provided for herein and the preparation of this Agreement and
other related documents, and, in the event the transactions contemplated hereby
shall not be consummated, each party will return to the other party all copies
of nonpublic documents and materials which have been furnished in connection
therewith. Such documents, materials and information shall not be communicated
to any third Person (other than, in the case of Buyer, to its counsel,
accountants, financial advisors or lenders, and in the case of the Seller, to
its counsel, accountants or financial advisors). The obligation of each party
to treat such documents, materials and other information in confidence shall
not apply to any information which (a) such party can demonstrate was already
lawfully in its possession
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prior to the disclosure thereof by the other party, (b) is known to the public
and did not become so known through any violation of a legal obligation, (c)
became known to the public through no fault of such party, (d) such party is
required to disclose any such information pursuant to judicial order or, in the
opinion of counsel, pursuant to applicable law (but only to the extent it must
be so disclosed), or (e) such party reasonably deems necessary to disclose to
obtain any of the consents or approvals contemplated hereby. Without limiting
the right of either party to pursue all other legal and equitable rights
available to it for violation of this Section 10.2 by the other party, it is
agreed that other remedies cannot fully compensate the aggrieved party for such
a violation of this Section 10.2 and that the aggrieved party shall be entitled
to injunctive relief to prevent a violation or continuing violation hereof.
10.3. GOVERNING LAW; SUBMISSION TO JURISDICTION. (a) This Agreement shall
be governed by and construed in accordance with the internal laws (as opposed
to the conflict of laws provisions) of the State of Illinois.
(b) Buyer and Seller agree that all actions, suits or proceedings
arising out of or based upon this Agreement or the subject matter hereof shall
be brought and maintained exclusively in the federal and state courts of the
State of Illinois. Each of Buyer and Seller, by execution hereof, (i)
irrevocably submits to the jurisdiction of the federal and state courts in the
State of Illinois for the purpose of any such action, suit or proceeding and
(ii) hereby waives to the extent not prohibited by applicable law, and agrees
not to assert, by way of motion, as a defense or otherwise, in any such action,
suit or proceeding, any claim that it is not subject personally to the
jurisdiction of the above-named courts, that it is immune from extraterritorial
injunctive relief or other injunctive relief, that its property is exempt or
immune from attachment or execution, that any such action, suit or proceeding
may not be brought or maintained in one of the above-named courts, that any
such action, suit or proceeding brought or maintained in one of the above-named
courts should be dismissed on grounds of forum non conveniens, should be
transferred to any court other than one of the above-named courts, should be
stayed by virtue of the pendency of any other action, suit or proceeding in any
court other than one of the above-named courts, or that this Agreement or the
subject matter hereof may not be enforced in or by any of the above-named
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courts. Each of Buyer and Seller hereby consents to service of process in any
such suit, action or proceeding in any manner permitted by the laws of the
State of Illinois, agrees that service of process by registered or certified
mail, return receipt requested, at the address specified in or pursuant to
Section 10.4, is reasonably calculated to give actual notice and waives and
agrees not to assert by way of motion, as a defense or otherwise, in any such
action, suit or proceeding any claim that service of process made in accordance
with Section 10.4 does not constitute good and sufficient service of process.
The provisions of this Section 10.3(b) shall not restrict the ability of Buyer
or Seller to enforce in any court any judgment obtained in a federal or state
court of the State of Illinois.
10.4. NOTICES. All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed given or delivered when
delivered personally, by messenger or by private courier or 72 hours after
having been sent by registered or certified mail addressed as follows:
If to Seller, to:
Secret Communications Limited Partnership
312 Walnut Street, Suite 3350
Cincinnati, Ohio 45202
Attention: Frank E. Wood,
Chief Executive Officer
and
1200 Shermer Road, 4th Floor
Northbrook, Illinois 60062
Attention: Arthur J. Schiller, Esq.,
General Counsel
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Dennis V. Osimitz, Esq.
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If to Buyer, to:
SFX Broadcasting, Inc.
150 East 58th Street, 19th Floor
New York, New York 10155
Attention: Robert F.X. Sillerman
with a copy to:
SFX Broadcasting, Inc.
150 East 58th Street, 19th Floor
New York, New York 10155
Attention: Richard A. Liese, Esq.
or to such other address as such party may indicate by a notice delivered to
the other parties hereto in accordance with this Section 10.4.
10.5. SUCCESSORS AND ASSIGNS. (a) The rights of either party under this
Agreement shall not be assignable by such party hereto prior to the Closing
without the written consent of the other; provided, however, that (i) the
rights of Buyer hereunder may be assigned prior to Closing, without the consent
of Seller, to a wholly-owned subsidiary of Buyer without Buyer being released
from any of its obligations hereunder and (ii) if Seller or Buyer subsequently
determines to qualify the transfer of any or all of the Purchased Assets as a
like-kind exchange under Section 1031 of the Code, such party shall be entitled
to assign its rights (but not its obligations) under this Agreement to a
"qualified intermediary" (as defined in Treas. Reg. ss. 1.1031 (k)-1(g)(4)). In
the event described in clause (ii) above, Buyer or Seller, as the case may be,
agrees to (A) consent to and acknowledge the assignment of this Agreement (or
such portions thereof as the other party shall determine) by the other party to
such qualified intermediary, (B) pay the Purchase Price directly to such
qualified intermediary, (C) make appropriate filings with the FCC and to amend
any FCC filings theretofore made and (D) otherwise cooperate with the other
party in order to enable such party to effect a like-kind exchange under
Section 1031 of the Code. Following the Closing, either party may assign any of
its rights hereunder, but no such assignment shall relieve it of its
obligations hereunder.
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(b) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their successors and permitted assigns. The successors
and permitted assigns hereunder shall include, without limitation, in the case
of Buyer, any permitted assignee as well as the successors in interest to such
permitted assignee (whether by merger, liquidation (including successive
mergers or liquidations) or otherwise). Nothing in this Agreement, expressed or
implied, is intended or shall be construed to confer upon any Person other than
the parties and successors and assigns permitted by this Section 10.5 any
right, remedy or claim under or by reason of this Agreement.
10.6. ACCESS TO RECORDS AFTER CLOSING. For a period of six years after the
Closing Date, Seller and its representatives shall have reasonable access to
all of the books and records relating to the Stations transferred to Buyer
hereunder to the extent that such access may reasonably be required by Seller
in connection with matters relating to or affected by the operations of the
Stations prior to the Closing Date. Such access shall be afforded by Buyer upon
receipt of reasonable advance notice and during normal business hours. Seller
shall be solely responsible for any costs or expenses incurred by it pursuant
to this Section 10.6. If Buyer shall desire to dispose of any of such books and
records prior to the expiration of such six-year period, Buyer shall, prior to
such disposition, give Seller a reasonable opportunity, at Seller's expense, to
segregate and remove such books and records as Seller may select.
For a period of six years after the Closing Date, Buyer and its
representatives shall have reasonable access to all of the books and records
relating to the Stations which Seller or any of its Affiliates may retain after
the Closing Date. Such access shall be afforded by Seller and its Affiliates
upon receipt of reasonable advance notice and during normal business hours.
Buyer shall be solely responsible for any costs and expenses incurred by it
pursuant to this Section 10.6. If Seller or any of its Affiliates shall desire
to dispose of any of such books and records prior to the expiration of such
six-year period, Seller shall, prior to such disposition, give Buyer a
reasonable opportunity, at Buyer's expense, to segregate and remove such books
and records as Buyer may select.
10.7. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Exhibits and
Schedules referred to herein and therein and
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the documents delivered pursuant hereto and thereto contain the entire
understanding of the parties hereto and thereto with regard to the subject
matter contained herein or therein, and supersede all prior agreements,
understandings or intents between or among any of the parties hereto. This
Agreement may not be amended, modified and supplemented except by a written
instruction signed by an authorized representative of each of the parties
hereto.
10.8. INTERPRETATION; DISCLOSURE SCHEDULES. Article titles and headings to
sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement. The Schedules and Exhibits referred to herein shall be construed
with and as an integral part of this Agreement to the same extent as if they
were set forth verbatim herein. Disclosure of any fact or item in any Schedule
hereto referenced by a particular section in this Agreement shall be deemed to
have been disclosed with respect to every other section in this Agreement. The
specification of any dollar amount in the representations or warranties
contained in this Agreement or the inclusion of any specific item in any
Schedules hereto is not intended to imply that such amounts, or higher or lower
amounts, or the items so included or other items, are or are not material, and
neither party shall use the fact of the setting of such amounts or the
inclusion of any such item in any dispute or controversy between the parties as
to whether any obligation, item or matter not described herein or included in a
Schedule is or is not material for purposes of this Agreement.
10.9. WAIVERS. Any term or provision of this Agreement may be waived, or
the time for its performance may be extended, by the party or parties entitled
to the benefit thereof. The failure of any party hereto to enforce at any time
any provision of this Agreement shall not be construed to be a waiver of such
provision, nor in any way to affect the validity of this Agreement or any part
hereof or the right of any party thereafter to enforce each and every such
provision. No waiver of any breach of this Agreement shall be held to
constitute a waiver of any other or subsequent breach.
10.10. EXPENSES. Except as herein provided, each party hereto will pay all
of its own costs and expenses incident to its negotiation and preparation of
this Agreement and to its
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performance and compliance with all agreements and conditions contained herein
on its part to be performed or complied with, including the fees, expenses and
disbursements of its counsel and accountants.
10.11. PARTIAL INVALIDITY. Wherever possible, each provision hereof shall
be interpreted in such manner as to be effective and valid under applicable
law, but in case any one or more of the provisions contained herein shall, for
any reason, be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provisions of this Agreement, and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision or provisions had never been
contained herein unless the deletion of such provision or provisions would
result in such a material change as to cause completion of the transactions
contemplated hereby to be unreasonable.
10.12. EXECUTION IN COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be considered an original instrument,
but all of which shall be considered one and the same agreement, and shall
become binding when one or more counterparts have been signed by each of the
parties and delivered to each of Seller and Buyer.
10.13. DEFINITIONS. As used in this Agreement, the following terms have
the meanings specified or referred to in this Section 10.13:
"Affiliate" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by or is under common control
with such Person.
"Aggregate 1996 Broadcast Cash Flow of the Stations" means the sum of
Broadcast Cash Flow of each of the Stations for the period January 1, 1996
through December 31, 1996, in the case of the Owned Stations, and for the
period June 1, 1996 through December 31, 1996, in the case of the Purchased
Stations.
"Allocation Schedule" has the meaning specified in Section 10.14.
"Assumed Liabilities" has the meaning specified in Section 1.4.
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"Balance Sheet" has the meaning specified in Section 2.4.
"Balance Sheet Date" has the meaning specified in Section 2.4.
"Broadcast Cash Flow" of any Station for any period means the excess of
the net revenues of such Station (exclusive of trade or barter items) for such
period over the operating expenses of such Station (exclusive of trade or
barter items) for such period; provided that the fees payable by Seller to
Entercom under the Purchased Stations Time Brokerage Agreement shall not be
included in the computation of Broadcast Cash Flow of the Purchased Stations.
"Buyer" has the meaning specified in the first paragraph of this
Agreement.
"Buyer Ancillary Agreements" has the meaning specified in Section 3.2.
"Closing" means the closing of the transfer of the Purchased Assets from
Seller to Buyer and the assumption of the Assumed Liabilities by Buyer.
"Closing Date" has the meaning specified in Section 1.6(a).
"Code" means the Internal Revenue Code of 1986, as amended.
"Communications Act" means the Communications Act of 1934, as amended.
"Encumbrance" means any lien, claim, charge, security interest, mortgage,
pledge, easement, conditional sale or other title retention agreement, defect
in title, covenant or other restrictions of any kind.
"Entercom" means Entertainment Communications, Inc.
"Environmental Laws" means any law, statute, regulation or court order
binding upon Seller, consent decree binding upon Seller, or settlement
agreement to which Seller is a party, which
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imposes liability for or standards of conduct concerning the manufacture,
processing, generation, distribution, use, treatment, storage, disposal,
release, threat of release, cleanup, transport or handling of Hazardous
Materials, including the Comprehensive Environmental Response Compensation and
Liability Act, the Resources Conservation and Recovery Act, any other
"Superfund" or "Superlien" law, the Toxic Substances Control Act, the Hazardous
Materials Transportation Act, their implementing regulations or any other
similar federal, state or local statutes or regulations.
"ERISA" has the meaning specified in Section 2.24.
"Escrow Agent" has the meaning specified in the third recital to this
Agreement.
"Escrow Agreement" has the meaning specified in the third recital to this
Agreement.
"Event of Loss" has the meaning specified in Section 10.16.
"Exchange Agreement" has the meaning specified in the first recital to
this Agreement.
"Exchange Transaction" has the meaning specified in Section 2.1.
"Excluded Assets" has the meaning specified in Section 1.2.
"Excluded Liabilities" has the meaning specified in Section 1.5.
"Expenses" means any and all reasonable expenses incurred in connection
with investigating, defending or asserting any claim, action, suit or
proceeding incident to any matter indemnified against hereunder (including,
without limitation, court filing fees, court costs, arbitration fees or costs,
witness fees, and reasonable fees and disbursements of legal counsel,
investigators, expert witnesses, accountants and other professionals).
"FCC" means the Federal Communications Commission.
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<PAGE>
"FCC Authorizations" means those Governmental Permits issued by the FCC
for each of the Stations.
"FCC Consent" means action by the FCC granting its consent to the
assignment of the FCC Authorizations as contemplated by this Agreement
pursuant to appropriate applications filed by the parties with the FCC.
"Final Order" means the FCC Consent, (a) which has not been reversed,
stayed, enjoined, set aside, annulled or suspended, and (b) with respect to
which (i) no requests have been filed for administrative or judicial review,
reconsideration, appeal or stay and the time for filing any such requests, and
the time for the FCC to set aside the action on its own motion, has expired, or
(ii) in the event of review, reconsideration or appeal, the FCC's order has
been affirmed and become final by expiration of the time for further review,
reconsideration or appeal.
"Governmental Permits" has the meaning specified in Section 2.8.
"Hazardous Materials" means substances defined as "hazardous substances,"
"hazardous materials," "hazardous wastes" or "toxic substances" in the
Comprehensive Environmental Response Compensation and Liability Act, the
Resource Conservation and Recovery Act or any analogous federal, state or local
laws, and shall specifically include, without limitation, petroleum (including
crude oil or any fraction thereof).
"Improvements Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Knowledge of Seller" means the actual knowledge of Frank E. Wood, John R.
Crabb and Arthur J. Schiller, after due inquiry of the appropriate management
level personnel of each Station and after review of the Exchange Agreement and
the schedules thereto and the documents described therein.
"Leased Real Property" has the meaning specified in Section 2.9.
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<PAGE>
"Losses" means any and all losses, costs, obligations, liabilities,
settlement payments, awards, judgments, fines, penalties, damages, expenses,
deficiencies or other charges.
"Owned Real Property" has the meaning specified in Section 2.9.
"Owned Stations" has the meaning specified in the first recital to this
Agreement.
"Permitted Encumbrances" means (a) liens for taxes and other governmental
charges and assessments which are not yet due and payable, (b) liens of
landlords and liens of carriers, warehousemen, mechanics and materialmen and
other like liens arising in the ordinary course of business for sums not yet
due and payable and (c) other liens or imperfections on property which are not
material in amount or do not materially detract from the value of or materially
impair the existing use of the property affected by such lien or imperfection.
"Person" means any person, employee, individual, corporation, limited
liability company, partnership, trust, or any other non-governmental entity or
any governmental or regulatory authority or body.
"Purchased Assets" has the meaning specified in Section 1.1.
"Purchased Stations" has the meaning specified in the first recital to
this Agreement.
"Purchased Stations Balance Sheet" has the meaning specified in Section
2.4(c).
"Purchased Stations Time Brokerage Agreement" has the meaning specified in
Section 2.25.
"Purchase Price" has the meaning specified in Section 1.3.
"Release" means any release, spill, emission, leaking, pumping, injection,
deposit, disposal discharge, dispersal, leaching or migration into the indoor
or outdoor environment or into or out of any property, including the movement
of Contami-
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<PAGE>
nants through or in the air, soil, surface water, groundwater or
property.
"Requirements of Law" means any federal, state or local law, rule or
regulation, Governmental Permit or other binding determination of any
governmental or regulatory authority or body.
"Seller" has the meaning specified in the first paragraph of this
Agreement.
"Seller Agreements" has the meaning specified in Section 2.17.
"Seller Ancillary Agreements" has the meaning specified in Section 2.3.
"Stations" has the meaning specified in first recital to this Agreement.
"Tax" means any federal, state, local or foreign net income, alternative
or add-on minimum, gross income, gross receipts, property, sales, use,
transfer, gains, license, excise, employment, payroll, withholding or minimum
tax, or any other tax custom, duty, governmental fee or other like assessment
or charge of any kind whatsoever, together with any interest or any penalty,
addition to tax or additional amount imposed on Seller by any federal, state,
local, foreign or other governmental authority or regulatory body.
"Tax Return" means any return, report or similar statement of Seller
required to be filed with respect to any Taxes (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return and declaration of estimated Tax.
10.14. ALLOCATION OF PURCHASE PRICE. Within 30 days following the Closing,
Buyer and Seller shall use their respective best efforts to negotiate and draft
a schedule (the "Allocation Schedule") allocating the Purchase Price
(including, for purposes of this Section 10.14, any other consideration paid to
Seller, including the Assumed Liabilities) among the Stations and the Purchased
Assets. The Allocation Schedule shall be reasonable and shall be prepared in
accordance with Section 1060
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<PAGE>
of the Code and the regulations thereunder. Buyer and Seller each agrees that
promptly upon receiving said Allocation Schedule it shall return an executed
copy thereof to the other party. Buyer and Seller each agrees to file Internal
Revenue Service Form 8594, and all federal, state, local and foreign Tax
Returns, in accordance with the Allocation Schedule. Buyer and Seller each
agrees to provide the other promptly with any other information required to
complete Form 8594. Notwithstanding the foregoing, if Buyer and Seller are
unable to agree on an Allocation Schedule each party shall be entitled to take
its own position on Form 8594 and such Tax Returns as to the allocation of the
Purchase Price.
10.15. SPECIFIC PERFORMANCE; OTHER RIGHTS AND REMEDIES. Subject to Section
8.6, each party agrees that each party shall, in addition to such other
remedies as may be available to it at law, be entitled to injunctive relief and
to enforce its rights by an action for specific performance to the extent
permitted by applicable Requirements of Law. Each party hereby waives any
requirement for security or the posting of any bond or other surety in
connection with any temporary or permanent award of injunctive, mandatory or
other equitable relief.
10.16. RISK OF LOSS. The risk of loss or damage to any of the Purchased
Assets shall be on Seller prior to the Closing Date and thereafter shall be on
Buyer. If any of the Purchased Assets is damaged or destroyed prior to the
Closing Date (any such event being referred to as an "Event of Loss"), Seller,
at its expense, shall use reasonable efforts to replace or repair the item with
comparable property of like value and quality as soon as practicable before the
Closing Date. If any Event of Loss shall materially affect the operations of
the Stations and repair or replacement cannot be accomplished by the scheduled
Closing Date but can be accomplished within 60 days after that date, the
Closing Date shall be postponed for such 60-day period; if, however, the
repair or replacement cannot be accomplished within such 60-day period, Buyer
may elect by written notice to Seller within 20 days after Buyer has received
notice that any Event of Loss has occurred:
(a) To postpone the Closing until a date within 15 business days after
Seller gives written notice to Buyer that the Purchased Assets which are the
subject of the Event of Loss have
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<PAGE>
been substantially restored to their condition immediately prior to the Event
of Loss, which date shall not be more than 60 days beyond the date specified in
Section 9.1(a)(v);
(b) To consummate the Closing on the scheduled Closing Date and accept
all of the Purchased Assets as is, in which event Seller shall assign to Buyer
at the Closing all of its rights under any insurance policies and to all
insurance proceeds covering that Event of Loss, including property damage, loss
of income and continuing expenses (less amounts due to the Seller for repairs
or replacements of the property prior to the Closing); or
(c) To terminate this Agreement without liability on the part of
Seller or Buyer.
If the Closing Date is postponed beyond the date specified in Section
9.1(a)(v), the parties shall amend their application to the FCC to request an
extension of the date of Closing.
10.17. ASSIGNMENT OF RIGHTS UNDER EXCHANGE AGREEMENT. Seller shall use its
reasonable best efforts to obtain the written consent of Entercom to the
assignment to Buyer, on or immediately after the Closing Date, of its rights
arising under Section 9.6.3 of the Exchange Agreement with respect to the
Purchased Stations and, after such assignment has been consummated, shall take
all actions reasonably requested by Buyer to enforce any of such rights with
respect to the Purchased Stations for the benefit of Buyer (it being the intent
of the parties that pursuant to this provision Seller shall transfer to Buyer
to the maximum extent possible the benefits of all representations and
warranties and covenants of Entercom contained in the Exchange Agreement). If
Seller is unable to obtain the consent of Entercom to the assignment of the
rights arising under Section 9.6.3 of the Exchange Agreement, Seller shall,
upon the request of Buyer, proceed diligently to exercise Seller's right to
indemnification under the Exchange Agreement with respect to the Purchased
Stations and Buyer shall be entitled to receive from Seller any amount actually
received by Seller with respect to such rights, less reasonable out of pocket
fees and expenses incurred by Seller in exercising such rights. Notwithstanding
the foregoing, Seller shall retain such rights against Entercom under the
Exchange Agreement (to the extent such
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<PAGE>
rights exist under the Exchange Agreement) as shall be necessary to recover
from Entercom with respect to any liability for which Seller makes payment to
Buyer pursuant to Seller's indemnification obligation under this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
SECRET COMMUNICATIONS LIMITED PARTNERSHIP
By: Broadcast Alchemy, L.P.,
a General Partner
By: Lane Broadcasting, Inc.
Its: General Partner
By: /s/ Arthur J. Schiller
----------------------------------------
Its: Secretary
----------------------------------------
SFX BROADCASTING, INC.
By: /s/ Robert F.X. Sillerman
----------------------------------------
Its: Chairman of the Board and
----------------------------------------
Chief Executive Officer
----------------------------------------
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of the 11th day of October, 1996 by and among DELSENER/SLATER
ENTERPRISES, LTD., a New York corporation, BEACH CONCERTS, INC., a New York
corporation, CONNECTICUT CONCERTS, INCORPORATED, a Connecticut corporation,
BROADWAY CONCERTS, INC., a New York corporation, ARDEE PRODUCTIONS, LTD., a
New York corporation, ARDEE FESTIVALS NJ, INC., a New Jersey corporation,
IN-HOUSE TICKETS, INC., a New York corporation, EXIT 116 REVISITED, INC., a
New Jersey corporation and DUMB DEAL, INC., a New York corporation
(collectively, the "Companies"); RON DELSENER, an individual residing at 1
Gracie Square, Penthouse, New York, New York 10028 (the "Seller"); MITCH
SLATER, an individual residing at 18 Circle Road, Scarsdale, New York 10583
("Slater") and SFX BROADCASTING, INC., a Delaware corporation having its
principal place of business in New York, New York (the "Buyer"):
WHEREAS, the Seller owns beneficially and of record all of the issued
and outstanding shares of stock (the "Shares") of the Companies; and
WHEREAS, the Companies conduct all of the activities of the Seller
and Slater in the concert promotion, event production, artist management,
artist development, ticket distribution, corporate sponsorship, venue
operation, concessionaire, parking, security and all similar businesses (the
"Business"); and
WHEREAS, the Seller and Slater do not receive any income related to
the Business from any source other than the Companies; and
WHEREAS, the Seller desires to sell to the Buyer and the Buyer
desires to purchase from the Seller all of the issued and outstanding Shares
of the Companies;
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<PAGE>
WHEREAS, the parties intend for the Buyer to assign its rights and
benefits (but not its obligations) hereunder to its wholly owned subsidiary,
Delsener/Slater Enterprises, Inc., a Delaware corporation (the "Buyer's Sub");
NOW THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein, and upon the terms and
subject to the conditions hereinafter set forth, the parties hereby agree as
follows:
ARTICLE 1
PURCHASE AND SALE
1.1 Purchase and Sale of Shares of the Companies. On the Closing Date
(as defined in SECTION 3.1), the Seller shall sell to the Buyer, and the Buyer
shall purchase from the Seller, the Shares for the Purchase Price (as defined
in SECTION 2.1) specified herein. At the Closing (as defined in SECTION 3.1),
the Seller shall deliver to the Buyer certificates representing all of the
Shares which are required to be delivered or are otherwise deliverable by the
Seller pursuant hereto duly endorsed in blank for transfer or accompanied by
duly executed stock powers assigning such Shares in blank, and the Buyer shall
deliver the Purchase Price in accordance with ARTICLE 2 below. In the event
that it is determined, at any time prior to or after the Closing, that any
assets related to the Business or any contractual relationships related to the
Business are owned or are in the name of any person or corporation other than
the Companies, this Agreement shall, at the sole and exclusive option of the
Buyer, be deemed an agreement to acquire such other corporations, assets or
contracts without any additional consideration therefor.
ARTICLE 2
CONSIDERATION
2.1 Purchase Price. The aggregate consideration (the "Purchase
Price") for the Shares shall be the sum of Twenty-Three Million, Nine Hundred
Fifty-Two Thousand and Five Hundred Dollars ($23,952,500). The parties hereto
agree to file their respective tax returns consistent with
2
<PAGE>
this Section with such amendments thereto as either party shall be directed by
the Internal Revenue Service to submit.
2.2 Payment. The Purchase Price shall be paid as follows:
2.2.1 At the Closing, the Buyer shall pay to the Seller the sum
of Nineteen Million, Nine Hundred Fifty-Two Thousand and Five Hundred Dollars
($19,952,500) (the "Fixed Payment"), in partial payment for the Shares.
2.2.2 In addition to the Fixed Payment, the Buyer shall pay to
the Seller the aggregate sum of Three Million Dollars ($3,000,000), without
interest, in 20 equal quarterly installments over a five (5) year period
commencing on January 1, 1997 (and on the first day of each subsequent quarter
until paid in full) in partial payment for the Shares. Notwithstanding the
foregoing, if at any time prior to January 1, 2002 there shall occur an
Acceleration Event (as defined below), then upon the occurrence of such
Acceleration Event all amounts due but not yet paid or payable pursuant to
this Section shall be immediately remitted to Seller at such time.
2.2.3 In addition to the Fixed Payment, the Buyer shall pay to
the Seller the aggregate sum of One Million Dollars ($1,000,000), without
interest, in 40 equal quarterly installments over a ten (10) year period
commencing on January 1, 1997 in partial payment for the Shares.
Notwithstanding the foregoing, if at any time prior to January 1, 2002 there
shall occur an Acceleration Event (as defined below), then upon the occurrence
of such Acceleration Event all amounts due but not yet paid or payable
pursuant to this Section shall be immediately remitted to Seller at such time.
The deferred Purchase Price payments set forth in this SECTION 2.2.3 and in
SECTION 2.2.2 are referred to herein as the "Deferred Purchase Price
Payments."
2.3 Escrow Account. On the date hereof, the Buyer shall deposit an
irrevocable stand-by letter of credit with a face amount of Two Million
Dollars ($2,000,000) into an escrow account (the "Escrow Account") with The
Chase Manhattan Bank, to be held in escrow in accordance with the
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<PAGE>
terms of the escrow agreement dated as of the date hereof among the Buyer, the
Seller and the escrow agent, a copy of which is attached as EXHIBIT A hereto.
After payment of the Fixed Payment by the Buyer at the Closing in accordance
with ARTICLE 2 hereof, the Escrow Deposit shall be returned to the Buyer.
2.4 [RESERVED]
2.5 Slater Payments. (a) The Buyer hereby agrees pay: (i) to Slater
the portions of the Deferred Purchase Price Payments identified on EXHIBIT B
hereto as being payable to Slater and (ii) to withhold from such portions of
the Deferred Purchase Price Payments to be so paid to Slater all applicable
withholding taxes, such taxes, along with any employer payroll taxes related
thereto (i.e., the applicable FICA taxes), to be remitted by the Buyer on a
timely basis to the appropriate taxing authorities.
(b) The Deferred Purchase Price Payments to be made by the
Buyer to the Seller pursuant to SECTION 2.2 shall be reduced by the portions
thereof payable to Slater by the Buyer as described in SECTION 2.5(A). The
Seller and the Buyer acknowledge that EXHIBIT B correctly sets forth, after
giving effect to such reductions, the portions of the Deferred Purchase Price
Payments to be so made by the Buyer to the Seller.
2.6 Acceleration Event. The term "Acceleration Event" shall mean any
of the following: (i) a Change in Control (as defined in the Employment
Agreements); (ii) an initial public offering of the Employer Stock (as defined
in the Employment Agreements) and (iii) a termination without Cause, other than
due to death, or a Constructive Termination Without Cause of the Seller's or
Slater's employment pursuant to their respective Employment Agreements (such
terms being defined in the Employment Agreements), provided, that the events
described in this clause (iii) shall only be an "Acceleration Event" for the
portions of the Deferred Purchase Price Payments payable to the individual so
terminated.
4
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2.7 Wire Instructions; Business Days. Payments to be made or caused
to be made hereunder shall be made by wire transfer in immediately available
funds to (i) the Seller to such account as the Seller shall direct and (ii)
Slater to such account as Slater shall direct. The amounts to be transferred
by wire at the Closing to the Seller and Slater and the appropriate wire
instructions are set forth on Appendix I hereto. Any such payment to be made
or caused to be made on a day that is not a business day shall be made on the
first business day immediately following such day.
ARTICLE 3
CLOSING
-------
3.1 Closing. Except as otherwise mutually agreed upon by the Seller
and the Buyer, the consummation of the transactions contemplated herein (the
"Closing") shall occur on the later of (i) five (5) business days following
the date of expiration or termination of all waiting periods, including any
extensions thereof, which are applicable to the transactions contemplated by
this Agreement pursuant to Title II of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the rules and
regulations thereunder and (ii) January 2, 1997. The Closing shall be held at
the Buyer's offices in New York, New York or such other location in New York,
New York as the Seller shall request. The date of the Closing is referred to
herein as the "Closing Date."
ARTICLE 4
GOVERNMENTAL CONSENTS
---------------------
4.1 HSR Act. It is specifically understood and agreed by the Buyer
and the Seller that the Closing and the purchase of the Shares is expressly
conditioned on and is subject to the prior expiration or termination of all
waiting periods, including any extensions thereof, which are applicable to the
transactions contemplated by this Agreement pursuant to the HSR Act.
4.2 Governmental Filings. The Companies, the Seller and the Buyer
will, within five
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<PAGE>
(5) business days following the date of this Agreement, file with the United
States Federal Trade Commission (the "FTC") and the Antitrust Division of the
United States Department of Justice (the "Department of Justice") pursuant to
the HSR Act all requisite documents and notifications in connection with the
transactions contemplated by this Agreement. The Seller and the Buyer will use
their commercially reasonable efforts to make or cause to be made all such
other filings and submissions as may be required under applicable laws and
regulations, if any, for the consummation of the transactions contemplated by
this Agreement. The Buyer and the Seller will coordinate with one another in
exchanging such information and reasonable assistance as another may request in
connection with all of the foregoing. The parties hereby acknowledge that in
making such filings, the parties will be relying on information provided by the
other party without independent investigation. The Buyer shall pay the filing
fee payable in respect of the pre-notification filing pursuant to the HSR Act.
The Seller and the Buyer agree to request early termination of the waiting
periods under the HSR Act.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE BUYER
-------------------------------------------
The Buyer hereby makes the following representations and warranties
to the Seller, each of which is true and correct on the date hereof, shall
remain true and correct to and including the Closing Date, shall be unaffected
by any notice to the Seller and shall survive the Closing.
5.1 Organization and Standing. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware, and will at Closing be duly qualified as a foreign corporation to
do business in the State of New York and have the corporate power and
authority to own the Shares and to carry on the business of the Companies as
they are now being conducted and as proposed to be conducted by the Companies
between the date hereof and the Closing Date.
5.2 Authorization and Binding Obligation. The Buyer has all necessary
power and
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<PAGE>
authority to enter into and perform this Agreement and the transactions
contemplated hereby, and to own the Shares and to carry on the business of the
Companies as they are now being conducted, and the Buyer's execution, delivery
and performance of this Agreement and the transactions contemplated hereby have
been duly and validly authorized by all necessary action on its part. This
Agreement has been duly executed and delivered by the Buyer, and this Agreement
constitutes, and the other agreements to be executed by the Buyer in connection
herewith will constitute, the valid and binding obligation of the Buyer,
enforceable in accordance with their terms, except as limited by laws affecting
the enforcement of creditors' rights.
5.3 Litigation and Compliance with Law. There is no litigation,
administrative, arbitration or other proceeding, or petition, complaint or, to
the best of the Buyer's knowledge, investigation pending, or to the best of
Buyer's knowledge, threatened before any court or governmental body, against
the Buyer or any of its affiliates that would adversely affect the Buyer's
ability to perform its obligations pursuant to this Agreement or the agreements
to be executed in connection herewith. To the best of the Buyer's knowledge,
there is no violation of any law, regulation or ordinance or any other
requirement of any governmental body or court which would have a material
adverse effect on the Buyer's ability to perform its obligations pursuant to
this Agreement or the agreements to be executed in connection herewith.
5.4 Investment Intent. The Buyer is acquiring the Shares solely for
its own account and not with a view to sale or distribution thereof in
violation of any securities laws. The Buyer acknowledges that the Shares are
restricted securities under the Securities Act of 1933, as amended, and cannot
be sold, transferred or conveyed without proper registration or an exemption
from registration under the Securities Act of 1933, as amended.
5.5 Accuracy of Information. To the best of Buyer's knowledge, no
written statement made by the Buyer herein and no information provided by the
Buyer herein or in the documents, instruments or other written communications
made or delivered directly by the Buyer to the Seller in connection with the
negotiations covering the purchase and sale of the Shares contains any
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<PAGE>
material untrue statement of a material fact or omits a material fact necessary
to make the statements contained therein or herein not materially misleading.
To the extent that a representation or other information is made to the Buyer's
knowledge or is otherwise qualified by its terms, this representation shall not
be interpreted to expand such limitations or qualifications.
5.6 Stock Ownership. Buyer's Sub is a wholly-owned subsidiary of the
Buyer, and the Buyer owns one hundred percent (100%) of the authorized and
issued capital stock of Buyer's Sub.
5.7 Absence of Conflicting Agreements or Required Consents. Except as
set forth in ARTICLE 4 hereof with respect to governmental consents, the
execution, delivery and performance of this Agreement by the Buyer: (a) does
not require the consent of any third party; (b) will not violate any applicable
law, judgment, order, injunction, decree, rule, regulation or ruling of any
governmental authority to which the Buyer is a party; and (c) will not, either
alone or with the giving of notice or the passage of time, or both, conflict
with, constitute grounds for termination of or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
agreement, instrument, license or permit to which the Buyer is now subject.
5.8 Audit. SCHEDULE 5.8 of the Disclosure Schedules sets forth the
results of the audit (the "Audit") of the Companies' financial statements
performed by Ernst & Young from August 1996 through September 1996. The Audit
is consistent in all respects with the Financial Statements.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE SELLER
--------------------------------------------
The Seller hereby makes the following representations and warranties
to the Buyer, each of which is true and correct on the date hereof, shall
remain true and correct to and including the Closing Date, shall be unaffected
by any notice to the Buyer other than in the Disclosure Schedule attached
hereto and hereby made a part hereof and shall survive the Closing as provided
in ARTICLE 16 hereof.
8
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6.1 No Other Interests. Other than through the Companies, the Seller,
directly or indirectly, individually or with others, does not own, manage,
operate, control, participate in, perform consultation services for, and is
not connected in any manner with the ownership, management, operation or
control of any business similar to, or competitive with, the business of the
Companies or any of their affiliates or subsidiaries. All activities of the
Seller in the Business are conducted by the Companies. All income of the
Seller generated from the conduct of the Business is generated by the
Companies.
6.2 Ownership of Shares; Title. The Seller is the owner of record and
beneficially of all of the Shares. The Seller has not received any notice of
any adverse claim to the ownership of the Shares, does not have any reason to
know of any such adverse claim and is not aware of existing facts that would
give rise to any adverse claim to the ownership of the Shares. The sale and
delivery of the Shares to the Buyer pursuant to this Agreement shall vest in
the Buyer legal and valid title to the Shares, free and clear of all liens,
security interests, adverse claims or other encumbrances of any character
whatsoever ("Encumbrances"), other than Encumbrances created by the Buyer and
restrictions on resales of the Shares under applicable securities laws.
6.3 Authorization and Binding Obligation. The Seller has all power
and authority to enter into and perform this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
the Seller, and this Agreement constitutes, and the other agreements to be
executed by the Seller in connection herewith will constitute, the valid and
binding obligation of the Seller, enforceable in accordance with their terms,
except as limited by laws affecting the enforcement of creditor's rights.
6.4 Absence of Conflicting Agreements or Required Consents. Except as
set forth in ARTICLE 4 hereof with respect to governmental consents, the
execution, delivery and performance of this Agreement by the Seller: (a) does
not require the consent of any third party; (b) will not violate any
applicable law, judgment, order, injunction, decree, rule, regulation or
ruling of any governmental authority to which the Seller is a party or by
which he or the Shares are bound; (c) will
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<PAGE>
not, either alone or with the giving of notice or the passage of
time, or both, conflict with, constitute grounds for termination of or result
in a breach of the terms, conditions or provisions of, or constitute a default
under, any contract, agreement, instrument, license or permit to which the
Seller or the Shares are now subject; and (d) will not result in the creation
of any lien, charge or Encumbrance on any of the Shares.
6.5 Continuation of Companies' Business. Except as set forth on
SCHEDULE 6.5 to the Disclosure Schedule, the Seller does not know of any
reason whatsoever why the consummation of the transactions contemplated hereby
would adversely affect the Companies' enjoyment of all their material
benefits, rights, title and interest under all of the Contracts (as defined
below).
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
OF THE SELLER AND THE COMPANIES
-------------------------------
The Seller and the Companies, jointly and severally, hereby make the
following representations and warranties to the Buyer, each of which is true
and correct on the date hereof, shall remain true and correct to and including
the Closing Date, shall be unaffected by any notice to the Buyer other than in
the Disclosure Schedule and shall survive the Closing as provided in ARTICLE
16 hereof.
7.1 Organization and Standing. Each of the Companies is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the corporate power and authority to
own, lease and operate its properties and to carry on its business as now
being conducted and as proposed to be conducted by the Companies between the
date hereof and the Closing Date. Each of the Companies is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by them or the nature of the business
conducted by them makes such qualification necessary. SCHEDULE 7.1 of the
Disclosure Schedule sets forth a complete and correct list of all
jurisdictions in which each of the
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Companies is incorporated and qualified or licensed to do business. The Seller
has heretofore delivered to the Buyer complete and correct copies of the
Certificate of Incorporation and By-laws (or other similar charter documents)
of each of the Companies.
7.2 Authorization and Binding Obligation. Each of the Companies has
the corporate power and authority to enter into and perform this Agreement and
the transactions contemplated hereby, and the Companies' execution, delivery
and performance of this Agreement, and the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action on
their part. This Agreement has been duly executed and delivered by the
Companies, and this Agreement constitutes, and the other agreements to be
executed by the Companies in connection herewith will constitute, the valid
and binding obligation of the Companies, enforceable in accordance with their
terms, except as limited by laws affecting the enforcement of creditor's
rights.
7.3 Capitalization. SCHEDULE 7.3 of the Disclosure Schedule sets
forth a complete and correct list of the authorized and issued capital stock
of each of the Companies including the registered holder of each of the
Shares. All outstanding Shares have been duly authorized and validly issued,
are fully paid and non-assessable and were not issued in violation of any
pre-emptive rights. Other than Slater's employment agreement dated as of
January 1, 1993 with the Companies (which shall be terminated on or prior to
the Closing), there is outstanding no security, option, warrant, right, call,
subscription, agreement, commitment or understanding of any nature whatsoever,
fixed or contingent, that directly or indirectly (i) calls for the issuance,
sale, pledge or other disposition of any Shares or of any capital stock of the
Companies or any securities convertible into, or other rights to acquire, any
such Shares or other capital stock of the Companies; or (ii) obligates the
Companies or the Seller to grant, offer or enter into any of the foregoing; or
(iii) relates to the voting or control of such Shares, capital stock,
securities or rights. No person has any right to require the Companies to
register any of its securities under the Securities Act of 1933, as amended.
7.4 Absence of Conflicting Agreements or Required Consents. Except as
set forth in ARTICLE 4 or SCHEDULE 7.10 of the Disclosure Schedules hereof
with respect to governmental
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consents, the execution, delivery and performance of this Agreement by the
Companies: (a) does not require the consent of any third party; (b) will not
violate any applicable law, judgment, order, injunction, decree, rule,
regulation or ruling of any governmental authority to which any of the
Companies is a party; (c) will not, either alone or with the giving of notice
or the passage of time, or both, conflict with, constitute grounds for
termination of or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any contract, agreement, instrument, license or
permit to which any of the Companies is now subject; and (d) will not result in
the creation of any lien, charge or Encumbrance on any of the Shares.
7.5 Government Authorizations. SCHEDULE 7.5 of the Disclosure
Schedule contains a true and complete list of all material licenses, permits
or other authorizations from governmental and regulatory authorities which are
required for the lawful conduct of the business and operations of the
Companies in the manner and to the full extent they are presently conducted.
The Companies are the authorized legal holders of the licenses, permits and
authorizations listed in SCHEDULE 7.5 of the Disclosure Schedule, none of
which is subject to any restrictions or condition which would limit in any
material respect the full operation of the Companies as now operated.
7.6 Subsidiaries. Except as set forth in SCHEDULE 7.6 of the
Disclosure Schedule, the Companies do not own any equity ownership interest,
directly or indirectly, in any person, corporation or other entity.
7.7 Taxes. The Companies have filed all material federal, state,
local and foreign income, franchise, sales, use, property, excise, payroll and
other tax returns required by law and have paid all material taxes, estimated
taxes, interest, assessments, and penalties due and payable. All material
returns and forms which have been filed have been true and correct in all
material respects, and no material tax or other payment in a material amount
other than as shown on such returns and forms is required to be paid and has
been paid by the Companies. Except as set forth in SCHEDULE 7.7 of the
Disclosure Schedule, there are no present disputes as to taxes of any nature
payable by the Companies.
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7.8 Personal Property. SCHEDULE 7.8 of the Disclosure Schedule
contains a list of all material tangible personal property and assets owned or
held by the Companies (the "Personal Property"). Except as disclosed in
SCHEDULE 7.8 the Disclosure Schedule, and except as may be subject to lease
agreements of the Companies specifically identified in SCHEDULE 7.10 of the
Disclosure Schedule, the Companies own and have, and will have on the Closing
Date, good and marketable title to all such property (and to all other
tangible and intangible personal property and assets to be transferred to the
Buyer hereunder), and none of such property is, or at the Closing will be,
subject to any Encumbrance other than (i) as set forth in the Disclosure
Schedule or the Financial Statements or (ii) mechanics', carriers', workmen's,
repairmen's or other like liens arising or incurred in the ordinary course of
business. All of the items of the tangible personal property and assets
included in the Disclosure Schedule are generally in good operating condition
(ordinary wear and tear excepted) and are available for immediate use. The
properties listed in the Disclosure Schedule include all such properties used
and necessary to conduct in all material respects the business and operations
of the Companies as now conducted.
7.9 Real Property. SCHEDULE 7.9 of the Disclosure Schedule contains a
complete and accurate list of all real property owned and leased by the
Companies (collectively the "Real Estate Contracts") and a list of the
applicable leases. The Real Estate Contracts listed in the Disclosure Schedule
constitute valid and binding obligations of the Companies and, to the best of
the Seller's knowledge, of all other persons purported to be parties thereto
and are in full force and effect as of the date hereof and will on the Closing
Date constitute valid and binding obligations of the Companies and, to the
best of the Seller's knowledge, of all other persons purported to be parties
thereto and shall be in full force and effect. Except as set forth in the
Disclosure Schedule, none of the Companies is in default under any of such
Real Estate Contracts and none has received or given written notice of any
default thereunder from or to any of the other parties thereto and will not be
in default thereunder at or prior to the Closing.
7.10 Contracts. SCHEDULE 7.10 of the Disclosure Schedule lists all
written and oral contracts having a remaining aggregate value in excess of
$25,000 as of the date of this Agreement
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for which the Companies shall continue to be liable as of the Closing Date
(the "Contracts").
7.11 Status of Contracts. Except as noted in SCHEDULE 7.10 of the
Disclosure Schedule, the Seller has delivered to the Buyer true and complete
copies of all written Contracts, including any and all amendments and other
modifications to such Contracts. All Contracts are valid, binding and
enforceable by the Companies in accordance with their respective terms, except
as limited by laws affecting creditors' rights. The Companies have all
complied in all material respects with all Contracts and are not in material
default beyond any applicable grace periods under any of the Contracts, and,
to the Seller's knowledge, no other contracting party is, as of the date
hereof, in default under any of the Contracts.
7.12 Environmental Matters. To the best of the Seller's and the
Companies' knowledge, the Companies have not unlawfully disposed of any
hazardous waste or hazardous substance in a manner which has caused, or is
reasonably likely to cause, the Buyer to incur a material liability under
applicable law in connection therewith. To the best of the Seller's knowledge,
the Companies have complied in all material respects with all federal, state
and local environmental laws, rules and regulations applicable to their
operations. To the best of the Seller's knowledge, no hazardous waste has been
disposed of by any other person on the real estate owned or leased by the
Companies. As used herein, the term "hazardous waste" shall mean as defined in
the Resource Conservation and Recovery Act (RCRA) as amended and in the
equivalent state statute under applicable law.
7.13 Copyrights, Trademarks and Similar Rights. SCHEDULE 7.13 of the
Disclosure Schedule lists, in all material respects, all copyrights,
trademarks, trade names, licenses, patents, permits and other similar
intangible property rights and interests applied for, issued to or owned by
the Companies or under which any of the Companies is a licensee or franchisee
and used exclusively or primarily in the conduct of the Business. Except as
set forth in the Disclosure Schedule, all of such rights and interests are
issued to or owned by the Companies, or if licensed or franchised to the
Companies, to the best of the Seller's knowledge, are valid and in good
standing and uncontested. The Seller has delivered or made available to the
Buyer copies of all material documents, if any,
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establishing such rights, licenses or other authority. The Companies have
received no written notice and have no knowledge of any material infringements
or materially unlawful use of such property. The properties listed in SCHEDULE
7.13 of the Disclosure Schedule include all such properties necessary to
conduct in all material respects the Business.
7.14 Personnel Information. SCHEDULE 7.14 of the Disclosure Schedule
contains a true and complete list of all persons currently employed by the
Companies, including a list of material compensation arrangements and employee
benefit plans and a list of other terms of any and all material agreements
affecting the employment of such persons. Except as set forth in the
Disclosure Schedule, as of the date hereof, the Companies have not received
notification that any of the employees of the Companies who are listed in the
Disclosure Schedule presently plan to terminate their employment, whether by
reason of the transactions contemplated hereby or otherwise.
7.14.1 SCHEDULE 7.14 of the Disclosure Schedule contains a true
and complete list of all contracts with any labor organization. None of the
Companies has agreed to recognize any union or other collective bargaining
unit other than as listed on SCHEDULE 7.14, nor has any union or other
collective bargaining unit been certified as representing any of the
Companies' employees other than as listed on SCHEDULE 7.14. The Seller has no
knowledge of any organizational effort currently being made or threatened by
or on behalf of any labor union with respect to any of the employees of the
Companies other than as listed on SCHEDULE 7.14. During the past five (5)
years, none of the Companies has experienced any strikes, work stoppages,
grievance proceedings, claims of unfair labor practices filed or other
significant labor difficulties of any nature.
7.14.2 The Companies have all complied in all material respects
with all laws relating to the employment of labor, including, without
limitation, the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and those laws relating to wages, hours, collective bargaining,
unemployment insurance, workers' compensation, equal employment opportunity,
sexual harassment and payment and withholding of taxes. More specifically, the
Companies have substantially complied with and are not knowingly in default in
any material respect under any laws,
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rules and regulations relating to employment of labor, including those relating
to wages, hours, equal employment opportunities, sexual harassment, employment
of protected minorities (including women and persons over 40 years of age),
collective bargaining and the withholding and payment of taxes and
contributions and have withheld all amounts required or agreed to be withheld
from wages and salaries of its employees, and are not liable (other than for
the current payroll period) for any arrearage of wages or for any tax or
penalty or failure to comply with the foregoing. There are no claims or
complaints pending or, to the knowledge of the Seller, threatened against the
Companies before any court or governmental agency and involving any alleged
unlawful employment practices, whether or not relating to the laws described
above. The Companies have not consented to any decree involving any claim of
unfair labor practice and have not been held in any judicial proceeding to have
committed any unfair labor practice and there are no material controversies
pending or threatened between the Companies and any of its employees.
7.15 Financial Statements. A copy of the unaudited consolidated and
consolidating balance sheet of the Companies as of the fiscal years ended
1993, 1994 and 1995 (and, in the case of Ardee Festivals NJ, Inc. and In-House
Tickets, Inc., the fiscal year ended 1996) and the unaudited consolidated and
consolidating statements of income and retained earnings and changes in
financial position of the Companies for the fiscal years ended 1993, 1994 and
1995 (and, in the case of Ardee Festivals NJ, Inc. and In-House Tickets, Inc.,
the fiscal year ended 1996), including the notes thereto (collectively the
"Financial Statements") are attached hereto as SCHEDULE 7.15. Except as noted
therein, and except as set forth on SCHEDULE 5.8 of the Disclosure Schedules,
the Financial Statements fairly present the consolidated financial position of
the Companies and their results of operations as of those dates in conformity
with generally accepted accounting principles consistently applied for such
period.
7.16 Liabilities. Except (i) as set forth in the Disclosure Schedules
or the Financial Statements and (ii) for liabilities and obligations incurred
in the ordinary course of business consistent with past practice since
December 31, 1995, including, without limitation, for income, franchise,
sales, use, property, excise, payroll and other taxes, the Companies have, as
of the date
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hereof and to the Seller's knowledge, no material debts, obligations or
liabilities of any kind or nature, either direct or indirect, absolute or
contingent, matured or unmatured.
7.17 Absence of Certain Changes or Events. Except as set forth in the
Disclosure Schedule or except as otherwise contemplated by this Agreement,
from the period from December 31, 1995, through the date hereof, there has not
been (a) any material damage, destruction or casualty loss to the physical
properties of the Companies (whether covered by insurance or not); (b) any
material change in the business, operations or financial condition of the
Companies; (c) any entry by the Companies into any transaction, commitment or
agreement (including without limitation any borrowing or capital expenditure)
material to any of the Companies' course of business other than in the
ordinary course of business; (d) any redemption or other acquisition by the
Companies of the Companies' capital stock or any declaration, setting aside or
payment of any dividend or other distribution in stock or property (other than
cash) with respect to the Companies' capital stock; (e) other than in
accordance with pre-existing plans, agreements and arrangements listed in the
Disclosure Schedule, any increase in the rate or terms of compensation payable
or to become payable by the Companies to its directors, officers or key
employees or any increase in the rate or terms of any bonus, pension,
insurance or other employee benefit plan, payment or arrangement made to, for
or with any such directors, officers or key employees; (f) any acceleration of
sales or reduction of aggregate administrative, marketing, advertising and
promotional expenses or research expenditures other than in the ordinary
course of business; (g) any sale, transfer or other disposition of any
material asset of the Companies to any party, including the Seller, except for
payment of third-party obligations incurred in the ordinary course of business
in accordance with the Companies' regular payment practices; (h) any
termination or waiver of any rights of value to the business of the Companies;
or (i) any failure by the Companies to pay their accounts payable or other
obligations in the ordinary course of business consistent with past practices.
7.20 Title to Properties. Except as set forth on the Disclosure
Schedule, the Companies have good and marketable title to all of the assets
and properties which they purport to own and which are reflected on the
Financial Statements, free and clear of all Encumbrances, except (a) for liens
for
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current taxes not yet due and payable or for taxes the validity of which is
being contested in good faith by appropriate proceedings, (b) for Encumbrances
which individually or in the aggregate do not materially and adversely affect
the business, operations or financial condition of the Companies, (c) as
otherwise set forth in the Financial Statements and (d) for lease agreements
specifically identified in SCHEDULE 7.10 to the Disclosure Schedule.
7.21 Litigation. Except as set forth in SCHEDULE 7.21 of the
Disclosure Schedule, as of the date hereof, none of the Companies is subject
to any judgment, award, order, writ, injunction, arbitration decision or
decree materially adversely affecting the conduct of any of their businesses,
and, as of the date hereof, there is no litigation, arbitration,
administration or other proceeding or, to the best of the Seller' s knowledge,
investigation pending or, to the best of the Seller's knowledge, threatened
against the Companies or the Seller in any federal, state or local court, or
before any administrative agency or arbitrator, or before any other tribunal
duly authorized to resolve disputes, which would reasonably be expected to
have a material adverse effect upon the business, property, assets or
condition (financial or otherwise) of any of the Companies or which seeks to
enjoin or prohibit, or otherwise questions the validity of, any action taken
or to be taken pursuant to or in connection with this Agreement.
7.22 Compliance With Laws. The Companies have not received any notice
prior to the date hereof asserting any material non-compliance by them in
connection with their business or operation with any applicable statute, rule
or regulation, whether federal, state or local. The Companies are not in
default with respect to any judgment, order, injunction or decree of any
court, administrative agency or other governmental authority or any other
tribunal duly authorized to resolve disputes in any respect material to the
transactions contemplated hereby. The Companies are in compliance with all
material laws, regulations and governmental orders applicable to the conduct
of their business and operations and the present use of the assets does not
violate any of such laws, regulations or orders.
7.23 Insurance. All insurance policies with respect to the
properties, assets, operations and
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business of the Companies (the "Insurance Policies") are in full force and
effect. Except as set forth on SCHEDULE 7.23 of the Disclosure Schedule, as of
the date hereof there are no pending claims against the Insurance Policies by
the Companies as to which the insurers have denied liability and with respect
to which there is a reasonable likelihood of a settlement or determination
adverse to the Companies. To the best of the Companies' and the Seller's
knowledge, the operations of each of the Companies have been conducted in a
manner so as to conform in all material respects to all applicable Insurance
Policies, nor are there any other parties having an interest under the
Insurance Policies. Except as set forth in SCHEDULE 7.23 of the Disclosure
Schedule, (i) there exist no material claims under the Insurance Policies that
have not been properly filed by the Companies; (ii) no insurance company has
refused to renew any material insurance policy of the Companies during the past
eighteen (18) months; and (iii) there have been no material rate or premium
increases or written notice of prospective changes therein on general
liability, property or directors and officers liability Insurance Policies
during the past eighteen (18) months. The Disclosure Schedule contains a list
that includes all Insurance Policies.
7.24 Payola/Plugola. Neither the Seller nor any of the Companies has
paid or agreed to pay any money, service or any valuable consideration, as
defined in, and other than any such payments or agreements to pay made in
accordance with, Sections 317 and 507 of the Communications Act of 1934, as
amended, for the radio broadcast of any matter whatsoever.
7.25 Accuracy of Information. To the best of the Seller's and the
Companies' knowledge, no written statement made by the Seller or the Companies
herein and no information provided by the Seller or the Companies herein or in
the documents, instruments or other written communications made or delivered
directly by the Seller or the Companies to the Buyer in connection with the
negotiations covering the purchase and sale of the Shares contains any
material untrue statement of a material fact or omits a material fact
necessary to make the statements contained therein or herein not materially
misleading. To the extent that a representation or other information is made
to the Seller's knowledge or is otherwise qualified by its terms, this
representation shall not be interpreted to expand such limitations or
qualifications.
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ARTICLE 8
COVENANTS OF THE BUYER
----------------------
8.1 Closing. On the Closing Date, the Buyer shall purchase the Shares
from the Seller as provided in ARTICLES 1 and 2 hereof and shall deliver or
cause to be delivered the Purchase Price as provided in ARTICLE 2 hereof. The
Buyer shall not permit the Companies to take any action between the Closing
and the beginning of the day after the day on which the Closing occurs other
than in the ordinary course of business.
8.2 Notification. The Buyer shall notify the Seller of any
litigation, arbitration or administrative proceeding pending or, to its
knowledge, threatened against the Buyer or its affiliates which challenges the
transactions contemplated hereby.
8.3 No Inconsistent Action. The Buyer shall not take any other action
which is materially inconsistent with its obligations under this Agreement.
8.4 Audit Costs. The Buyer agrees to pay the full cost of the audit
of the Companies' financial statements performed by Ernst & Young between
August, 1996 and September, 1996.
8.5 Current Assets. The Buyer agrees that all cash and other current
assets as of December 31, 1996 and all prepaid taxes (that are not current
assets) in excess of the corresponding tax liabilities as of December 31, 1996
(collectively the "Current Assets"), other than cash in respect of advance
ticket sales for events that are scheduled to occur after December 31, 1996
("Advance Cash"), shall be solely for the account of the Seller, and Seller
shall be entitled to retain such Current Assets. The parties shall, not later
than January 31, 1997, take such steps as are necessary for Buyer to receive
the Advance Cash and Seller to receive the Current Assets.
8.6 Advances, Security Deposits, Etc. The Buyer shall reimburse the
Seller for all security deposits, advances to venues or to performers to the
extent made in the ordinary course of
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business relating to events that will generate any portion of their revenues
after December 31, 1996, as well as all capital investments in venues
(including professional fees) that have been or are to be made in or after
1996. All such deposits, advances and the like made prior to the date hereof
are listed on SCHEDULE 8.6 attached hereto. The Buyer shall make the
reimbursement described above (a) on January 2, 1997 with respect to deposits,
advances and the like for which the Seller has provided to the Buyer receipts,
invoices or other evidence reasonably satisfactory to the Buyer no later than
December 20, 1996 and (b) from time to time after January 2, 1997 within five
business days after the Seller has provided to the Buyer receipts, invoices or
other evidence reasonably satisfactory to the Buyer. Notwithstanding the
foregoing, the Seller shall remain responsible for the funding of all such
items, whether or not listed on SCHEDULE 8.6, through and including the Closing
Date.
ARTICLE 9
COVENANTS OF THE SELLER AND THE COMPANIES
-----------------------------------------
9.1 Pre-Closing Covenants. The Seller and the Companies covenant and
agree with respect to the Companies that between the date hereof and the
Closing Date, except as expressly permitted by this Agreement or with the
prior written consent of the Buyer, they shall act in accordance with the
following:
9.1.1 The Companies shall conduct their business and operations
in the ordinary and prudent course of business consistent with past practices
and with the intent of preserving the ongoing operations and assets of the
Companies.
9.1.2 The Companies shall use reasonable efforts to preserve
their customers, suppliers and others having business relations with the
Companies and continue to conduct the financial operations of the Companies,
including their credit and collection policies, in the ordinary course of
business with substantially the same effort, and to substantially the same
extent and in the same manner, as in the prior conduct of the business of the
Companies.
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9.1.3 The Companies shall not, other than in the ordinary course
of business or in accordance with a pre-existing plan, agreement or
arrangement listed on SCHEDULE 9.1 of the Disclosure Schedule, (i) sell or
dispose of or commit to sell or dispose of any of the Companies' assets; (ii)
grant or agree to grant any general increases in the rates of salaries or
compensation payable to employees of the Companies; (iii) grant or agree to
grant any specific bonus or increase to any executive or management employee
of any of the Companies; (iv) provide for any new pension, retirement or other
employment benefits for employees of the Companies or any increases in any
existing benefits, other than as required by law; or (v) voluntarily incur any
liability not currently reflected on the Financial Statements.
9.1.4 The Seller and the Companies shall provide the Buyer
prompt written notice of any change in any of the information contained in the
representations and warranties made in ARTICLE 6 and ARTICLE 7 hereof or any
Exhibits or the Disclosure Schedule herein or attached hereto.
9.1.5 Between the date of this Agreement and the Closing Date,
the Companies will and the Seller will cause the Companies to (i) give the
Buyer and its authorized representatives reasonable access to all books,
records, offices and other facilities and properties of the Companies; (ii)
permit the Buyer to make such inspections thereof, during regular business
hours, as the Buyer may reasonably request, and (iii) cause their officers to
furnish the Buyer with such financial and operating data, including tax
returns and supporting schedules, and other information with respect to the
business and properties of the Companies as the Buyer may from time to time
reasonably request. The Seller shall cause the Companies' officers and
managerial employees, counsel and auditors to be available upon reasonable
notice and during normal business hours for such questions of the Buyer and
its authorized representatives concerning the business and affairs of the
Companies as the Buyer shall reasonably request.
9.1.6 Upon the Buyers request, the Companies shall, at the sole
cost of the Buyer, provide the Buyer with monthly unaudited consolidated and
consolidating statements of revenue and
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expenses, such monthly statements to be provided within forty-five (45) days of
the end of each month.
9.1.7 Without the prior written consent of the Buyer, the
Companies shall not enter into or renew or modify in any material respect any
agreements, commitments or contracts, including the Contracts listed on
SCHEDULE 7.10 of the Disclosure Schedules, except in the ordinary course of
business consistent with the past practices of the Companies.
9.1.8 The Companies shall not permit any of their insurance (or
reinsurance) policies to be canceled or terminated or any of the coverage
thereunder to lapse unless simultaneously with such termination, cancellation
or lapse, replacement policies providing coverage equal to or greater than
coverage remaining under those canceled, terminated or lapsed are in full
force and effect.
9.1.9 The Companies shall not and the Seller shall not permit
the Companies to amend any of their certificates of incorporation or by-laws.
9.2 Notification. The Seller and the Companies shall notify the Buyer
of any material litigation, arbitration or administrative proceeding pending
or, to their knowledge, threatened against the Seller or the Companies which
challenges the transactions contemplated hereby.
9.4 No Inconsistent Action. The Seller and the Companies shall take
no action which is materially inconsistent with their obligations under this
Agreement.
9.5 Closing Covenant. On the Closing Date, the Seller shall sell and
deliver the Shares to the Buyer as provided in ARTICLES 1 and 2 of this
Agreement.
9.6 No Shopping. From and after the date hereof until the termination
of the Agreement
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in accordance with its terms, neither the Seller or any representative or agent
of the Seller, nor the Companies, any officer, director, employee agent, or
representative of the Companies, shall directly or indirectly solicit or
knowingly encourage, including by way of furnishing information, the initiation
of any inquiries or proposals regarding, or engage in any discussions or enter
into any agreements regarding any merger, sale of shares of capital stock, sale
of all or substantially all of the assets or similar business combination or
transaction involving the Companies.
9.7 Escrow. In the event the Buyer, in good faith, asserts a bona
fide claim for indemnification under ARTICLE 16 against the Seller and Slater
after the Closing and prior to the last day of the eighteenth month following
the Closing, the Seller and Slater shall promptly place funds into an escrow
account in an amount equal to the lesser of (a) $2,000,000 (less any amounts
already put in escrow) and (b) the amount of such claim (each of the Seller
and Slater being severally responsible for his respective Applicable
Percentage (as defined in the Letter Agreement) of the amount in (a) or (b)).
Such amount (or an appropriate portion thereof) shall be released from escrow
(x) to the Buyer upon resolution of the claim in the Buyer's favor, or (y) to
the Seller and Slater upon resolution of the claim in the favor of the Seller
or Slater. Any claim made shall be accompanied by a certificate signed by the
Chief Executive Officer and Chief Financial Officer of the Parent to the
effect that they believe that the claim and the amount thereof to be in good
faith and bona fide.
ARTICLE 10
JOINT COVENANTS
---------------
The Buyer, the Seller and the Companies covenant and agree that
between the date hereof and the Closing Date, they shall act in accordance with
the following:
10.1 Conditions; Closing. Except as otherwise provided in this
Agreement, if any event should occur, either within or without the control of
any party hereto, which would prevent fulfillment of the conditions set forth
in Articles 11 and 12 hereof upon the obligations of any party hereto to
consummate the transactions contemplated by this Agreement, the parties hereto
shall use their reasonable best efforts to cure the event as expeditiously as
possible.
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10.2 Confidentiality. The Buyer, the Seller and the Companies shall
each keep confidential all information obtained by it or them with respect to
the other in connection with this Agreement and the negotiations preceding
this Agreement, and will use such information solely in connection with the
transactions contemplated by this Agreement, and if the transactions
contemplated hereby are not consummated for any reason, each shall return
promptly to the other, without retaining a copy thereof, any schedules,
documents or other written information obtained from the other in connection
with this Agreement and the transactions contemplated hereby. Notwithstanding
the foregoing, no party shall be required to keep confidential or return any
information which (i) is known or available through other lawful sources, not
bound by a confidentiality agreement with the disclosing party, (ii) is or
becomes publicly known through no fault of the receiving party or its agents,
(iii) is required to be disclosed pursuant to an order or request of a
judicial or governmental authority or because of the rules and regulations of
the Securities and Exchange Commission (the "SEC") (provided the other parties
are given reasonable prior notice and a reasonable opportunity to object or
seek exemption from such order, request or regulations), or (iv) is developed
by the receiving party independently of the disclosure by the disclosing
party. The Companies and the Seller hereby acknowledge that the Buyer is a
reporting person under the rules and regulations of the SEC and will be
required, upon the execution of this Agreement, to disclose and file this
Agreement (not including the Disclosure Schedules and the Exhibits hereto)
with its regularly required SEC reports, provided, that the Buyer shall afford
the Seller reasonable time to comment on the text accompanying any such
disclosure prior to such filing.
10.3 Cooperation. The Buyer, the Seller and the Companies shall
cooperate fully with each other in taking any actions, including actions to
obtain the required consent of any governmental instrumentality or any third
party, necessary or helpful to accomplish the transactions contemplated by this
Agreement; provided, however, that no party shall be required to take any
action which would have a material adverse effect upon it or any affiliated
entity.
10.4 Publicity. The Seller, the Companies and the Buyer agree that,
from the date hereof through the Closing Date, no public release or
announcement concerning the transactions
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contemplated hereby shall be issued by such party without the prior consent of
the other parties (which consent shall not be unreasonably withheld), (i)
except that a public announcement substantially in the form of EXHIBIT C hereto
may be released prior to the Closing Date and (ii) except as such release or
announcement may be required by law or the rules or regulations of any United
States securities exchange, in which case the party required to make the
release or announcement shall allow the other party reasonable time to comment
on such release or announcement in advance of such issuance; provided, however,
that the Seller may make internal announcements to the employees of the
Companies regarding the transactions contemplated hereby after reasonable prior
notice to and consultation with the Buyer.
ARTICLE 11
CONDITIONS OF CLOSING BY THE BUYER
----------------------------------
The obligations of the Buyer hereunder are, at its option, subject to
satisfaction, at or prior to the Closing Date, of each of the following
conditions:
11.1 Governmental Consents. Each of the Seller, the Buyer and the
Companies, as required in connection with the transactions contemplated hereby
to file a Notification and Report Form for Certain Mergers and Acquisitions
with the Department of Justice and the FTC pursuant to the HSR Act, shall have
made such filing and all applicable waiting periods with respect to each such
filing (including extensions thereof) shall have expired or been terminated.
11.2 Adverse Proceedings. No order, decree or judgment of any court,
agency or other governmental authority shall have been rendered against any
party hereto which would render it unlawful, as of the Closing Date, to effect
the transactions contemplated by this Agreement in accordance with its terms.
11.3 No Further Conditions. Other than as explicitly set forth above,
there shall be no conditions whatsoever to the obligations of the Buyer under
this Agreement.
26
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ARTICLE 12
CONDITIONS OF CLOSING BY THE SELLER
-----------------------------------
The obligations of the Seller hereunder are, at his option, subject
to satisfaction, at or prior to the Closing Date, of each of the following
conditions:
12.1 Governmental Consents. Each of the Seller, the Buyer and the
Companies, as required in connection with the transactions contemplated hereby
to file a Notification and Report Form for Certain Mergers and Acquisitions
with the Department of Justice and the FTC pursuant to the HSR Act, shall have
made such filing and all applicable waiting periods with respect to each such
filing (including extensions thereof) shall have expired or been terminated.
12.2 Adverse Proceedings. No order, decree or judgment of any court,
agency or other governmental authority shall have been rendered against any
party hereto which would render it unlawful, as of the Closing Date, to effect
the transactions contemplated by this Agreement in accordance with its terms.
12.3 Payment of Purchase Price. The Buyer shall have delivered or
caused to be delivered the Purchase Price in accordance with the terms of
ARTICLE 2 hereof.
12.4 No Further Conditions. Other than as explicitily set forth
above, there shall be no conditions whatsoever to the obligations of the
Seller under this Agreement.
ARTICLE 13
FEES AND EXPENSES
-----------------
13.1 Expenses. Each party hereto shall be solely responsible for all
costs and expense incurred by it in connection with the negotiation,
preparation and performance of and compliance with the terms of this
Agreement.
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ARTICLE 14
COMMISSIONS OR FINDER'S FEE
---------------------------
14.1 The Buyer's Representation and Agreement to Indemnify. The Buyer
represents and warrants to the Seller and the Companies that neither it nor
any person or entity acting on its behalf has agreed to pay a commission,
finder's fee or similar payment in connection with this Agreement or any
matter related hereto to any person or entity, other than to Sillerman
Communications Management Corporation. The Buyer further agrees to indemnify,
defend and hold the Seller harmless from and against any and all claims,
losses, liabilities and expenses (including reasonable attorney's fees)
arising out of a claim by any person or entity (including Sillerman
Communications Management Corporation) based on any such arrangement or
agreement made or alleged to have been made by the Buyer.
14.2 The Seller's and Companies' Representation and Agreement to
Indemnify. The Seller and the Companies, jointly and severally, represent and
warrant to the Buyer that neither they nor any person or entity acting on
their behalf has agreed to pay a commission, finder's fee or similar payment
in connection with this Agreement or any matter related hereto to any person
or entity. The Seller and the Companies further agree to jointly and severally
indemnify, defend and hold the Buyer harmless from and against any and all
claims, losses, liabilities and expenses (including reasonable attorney's
fees) arising out of a claim by any person or entity based on any such
arrangement or agreement made or alleged to have been made by the Seller or
the Companies.
ARTICLE 15
DOCUMENTS TO BE RELEASED FROM ESCROW AT CLOSING
-----------------------------------------------
15.1 The Seller's Documents. At the Closing, immediately after the
wire transfers to be made at the closing have cleared, the Buyer's counsel
shall release the following documents from escrow to the Buyer:
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15.1.1 Certified resolutions of the Boards of Directors of the
Companies approving the execution and delivery of this Agreement and each of
the other documents and authorizing the consummation of the transactions
contemplated hereby and thereby;
15.1.2 Articles of Incorporation of the Companies certified by
the Secretary of State of the states of incorporation of the Companies;
15.1.3 Written opinion letters, dated the date hereof, a copies
of which are attached hereto as EXHIBIT D;
15.1.4 Certificates evidencing the Shares;
15.1.5 Governmental certificates showing that the Companies are
duly incorporated and in good standing under the laws of their states of
incorporation and that they are qualified as foreign corporations in the State
of New York and all other states in which they conduct business, dated not
more than ten (10) calendar days before the date hereof;
15.1.6 All stock books and records, minute books and all files
and records pertaining to the business and operations of the Companies.
15.1.17 The letter agreement dated the date hereof among the
Companies, the Seller and Slater (the "Letter Agreement"), a copy of which is
attached hereto as EXHIBIT E.
15.2 The Buyer's Documents. At the Closing, the Buyer's counsel shall
release from escrow the following, or otherwise cause to be delivered, to the
Seller:
15.2.1 The Purchase Price in accordance with SECTION 2.2 hereof.
15.2.2 The written opinion of the Buyer's corporate counsel,
dated the date hereof,
29
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a copy of which is attached hereto as EXHIBIT F;
15.2.3 Governmental certificates showing that the Buyer and the
Buyer's Sub are duly incorporated and in good standing in the State of
Delaware and that the Buyer is qualified as a foreign corporation in the State
of New York, dated not more than ten (10) calendar days before the date
hereof;
15.2.4 Certified resolutions of the Board of Directors of the
Buyer approving the execution and delivery of this Agreement and each of the
other documents and agreements referred to herein and authorizing the
consummation of the transactions contemplated hereby and thereby; and
15.2.5 The Employment Agreements.
ARTICLE 16
INDEMNIFICATION
---------------
16.1 The Seller's Indemnities. 16.1.1. Subject to the limitations set
forth in this Article 16, each of the Seller and Slater hereby indemnifies,
defends and holds the Buyer harmless with respect to any and all demands,
claims, actions, suits, proceedings, assessments, judgments, costs, losses,
damages, liabilities and expenses, including, without limitation, reasonable
attorneys' fees (collectively, "Losses"), other than with respect to Taxes (as
defined below) asserted against, resulting from, imposed upon or incurred by
the Buyer directly or indirectly relating to or arising out of the inaccuracy
of any representation or warranty, or the breach of any covenant or agreement,
contained herein or in any instrument or certificate delivered pursuant
hereto.
16.1.2 The Seller hereby indemnifies, defends and holds the Buyer
harmless with respect to any and all Losses asserted against, resulting from,
imposed upon or incurred by the Buyer directly or indirectly relating to or
arising out of Taxes payable by the Companies with respect to any Pre-Closing
Tax Period ("Pre-Closing Taxes"). The term "Tax" or "Taxes" shall
30
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mean all Federal, state, local, foreign and other governmental taxes,
assessments, duties, fees, levies or similar charges of any kind (including,
without limitation, all interest, penalties and additions imposed with respect
to such amounts), including, without limitation, all sales, payroll, employment
and other withholding taxes, and including, without limitation, all obligations
under any tax sharing agreement, tax indemnity obligation or similar written or
unwritten agreement, arrangement or practice and any liability for taxes
imposed by reason of transferee liability or status as the successor to another
entity or member of a consolidated, combined or unitary group including other
entities. The term "Pre-Closing Tax Period" shall mean all taxable periods
ending on or before the Closing Date and the portion ending on the Closing Date
of any taxable period that includes (but does not end on) such day.
16.2 The Buyer's Indemnities. 16.2.1. The Buyer hereby indemnifies,
defends and holds the Seller harmless with respect to any and all Losses,
other than with respect to Taxes asserted against, resulting from, imposed
upon or incurred by the Seller directly or indirectly relating to or arising
out of the inaccuracy of any representation or warranty, or the breach of any
covenant or agreement, contained herein or in any instrument or certificate
delivered pursuant hereto.
16.2.2 The Buyer hereby indemnifies, defends and holds the
Seller harmless with respect to any and all Losses asserted against, resulting
from, imposed upon or incurred by the Seller directly or indirectly relating
to or arising out of Taxes payable by the Companies with respect to any
Post-Closing Tax Period ("Post-Closing Taxes") except to the extent that such
Losses or Taxes relate to the activities of the Companies prior to the
Closing. The term "Post- Closing Tax Period" shall mean all taxable periods
beginning after the Closing Date and the portion beginning on the day after
the Closing Date of any taxable period that includes (but does not begin on)
such day.
16.3 Rights. After the Closing Date, the indemnification provided in
Sections 16.1 and 16.2 and any other indemnification expressly provided in this
Agreement and in the terms of any other agreements or documents delivered
pursuant to this Agreement will be the sole and exclusive
31
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remedy of the parties hereto with respect to any and all Losses incurred
directly or indirectly because of or resulting from or arising out of or
relating to this Agreement, the transactions contemplated hereby, the Companies
or their respective assets, liabilities and businesses (other than claims of,
or causes of action arising from, fraud).
16.4 Survival of Representations and Warranties. The representations
and warranties contained herein, other than those contained in SECTIONS 6.2
and 7.3, shall survive the Closing for a period of eighteen (18) months (the
"Claims Period") following the Closing Date, and upon the expiration of such
period shall lapse and be of no further effect. The representations and
warranties contained in SECTIONS 6.2 and 7.3 shall survive the Closing.
16.5 Limitations on Indemnity. 16.5.1 Notwithstanding anything to the
contrary contained in this Agreement, neither the Buyer on the one hand nor
the Seller or Slater on the other shall have any liability or obligation to
the other for the inaccuracy or breach of any representation, warranty,
covenant or agreement of such other party made in this Agreement except to the
extent that the aggregate of such other party's Losses from such inaccuracies
or breaches exceed One Hundred Thousand Dollars ($100,000) (the "Threshold
Amount") in the aggregate, in which event the party so liable shall then be
liable only for all such Losses, including the sums constituting the Threshold
Amount. Any claim for indemnification must be made within eighteen (18) months
of the Closing.
16.5.2 Notwithstanding anything to the contrary contained in
this Agreement, (i) the liability of each of the Seller and Slater under
Section 16.1.1 with respect to any Loss shall be limited to an amount of such
Loss equal to his respective Applicable Percentage (as defined in the Letter
Agreement) of such Loss and (ii) the aggregate liability of each of the Seller
and Slater under this Article 16 shall not exceed the product of his
respective Applicable Percentage and the Fixed Payment.
16.5.3 The amount of any Loss for which indemnification is
provided under this Article 16 shall be net of any amounts recovered or
recoverable by the Indemnified Party (as
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defined below) under insurance policies with respect to such Loss and shall be
(i) increased to take account of any net Tax cost incurred by the Indemnified
Party arising from the receipt of indemnity payments hereunder (grossed up for
such increase) and (ii) reduced to take account of any net Tax benefit realized
by the Indemnified Party arising from the incurrence or payment of any such
Loss. In computing the amount of any such Tax cost or Tax benefit, the
Indemnified Party shall be deemed to recognize all other items of income, gain,
loss, deduction or credit before recognizing any item arising from the receipt
of any indemnity payment hereunder or the incurrence or payment of any
indemnified Loss.
16.6 Procedures.
16.6.1 Promptly after the receipt by any party (the "Indemnified
Party") of notice of (A) any claim or (B) the commencement of any action,
proceeding or litigation (collectively, "Litigation") which may entitle such
party to indemnification under this Section, such party shall give the other
party (the "Indemnifying Party") written notice of such claim or the
commencement of such claim or Litigation and shall permit the Indemnifying
Party to assume the defense of any such Litigation. The failure to give the
Indemnifying Party timely notice under this clause shall not preclude the
Indemnified Party from seeking indemnification from the Indemnifying Party
unless such failure has materially prejudiced the Indemnifying Party's ability
to defend such claim or Litigation.
16.6.2 If the Indemnifying Party assumes the defense of any such
claim or Litigation with counsel reasonably acceptable to the Indemnified
Party, the obligations of the Indemnifying Party as to such claim or
Litigation shall be limited to taking all steps necessary in the defense or
settlement of such claim or Litigation and to holding the Indemnified Party
harmless from and against any losses, damages and liabilities caused by or
arising out of any settlement approved by the Indemnifying Party or any
judgment in connection with such claim or Litigation; however, the Indemnified
Party may participate, at its or his expense, in the defense of such claim or
Litigation provided that the Indemnifying Party shall direct and control the
defense of such claim or Litigation.
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The Indemnified Party shall cooperate and make available all books and records
reasonably necessary and useful in connection with the defense. The
Indemnifying Party shall not, in the defense of such claim or Litigation,
consent to entry of any judgment, except with the written consent of the
Indemnified Party, or enter into any settlement, except with the written
consent of the Indemnified Party, which does not include as an unconditional
term thereof the giving by the claimant or the plaintiff to the Indemnified
Party of a release from all liability in respect of such claim or Litigation.
16.6.3 If the Indemnifying Party shall not assume the defense of
any such claim or Litigation, the Indemnified Party may, but shall have no
obligation to, defend against such claim or Litigation in such manner as it
may deem appropriate. The Indemnifying Party shall promptly reimburse the
Indemnified Party for the amount of all reasonable expenses, legal or
otherwise, incurred by the Indemnified Party in connection with the defense
against or settlement of such claim or Litigation. If no settlement of the
claim or Litigation is made, the Indemnifying Party shall promptly reimburse
the Indemnified Party for the amount of any judgment rendered with respect to
such claim or in such Litigation and of all reasonable expenses, legal or
otherwise, incurred by the Indemnified Party in the defense against such claim
or Litigation.
16.6.4 Regardless of whether the Indemnifying Party shall have
assumed the defense of any such claim or Litigation, the Indemnified Party
shall not admit any liability with respect to, or settle, compromise or
discharge, such claim or Litigation without the Indemnifying Party's prior
written consent (which consent shall not be unreasonably withheld).
ARTICLE 17
TERMINATION RIGHTS
------------------
17.1 Termination. This Agreement may be terminated by either the
Buyer or the Seller, if the party seeking to terminate is not in material
default or breach of this Agreement, upon written notice to the other upon the
occurrence of any of the following:
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(a) by mutual written consent of the Buyer and the Seller;
(b) by the Buyer if any of the conditions set forth in Article
11 shall have become incapable of fulfillment, and shall not have been waived
by the Buyer;
(c) by the Seller if any of the conditions set forth in Article
12 shall have become incapable of fulfillment, and shall not have been waived
by the Seller; or
(d) by either the Buyer or the Seller, if the Closing does not
occur on or prior to March 1, 1997.
17.2 Liability. The termination of this Agreement under SECTION 17.1
shall not relieve any party of any liability for breach of this Agreement
prior to the date of termination.
17.3 Effect of Termination. If this Agreement is terminated as
described in SECTION 17.1, this Agreement shall become void and of no further
force or effect, except for the provisions of Sections 10.2, 10.4, 13.1, 14.1,
14.2, this Section 17.3 and Section 18.1.
ARTICLE 18
OTHER PROVISIONS
----------------
18.1 Certain Remedies of Seller and Slater. If this Agreement is
terminated pursuant to Section 17.1 (C), the Seller shall have no liability to
the Buyer. If on the Closing Date, (i) all applicable waiting periods under
the HSR Act have expired or been terminated, (ii) no order, decree or judgment
of any governmental authority has been rendered against any party hereto which
would render it unlawful to effect the transactions contemplated by this
Agreement and (iii) the Buyer has failed to comply with Section 12.3 of this
Agreement, the Seller and Slater shall have the right to immediately draw on
the full amount of the letter of credit deposited in the Escrow Account. The
foregoing right of the Seller and Slater is in addition to any and all other
rights and remedies of the
35
<PAGE>
Seller and Slater hereunder, under applicable law, including in a court of
equity, or otherwise.
18.2 Risk of Loss. The risk of loss or damage to the Companies or
their business or any of their assets prior to December 31, 1996 shall be upon
the Seller. The Companies shall repair, replace and restore any such damaged
or lost asset to their prior condition, as soon as possible and in no event
later than the Closing Date. If the Companies fail to restore or replace any
such asset having a value exceeding Fifty Thousand Dollars ($50,000) , the
Companies shall assign or cause to be assigned to the Buyer at Closing his
rights under any insurance policy or pay over to the Buyer all proceeds of
insurance covering such asset's damage, destruction or loss.
18.3 Specific Performance. In the event of a material breach by one
of the parties hereto of their respective representations and obligations
hereunder, not cured within ten (10) calendar days after written notice to
that effect from another party, such other party shall have the right to bring
an action to enforce the terms of this Agreement by decree of specific
performance without being required to prove actual damages, post bond or
furnish other security, it being agreed that the property to be transferred
hereunder is unique and not readily available in the open market, and each
party hereto further agrees to waive any and all defenses against any such
action for specific performance based on the grounds that there is an adequate
remedy for money damages available.
18.4 Further Assurances. After the Closing, the Seller shall from
time to time, at the request of and without further cost or expense to the
Buyer, execute and deliver such other instruments of conveyance and transfer
and take such other actions as may reasonably be requested in order to more
effectively consummate the transactions contemplated hereby to vest in the
Buyer good and marketable title to the Shares being transferred hereunder, and
the Buyer shall from time to time, at the request of and without further cost
or expense to the Seller, execute and deliver such other instruments and take
such other actions as may reasonably be requested in order to more effectively
relieve the Seller of the obligations being assumed by the Buyer in connection
herewith.
18.5 Benefit and Assignment. This Agreement shall be binding upon and
shall inure to the
36
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benefit of the parties hereto and their respective successors and permitted
assigns. No party may voluntarily or involuntarily assign its interest under
this Agreement without the prior written consent of the other party; provided,
that, prior to the Closing Date, the Buyer shall assign its rights and benefits
(but not its obligations) hereunder to the Buyer's Sub and, effective upon such
assignment, all references herein to the "Buyer" shall be deemed to be to each
of SFX Broadcasting, Inc. and Delsener/Slater Enterprises, Inc.
18.6 Entire Agreement. This Agreement, the Disclosure Schedule and
the Exhibits hereto embody the entire agreement and understanding of the
parties hereto and supersede any and all prior agreements, arrangements and
understandings relating to the matters provided for herein. In the event of a
conflict between the terms of this Agreement and any other agreement executed
in connection herewith, the terms of this Agreement shall prevail. No
amendment, waiver of compliance with any provision or condition hereof or
consent pursuant to this Agreement shall be effective unless evidenced by an
instrument in writing signed by the party against whom enforcement of any
waiver, amendment, change, extension or discharge is sought.
18.7 Headings. The headings set forth in this Agreement are for
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement.
18.9 Payments. Neither Buyer on the one hand nor the Seller, Slater
or the Companies on the other has made any representation or warranty with
respect to the tax treatment of either the Fixed Payment or the Deferred
Purchase Price Payments.
18.10 Governing Law. The construction and performance of this
Agreement shall be governed by the laws of the State of New York without
giving effect to the choice of law provisions thereof.
18.11 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
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and received on the date of personal delivery or on the date of receipt, if
mailed by registered or certified mail, postage prepaid and return receipt
requested, or on the date of a stamped receipt, if sent by an overnight
delivery service, or on the date of written confirmation of delivery by
facsimile or facsimile transmission, and shall be addressed to the following
addresses, or to such other address as any party may request, in the case of
the Seller, by notifying the Buyer, and in the case of the Buyer, by notifying
the Seller:
To the Companies:
Delsener/Slater Enterprises, Ltd.
27 East 67th Street
New York, New York 10021
Attn: Mr. Ron Delsener
Attn: Mr. Mitch Slater
Facsimile #: (212) 249-7662.
With copies to:
Robert A. Kindler, Esq.
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019-7475
Facsimile #: (212) 474-3700
Bettina B. Plevan, Esq.
Proskauer, Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Facsimile #: (212) 969-2900
To the Seller:
Mr. Ron Delsener
1 Gracie Square
Penthouse
New York, New York 10028
Facsimile #: (212)249-7662
38
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With a Copy to:
Bettina B. Plevan, Esq.
Proskauer, Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Facsimile #: (212) 969-2900
To Slater:
Mr. Mitch Slater
18 Circle Road
Scarsdale, New York 10583
Facsimile#: (212)249-7662
With a Copy to:
Robert A. Kindler, Esq.
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019-7475
Facsimile #: (212) 474-3700
To Buyer:
SFX Broadcasting, Inc.
150 East 58th Street, 19th Floor
New York, New York 10155
Attention: Kraig G. Fox
Facsimile#: (212) 753-3188
With a Copy to:
Howard J. Tytel, Esq.
Executive Vice President
and General Counsel
SFX Broadcasting, Inc.
150 East 58th Street, 19th Floor
New York, New York 10155
Facsimile #: (212) 753-3188
18.12 Arbitration. Any dispute between the Buyer and the Seller over
any of the terms or conditions of this Agreement shall be submitted to the
American Arbitration Association in the City of New York, State of New York
for arbitration under its then prevailing rules, the arbitrator(s) to be
selected as follows: Each of the parties hereto shall by written notice to the
other have the right
39
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to appoint one arbitrator. If, within thirty (30) days following the giving of
such notice by one party, the other shall not, by written notice, appoint
another arbitrator, the first arbitrator shall be the sole arbitrator. If two
arbitrators are so appointed, they shall appoint a third arbitrator. If thirty
(30) days elapse after the appointment of the second arbitrator and the two
arbitrators are unable to agree upon the third arbitrator, then either party
may, in writing, request the American Arbitration Association to appoint the
third arbitrator. The award made in the arbitration shall be binding and
conclusive on the parties and judgment may be, but need not be, entered in any
court having jurisdiction. Such award shall include the fixing of the costs,
expenses and reasonable attorney's fees of arbitration, which shall be borne by
the unsuccessful party.
18.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date and year first above written.
THE COMPANIES
- -------------
DELSENER/SLATER ENTERPRISES, LTD CONNECTICUT CONCERTS,
INCORPORATED
By: /s/ Ron Delsener By: /s/ Ron Delsener
-------------------- ---------------------
Ron Delsener Ron Delsener
President President
BEACH CONCERTS, INC. BROADWAY CONCERTS, INC.
By: /s/ Ron Delsener By: /s/ Ron Delsener
-------------------- ---------------------
Ron Delsener Ron Delsener
President President
40
<PAGE>
ARDEE PRODUCTIONS, LTD. DUMB DEAL, INC.
By:/s/ Ron Delsener By: /s/ Ron Delsener
-------------------- --------------------
Ron Delsener Ron Delsener
President President
ARDEE FESTIVALS NJ, INC. SELLER:
By: /s/ Ron Delsener /s/ Ron Delsener
-------------------- --------------------
Ron Delsener Ron Delsener
President
SLATER:
IN-HOUSE TICKETS, INC.
/s/ Mitch Slater
-----------------------
By: /s/ Ron Delsener Mitch Slater
--------------------
Ron Delsener
President SFX BROADCASTING, INC.
EXIT 116 REVISITED, INC.
By: /s/ Robert F.X. Sillerman
----------------------------
Robert F.X. Sillerman
By: /s/ Ron Delsener Chief Executive Officer
--------------------
Ron Delsener
President
41
PURCHASE AND SALE AGREEMENT
---------------------------
This PURCHASE AND SALE AGREEMENT (the "Agreement") is made and
entered into as of the 23rd day of October, 1996 by and among WWYZ, Inc.
("WWYZ"), a Connecticut corporation and Great American Music Fest & Production
Co., a Connecticut corporation (collectively, the "Companies"); each of the
shareholders of the Companies, as set forth on Schedule 1 and the signature
page of the Agreement (collectively the "Sellers"); and SFX BROADCASTING OF
HARTFORD, INC., a Delaware corporation (the "Buyer"); and SFX BROADCASTING,
INC., a Delaware Corporation, ("SFX"), and the indirect parent of Buyer;
WHEREAS, the Sellers own beneficially and of record all of the issued
and outstanding shares of the capital stock (the "Shares") of the Companies,
WWYZ is the licensee, and the Companies are the owners of all of the assets,
of radio station WWYZ-FM serving the Hartford, Connecticut market (the
"Station"); and
WHEREAS, the Sellers desire to sell to the Buyer and the Buyer
desires to purchase from the Sellers all of the issued and outstanding Shares
of the Companies;
NOW THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein, and upon the terms and
subject to the conditions hereinafter set forth, the parties hereby agree as
follows:
ARTICLE 1
PURCHASE AND SALE
-----------------
1.1 Purchase and Sale of Shares of the Companies. On the Closing Date
(as defined in Section 3.1), the Sellers shall sell to the Buyer, and the
Buyer shall purchase from the Sellers, the Shares for the Purchase Price (as
defined in Section 2.1) specified herein. At the Closing (as defined in
Section 3.1), the Sellers shall deliver to the Buyer certificates representing
all of the Shares which are required to be delivered or are otherwise
deliverable by the Sellers pursuant hereto duly endorsed
1
<PAGE>
in blank for transfer or accompanied by duly executed stock powers assigning
such Shares in blank, and the Buyer shall deliver to the Sellers the Purchase
Price subject to the adjustment contemplated by Section 2.4 below.
ARTICLE 2
CONSIDERATION
-------------
2.1 Purchase Price. The aggregate consideration for the Shares shall
be Twenty-Five Million Five Hundred Thousand Dollars ($25,500,000) subject to
adjustment as set forth in Section 2.4 below (the "Purchase Price").
2.2 Payment. At the Closing, Buyer shall pay to Sellers the Purchase
Price, less the Indemnity Retention Amount (as defined below) and less the
amounts of any Net Cash Deposits (as defined below) together with interest
thereon at the greater rate of (i) the 120 day certificate of deposit rate as
of the date hereof or (ii) the actual interest earned on such Cash Deposits.
Payment shall be made by wire transfer in immediately available funds to the
Waterbury office of The Bank of Boston. At the Closing, the Parties shall
direct the Escrow Agent (as defined below) to deliver the Net Cash Deposits to
the Seller together with interest thereon at the greater rate of (i) the 120
day certificate of deposit rate as of the date hereof or (ii) the actual
interest earned on such Cash Deposits.
2.3 Escrow Account. (a) On the date of this Agreement, Buyer shall
deposit the sum of Two Million Five Hundred Thousand Dollars ($2,500,000) by
wire transfer in immediately available funds into an escrow account (the
"Initial Cash Deposit") with the Waterbury office of the Bank of Boston, as
escrow Agent (the "Escrow Agent"), to be held in escrow in accordance with the
terms of an escrow agreement (the "Escrow Agreement") between the parties
substantially in the form of Exhibit A hereto. Beginning February 1, 1997, the
Initial Cash Deposit may be increased by subsequent monthly cash deposits of
$50,000 per month by the Buyer pursuant to Section 16.4 of this Agreement,
such monthly deposits being intended to extend the Expiration Date, on a
monthly
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basis, after February 1, 1997, but in no event later than October 1, 1997
without the Sellers' prior written approval. The Initial Cash Deposit and such
monthly deposits shall collectively be called the "Cash Deposit". The Cash
Deposit less the Indemnity Retention Amount shall be called the "Net Cash
Deposit".
(b) Notwithstanding any other provision of this Agreement, and irrespective of
the receipt of governmental approvals or adverse proceedings as described in
Sections 10.2, 10.3 or 10.4, Buyer and SFX agree, and the Escrow Agreement
shall so provide, that Sellers shall be entitled to receive from the Escrow
Agent, as a "breakage fee", the sum of $500,000, increased by $50,000 per
month for each month that the Expiration Date is extended beyond February 1,
1997, if the Closing does not occur by the Expiration Date because of the
failure to receive all governmental approvals contemplated herein or the
failure of Buyer to proceed with the closing and such failure, in eitehr
event, is in no way attributable to the Companies, the Sellers or the
operation of the Station prior to Closing.
2.4 Working Capital Purchase Price Adjustment. (a) The Purchase Price
shall be increased or decreased to the extent that on the Closing Date the
Companies' Net Working Capital (as defined below) is less than or exceeds TWO
HUNDRED FIFTY THOUSAND DOLLARS ($250,000). For purposes of this Agreement, Net
Working Capital shall mean the difference between (i) the sum of (a) cash, (b)
billed and unbilled receivables, net of a reserve of 8/10ths of 1% for bad
debt and exclusive of trade and (c) pre-paid expense and other current assets,
minus (ii) the sum of (a) accounts payable, (b) accrued compensation and
benefits and accrued vacation and the like, computed on a basis consistent
with prior practice as set forth in Schedule 2.4 (a) of the Disclosure
Schedule (c) other accrued expenses, and (d) other current liabilities
exclusive of federal and state corporate income taxes and trade obligations as
determined in accordance with GAAP.
(b) Sellers shall submit to Buyer within ten (10) days of the estimated
Closing Date a certificate setting forth the Companies' estimated Net Working
Capital as of the Closing Date. Buyer shall have five (5) days from receipt of
such certificate to either accept or object to the determination of
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the Companies' estimated Net Working Capital set forth in such certificate. If
Buyer accepts Sellers' calculation of the Companies' Net Working Capital, the
Purchase Price shall be adjusted at Closing accordingly. If Buyer, in good
faith, objects to the Companies' Net Working Capital as set forth in Sellers'
certificate, Buyer shall set forth the basis for such objection, and, if
possible, its proposed calculation of Net Working Capital. If Buyer and Seller
cannot agree on the amount of the Net Working Capital, Buyer and Sellers shall
jointly engage an independent accounting firm to determine the Companies' Net
Working Capital as of the Closing Date (the "Independent Valuation"). If Buyer
and Sellers receive the Independent Valuation prior to the Closing Date, the
Purchase Price shall be adjusted accordingly at Closing. If Buyer and Sellers
do not receive the Independent Valuation prior to the Closing Date, then Buyer
shall have the right, at the Closing, to withhold an amount equal to the
difference between Seller's and Buyers estimates of the Companies Net Working
Capital at Closing. Thereafter, upon receipt of the Independent Valuation, the
Buyer, shall immediately remit to Sellers, (after pro ration between WWYZ, Inc.
and Great American Music Fest & Production Co.) in the same proportion as their
stock ownership interests as set forth in Schedule I attached hereto, the
amount, if any, by which the Companies Net Working Capital on the Closing Date,
as determined by the Independent Valuation, exceeds $250,000, and shall retain
the amount by which the Companies Net Working Capital, as determined by the
Independent Valuation is below $250,000.
2.5 Remittance of Indemnity Retention Amount. Any balance of the
Indemnity Retention Amount, not permitted to be retained by the Buyer pursuant
to Section 15 of this Agreement, shall be paid by the Escrow Agent to the
Sellers at the termination of the Claim Period, as defined in Section 15.5 of
this Agreement.
ARTICLE 3
CLOSING
-------
3.1 Closing. Except as otherwise mutually agreed upon by the Sellers
and the Buyer, the consummation of the transactions contemplated herein (the
"Closing") shall occur within thirty (30)
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calendar days following the latter of (i) the date of expiration or termination
of all waiting periods, including any extensions thereof, which are applicable
to the transactions contemplated by this Agreement pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the rules and regulations thereunder and (ii) the date on which the
FCC Consent (as defined in Section 4.1) has become a Final Order (as defined
below), unless the Buyer in its sole discretion shall have waived in writing
the condition that such consent shall have become final (the "Closing Date").
In no event shall the Closing occur after the Expiration Date without Seller's
prior written consent which Sellers may withhold in their sole discretion if
additional deposits are not made under Section 16.4, and in any event, after
October 1,1 997. For purposes of this Agreement, the FCC Consent shall be
deemed to be a Final Order (i) when it has not been vacated, reversed, stayed,
set aside, annulled or suspended; (ii) when it is not the subject of any
pending timely appeal, request for stay or petition for rehearing,
reconsideration or review by any party or by the Federal Communications
Commission (the "FCC") on its own motion; and (iii) is an action by the FCC as
to which the time for filing any such appeal, request, petition or similar
document or for the reconsideration or review by the FCC on its own motion
under the Communications Act of 1934 and the rules and regulations of the FCC
has expired.
The Closing shall be held at the Carmody & Torrance in Waterbury,
Connecticut unless the parties agree to close by release of pre-approved
executed closing documents on the Closing Date.
ARTICLE 4
GOVERNMENTAL CONSENTS
---------------------
4.1 FCC Consent. It is specifically understood and agreed by the
Buyer and the Sellers that the Closing and the purchase of the Shares is
expressly conditioned on and is subject to the prior consent of the FCC and
any condition imposed in such consent reasonably acceptable to the Buyer (the
"FCC Consent"). This provision and the provisions of Sections 4.2 and 4.3 are
not intended to override the provision in the Section 3.2 (b) regarding
Seller's rights to retain a portion of the Cash
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Deposit if FCC approval is not obtained due to circumstances not involving the
Companies or the Sellers.
4.2 FCC Application. WWYZ, its shareholders and the Buyer shall within
ten (10) business days following the date of this Agreement file with the FCC
the requisite applications (the "FCC Applications") for the transfer of control
of the Companies' FCC licenses (the "Station Licenses") from the shareholders
of WWYZ to the Buyer and to prosecute the FCC Applications with all reasonable
diligence and otherwise use their best efforts to obtain the grant of the FCC
Applications as expeditiously as practicable (but neither the Sellers nor the
Buyer shall have any obligation to satisfy complainants or the FCC by taking
any steps which would have a material adverse effect upon the Sellers or the
Buyer or upon any affiliated entity). If the FCC Consent imposes any condition
on either party hereto, such party shall use his or its best efforts to comply
with such condition; provided, however, that neither party shall be required
hereunder to comply with any condition that would have a material adverse
effect upon Sellers, the Buyer, or SFX or any direct or indirect subsidiary of
SFX; and provided further, that the Buyer is not obligated to accept any
conditions that are imposed which arise out of the actions, inactions or
misconduct of the Sellers. If reconsideration or judicial review is sought with
respect to the FCC Consent, the party affected shall vigorously oppose such
efforts for reconsideration or judicial review; provided, however, that nothing
herein shall be construed to limit either party's right to terminate this
Agreement pursuant to Article 16 hereof. SFX shall take all necessary action to
cause Buyer to meet its obligations under this Section 4.2 and Section 4.3
following.
4.3 HSR Act. Within ten (10) business days from the date hereof,
Sellers and Buyer shall make any filings as may be required under the HSR Act.
Each party shall furnish to the other party such necessary information and
reasonable assistance as such party shall request in connection with its
preparation of any necessary filings under the HSR Act. Each party shall keep
the other party informed of the status of any inquiries made of such party by
the Federal Trade Commission or any other Antitrust Division of the U.S.
Department of Justice or any other governmental agency or authority with
respect to this Agreement or the transactions contemplated hereby. The parties
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hereby acknowledge that in making such filings, the parties will be relying on
information provided by the other party without independent investigation. The
Sellers and the Buyer agree to request early termination of the waiting periods
under the HSR Act, but if additional information is required, Buyer, with
Seller's cooperation, shall use its best efforts to resolve any objections to
the transactions contemplated by this Agreement as expeditiously as possible.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND SFX
---------------------------------------------------
The Buyer and SFX hereby make the following representations and
warranties to the Sellers, each of which is true and correct on the date
hereof, shall remain true and correct to and including the Closing Date, shall
be unaffected by any notice to the Sellers and shall survive the Closing.
5.1 Organization and Standing. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware, and will at Closing be duly qualified as a foreign corporation to
do business in the State of Connecticut and have the corporate power and
authority to own the Shares and to carry on the business of the Station as now
being conducted and as proposed to be conducted by the Companies between the
date hereof and the Closing Date.
5.2 (a) Authorization and Binding Obligation. The Buyer has all
necessary power and authority and financing commitments necessary to enter
into and perform this Agreement and the transactions contemplated hereby, and
to own the Shares and to carry on the business of the Station as it is now
being conducted, and the Buyer's execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly and validly
authorized by all necessary action on its part. This Agreement has been duly
executed and delivered by the Buyer, and this Agreement constitutes, and the
other agreements to be executed in connection herewith will constitute, the
valid and binding obligation of the Buyer, enforceable in accordance with
their terms, except as limited by laws affecting the enforcement of creditors'
rights or equitable principles
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generally.
(b) Absence of Conflicting Agreements or Required Consents. Except as
set forth in Article 4 hereof with respect to governmental consents, the
execution, delivery and performance of this Agreement by the Buyer: (a) does
not require the consent of any third party; (b) will not violate any
applicable law, judgment, order, injunction, decree, rule, regulation or
ruling of any governmental authority to which the Buyer, SFX or any direct or
indirect subsidiary of SFX are a party or by which they are bound; and (c)
will not, either alone or with the giving of notice or the passage of time, or
both, conflict with, constitute grounds for termination of or result in a
breach of the terms, conditions or provisions of, or constitute a default
under, any contract, agreement, instrument, license or permit to which the
Buyer, SFX or any direct or indirect subsidiary of SFX are now subject.
5.3 Qualification. To the best of the Buyer's and SFX's knowledge,
there are no facts applicable to Buyer, SFX or any direct or indirect
subsidiary of SFX which, under the Communications Act of 1934, as amended, or
the existing Rules and Regulations of the FCC, the Federal Trade Commission or
the Justice Department would disqualify the Buyer as a licensee of the Station
Licenses.
5.4 Litigation and Compliance with Law. There is no litigation,
administrative, arbitration or other proceeding, or petition, complaint or, to
the best of the Buyer's or SFX's knowledge, investigation before any court or
governmental body, pending against the Buyer, SFX or any of their respective
principals or any direct or indirect subsidiary of SFX that would adversely
affect the Buyer's ability to perform its obligations pursuant to this
Agreement or the agreements to be executed in connection herewith. To the best
of the Buyer's and SFX's knowledge, there is no violation of any law,
regulation or ordinance or any other requirement of any governmental body or
court by Buyer, SFX or direct or indirect subsidiary of SFX which would have a
material adverse effect on the Buyer or its ability to perform its obligations
pursuant to this Agreement or the agreements to be executed in connection
herewith.
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5.5 Investment Intent. The Buyer is acquiring the Shares solely for
its own account and not with a view to sale or distribution thereof in
violation of any securities laws. The Buyer acknowledges that it has received,
or has had access to, information which it considers necessary or advisable to
enable it to make a decision concerning its purchase of the Shares, provided
that the foregoing shall not limit or otherwise affect the rights or remedies
of the Buyer hereunder with respect to the breach of any representations,
warranties, covenants or agreements of the Sellers contained herein.
5.6 Accuracy of Information. To the best of Buyer's and SFX'
knowledge, no written statement made by the Buyer herein and no information
provided by the Buyer herein or in the documents, instruments or other written
communications made or delivered directly by the Buyer or SFX to the Sellers
in connection with the negotiations covering the purchase and sale of the
Shares contains any untrue statement of a material fact or omits a material
fact necessary to make the statements contained therein or herein not
misleading and there is no fact known to the Buyer or SFX which relates to any
information contained in any such written document, instrument or
communications which the Buyer has not disclosed to the Sellers in writing
which could materially affect adversely Buyers ability to acquire the Station.
To the extent that a representation or other information is made to the
Buyer's knowledge or is otherwise qualified by its terms, this representation
shall not be interpreted to expand such limitations or qualifications.
5.7 Audit. The Audit, as defined below, is consistent in all respects
with the Financial Statements, as defined below.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
OF THE SELLERS AND THE COMPANIES
--------------------------------
The Sellers and the Companies hereby make the following
representations and warranties to the Buyer, each of which is true and correct
on the date hereof, shall remain true and correct to
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and including the Closing Date, shall be unaffected by any notice to the Buyer
other than in the Disclosure Schedule (as defined herein) and shall survive the
Closing. Such representations and warranties are subject to, and qualified by,
any fact or facts disclosed in the separate Disclosure Schedule which are
attached hereto (the "Disclosure Schedule").
6.1 Organization and Standing. The Companies are corporations duly
organized, validly existing and in good standing under the laws of the State
of Connecticut and have the corporate power and authority to own, lease and
operate the Station and to carry on the business of the Station as now being
conducted and as proposed to be conducted by the Companies between the date
hereof and the Closing Date.
6.2 Authorization and Binding Obligation. The Companies have the
corporate power and authority to enter into and perform this Agreement and the
transactions contemplated hereby, and the Companies' execution, delivery and
performance of this Agreement, and the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action on their
part. This Agreement has been duly executed and delivered by the Companies,
and this Agreement constitutes, and the other agreements to be executed in
connection herewith will constitute, the valid and binding obligation of the
Companies and the Sellers, enforceable in accordance with their terms, except
as limited by laws affecting the enforcement of creditor's rights or equitable
principles generally.
6.3 Capitalization. The authorized capital stock of WWYZ, Inc.
consists of 50,000 of common stock, no par value per share, of which 1,680
shares of common stock are issued and outstanding, all of which are owned of
record and beneficially by the Sellers in the amounts set forth in Schedule
6.3 of the Disclosure Schedule. The authorized capital stock of Great American
Music Fest & Production Co. consists of 1,000 shares of common stock, $1.00
par value per share, of which 1,000 shares of common stock are issued and
outstanding, all of which are owned of record and beneficially by the Sellers
in the amounts set forth in Schedule 6.3 of the Disclosure Schedule. All
outstanding Shares have been duly authorized and validly issued, are fully
paid and non-assessable
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and were not issued in violation of any pre-emptive rights. There is
outstanding no security, option, warrant, right, call, subscription, agreement,
commitment or understanding of any nature whatsoever, fixed or contingent, that
directly or indirectly (i) calls for the issuance, sale, pledge or other
disposition of any Shares or of any capital stock of the Companies or any
securities convertible into, or other rights to acquire, any such Shares or
other capital stock of the Companies; or (ii) obligates the Companies or the
Sellers to grant, offer or enter into any of the foregoing; or (iii) relates to
the voting or control of such Shares, capital stock, securities or rights. No
person has any right to require the Companies to register any of its securities
under the Securities Act of 1933 as amended.
6.4 Title to Shares. The Sellers are the owners of record and
beneficially of all of the Shares. The Sellers have not received any notice of
any adverse claim to the ownership of the Shares, do not have any reason to
know of any such adverse claim and are not aware of existing facts that would
give rise to any adverse claim to the ownership of the Shares. The sale and
delivery of the Shares to the Buyer pursuant to this Agreement shall vest in
the Buyer legal and valid title to the Shares, free and clear of all liens,
security interests, adverse claims or other encumbrances of any character
whatsoever ("Encumbrances"), other than Encumbrances created by the Buyer and
restrictions on resales of the Shares under applicable securities laws.
6.5 Absence of Conflicting Agreements or Required Consents. Except as
set forth in Article 4 hereof with respect to governmental consents and as set
forth in Schedule 6.5 of the Disclosure Schedule, the execution, delivery and
performance of this Agreement by the Companies and the Sellers: (a) does not
require the consent of any third party; (b) will not violate any applicable
law, judgment, order, injunction, decree, rule, regulation or ruling of any
governmental authority to which the Companies and the Sellers are a party or
by which they or the Shares are bound; (c) will not, either alone or with the
giving of notice or the passage of time, or both, conflict with, constitute
grounds for termination of or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, agreement,
instrument, license or permit to which the Companies, the Sellers or the
Shares are now subject; and (d) will not result in the creation of any lien,
charge or Encumbrance on any of the Shares.
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6.6 Government Authorizations. Schedule 6.6 of the Disclosure
Schedule contains a true and complete list of the Station Licenses and other
material licenses, permits or other authorizations from governmental and
regulatory authorities which are required for the lawful conduct of the
business and operations of the Station in the manner and to the full extent
they are presently conducted. WWYZ is the authorized legal holders of the
Station Licenses and other licenses, permits and authorizations listed in the
Disclosure Schedule, none of which is subject to any restrictions or condition
which would limit in any respect the full operation of the Station as now
operated or requires the Companies or any transferee or assignee to perform
any acts or make any filings not required of all licensees by the FCC.
Except as set forth in Schedule 6.6 of the Disclosure Schedule, there are no
applications, complaints or proceedings pending or, to the best of the Sellers'
knowledge, threatened as of the date hereof before the FCC relating to the
business or operations of the Station other than applications, complaints or
proceedings which generally affect the broadcasting industry. The Sellers have
delivered to the Buyer true and complete copies of the Station Licenses,
including any and all amendments and other modifications thereto. The Station
Licenses listed in Schedule 6.6 of the Disclosure Schedule are in good
standing, are in full force and effect and are unimpaired by any act or
omission of the Sellers, the Companies or its officers, directors or employees;
and the operation of the Station is in accordance with the Station Licenses and
the underlying construction permits. Except as set forth in Schedule 6.6 of the
Disclosure Schedule, no proceedings are pending or, to the knowledge of the
Sellers, are threatened which may result in the revocation, modification,
non-renewal or suspension of any of the Station Licenses, the denial of any
pending applications, the issuance of any cease and desist order, the
imposition of any administrative actions by the FCC with respect to the Station
Licenses or which may affect the Buyer's ability to continue to operate the
Station as it is currently operated. The Sellers have no reason to believe that
the Station Licenses will not be renewed in their ordinary course. All material
reports, forms and statements required to be filed by the Companies with the
FCC with respect to the Station since the grant of the last renewal of the
Station Licenses have been filed and are substantially complete and accurate.
To the best knowledge of the Sellers, there are no facts which, under the
Communications Act of 1934, as
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amended, or the existing Rules and Regulations of the FCC, would disqualify the
Companies as a transferor of the Station Licenses.
6.7 Compliance with FCC Regulations. To the best of Sellers'
knowledge, the operation of the Station has been, is and will as of the
Closing Date be in material compliance in all material respects with (i) all
applicable engineering standards required to be met under applicable FCC
rules, and (ii) all other applicable rules, regulations, requirements and
policies of the FCC, including, but not limited to, ANSI Radiation Standards
C95.1 - 1982.
6.8 Subsidiaries. The Companies do not own any equity ownership
interest, directly or indirectly, in any person, corporation or other entity.
6.9 Taxes. The Companies have filed all federal, state, local and
foreign income, franchise, sales, use, property, excise, payroll and other tax
returns required by law and has paid in full all taxes, estimated taxes,
interest, assessments, and penalties due and payable. All returns and forms
which have been filed have been true and correct in all material respects and
no tax or other payment in a material amount other than as shown on such
returns and forms are required to be paid and have been paid by the Companies.
Except as noted in Schedule 6.9, there are no present audit reviews as to
taxes of any nature payable by the Companies.
6.10 Personal Property. Schedule 6.10 of the Disclosure Schedule
contains a list of all material tangible personal property and assets owned or
held by the Companies and used primarily or exclusively in the conduct of the
business and operations of the Station (the "Personal Property"). Schedule
6.10 of the Disclosure Schedule contains a list of Personal Property which
will not be transferred to the Buyer at the Closing. Except as disclosed in
Schedule 6.10 of the Disclosure Schedule, and except as may be subject to
lease agreements of the Companies specifically identified in the Disclosure
Schedule, the Companies owns and has, and will have on the Closing Date, good
and marketable title to all such property (and to all other tangible and
intangible personal property and assets including cash and receivables to be
transferred to the Buyer hereunder), and none of such
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property is, or at the Closing will be, subject to any security interest,
mortgage, pledge, conditional sales agreement or other lien or encumbrance
other than as set forth in Schedule 6.10 of the Disclosure Schedule. All of the
items of the tangible personal property and assets included in Schedule 6.10 of
the Disclosure Schedule are in all respects in good operating condition
(ordinary wear and tear excepted) and are available for immediate use in the
conduct of the business and operations of the Station. The technical equipment
constituting a part of the Personal Property transferred hereunder has been
maintained in accordance with industry practice and is in good operating
condition and complies in all material respects with all applicable rules and
regulations of the FCC and the terms of the Station Licenses. The properties
listed in Schedule 6.10 of the Disclosure Schedule include all such properties
used and necessary to conduct in all material respects the business and
operations of the Station as now conducted. The representations and warranties
contained in this Section shall survive the Closing only for a period of 120
days.
6.11 Real Property. The Companies own no real property. The leases
described in Schedule 6.11 of the Disclosure Schedule contain a complete and
accurate list of all real property currently leased by the Companies and used
exclusively by the Station relating to the antenna, transmitter, studio site
and offices of the Station (collectively the "Real Estate Contracts") and a
summary of the applicable leases. The Real Estate Contracts listed in Schedule
6.11 of the Disclosure Schedule, copies of which are attached hereto as
Exhibit E and Exhibit F will constitute valid and binding obligations of the
Companies and, to the best of the Sellers' knowledge, of all other persons
purported to be parties thereto and will be in full force and effect as of the
Closing Date and will constitute valid and binding obligations of the
Companies and, to the best of the Sellers' knowledge, of all other persons
purported to be parties thereto and shall be in full force and effect and are
all of the leases and agreements necessary for the Buyer to continue to
operate the Station after the Closing as it is currently operating. Except as
set forth in Schedule 6.11 of the Disclosure Schedule, the Companies are not
in default under any of such Real Estate Contracts and have not received or
given written notice of any default thereunder from or to any of the other
parties thereto and will not have received any such notice at or prior to the
Closing.
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6.12 Contracts. Schedule 6.12 of the Disclosure Schedule lists or
describes by reference all material written and oral contracts as of the date
of this Agreement for which the Companies shall continue to be liable as of
the Closing Date, except contracts entered into in the ordinary course of
business (i) of less than three (3) months duration and which impose monetary
obligations of Ten Thousand Dollars ($10,000) in the aggregate or (ii) which
are currently scheduled to expire prior to Closing Date and for which the
Companies will no longer be liable. Those contracts which the Sellers and the
Buyer agree are critical to the consummation of the transactions contemplated
hereby are identified as "Material Contracts". Notwithstanding the foregoing,
if it is discovered before Closing that the Sellers failed to list any
contract in the Disclosure Schedule which was required to be listed, the
failure by the Sellers to disclose such contract shall not permit the Buyer to
refuse to close under this Agreement or to bring an action for damages against
the Sellers if the absence of such contract would not have a material adverse
effect on the Buyer, the Companies or the Station.
6.13 Status of Contracts. Except as noted in Schedule 6.12 of the
Disclosure Schedule, the Sellers have delivered to the Buyer true and complete
copies of all written Material Contracts, including any and all amendments and
other modifications to such Material Contracts. All Material Contracts are
valid, binding and enforceable by the Companies in accordance with their
respective terms, except as limited by laws affecting creditors' rights or
equitable principles generally. To the best of the Sellers' knowledge, the
Companies have complied in all material respects with all Material Contracts
and are not in default beyond any applicable grace periods under any of the
Material Contracts, and no other contracting party is in default under any of
the Material Contracts.
6.14 Environmental Matters. The Companies have not unlawfully
disposed of any hazardous waste or hazardous substance including
Polychlorinated Byphenyls ("PCBs") in a manner which has caused, or could
cause, the Buyer to incur a material liability under applicable law in
connection therewith; and the Sellers and the Companies warrant that the
technical equipment owned by the Station does not contain any PCBs which are
required by law to be removed and if any equipment does contain PCBs, that
such equipment is stored and maintained in compliance with applicable law. To
the best of the Sellers' knowledge, the Companies have complied in all
material
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respects with all federal, state and local environmental laws, rules and
regulations applicable to the Station and its operations, including but not
limited to the FCC's guidelines regarding RF radiation. No hazardous waste has
been disposed of by the Companies, and to the best of the Sellers' knowledge,
no hazardous waste has been disposed of by any other person on the real estate
leased by the Companies. As used herein, the term "hazardous waste" shall mean
as defined in the Resource Conservation and Recovery Act (RCRA) as amended and
in the equivalent state statute under California law.
6.15 Copyrights, Trademarks and Similar Rights. The Companies have no
copyrights, trademarks, patents or permits other than the government
authorization listed in Section 6.6, and pursuant to contracts under Section
6.1. Schedule 6.15 of the Disclosure Schedule lists, in all material respects,
all licenses, jingles and other similar intangible property rights and
interests applied for, issued to or owned by the Companies or under which the
Companies is a licensee or franchisee and used exclusively or primarily in the
conduct of the business and operations of the Station. Except as set forth in
Schedule 6.15 of the Disclosure Schedule, all of such rights and interests are
issued to or owned by the Companies, or if licensed or franchised to the
Companies, to the best of the Sellers' knowledge, are valid and in good
standing and uncontested. The Sellers have delivered or made available to the
Buyer copies of all material documents, if any, establishing such rights,
licenses or other authority. The Companies have received no written notice and
have no knowledge of any infringements or unlawful use of such property. The
properties listed in the Disclosure Schedule include all such properties
necessary to conduct in all material respects the business and operations of
the Station as now conducted.
6.16 Personnel Information. Schedule 6.16 of the Disclosure Schedule
contains a true and complete list of all persons employed at the Station and
by the Companies, including a description of material compensation
arrangements and employee benefit plans and a list of other terms of any and
all agreements affecting such persons. As of the date hereof only and except
as set forth in Schedule 6.16 of the Disclosure Schedule and the resignation
of certain officers of the Companies at the Closing as identified on Schedule
II, the Companies have not received notification
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that any of the employees of the Companies presently plan to terminate their
employment, whether by reason of the transactions contemplated hereby or
otherwise.
6.16.1 The Companies are not a party to any contract with any
labor organization, nor have the Companies agreed to recognize any union or
other collective bargaining unit, nor has any union or other collective
bargaining unit been certified as representing any of the Companies'
employees. As if the date hereof only, the Sellers have no knowledge of any
organizational effort currently being made or threatened by or on behalf of
any labor union with respect to employees of the Companies. During the past
three (3) years, the Companies have not experienced any strikes, work
stoppages, grievance proceedings, claims of unfair labor practices filed or
other significant labor difficulties of any nature.
6.16.2 Except as disclosed in Schedule 6.16 of the Disclosure
Schedule, the Companies have complied in all material respects with all laws
relating to the employment of labor, including, without limitation, the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
those laws relating to wages, hours, collective bargaining, unemployment
insurance, workers' compensation, equal employment opportunity, sexual
harassment and payment and withholding of taxes. More specifically, the
Companies have substantially complied with and are not in default in any
material respect under any laws, rules and regulations relating to employment
of labor, including those relating to wages, hours, equal employment
opportunities, sexual harassment, employment of protected minorities
(including women and persons over 40 years of age), collective bargaining and
the withholding and payment of taxes and contributions and has withheld all
amounts required or agreed to be withheld from wages and salaries of its
employees, and are not liable for any arrearage of wages or for any tax or
penalty or failure to comply with the foregoing. There are no claims or
complaints pending or, to the knowledge of the Sellers, threatened against the
Companies or the Station before any court or governmental agency and involving
any alleged unlawful employment practices, whether or not relating to the laws
described above. The Companies have not consented to any decree involving any
claim of unfair labor practice and have not been held in any judicial
proceeding to have committed any unfair labor practice and there are
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no material controversies pending or threatened between the Companies and any
of its employees.
6.17 Financial Statements. The Companies have delivered to Buyer
complete copies of the operating income statements for the Station for years
ended December 31, 1994 and 1995, and for the nine month period ended
September 30, 1996 (the "Financial Statements"). The Financial Statements
accurately represent and present fairly the financial condition and results of
operations of the Station for the periods indicated. Between September 30,
1996 and the date hereof, there has been no material adverse change in the
business, property, assets or condition (financial or otherwise) of the
Companies and (except for the transaction contemplated herein) the Companies
have operated the Station in all respects only in the ordinary course of
business. The Companies have engaged Ernst & Young, LLP (the expenses of which
shall paid 50% by the Sellers and 50% by the Buyer up to a maximum payment by
the Seller of $15,000), to perform an audit (the "Audit") of the Companies
operations for the year ended December 31, 1995 and to perform a review of the
Companies operations for the nine month period ended September 30, 1996
(collectively, the "Audit and Review") which shall be delivered to Buyer by
October 21, 1996.
Except for (a) liabilities as and to the extent reflected or reserved
against in the Financial Statements, (b) liabilities not yet due and payable
or obligations to be performed or satisfied after the date hereof under
contracts and agreements listed in the Disclosure Schedule, or excluded from
the Disclosure Schedule pursuant to the terms of this Agreement, (c)
liabilities incurred between September 30, 1996 and the date hereof at or by
the Station in the ordinary and usual course of business including tax
liabilities resulting solely from the normal operations of the Companies
during such period but not taxes, if any, arising as a result of the
transactions contemplated by this Agreement which Buyer expressly assumes to
the extent that they are attributable solely to the Companies; and (d) any
other liabilities relating to the Station disclosed in this Agreement or in
the Disclosure Schedule, on the date hereof, the Companies have no material
liabilities or obligations of any nature, whether accrued, absolute,
contingent or otherwise, of a nature customarily reflected in financial
statements reflecting the accrual basis of accounting.
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6.18 Liabilities. Except as set forth in the Disclosure Schedule and
the Financial Statements, the Companies have no debts, obligations or
liabilities of any kind or nature, either direct or indirect, absolute or
contingent, matured or unmatured.
6.19 Absence of Certain Changes or Events. Except as set forth in
Schedule 6.19 of the Disclosure Schedule or except as otherwise contemplated
by this Agreement, since September 30, 1996 there has not been (a) any damage,
destruction or casualty loss to the physical properties of the Companies
(whether covered by insurance or not); (b) any material change in the
business, operations or financial condition of the Companies; (c) any entry
into any transaction, commitment or agreement (including without limitation
any borrowing or capital expenditure) material to the Companies's course of
business; (d) any redemption or other acquisition by the Companies of the
Companies' capital stock or any declaration, setting aside or payment of any
dividend or other distribution in cash, stock or property with respect to the
Companies' capital stock; (e) except for normal salary reviews, not to exceed
5%, with personnel on the anniversary date of employment, consistent with past
practice, and compensation to the employees and officers who are to resign at
Closing and are listed on Schedule II, any increase in the rate or terms of
compensation payable or to become payable by the Companies to its directors,
officers, employees or any increase in the rate or terms of any bonus,
pension, insurance or other employee benefit plan, payment or arrangement made
to, for or with any such directors, officers or key employees; (f) any change
in or acceleration of sales, or reduction of aggregate administrative,
marketing, advertising and promotional expenses or research expenditures other
than in the ordinary course of business; (g) any sale, transfer or other
disposition of any asset of the Companies to any party, including the Sellers,
except for payment of third-party obligations incurred in the ordinary course
of business in accordance with the Companies' regular payment practices; (h)
any termination or waiver of any rights of value to the business of the
Companies; or (i) any failure by the Companies to pay its accounts payable or
other obligations in the ordinary course of business consistent with past
practices.
6.20 Title to Properties. Except as set forth on Schedule 6.20 of the
Disclosure Schedule, the Companies have good and marketable title to all of
the assets and properties which they purport
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to own including, without limitation, those which are reflected on the
Financial Statements, free and clear of all Encumbrances, except for (a) liens
for current taxes not yet due and payable or for taxes the validity of which is
being contested in good faith by appropriate proceedings, and (b) Encumbrances
which individually or in the aggregate do not materially and adversely affect
the business, operations or financial condition of the Companies.
6.21 Litigation. Except as set forth in Schedule 6.21 of the
Disclosure Schedule, (a) the Companies are subject to no judgment, award,
order, writ, injunction, arbitration decision or decree materially adversely
affecting the conduct of the business of the Station, and there is no
litigation, arbitration, administration or other proceeding or, to the best of
the Sellers' knowledge, investigation pending or any basis for any person to
assert a claim or, to the best of the Sellers' knowledge, threatened against
the Companies or the Station in any federal, state or local court, or before
any administrative agency or arbitrator (including, without limitation, any
proceeding which seeks the forfeiture of, or opposes the renewal of, any of
the Station Licenses), or before any other tribunal duly authorized to resolve
disputes, which would reasonably be expected to have any material adverse
effect upon the business, property, assets or condition (financial or
otherwise) of the Station or which seeks to enjoin or prohibit, or otherwise
questions the validity of, any action taken or to be taken pursuant to or in
connection with this Agreement; and (b) in particular, but without limiting
the generality of the foregoing, there are no applications, complaints or
proceedings pending or, to the best of the Sellers' knowledge, threatened
before the FCC or any other governmental organization with respect to or
adverse to the business or operations of the Station other than applications,
complaints or proceedings which affect the broadcasting industry generally.
6.22 Compliance With Laws. Except as set forth in Schedule 6.22 of
the Disclosure Schedule, (a) the Companies have not received any notice
asserting any non-compliance by them with any applicable statute, rule or
regulation, whether federal, state or local; (b) the Companies are not in
default with respect to any judgment, order, injunction or decree of any
court, administrative agency or other governmental authority or any other
tribunal duly authorized to resolve disputes in any respect material to the
transactions contemplated hereby; and (c) the Companies are in
20
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compliance with all material laws, regulations and governmental orders
applicable to the conduct of the business and operations of the Companies and
the Station, the failure to comply with which would have a material adverse
effect on the business, operations or financial condition of the Station, and
their present use of the Station's assets does not violate any of such laws,
regulations or orders, violation of which would have a material adverse effect
on the Station's operation.
6.23 Insurance. All insurance policies with respect to the
properties, assets, operations and business of the Companies (the "Insurance
Policies") are in full force and effect. Except as set forth in Schedule 6.23
of the Disclosure Schedule, there are no pending claims against the Insurance
Policies by the Companies as to which the insurers have denied liability and
with respect to which there is a reasonable likelihood of a settlement or
determination adverse to the Companies. To the best of the Sellers' knowledge,
there are no circumstances existing which would enable the insurers to avoid
liability under the Insurance Policies, nor are there any other parties having
an interest under the Insurance Policies. Except as set forth in Schedule 6.23
of the Disclosure Schedule, (i) there exist no material claims under the
Insurance Policies that have not been properly filed by the Companies; (ii) no
insurance company has refused to renew any material insurance policy of the
Companies during the past eighteen (18) months; and (iii) there have been no
material rate or premium increases or written notice of prospective changes
therein on general liability, property or directors and officers liability
Insurance Policies during the past eighteen (18) months. Schedule 6.23 of the
Disclosure Schedule contains a list that includes all Insurance Policies.
6.24 Accuracy of Information. No written statement made by the
Sellers herein and no information provided by the Sellers herein or in the
documents, instruments or other written communications made or delivered
directly by the Sellers to the Buyer in connection with the negotiations
covering the purchase and sale of the Shares contains any untrue statement of
a material fact or omits a material fact necessary to make the statements
contained therein or herein not misleading and there is no fact known to the
Sellers which relates to any information contained in any such written
document, instrument or communications which the Sellers have not disclosed to
the Buyer in writing which materially affects adversely the Station. To the
extent that a
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representation or other information is made to the Sellers' knowledge or is
otherwise qualified by its terms, this representation shall not be interpreted
to expand such limitations or qualifications.
6.25 Accounts Receivable. All accounts receivable reflected on the
Financial Statements represent sales actually made or services actually
rendered in the ordinary course of business on or prior to September 30, 1996;
all accounts receivable of the Companies as of the Closing Date will represent
sales actually made on services actually rendered in the ordinary course of
business consistent with past practices prior to the Closing Date.
6.26 Qualification. To the best of the Sellers' knowledge, there are
no facts which, under the Communications Act of 1934, as amended, or the
existing rules and regulations of the FCC, would disqualify the WWYZ from
remaining the FCC licensee of the Station.
ARTICLE 7
COVENANTS OF THE BUYER AND SFX
------------------------------
7.1 Closing. On the Closing Date, the Buyer shall purchase the Shares
from the Sellers as provided in Articles 1 and 2 hereof and shall deliver or
cause to be delivered to the Sellers the Purchase Price as provided in Article
2 hereof.
7.2 Notification. The Buyer shall immediately notify the Sellers, and
thereafter keep Sellers informed on a current basis, of any litigation,
arbitration or administrative proceeding pending or, to its knowledge,
threatened against the Buyer, or to its knowledge, SFX and SFX's direct and
indirect subsidiaries which challenges, or would otherwise impact on the
transactions contemplated hereby.
7.3 No Inconsistent Action. The Buyer shall not take any other action
which is materially inconsistent with its obligations under this Agreement.
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7.4 Notification on Sellers Warranties and Covenants. From and after
the date of this Agreement until the Closing Date, Buyer shall immediately
notify Sellers, and provide Sellers an opportunity to cure, any fact,
circumstance or event which Buyer discovers during its due diligence
investigation, which Buyer could otherwise assert is a breach of Sellers' or
the Companies warranties or pre-closing covenants.
7.5 SFX Covenant. SFX shall cause Buyer to perform its obligations
hereunder, and, if Buyer fails to perform, shall pay Sellers the amounts due
hereunder in Buyer's stead.
ARTICLE 8
COVENANTS OF THE SELLERS AND THE COMPANIES
------------------------------------------
8.1 Pre-Closing Covenants. The Sellers and the Companies covenant and
agree with respect to the Station that between the date hereof and the Closing
Date, except as expressly permitted by this Agreement or with the prior
written consent of the Buyer, they shall act in accordance with the following;
provided that Buyer agrees that if Sellers and the Companies fully comply with
their obligations hereunder, Sellers shall not be responsible under covenants
8.1.1 or 8.1.2, if its employees or customers elect to discontinue their
association with the companies, due to the announcement of the transactions
contemplated by the Agreement or if there is a change in the historic
revenues, or the Arbitron (or other audience) ratings for the Station, between
the date hereof and the Closing.
8.1.1 The Sellers shall cause the Companies to and the Companies
shall conduct the business and operations of the Station in the ordinary and
prudent course of business and with the intent of preserving the ongoing
operations and assets of the Station, including, but not limited to, retaining
the current format of the Station, using its reasonable best efforts to retain
the services of its employees, and keeping in good standing all licenses,
permits and authorizations.
8.1.2 The Sellers shall cause the Companies to and the Companies
shall use
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reasonable efforts to preserve the operation of the Station intact and to
preserve the business of Station's customers, suppliers and others having
business relations with the Station and continue to conduct the financial
operations of the Station, including its credit and collection policies, in the
ordinary course of business with substantially the same effort, and to
substantially the same extent and in the same manner, as in the prior conduct
of the business of the Station.
8.1.3 The Shareholders of WWYZ shall cause the Companies to and
the Companies shall operate the Station in accordance with all material FCC
Rules and Regulations and the Station Licenses and with all other laws,
regulations, rules and orders, and shall not cause or permit by any act, or
failure to act, any of the Station Licenses to expire, be surrendered,
adversely modified, or otherwise terminated, or the FCC to institute any
proceedings for the suspension, revocation or adverse modification of any of
the Station Licenses, or fail to prosecute with due diligence any pending
applications to the FCC.
8.1.4 Should any fact relating to the WWYZ or its shareholders
which would cause the FCC to deny its consent to the transactions contemplated
by this Agreement come to WWYZ's or its shareholders attention, the
shareholders or WWYZ, as the case may be, shall promptly notify the Buyer
thereof and shall use their reasonable efforts to take such steps as may be
necessary to remove any such impediment to the transactions contemplated by
this Agreement.
8.1.5 The Sellers shall prevent the Companies from, and the
Companies shall not other than in the ordinary course of business or in
accordance with a pre-existing plan or arrangement listed in the Disclosure
Schedule (i) sell or dispose of or commit to sell or dispose of any of the
Companies or the Station's assets; (ii) except for normal salary reviews, not
to exceed 5%, with personnel on the anniversary date of employment, consistent
with past practice, and for compensation for certain officers and employees
how are due to resgin at the Closing and are listed on Schedule II, grant or
agree to grant any general increases in the rates of salaries or compensation
payable to employees of the Companies or the Station; (iii) except for normal
salary reviews, not to exceed 5%, with personnel on the anniversary date of
employment, consistent with past practice, and
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for compensation to certain officers and employees who are to resign at Closing
and are as listed on Schedule II, grant or agree to grant any specific bonus or
increase to any executive or management employee of the Companies or the
Station; or (iv) provide for any new pension, retirement or other employment
benefits for employees of the Companies or the Station or any increases in any
existing benefits.
8.1.6 The Sellers shall provide the Buyer prompt written notice
of any material change in any of the information contained in the
representations and warranties made in Article 6 hereof or any Exhibits or the
Disclosure Schedule herein or attached hereto.
8.1.7 Following the acquisition of all approvals under Section 4,
provided there is no unsatisfied condition precedent to Buyer's obligation,
the Companies and the Sellers shall give the Buyer and the Buyer's counsel,
accountants, engineers and other representatives, full and reasonable access
during normal business hours to all of the Companies's personnel, properties,
books, contracts, reports and records including financial information and tax
returns, to all real estate, buildings and equipment relating, and to the
Companies and the Station's employees in order that the Buyer may have full
opportunity to make such investigation as it desires of the affairs of the
Companies and to furnish the Buyer with information, and copies of all
documents and agreements including but not limited to financial and operating
data and other information concerning the financial condition, results of
operations and business of the Companies and the Station, that the Buyer may
reasonably request. The rights of the Buyer under this Section shall not be
exercised in such a manner as to interfere with the business of the Station.
Prior to such date, Sellers and Companies shall provide Buyer with such
information as may be requested for review off premises. The failure to
provide such information shall constitute a material breach of this Agreement
unless cured by Sellers within the time periods set forth herein.
8.2 Trade Agreements. At the Closing, the aggregate value by which
the Companies's post-closing obligations under all contracts for the sale of
advertising time on the Station for consideration other than cash such as
merchandise, services or promotional consideration exceeds
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the aggregate value of the merchandise, services or promotional consideration
to be received by the Station after the Closing, shall not be more than Fifty
Thousand Dollars ($50,000).
8.3 Notification. The Sellers and the Companies shall notify the
Buyer of any material litigation, arbitration or administrative proceeding
pending or, to their knowledge, threatened against the Sellers or the
Companies which challenges the transactions contemplated hereby.
8.4 No Inconsistent Action. The Sellers and the Companies shall take
no action which is materially inconsistent with their obligations under this
Agreement.
8.5 Closing Covenant. On the Closing Date, the Sellers shall sell and
deliver the Shares to the Buyer as provided in Articles 1 and 2 of this
Agreement.
ARTICLE 9
JOINT COVENANTS
---------------
SFX, through its power to control the Buyer, or directly if Buyer
defaults, the Buyer, the Sellers and the Companies covenant and agree that
between the date hereof and the Closing Date, they shall act in accordance
with the following:
9.1 Conditions. Except as otherwise provided in this Agreement, if
any event should occur, either within or without the control of any party
hereto, which would prevent fulfillment of the conditions upon the obligations
of any party hereto to consummate the transactions contemplated by this
Agreement, the parties hereto shall use their reasonable best efforts to cure
the event as expeditiously as possible.
9.2 Confidentiality. WWYZ and SFX have entered into a confidentiality
agreement dated as of August 27, 1996, which shall continue to apply to the
parties hereto, including the Buyer. In addition the Buyer, the Sellers and
the Companies shall each keep confidential all information
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obtained by it or them with respect to the other in connection with this
Agreement and the negotiations preceding this Agreement, and will use such
information solely in connection with the transactions contemplated by this
Agreement, and if the transactions contemplated hereby are not consummated for
any reason, each shall return to the other, without retaining a copy thereof,
any schedules, documents or other written information obtained from the other
in connection with this Agreement and the transactions contemplated hereby.
Notwithstanding the foregoing, no party shall be required to keep confidential
or return any information which (i) is known or available through other lawful
sources, not bound by a confidentiality agreement with the disclosing party,
(ii) is or becomes publicly known through no fault of the receiving party or
its agents, (iii) is required to be disclosed pursuant to an order or request
of a judicial or governmental authority or because of the rules and regulations
of the Securities and Exchange Commission (provided the other parties are given
reasonable prior notice), or (iv) is developed by the receiving party
independently of the disclosure by the disclosing party.
9.3 Cooperation. The Buyer, the Sellers and the Companies shall
cooperate fully with each other in taking any actions, including actions to
obtain the required consent of any governmental instrumentality or any third
party necessary or helpful to accomplish the transactions contemplated by this
Agreement; provided, however, that no party shall be required to take any
action which would have a material adverse effect upon it or any of its direct
or indirect subsidiaries. Buyer and SFX shall bear the costs to the extent set
forth in Section 12.3.
ARTICLE 10
CONDITIONS OF CLOSING BY THE BUYER
----------------------------------
The obligations of the Buyer hereunder are, at its option, subject to
satisfaction, at or prior to the Closing Date, of each of the following
conditions, provided, however, that Buyer may not rely upon conditions 10.2,
10.3 or 10.4 or the delivery of Closing documents if the Agreement is
terminated as a basis not to pay the "breakage fee" as set forth in Section
2.3 (b):
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10.1 Representations, Warranties and Covenants.
10.1.1 All representations and warranties of the Companies and
the Sellers made in this Agreement shall be true and complete in all material
respects as of the date hereof and on and as of the Closing Date as if made on
and as of that date.
10.1.2 All of the terms, covenants and conditions to be complied
with and performed by the Companies and the Sellers on or prior to Closing
Date shall have been complied with or performed in all material respects.
10.1.3 The Buyer shall have received a certificate, dated as of
the Closing Date, executed by a duly qualified officer of the Companies and
each of the Sellers, to the effect that their respective representations and
warranties contained in this Agreement are true and complete in all material
respects on and as of the Closing Date as if made on and as of that date, and
that each has complied with or performed all terms, covenants and conditions
to be complied with or performed by him or it in all material respects on or
prior to the Closing Date.
10.2 Governmental Consents. The FCC Consent shall have become a Final
Order, or such condition shall have been waived in writing by the Buyer, and
all consents, approvals, authorizations or other requirements prescribed by
the HSR Act shall have been obtained and satisfied.
10.3 Governmental Authorizations. The Companies shall be the holder of
the Station Licenses and all other material licenses, permits and other
authorizations listed in the Disclosure Schedule, and there shall not have been
any modification of any of such licenses, permits and other authorizations which
has a material adverse effect on the Station or the conduct of its business and
operations. No proceeding shall be pending which seeks or the effect of which
reasonably could be to revoke, cancel, fail to renew, suspend or modify
materially and adversely the Station Licenses or any other material licenses,
permits or other authorizations.
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10.4 Adverse Proceedings. No suit, action, claim or governmental
proceeding shall be pending against, or no order, decree or judgment of any
court, agency or other governmental authority shall have been rendered
against, any party hereto which challenges or would render it unlawful, as of
the Closing Date, to effect the transactions contemplated by this Agreement in
accordance with its terms.
10.5 Legal Opinion. The Companies and the Seller shall have delivered
to the Buyer a written opinion of its or their counsel, dated as of the
Closing Date, substantially in the form attached hereto as Exhibit C.
10.6 FCC Legal Opinion. The Sellers shall have furnished the Buyer a
written opinion of the Companies' and the Sellers' FCC counsel, dated as of
the Closing Date, addressed to the Buyer substantially in the form attached
hereto as Exhibit D.
10.7 Delivery of Shares. On the Closing Date, the Buyer shall have
received certificates representing the Shares.
10.8 Resignations. On the Closing Date, the Buyer shall have received
the resignations of all of the officers and directors of the Companies as set
forth on Schedule II.
10.9 Leases. On the Closing Date, the Sellers' shall have entered
into lease agreements with Buyer for the Station's studio and tower facilities
substantially in the form attached hereto as Exhibit E and Exhibit F.
10.10 Seller's Cure. Buyer shall not have a right to rely on any
event under Sections 10.1.1 and 10.1.2, if such event can be cured, in the
reasonable judgment of Buyer, by the payment of money, and Seller elects to
permit an offset to the Purchase Price at the Closing for the cost of the
cure. In the event that the Buyer agree's that the breach can be cured by the
payment of money and the cure is not capable of exact determination, the
parties shall apply the procedure set forth in
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Section 2.4(b) as to Net Working Capital to determine the cost of such cure.
10.11 Escrow Agreement. On the Closing Date, the Escrow Agreement
shall be in full force and effect.
ARTICLE 11
CONDITIONS OF CLOSING BY THE SELLERS
------------------------------------
The obligations of the Sellers hereunder are, at their option, subject
to satisfaction, at or prior to the Closing Date, of each of the following
conditions:
11.1 Representations, Warranties and Covenants.
11.1.1 All representations and warranties of the Buyer shall be
true and complete in all material respects as of the date hereof and on and as
of the Closing Date as if made on and as of that date.
11.1.2 All the terms, covenants and conditions to be complied
with and performed by the Buyer on or prior to the Closing Date shall have
been complied with or performed in all material respects.
11.1.3 The Sellers shall have received a certificate, dated as
of the Closing Date, executed by a duly qualified officer of the Buyer, to the
effect that the representations and warranties of the Buyer contained in this
Agreement are true and complete in all material respects on and as of the
Closing Date as if made on and as of that date, and that the Buyer has
complied with or performed all terms, covenants and conditions to be complied
with or performed by it in all material respects on or prior to the Closing
Date.
11.2 Governmental Consents. The FCC Consent shall have become a Final
Order, or such
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condition shall have been waived by the Sellers, and all consents, approvals,
authorizations or other requirements prescribed by the HSR Act shall have been
obtained and satisfied.
11.3 Adverse Proceedings. No suit, action, claim or governmental
proceeding shall be pending against, or no other, decree or judgment of any
court, agency or other governmental authority shall have been rendered against
any party hereto which challenge or would render it unlawful, as of the
Closing Date, to effect the transactions contemplated by this Agreement in
accordance with its terms.
11.4 Legal Opinion. The Buyer and SFX shall have delivered to the
Sellers opinions of their corporate counsel, dated as of the Closing Date,
substantially in the form attached hereto as Exhibit G.
11.5 Employment Agreement. The Buyer shall have entered into an
employment agreement with Stephen P. Gilmore substantially in the form
attached hereto as Exhibit H.
11.6 Payment of Purchase Price. The Buyer shall have delivered or
caused to be delivered to the Sellers the Purchase Price in accordance with
the terms of Article 2 hereof.
ARTICLE 12
TRANSFER TAXES; FEES AND EXPENSES
---------------------------------
12.1 Expenses. Except as set forth in Sections 6.17, 12.2 and 12.3
hereof , each party hereto shall be solely responsible for all costs and
expense incurred by it in connection with the negotiation, preparation and
performance of and compliance with the terms of this Agreement.
12.2 Governmental Filing or Grant Fees. Any filing or grant fees
imposed by any governmental authority the consent of which is required to the
transactions contemplated hereby shall be paid by the Buyer; provided, however,
the Sellers shall reimburse the Buyer, within ten (10)
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days of a written request of Buyer, 50% of any FCC fling fees and $12,000
toward the HSR Act filing fees.
12.3 Costs of Consultants, Accountants and Attorneys. Each party will
bear the cost of their respective counsel and other consultants (unless
otherwise specifically provided) unless and until an objection or request for
additional information is received pursuant to the HRS filing, or the FCC
filing for any reason relating to Buyers or SFX's operations or structure.
Thereafter, Buyer or SFX shall be solely responsible for all reasonable costs
incurred for attorneys or other consultants used by Sellers, Companies and
Buyer in such proceedings or any collateral proceeding challenging the
transactions contemplated by this Agreement and in obtaining the approvals as
required herein. Buyer's responsibility for Seller's costs in prosecuting the
proceedings contemplated by this Agreement shall be limited to proceedings or
investigations caused solely by reason of Buyer's or SFX's operations or
structure in regard to the transactions contemplated by this Agreement.
ARTICLE 13
COMMISSIONS OR FINDER'S FEE
---------------------------
13.1 The Buyer's Representation and Agreement to Indemnify. The
parties hereto represent and warrant that neither they nor any person or
entity acting on their behalf has agreed to pay a commission, finder's fee or
similar payment in connection with this Agreement or any matter related hereto
to any person or entity, other than to Media Services Corp. The parties hereto
further agree to indemnify, defend and hold each other harmless from and
against any and all claims, losses, liabilities and expenses (including
reasonable attorney's fees) arising out of a claim by any person or entity
(including Media Services Corp.) based on any such arrangement or agreement
made or alleged to have been made by the Buyer. Each party hereto shall enter
into a separate arrangement with Media Services Corp. relating to any finder's
fee or similar payment in connection with the transactions contemplated
hereby.
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<PAGE>
ARTICLE 14
DOCUMENTS TO BE DELIVERED AT CLOSING
------------------------------------
14.1 The Sellers' Documents. At the Closing, the Sellers and the
Companies shall deliver or cause to be delivered to the Buyer the following:
14.1.1 Certified resolutions of the Board of Directors of the
Companies approving the execution and delivery of this Agreement and each of
the other documents and authorizing the consummation of the transactions
contemplated hereby and thereby;
14.1.2 Certificates, dated the Closing Date, by the Companies
and the Sellers in the form described in Section 10.1.3 above;
14.1.3 Articles of Incorporation and Bylaws of the Companies
certified by the Companies secretary as of the Closing Date;
14.1.4 At the time and place of Closing, originals or copies of
all program, operations, transmissions, or maintenance logs and all other
records required to be maintained by the FCC with respect to the Station,
including the Station's public file, shall be left at the Station and thereby
delivered to the Buyer;
14.1.5 The opinion letters, dated the Closing Date, referenced
in Sections 10.5 and 10.6 above;
14.1.6 The leases, effective as of the Closing date, referenced
in Section 10.9 above;
14.1.7 Certificates evidencing the Shares;
14.1.8 Governmental certificates showing that the Companies are
duly incorporated
33
<PAGE>
and in good standing in the State of Connecticut, dated not more than
forty-five (45) calendar days before the Closing Date; and
14.1.9 Such additional information and material as the Buyer
shall have requested in a timely manner in writing and which is reasonably
necessary for the Closing.
14.1.10 The resignations of the officers and directors of the
Companies listed on Schedule II.
14.1.11 The Escrow Agreement attached as Exhibit A.
14.2 The Buyer's Documents. At the Closing, the Buyer shall deliver
or cause to be delivered to the Sellers the following:
14.2.1 The Purchase Price in accordance with Section 2.2 hereof.
14.2.2 A certificate, dated the Closing Date, by the Buyer in
the form described in Section 11.1.3 above.
14.2.3 The opinions of the Buyer's and SFX's corporate counsel,
dated the Closing Date, to the effect set forth in Section 11.4;
14.2.4 Governmental certificates showing that the Buyer is duly
incorporated and in good standing in the State of Delaware and is qualified as
a foreign corporation in the State of Connecticut, dated not more than
forty-five (45) calendar days before the Closing Date;
14.2.5 Certified resolutions of the Board of Directors of the
Buyer approving the execution and delivery of this Agreement and each of the
other documents and agreements referred to herein and authorizing the
consummation of the transactions contemplated hereby and thereby;
34
<PAGE>
14.2.6 Articles of Incorporation and Bylaws of the Buyer
certified by the Buyer's secretary as of the Closing Date; and
14.2.7 Such additional information and material as the Sellers
shall have requested in a timely manner in writing and which is reasonably
necessary for the Closing.
14.2.8 The Employment Agreement with Stephen P. Gilmore.
ARTICLE 15
INDEMNIFICATION
---------------
15.1.1 The Sellers' Indemnities. To the extent set forth in
Section 15.1.2, the Sellers hereby agree to indemnify, defend and hold the
Buyer harmless with respect to any and all demands, claims, actions, suits,
proceedings, assessments, judgments, costs, losses, damages, liabilities and
expenses (including, without limitation, reasonable attorneys' fees)
(collectively, "Losses"), asserted against, resulting from, imposed upon or
incurred by the Buyer directly or indirectly relating to or arising out of (i)
the inaccuracy of any representation or warranty, or the breach of any
covenant or agreement, contained herein or in any instrument or certificate
delivered pursuant hereto and (ii) all operations of the Station prior to the
Closing including, but not limited to, the payment of all Federal, state,
local, foreign and other governmental taxes, assessments, duties, fees, levies
or similar charges of any kind (including, without limitation, all interest,
penalties and additions imposed with respect to such amounts), including,
without limitation, all sales, payroll, employment and other withholding
taxes, and including, without limitation, all obligations under any tax
sharing agreement, tax indemnity obligation or similar written or unwritten
agreement, arrangement or practice and any liability for taxes imposed by
reason of transferee liability or status as the successor to another entity or
member of a consolidated, combined or unitary group including other entities
for all taxable periods ending on or before the Closing Date and the portion
ending on the Closing Date of any taxable period that includes (but does not
end on) such day.
35
<PAGE>
15.1.2 As a condition to Sellers' agreement to assume all risks
of Closing prior to the Expiration Date, as to the "breakage fee" set forth in
Section 3.2 (b), and Buyer's agreement to close without regard to certain
pre-closing conditions set forth Section 10, Sellers have agreed that a
portion of the Purchase Price may be retained by the Buyer in the Escrow
Account until all of the Sellers' indemnity responsibilities, as set forth in
this Section 15, are satisfied to the satisfaction of Buyer. Buyer hereby
agrees to periodically review with the Sellers the amount of money retained in
the Escrow Account and authorize the reduction of such amounts upon
satisfaction that the indemnity obligations of the Sellers have been
satisfied. At the Closing, the Sellers shall permit the Buyer to retain with
the Escrow Agent under the Escrow Agreement, the amount of $2,000,000 (the
"Indemnity Retention Amount") as security for Sellers indemnification
obligations contained here, such amount to be retained until the settlement of
al claims presented within the Claims Period (as defined below), as provided
in this Section 15. Any balance shall be paid from the Escrow Agent to the
Sellers.
15.2 SFX's and Buyer's Indemnities. SFX and the Buyer hereby agrees
to indemnify, defend and hold the Sellers harmless with respect to any and all
demands, claims, actions, suits, proceedings, assessments, judgments, costs,
losses, damages, liabilities and expenses (including, without limitation,
reasonable attorneys' fees) asserted against, resulting from, imposed upon or
incurred by the Sellers directly or indirectly relating to or arising out of
the inaccuracy of any representation or warranty, or the breach of any
covenant or agreement, contained herein or in any instrument or certificate
delivered pursuant hereto or from the operations of Buyer after the Closing.
15.3 Rights. The Buyer and the Sellers agree that the rights of
indemnification provided in this Article 15 are exclusive of any and all other
such rights of the Buyer and the Sellers hereunder and that Sellers' liability
for all claims asserted hereunder may not exceed 20% of the Purchase Price.
Buyer hereby agrees to periodically review with the Sellers the percentage of
the Purchase Price for which the Sellers remain liable authorize the reduction
of such percentage upon satisfaction that the indemnity obligations of the
Sellers have been satisfied.
36
<PAGE>
15.4 Survival of Representations and Warranties. The representations,
warranties and covenants contained herein set forth in Sections 6.10, 6.12 and
6.19 (a), (e) and (f) and 8.1.1 and 8.1.2 shall survive the Closing for a
period of 120 days (the "120 day Claims") and all other representations and
warranties, other than with respect to Section 6.9 which shall survive the
Closing, shall survive the Closing for a period of twenty-four (24) months
(the "Claims Period") following the Closing Date, and upon the expiration of
such period shall lapse and be of no further effect.
15.5 Limitation on Indemnity. Notwithstanding anything to the contrary
contained in this Agreement, and subject to the proviso set forth in this
Section 15.5, neither the Buyer nor the Sellers shall have any liability or
obligation to the other for breach of any representation, warranty, covenant or
agreement of such other party made in this Agreement except to the extent that
the aggregate of all 120 day Claims by such other party for such breaches, net
of tax benefit, exceed Fifty Thousand Dollars ($50,000) (the "Threshold Amount")
in the aggregate, in which event the party so liable shall then be liable for
all claims for any such breaches, including the sums constituting the Threshold
Amount, if asserted within the 120 day claim period. All other Claims may be
asserted for a period of 24 moths following the Closing Date, but only if such
claims exceed $5,000 as to any single matter, and then only if the aggregate
of such claims exceed $150,000 (the "Other Claim Threshold") in which case the
Sellers shall only be liable for the excess over $100,000.
15.6 Procedures.
15.6.1 Promptly after the receipt by any party (the "Indemnified
Party") of notice of (A) any claim or (B) the commencement of any action or
proceeding which may entitle such party to indemnification under this Section,
such party shall give the other party (the "Indemnifying Party") written
notice of such claim or the commencement of such action or proceeding and
shall permit the Indemnifying Party to assume the defense of any such claim or
any litigation resulting from such claim. The failure to give the Indemnifying
Party timely notice under this clause shall not preclude the Indemnified Party
from seeking indemnification from the Indemnifying Party unless such failure
has materially prejudiced the Indemnifying Party's ability to defend the claim
or
37
<PAGE>
litigation.
15.6.2 If Indemnifying Party assumes the defense of any such
claim or litigation resulting therefrom with counsel reasonably acceptable to
Indemnified Party, the obligations of the Indemnifying Party as to such claim
shall be limited to taking all steps necessary in the defense or settlement of
such claim or litigation resulting therefrom and to holding the Indemnified
Party harmless from and against any losses, damages and liabilities caused by
or arising out of any settlement approved by the Indemnifying Party or any
judgment in connection with such claim or litigation resulting therefrom;
however, the Indemnified Party may participate, at its or his expense, in the
defense of such claim or litigation provided that the Indemnifying Party shall
direct and control the defense of such claim or litigation. The Indemnified
Party shall cooperate and make available all books and records reasonably
necessary and useful in connection with the defense. The Indemnifying Party
shall not, in the defense of such claim or any litigation resulting therefrom,
consent to entry of any judgment, except with the written consent of the
Indemnified Party, or enter into any settlement, except with the written
consent of the Indemnified Party, which does not include as an unconditional
term thereof the giving by the claimant or the plaintiff to the Indemnified
Party of a release from all liability in respect of such claim or litigation.
15.6.3 If the Indemnifying Party shall not assume the defense of
any such claim or litigation resulting therefrom, the Indemnified Party may,
but shall have no obligation to, defend against such claim or litigation in
such manner as it may deem appropriate, and the Indemnified Party may
compromise or settle such claim or litigation without the Indemnifying Party's
consent. The Indemnifying Party shall promptly reimburse the Indemnified Party
for the amount of all expenses, legal or otherwise, incurred by the
Indemnified Party in connection with the defense against or settlement of such
claim or litigation. If no settlement of the claim or litigation is made, the
Indemnifying Party shall promptly reimburse the Indemnified Party for the
amount of any judgment rendered with respect to such claim or in such
litigation and of all expenses, legal or otherwise, incurred by the
Indemnified Party in the defense against such claim or litigation.
38
<PAGE>
ARTICLE 16
TERMINATION RIGHTS
------------------
16.1 Termination. Subject to Buyer's obligation for the "breakage
fee" set forth in Section 2.3 (b), this Agreement may be terminated by either
the Buyer or the Sellers, if the party seeking to terminate is not in material
default or breach of this Agreement, upon written notice to the other upon the
occurrence of any of the following (for purposes of this Article, the term
Buyer shall include SFX):
(a) if, on or prior to the Closing Date, the other party
defaults in any material respect in the observance or in the due and timely
performance of any of its covenants or agreements herein contained and such
material default shall not be cured, within ten (10) calendar days of the date
of written notice of default served by the party claiming such material
default or if such event cannot be cured within such ten (10) day period, the
defaulting party is diligently pursuing the cure, and the extension of the
cure period does not prejudice the rights of the non-defaulting party to a
cure by the Closing Date; or
(b) subject to Section 16.4 below, if the FCC denies the FCC
Application, or fails to grant the FCC Consent of if all applicable waiting
periods under the HSR Act have not expired by February 1, 1997, as the same
may be extended by Section 16.4 (the "Expiration Date"), provided that the
party seeking termination has diligently prosecuted and utilized its best
efforts to obtain the FCC Application in good faith; or
(c) if there shall be in effect any judgment, final decree or
order that would prevent or make unlawful the Closing of this Agreement; or
(d) by the Buyer only if broadcast transmissions are interrupted
for a period of five (5) consecutive calendar days or for seven (7) or more
calendar days within any thirty (30) day period, or normal broadcast
transmissions are not resumed by the date immediately
39
<PAGE>
preceding the Closing Date; or
(e) as provided in Section 17.2 or any other Section of this
Agreement which specifically provides for termination.
16.2 Right to Cure. A defaulting party under Section 16.1(a) of this
Agreement shall only be entitled to invoke the cure provisions whenever
necessary during the term of this Agreement. Additionally, if a delay in the
Closing Date under Section 16.1(a) would cause the Closing to fall at any time
after the period permitted by the FCC Consent, the Sellers and the Buyer shall
file an appropriate request with the FCC for an extension of time within which
to complete the Closing.
16.3 Liability. The termination of this Agreement under Section 16.1
shall not relieve any party of any liability for breach of this Agreement
prior to the date of termination. In the event Sellers or Buyer cannot proceed
because of the failure to obtain governmental approvals, Sellers shall be
entitled to retain the amounts set forth in the Escrow Agreement even though
Buyer fulfilled its obligations hereunder.
16.4 Extension of Expiration Date. Notwithstanding the provisions of
Section 16.1(b) above, the Buyer may, at its option, extend the Expiration
Date for successive thirty (30) day periods, up to and including September 30,
1997, by placing into escrow with the Escrow Agent additional cash deposits
(the "Additional Cash Deposits") in the amount of FIFTY THOUSAND DOLLARS
($50,000) for each such successive thirty (30) day period. The term Cash
Deposit and Additional Cash Deposits are collectively referred to herein as
the "Cash Deposits." The Escrow Agent shall hold such Additional Cash Deposits
pursuant to the terms of the Escrow Agreement. The term Expiration Date as
used herein shall include any successive thirty (30) day period for which the
Buyer has remitted Additional Cash Deposits in accordance with this Section
16.4.
ARTICLE 17
OTHER PROVISIONS
----------------
40
<PAGE>
17.1 Liquidated Damages. In addition to the "breakage fee" under
Section 2.3 (b), if the parties hereto shall fail to consummate this Agreement
on the Closing Date due to the Buyer's breach of any material representation,
warranty, covenant or condition hereunder, and the Sellers are not at that
time in breach of any material representation, warranty, covenant or condition
hereunder, the parties acknowledge and agree that the Sellers' damages will be
extremely difficult and impractical to ascertain and that the Cash Deposit in
excess of the "breakage fee" represents a reasonable estimate of such damages,
considering all the circumstances existing on the date of this Agreement.
Therefore, the parties acknowledge and agree that in the event of such failure
to perform by the Buyers, the Sellers shall have the right to retain the
amount of the Cash Deposits in excess of the "breakage fee" as liquidated
damages. Such liquidated damages and "breakage fee" constitute the Sellers'
sole and exclusive remedy against the Buyer for failing to consummate this
agreement on the Closing Date or for any other breaches under this Agreement
that prevent the Closing from occurring, all other remedies being hereby
expressly waived by the Sellers.
17.2 Risk of Loss. The risk of loss or damage to the Station or any
of its assets prior to the Closing Date shall be upon the Sellers. The Sellers
shall repair, replace and restore any such damaged or lost Station asset to
its prior condition, as soon as possible and in no event later than the
Closing Date. If the Sellers fail to restore or replace such Station asset,
the Sellers shall assign or cause to be assigned to the Buyer at Closing their
rights under any insurance policy or pay over to the Buyer all proceeds of
insurance covering such Station asset's damage, destruction or loss or, in the
alternative, the Buyer shall have the right to reduce the Purchase Price by an
amount reasonably estimated to be sufficient to repair or replace such
property. If the restoration and replacement of any damaged or destroyed
property has not been completed at the time the Closing would otherwise be
held, then unless the Sellers and the Buyer otherwise agree, the Closing Date
shall be delayed and shall take place within fifteen (15) calendar days after
the Sellers give written notice to the Buyer of completion of the restoration
or replacement of such asset. If the delay in the Closing Date under this
Section 17.2 would cause the Closing to fall at anytime after the period
permitted by the FCC Consent, the Sellers and the Buyer shall file an
appropriate request with the FCC for an extension of time within which to
complete the Closing. Time is of the essence in the Sellers' restoration or
41
<PAGE>
replacement of the Station assets.
17.3 Specific Performance. In the event of a material breach by the
Sellers of their respective representations and obligations hereunder, not
cured within ten (10) calendar days after written notice to that effect from
the Buyer, the Buyer shall have the right to bring an action to enforce the
terms of this Agreement by decree of specific performance, it being agreed
that the property to be transferred hereunder is unique and not readily
available in the open market, and the Sellers thereby further agree to waive
any and all defenses against any such action for specific performance based on
the grounds that there is an adequate remedy for money damages available.
17.4 Further Assurances. After the Closing, the Sellers shall from
time to time, at the request of and without further cost or expense to the
Buyer, execute and deliver such other instruments of conveyance and transfer
and take such other actions as may reasonably be requested in order to more
effectively consummate the transactions contemplated hereby to vest in the
Buyer good and marketable title to the assets being transferred hereunder, and
the Buyer shall from time to time, at the request of and without further cost
or expense to the Sellers, execute and deliver such other instruments and take
such other actions as may reasonably be requested in order to more effectively
relieve the Sellers of any obligations being assumed by the Buyer hereunder.
17.5 Benefit and Assignment. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. No party may voluntarily or involuntarily
assign its interest under this Agreement without the prior written consent of
the other party, except for any assignment by the Buyer to an affiliate of the
Buyer in which case the Buyer shall remain fully obligated under this
Agreement as an assignor.
17.6 Entire Agreement. This Agreement, the Disclosure Schedule and
the Exhibits hereto embody the entire agreement and understanding of the
parties hereto and supersede any and all prior agreements, arrangements and
understandings relating to the matters provided for herein. In the event of a
conflict between the terms of this Agreement and any other agreement executed
in
42
<PAGE>
connection herewith, the terms of this Agreement shall prevail. No amendment,
waiver of compliance with any provision or condition hereof or consent pursuant
to this Agreement shall be effective unless evidenced by an instrument in
writing signed by the party against whom enforcement of any waiver, amendment,
change, extension or discharge is sought.
17.7 Headings. The headings set forth in this Agreement are for
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement.
17.8 Governing Law. The construction and performance of this
Agreement shall be governed by the laws of the State of Connecticut without
giving effect to the choice of law provisions thereof.
17.9 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 or on the date of receipt, if mailed by registered or certified mail,
postage prepaid and return receipt requested, or on the date of a stamped
receipt, if sent by an overnight delivery service, or on the date of written
confirmation of delivery by facsimile, and shall be addressed to the following
addresses, or to such other address as any party may request, in the case of
the Sellers, by notifying the Buyer, and in the case of the Buyer, by
notifying the Sellers:
To the Companies: WWYZ, Inc.
Prior to Closing One Broadcast Lane
Waterbury, Connecticut 06706
Attention: Mr. B. Preston Gilmore
Fax: 203- 755-3111
With a Copy to: Norman K. Jellinghaus, Esq.
Carmody & Torrance
50 Leavenworth Street
P.O. Box 1110
Waterbury, Connecticut 06721
Fax: 203-575-2600
43
<PAGE>
To the Sellers: Mr. B. Preston Gilmore
After Closing c/o WATR, Inc.
One Broadcast Lane
Waterbury, Connecticut 06706
Attention: Mr. B Preston Gilmore
Fax: 203-____-______
With a Copy to: Norman K. Jellinghaus, Esq.
Carmody & Torrance
50 Leavenworth Street
P.O. Box 1110
Waterbury, Connecticut 06721
To the Buyer: SFX Broadcasting of Hartford, Inc.
150 East 58th Street, 19th Floor
New York, New York 10155
Attention: Robert F.X. Sillerman
Fax: 212-753-3188
With a Copy to: Howard J. Tytel, Esq.
Executive Vice President
and General Counsel
SFX Broadcasting, Inc.
150 East 58th Street, 19th Floor
New York, New York 10155
Fax: 212-753-3188
17.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which
together will constitute one and the same instrument.
17.11 Arbitration. Any post closing dispute between the Buyer and the
Seller over any of the terms or conditions of this Agreement shall be
submitted to the American Arbitration Association in the City of Hartford,
Connecticut for arbitration under its then prevailing rules, the arbitrator(s)
to be selected as follows: Each of the parties hereto shall by written notice
to the other have the right to appoint one arbitrator. If, within thirty (30)
days following the giving of such notice by one party, the other shall not, by
written notice, appoint another arbitrator, the first arbitrator shall be the
sole arbitrator. If two arbitrators are so appointed, they shall appoint a
third arbitrator. If thirty (30) days
44
<PAGE>
elapse after the appointment of the second arbitrator and the two arbitrators
are unable to agree upon the third arbitrator, then either party may, in
writing, request the American Arbitration Association to appoint the third
arbitrator. The award made in the arbitration shall be binding and conclusive
on the parties and judgment may be, but need not be, entered in any court
having jurisdiction. Such award shall include the fixing of the costs, expenses
and reasonable attorney's fees of arbitration, which shall be borne by the
unsuccessful party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first above written.
COMPANIES: SFX:
- ---------- ----
WWYZ, INC. SFX BROADCASTING, INC.
By: /s/ B. Preston Gilmore By: Robert F.X. Sillerman
-------------------------- --------------------------
Name: B. Preston Gilmore Name: Robert F.X. Sillerman
Title: President Title: Chairman of the
Board and Chief
Executive Officer
GREAT AMERICAN MUSIC FEST & SELLERS OF WWYZ, INC.
PRODUCTION CO. ---------------------
/s/ Florence Gilmore
-----------------------------
By: /s/ Suzanne Geiger Florence Gilmore
--------------------------
Name: Suzanne Geiger
Title: President
/s/ B. Preston Gilmore
-----------------------------
BUYER: B. Preston Gilmore
SFX BROADCASTING OF HARTFORD,
INC.
/s/ Mark Gilmore
-----------------------------
Mark Gilmore
By: Robert F.X. Sillerman
--------------------------
Name: Robert F.X. Sillerman
Title: President
/s/ Lisa Gilmore
-----------------------------
Lisa Gilmore
45
<PAGE>
/s/ Jacqueline Cloherty
-------------------------------
Jacqueline Cloherty, a/k/a
/s/ Mark Gilmore Jacqueline G. Cloherty, as
- ------------------------------------------- Custodian for Meghan Cloherty
Mark Gilmore as Custodian for Laura Gilmore under the CTUGMA
under the CTUGMA
/s/ Suzanne Geiger
-------------------------------
Suzanne Geiger a/k/a Suzanne
/s/ Mark Gilmore Gilmore Geiger a/k/a Susan
- ------------------------------------------- Gilmore Geiger
Mark Gilmore as Custodian for Sarah Gilmore
under the CTUGMA
/s/ Suzanne Geiger
-------------------------------
Suzanne Geiger, a/k/a Suzanne G.
Geiger, as Custodian for Katelyn
Geiger under the CTUGMA
/s/ Stephen P. Gilmore
- -------------------------------------------
Stephen P. Gilmore
/s/ Suzanne Geiger
-------------------------------
Suzanne Geiger, a/k/a Suzanne G.
Geiger, as Custodian for Molly
Geiger under the CTUGMA
/s/ Katie Gilmore
- -------------------------------------------
Katie Gilmore
/s/ Mark Gilmore
-------------------------------
Mark Gilmore as Custodian for
/s/ Katie Gilmore Christoph Gilmore under the
- ------------------------------------------- CTUGMA
Stephen Gilmore as Custodian for
Stephanie Gilmore under the CTUGMA SELLERS OF GREAT AMERICAN MUSIC
FEST & PRODUCTION CO.
/s/ Stephen Gilmore /s/ Jacqueline Cloherty
- ------------------------------------------- -------------------------------
Stephen Gilmore as Custodian for Mallory Jacqueline Cloherty
Gilmore under the CTUGMA
/s/ Suzanne Geiger
-------------------------------
Suzanne Geiger
/s/ Stephen Gilmore
- -------------------------------------------
Stephen Gilmore as Custodian for Hailey
Gilmore under the CTUGMA
/s/ Jacqueline Cloherty
- -------------------------------------------
Jacqueline Cloherty
a/k/a Jacqueline Gilmore Cloherty
46
AMENDMENT TO ASSET PURCHASE AGREEMENT
This Amendment to Asset Purchase Agreement is made and entered into this
22nd day of October, 1996, by and between Texas Coast Broadcasters, Inc.
("Seller"), a Texas corporation, and Multi-Market Radio, Inc. ("Purchaser"), a
Delaware corporation.
WHEREAS, Seller and Purchaser executed that certain Asset Purchase
Agreement dated December 27, 1995 (the "Agreement"), pursuant to which Seller
agreed to sell to Purchaser the properties and assets described in the
Agreement;
WHEREAS, a portion of the Ennis Site, as defined in the Agreement, will be
transferred from Seller to Industrial Recovery Capital Company LLC ("IRCC")
pursuant to an agreement that will require IRCC to remediate the property and
indemnify Purchaser and Seller for remediation costs and certain third party
claims; and
WHEREAS, the Seller and Purchaser wish to amend the Agreement to evidence
certain agreements between Purchaser and Seller related to the transfer of
assets from Seller to Purchaser.
NOW, THEREFORE, in consideration of the promises and the mutual covenants
and agreements contained in this amendment and in the Agreement, the parties
agree as follows:
- 1 -
<PAGE>
1. Purchaser will deliver to Bank of Houston, as Escrow Agent, on
Wednesday, October 23, 1996, the sum of $2,000,000 as the earnest money
provided for in Section 2.1 of the Agreement. Upon receipt of such funds, Bank
of Houston is hereby authorized and directed to return to Purchaser the
irrevocable standby letter of credit held by Bank of Houston pursuant to
Section 2.1 of the Agreement (the "Letter of Credit"). Bank of Houston will
hold the earnest money in escrow, in an interest bearing account, until
instructed to disburse such funds by the terms of this amendment or the written
instructions of Seller and Purchaser, which instructions will be consistent
with the provisions of this amendment. In addition, Purchaser and Seller hereby
instruct the Escrow Agent to transfer any balance remaining in the
Environmental Escrow Account to the escrow account established to hold the
earnest money, and such amount shall be treated as additional earnest money
(notwithstanding the fact that one-half of such Environmental Escrow Account
was contributed by Seller). If the sale of assets provided for in the Agreement
closes, the earnest money, including the entire Environmental Escrow Account,
will be applied to the purchase price of the assets. If, for any reason, other
than (i) termination of the Agreement in accordance with its terms, (ii) a
Default by Seller occurring after the date of this amendment or (iii) failure
of a condition precedent, the asset sale does not close, Seller shall be
entitled to retain the total amount of the earnest money, including the portion
of the Environmental Escrow Account attributable to Purchaser, as liquidated
damages, free and clear of any claim of Purchaser. If Purchaser does not wire
transfer the sum of $2,000,000 to Bank of Houston on October 23, 1996, the
Agreement shall terminate automatically, the Letter of Credit and the portion
of the Environmental Escrow Account attributable to Purchaser shall be
immediately returned to Purchaser, the portion of the Environmental Escrow
Account
- 2 -
<PAGE>
attributable to Seller shall be immediately returned to Seller, and neither
party shall have any claim or right against the other.
2. Any Environmental Expenses incurred subsequent to September 30, 1996,
shall be paid by the party that authorized such Environmental Expense and shall
not be deducted from the Environmental Escrow Account. In this regard, the
parties agree that Seller shall be deemed to have authorized any services
performed by Weston after September 30, 1996, and Purchaser shall be deemed to
have authorized any services performed by Environmental Strategies Corporation
after September 30, 1996.
3. Purchaser has informed Seller that Purchaser's agreement with IRCC
requires Purchaser to pay IRCC $8,500,000 at the time of Closing. In addition,
if IRCC determines that the cost of the remediation of the Ennis Site will
exceed $2,000,000, Purchaser is required to pay IRCC an amount equal to the
remediation costs in excess of $2,000,000 but less than $8,500,000 (the
"Contingent Amount"), with the Contingent Amount to be paid to IRCC in ten
equal annual installments, without interest. If the asset sale closes, Seller
will contribute the sum of $250,000 toward the payment to be made by Purchaser
to IRCC at Closing by reducing the purchase price of the assets by $250,000,
provided the indemnification of Seller by IRCC covers both third party claims
asserted against Seller and remediation costs. In addition, if the asset sale
closes, Seller agrees to pay to IRCC, in installments, the first $250,000 of
the Contingent Amount and the final $500,000 of the Contingent Amount, if such
amounts are required to be paid to IRCC by virtue of the remediation costs
exceeding $2,000,000, provided
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<PAGE>
the indemnification of Seller by IRCC covers both third party claims asserted
against Seller and remediation costs. Any payment of the Contingent Amount that
Seller is required to pay to IRCC will be paid pursuant to the same schedule
and subject to the same conditions as would be applicable if the payments were
made by Purchaser. In addition, Seller shall be entitled to the same rights and
protections with respect to the payment of the Contingent Amount as are
provided to Purchaser in its agreement with IRCC.
4. At Closing, Seller will deposit the sum of $750,000 ("Seller Deposit")
with Bank of Houston or another escrow agent selected by Seller and approved by
Purchaser to be placed in an interest bearing escrow account. Interest earned
on this account will be distribute quarterly to Seller by the escrow agent.
Seller's Deposit will be used to pay Seller's portion of the Contingent Amount
as and when it becomes due. Payments from the escrow account shall be made at
the direction of IRCC, provided IRCC certifies to the escrow agent and Seller
that it has complied with all conditions precedent to the withdrawal of such
funds. If the Contingent Amount is finally determined by IRCC to be less than
$1,500,000 any portion of Seller's Deposit that is unnecessary to meet Seller's
payment of the Contingent Amount will be promptly returned to Seller at the
time of such determination. In this regard, Purchaser and Seller agree that
they will attempt to require IRCC to determine within two years of Closing the
portion of the Contingent Amount that must be paid so that any portion of
Seller's Deposit that is unnecessary may be returned to Seller within two years
of Closing. In addition, any portion of Seller's Deposit remaining after
payment of the portion of the Contingent Amount to be paid by Seller shall be
returned to Seller.
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<PAGE>
5. Seller and Purchaser agree that Seller's conveyance of a portion of the
Ennis Site to IRCC will be on the same terms and conditions as Seller is
required to transfer such property to Purchaser under the terms of the
Agreement. Seller will provide IRCC access to any information developed by
Weston with respect to the Ennis Site, but will not be obligated to allow IRCC
to conduct further assessment or testing of the Ennis Site prior to Closing. In
addition, Purchaser represents that IRCC will not conduct any testing on
property adjacent to the Ennis Site prior to Closing. Seller, at its cost, will
cause a survey of the Ennis Site to be completed as soon as reasonably
practicable (but in any event on or before November 1, 1996), which survey
shall show and describe the portion of the Ennis Site to be transferred to
Dixie Electro Plating Co. ("Dixie") and the portion to be transferred to IRCC,
and shall deliver such survey to Purchaser as soon as it is received from the
surveyor.
6. The closing of the asset sale provided for in the Agreement shall be
held on January 8, 1997, with the sale effective as of January 1, 1997.
7. Except for Section 5.9(b) of the Agreement which relates to the
operation of the Environmental Escrow Account and Section 5.9(i) of the
Agreement which relates to Purchaser's release of Seller from claims related to
Environmental Expenses, Section 5.9 of the Agreement is hereby eliminated.
Additionally, Section 15.1(a) of the Agreement is hereby eliminated.
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<PAGE>
8. The obligations of Purchaser and Seller under this Agreement are
subject to completion on or prior to the Closing Date of each of the following
conditions, except to the extent such conditions have been waived by the
benefitting party in writing:
a. Seller has delivered to Purchaser by or before November 1, 1996, a
survey of the Ennis Site showing the portion of the Ennis Site to be
transferred to IRCC and the portion to be transferred to Dixie. The
portion of the Ennis Site to be transferred to Dixie shall be
substantially the same as the property described by drawing in the July
22, 1996 letter agreement between Seller and Dixie, with the remainder of
the Ennis Site to be transferred to IRCC.
b. Seller has completed the transfer of a portion of the Ennis Site
to Dixie on terms and conditions that provide Purchaser and IRCC
reasonable rights of ingress and egress to the remainder of the Ennis
Property and a nonexclusive right to use the transferred property for the
operation of the radio tower, consistent with its current use. The term of
such transfer shall be substantially in accordance with the form of
Agreement attached hereto as Exhibit A, and the rights and benefits of
such Agreement shall be assigned at Closing to Purchaser and/or IRCC.
c. Purchaser's agreement with IRCC provides indemnification of Seller
by IRCC that covers both third party claims asserted against Seller and
remediation costs.
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<PAGE>
9. Prior to and after Closing, Seller agrees to provide any reasonable
assistance that may be required by IRCC with respect to the Ennis Site,
provided IRCC reimburses Seller for any expenses, losses or damages Seller may
incur or suffer as a result of providing such assistance and provided further
that Seller will not be required to allow IRCC to conduct additional assessment
from IRCC should not be unreasonable and should not require unreasonable effort
on the part of Seller.
10. Seller withdraws its notice of termination of the Agreement.
Similarly, Purchaser withdraws its assertion that Seller is or was in default
under the Agreement. Purchaser acknowledges that, as of this date, Seller has
complied with all terms and conditions of the Agreement and that no Default (as
that term is defined in the Agreement) exists and that no event has occurred
(or failed to occur) which, with the passage of time and/or proper notice,
would become a Default. Similarly, Seller acknowledges that, as of this date,
Purchaser has complied with all terms and conditions of the Agreement and that
no Default (as that term is defined in the Agreement) exists and that no event
has occurred (or failed to occur) which, with the passage of time and/or proper
notice, would become a Default. Purchaser accepts the current condition of all
matters relative to the sale, including the governmental licenses and the
operations of the stations.
11. Purchaser has the right to terminate this Agreement by written notice
to Seller and Bank of Houston on or before 5:00 p.m. Central Standard Time on
November 6, 1996, if it has not negotiated an agreement with IRCC that is
acceptable to it in all respects. Purchaser
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<PAGE>
elects to terminate this Agreement pursuant to this provision, Bank of Houston
is hereby instructed to distribute the earnest money to the parties in the
following manner: (i) $2,000,000 shall be distributed to Purchaser; (ii)
one-half of the balance of the Environmental Escrow Account that was added to
the earnest money shall be distributed to Purchaser and one-half shall be
distributed to Seller; and (iii) the remainder of the amount held by Bank of
Houston (which amount should constitute interest on the earnest money) shall be
distributed to Purchaser and Seller in the same ratio as the amounts
distributed to them pursuant to provisions (i) and (ii) of this sentence. If
Purchaser does not elect to terminate this Agreement on or prior to November 6,
1996, Bank of Houston shall distribute the earnest money, including any
interest earned on such amount, to Seller to be held in escrow by Seller until
Closing.
12. This amendment contains the understanding of the parties hereto with
respect to the matters addressed in this amendment of the Agreement. In
addition, this amendment supersedes and replaces all prior amendments to the
Agreement. As of the date hereof, the rights, duties and obligations of the
parties with respect to the sale of the properties and assets described in the
Agreement are the rights, duties and obligations set forth in the Agreement, as
modified solely by this amendment. The parties confirm that any future
amendments to the Agreement must be evidenced by a written instrument signed by
the parties, as required by Section 16.8 of the Agreement.
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<PAGE>
13. This amendment may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
14. Subject to the terms of Paragraph 9 of this amendment, Seller and
Purchaser agree to work together in good faith to reach final agreement on any
and all documentation relating to IRCC's agreement to remediate the Ennis Site
and to indemnify Seller and Purchaser for remediation costs and third party
claims (including, without limitation, the escrow agreement described in
Paragraph 4 hereof and any similar agreement).
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to
Assent Purchase Agreement to be effective as of the date first above written.
SELLER:
TEXAS COAST BROADCASTERS, INC.
By: /s/ David H. Morris
____________________________________
PURCHASER:
MULTI-MARKET RADIO, INC.
By: /s/ Michael G. Ferrel
____________________________________
- 9 -
<PAGE>
EXHIBIT A
AGREEMENT
This Agreement dated as of the ____ day of October, 1996, is entered into
by and between Texas Coast Broadcasters, Inc. ("Texas Coast") and Dixie Electro
Plating Co. ("Dixie").
WHEREAS, Texas Coast is the owner of a certain tract of land located at
315 North Ennis in Houston, Texas (the "Ennis Property");
WHEREAS, based on soil and groundwater sampling on the Ennis Property, it
appears that chromium contamination has migrated onto a portion of the Ennis
Property from property owned by Dixie which is located at 3001 Engelke in
Houston, Texas; and
WHEREAS, Texas Coast and Dixie have reached the following agreements in
order to facilitate Dixie's remediation of the chromium contamination.
NOW, THEREFORE, in consideration of the mutual benefits accruing to the
parties, Texas Coast and Dixie agree as follows:
1. Texas Court will convey to Dixie for $5,000 and the other consideration
set forth in this Agreement, the portion of the Ennis Property that has been
impacted by the chromium contamination migrating from the Dixie Property. The
property to be transferred to Dixie (the "Transferred Property") is more fully
described in Exhibit A of the Warranty Deed and Reservation of Easement
attached hereto as Exhibit 1. Texas Coast will retain an easement over, under,
upon, through and across the Transferred Property to provide access to the
remainder of the Ennis Property and to reserve the right to use the Transferred
Property, including its
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<PAGE>
subsurface and air space, for purposes of continuing the operation of the radio
tower on the Ennis Property. The easement retained by Texas Coast will be
without cost to Texas Coast, other than expenses and costs of Texas Coast or
its assignee attributable to the use of such easement, including the cost of
liability insurance covering the acts or omissions of Texas Coast or its
assignee associated with the use of the easement. The terms of the property
transfer, including the easement retained by Texas Coast, are more fully set
forth in the Warranty Deed and Reservation of Easement attached hereto as
Exhibit 1.
2. Dixie will remediate the Transferred Property under the Texas Voluntary
Cleanup Program administered by the Texas Natural Resource Conservation
Commission ("TNRCC") and will conduct any investigation and any remediation or
other corrective action that may be required by the TNRCC. With respect to the
proposed remediation, Dixie has prepared a Work Plan Summary (the "Work Plan"),
a copy of which is attached as Exhibit 2. The specific actions to be taken by
Dixie are more fully described in the Work Plan, but the Work Plan generally
contemplates remediation of both the soil and the shallow groundwater in
accordance with Risk Reduction Standard No. 2. The Work Plan also describes
certain specific remedial actions that Dixie agrees with Texas Coast to
implement, regardless of the requirements of the TNRCC, including (i) removal
of that portion of the initial two feet of soil in the drainage swale on the
Transferred Property that contains chromium in excess of the Soil-Air Interface
Value under Risk Reduction Standard No. 2 for industrial facilities and (ii)
implementation of the groundwater recovery and treatment system described in
the Work Plan, unless it is determined
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<PAGE>
through testing that such system will not contain and remediate the chromium
contaminated groundwater.
3. Dixie will keep Texas Coast and its successors and assigns informed of
its actions with respect to the chromium contamination and will notify Texas
Coast, or its successor or assignee, of any remediation or other corrective
action proposed for the Transferred Property. After receiving such notices,
Texas Coast, or its successor or assignee, will provide Dixie information
concerning any equipment or structures maintained by Texas Coast, or its
successor or assignee, on the Transferred Property that might be impacted by
the remediation or other corrective action and Dixie will use its best efforts
to plan, design, implement and perform any remediation or other corrective
action required by the TNRCC in a timely and professional manner and in a
manner consistent with the operation of the radio tower on the Transferred
Property. Dixie will provide Texas Coast and its successors and assigns a copy
of any significant report, plan or correspondence submitted to the TNRCC with
respect to the chromium contamination and will provide Texas Coast and its
successors and assigns at least five days' notice (or shall provide Texas Coast
and its successors and assigns notice as soon as practicable if five days'
notice is not practical) of any meeting with or hearings before the TNRCC with
respect to the chromium contamination and will not object to the participation
of Texas Coast and its successors and assigns in such meetings or hearings to
the extent such meetings or hearings concern remediation of the Transferred
Property.
- 12 -
<PAGE>
4. Dixie agrees to indemnify, defend and hold harmless Texas Coast and its
officers, directors, successors and assigns from, against and in respect of any
and all costs, expenses (including reasonable attorney's fees), losses and
damages, including full indemnity from claims asserted by third parties, that
arise from or relate to (i) the chromium contamination existing on the
Transferred Property or originating from Dixie's property located at 3001
Engelke, or (ii) the remediation activities conducted by Dixie on the
Transferred Property.
5. Texas Coast agrees to indemnify, defend and hold harmless Dixie and its
officers, directors, successors and assigns from, against and in respect of any
and all costs, expenses (including reasonable attorney's fees), losses and
damages, including full indemnity from claims asserted by third parties, that
arise directly from any lead contamination existing on the Transferred Property
on the date of transfer, or any battery casings or other wastes placed on the
Transferred Property by Texas Coast or with its permission, other than any
costs, expenses, losses and damages that arise from or relate to the removal of
soil from a portion of the initial two feet of soil in the drainage swale on
the Transferred Property. In consideration for such agreement to indemnify,
Dixie agrees that Texas Coast and its successors, assigns, and agents may
conduct any and all corrective actions on the Transferred Property that are
required by the TNRCC or deemed necessary or desirable by Texas Coast or its
successors or assigns to remediate or prevent any release or threatened release
of lead on or from the Transferred Property, and Dixie grants Texas Coast and
its successors, assigns, and agents access to the Transferred Property for
purposes of conducting such corrective actions.
- 13 -
<PAGE>
6. This Agreement does not constitute, and will not be construed as, an
admission of wrongdoing by any party. In addition, except for the obligations
and responsibilities Dixie has agreed to accept pursuant to the terms of this
Agreement, this Agreement does not otherwise constitute an agreement by Dixie
to accept liability or responsibility for the chromium contamination, nor does
it alter or diminish any liability Dixie may have for the chromium
contamination independent of this Agreement.
[7. Schumacher Co., Inc. (the "Guarantor"), the parent corporation of
Dixie, hereby guarantees the performance of Dixie in accordance with the terms
of this Agreement. Guarantor agrees that it shall be liable under this
Agreement to the same extent as if it and not Dixie had performed or failed to
perform Dixie's obligations under this Agreement. The Guarantor agrees that
Texas Coast, or its successor or assignee, shall be entitled to take any action
against the Guarantor or Dixie in any order or concurrently as Texas Coast, or
its successor or assignee, may elect and shall not be required to resort to any
other remedy which Texas Coast, or its successor or assignee, may have. This
guarantee shall be construed as a continuing, absolute and unconditional
guaranty and the obligations and liabilities of the Guarantor shall not be
conditioned or contingent upon the pursuit by Texas Coast or any other persons
at any time of any right or remedy against Dixie or against any other person
that may be or become liable under this Agreement. No delay in exercising or
failure to exercise any option, right, power or privilege hereunder by Texas
Coast, or its successor or assignee, shall operate as a waiver thereof, nor
shall any single or partial exercise of any such option, power, right or
privilege preclude any other further exercise of such option, power, right or
privilege. The
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<PAGE>
Guarantor hereby waives demand for performance, or any other notice or
condition precedent to action against the Guarantor for performance pursuant to
this Agreement.] [Note - This provision is still under discussion and may be
deleted if found to be unnecessary.]
8. Any and all notices, requests, consents, demands and other
communications required or permitted to be made or given under this Agreement
must be in writing and must be given to the other party at its address or
facsimile number set forth in this paragraph or at such other address or
facsimile number as such party may hereafter specify for such purpose by notice
to the other party. Notices will be deemed to have been made or given (i) if
given by facsimile, when sent, and the appropriate confirmation is received,
and (ii) if given by any other means, when delivered. Unless changed in
accordance with this paragraph, the addresses for notices are as follows:
If to Texas Coast:
-----------------------
-----------------------
-----------------------
-----------------------
Facsimile No.:
---------
If to Dixie:
-----------------------
-----------------------
-----------------------
Facsimile No.:
-----------
9. This Agreement, including the exhibits referenced herein, represents
the entire Agreement between Texas Coast and Dixie and fully supersedes all
prior agreements and
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<PAGE>
understandings between Texas Coast and Dixie and may not be contradicted by
evidence of prior, contemporaneous, or subsequent oral agreements between Texas
Coast and Dixie. This Agreement cannot under any circumstances be modified
orally, and no agreement will be effective to waive, change, modify, or
discharge this Agreement in whole or in part unless such agreement is in
writing and is signed by both Texas Coast and Dixie.
10. In the event any provision of this Agreement is determined by a court
of competent jurisdiction to be invalid or unenforceable, the remainder of this
Agreement will nonetheless remain in full force and effect.
11. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. This Agreement is
governed by the laws of the State of Texas.
EXECUTED in multiple originals as of the date first herein specified.
TEXAS COAST BROADCASTERS, INC.
By:
----------------------------------
DIXIE ELECTRO PLATING CO.
By:
----------------------------------
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<PAGE>
SCHUMACHER CO., INC.
By:
----------------------------------
- 17 -
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Supplement No. 1 to the SFX Broadcasting, Inc. ("SFX") Merger Proxy/ Prospectus
(the "Supplement") which is incorporated by reference in, and attached to, the
Form 8-K to be filed on or about October 28, 1996 and incorporated by reference
in the Registration Statement (Form S-4) and related Prospectus of SFX filed on
October 3, 1996 and the Registration Statement (Form S-3) and related Prospectus
of SFX filed on June 25, 1996, and to the inclusion in the Supplement and
incorporation by reference in the Registration Statements of our report dated
October 4, 1996 with respect to the combined financial statements of KTXQ-FM and
KRRW-FM (divisions of CBS, Inc.) at December 31, 1995 and for the year then
ended.
/s/ Ernst & Young LLP
---------------------------
Ernst & Young LLP
New York, New York
October 28, 1996
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
--------------------------------------------
As independent public accountants, we hereby consent to the use of our report
dated October 28, 1996 with respect to the combined financial statements of The
Secret Stations: Cleveland, Indianapolis, Pittsburgh (and to all references to
our Firm) included in (i) Supplement No. 1, dated October 28, 1996, to the Joint
Proxy Statement/Prospectus of SFX Broadcasting, Inc. ("SFX") and Multi-Market
Radio, Inc. ("MMR"), (ii) Form 8-K of SFX dated October 29, 1996 (and we hereby
consent to the incorporation by reference of such Form 8-K into previously filed
Form S-3 Registration Statement File No. 333-6793 of SFX and Form S-4
Registration Statement File No. 333-13337 of SFX) and (iii) Form 8-K of MMR
dated October 29, 1996 (and we hereby consent to the incorporation by reference
of such Form 8-K into previously filed Form SB-2 Registration Statement No.
33-74526 of MMR, including Post-Effective Amendment No. 3 thereto on Form S-3).
/s/ Arthur Andersen LLP
Chicago, Illinois,
October 29, 1996
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Supplement No. 1 to the SFX Broadcasting, Inc. ("SFX") Merger Proxy/ Prospectus
(the "Supplement") which is incorporated by reference in, and attached to, the
Form 8-K to be filed on or about October 28, 1996 and incorporated by reference
in the Registration Statement (Form S-4) and related Prospectus of SFX filed on
October 3, 1996 and the Registration Statement (Form S-3) and related Prospectus
of SFX filed on June 25, 1996, and to the inclusion in the Supplement and
incorporation by reference in the Registration Statements of our report dated
March 6, 1996 with respect to the financial statements of Texas Coast
Broadcasters, Inc. at December 31, 1995 and 1994 and for the years then ended.
/s/ Mohle, Adams, Till, Guidry & Wallace, L.L.P.
------------------------------------------------
Mohle, Adams, Till, Guidry & Wallace, L.L.P.
Houston, Texas
October 28, 1996
<PAGE>
[SFX/MMR LOGO]
SUPPLEMENT NO. 1
TO
JOINT PROXY STATEMENT/PROSPECTUS DATED OCTOBER 4, 1996
The information contained in this Supplement No. 1 supplements the Joint
Proxy Statement/Prospectus, dated October 4, 1996 (the "Joint Proxy
Statement/Prospectus"), of SFX Broadcasting, Inc. ("SFX") and Multi-Market
Radio, Inc. ("MMR") relating to the 1996 Annual Meeting of Stockholders of
SFX (the "SFX Annual Meeting") and the Special Meeting of Stockholders of MMR
(the "MMR Special Meeting"), each of which is scheduled to be held on
November 22, 1996. This Supplement No. 1, together with the Annexes attached
hereto, should be read in conjunction with the Joint Proxy
Statement/Prospectus, a copy of which is included herewith. All capitalized
terms used in this Supplement No. 1 (including the Annexes attached hereto)
which are not defined herein shall have the meanings given them in the Joint
Proxy Statement/Prospectus.
This Supplement No. 1 is being delivered to all holders of SFX Shares and
MMR Shares as of October 1, 1996, the record date for the SFX Annual Meeting
and the MMR Special Meeting. This Supplement No. 1 and a copy of the Joint
Proxy Statement/Prospectus are first being mailed to stockholders of SFX and
MMR on or about October 29, 1996.
SEE PAGES S-5 AND S-6 OF THIS SUPPLEMENT NO. 1 FOR A DISCUSSION OF SFX'S
FINANCING PLAN AND CERTAIN RISK FACTORS THAT SHOULD BE CONSIDERED BY THE
STOCKHOLDERS OF SFX AND MMR.
Consistent with its business strategy, SFX has entered into a number of
additional acquisitions. These additional acquisitions are described below
and historical financial statements for certain of the acquisitions are
included herein. This Supplement No. 1 also includes revised pro forma
financial information of SFX, which gives effect to the additional
acquisitions. There can be no assurance that any of the acquisitions
described herein will be consummated. Pursuant to the terms of the Merger
Agreement, MMR has consented to SFX entering into each of the acquisitions
described herein.
ADDITIONAL ACQUISITIONS AND OTHER RECENT DEVELOPMENTS
THE CBS EXCHANGE. On September 25, 1996, SFX entered into an agreement
with CBS Inc. pursuant to which SFX agreed to exchange WHFS-FM, serving the
Baltimore, Maryland and Washington, D.C. markets, for KTXQ-FM and KRRW-FM,
both serving the Dallas, Texas market (the "CBS Exchange"). The CBS Exchange
is intended to qualify as a like-kind exchange under Section 1031 of the
Code. The closing of the CBS Exchange is subject to certain closing
conditions, including among others, the prior receipt of approval from the
FCC and the expiration or termination of any applicable waiting period under
the HSR Act.
THE SECRET COMMUNICATIONS ACQUISITION. On October 15, 1996, SFX entered
into an Asset Purchase Agreement with Secret Communications Limited
Partnership, a privately-held entity ("Secret Communications"), pursuant to
which SFX agreed to acquire substantially all of the assets (the "Secret
Communications Acquisition") used in the operation of nine radio stations
located in three markets:
(continued)
------------------------
The date of this Supplement No. 1 is October 28, 1996.
<PAGE>
WTAM-AM and WLTF-FM, both serving the Cleveland, Ohio market; WFBQ-FM,
WRZX-FM and WNDE-AM, each serving the Indianapolis, Indiana market; and
WDVE-FM, WXDX-FM, WDSY-FM and WJJJ-FM, each serving the Pittsburgh,
Pennsylvania market. Two of the radio stations, WDSY-FM and WJJJ-FM
(collectively, the "Third Party Stations"), are not yet owned by Secret
Communications. Secret Communications currently operates the Third Party
Stations under an LMA. Secret Communications has entered into an agreement to
acquire these two stations from a third party and it is anticipated that the
acquisition of the Third Party Stations by Secret Communications will occur
prior to the consummation of the Secret Communications Acquisition.
The purchase price for the nine stations is $300.0 million, subject to
certain downward adjustments based upon the cash flow of the stations to be
acquired. SFX has deposited $15.0 million in escrow in order to secure its
obligations under the purchase agreement. It is anticipated that the Secret
Communications Acquisition will be consummated during the second or third
quarter of 1997.
The closing of the Secret Communications Acquisition is subject to certain
closing conditions, including among others, the expiration or termination of
any applicable waiting period under the HSR Act and the prior receipt of
approval from the FCC.
The purchase agreement may be terminated by either party (i) prior to
February 16, 1997, if broadcast cash flow, as defined in the purchase
agreement, does not achieve a specified amount, (ii) if the closing of the
Secret Communications Acquisition does not occur before September 30, 1997
(unless such date is extended by the parties), or (iii) at any time, if the
purchase agreement relating to the Third Party Stations is terminated.
THE DELSENER/SLATER ACQUISITION. On October 11, 1996, SFX entered into an
agreement to acquire privately-owned Delsener/Slater Enterprises, Ltd.
("Delsener/Slater"), a concert promotion company, for approximately $24.0
million (the "Delsener/Slater Acquisition"). Management of SFX believes that
the acquisition will present the opportunity for SFX to take advantage of
potential synergies between the radio broadcasting business and the concert
promotion business. The acquisition is subject to customary closing
conditions, including the expiration of all applicable waiting periods under
the HSR Act, and is currently scheduled to close in the first quarter of
1997. It is anticipated that Delsener/Slater will become an independent
division of SFX and will retain its current name, management and corporate
location.
THE SFX HARTFORD ACQUISITION. On October 23, 1996, SFX entered into an
agreement to acquire the outstanding shares of WWYZ, Inc. ("WWYZ") and an
affiliated entity for $25.5 million, subject to adjustment under certain
circumstances (the "SFX Hartford Acquisition" ). WWYZ owns and operates radio
station WWYZ-FM, serving the Hartford, Connecticut market. SFX has deposited
$2.5 million in escrow to secure its obligations under the purchase
agreement. The SFX Hartford Acquisition is subject to customary closing
conditions, including the prior approval of the FCC and the expiration or
termination of any applicable waiting period under the HSR Act. The purchase
is scheduled to close by February 1, 1997.
THE TEXAS COAST ACQUISITION. MMR has entered into a purchase agreement
with Texas Coast Broadcasters, Inc. ("Texas Coast") pursuant to which MMR has
agreed to acquire substantially all of the assets (other than the real
property upon which the radio tower is located) of KQUE-FM and KNUZ-AM, both
serving the Houston, Texas market, for an aggregate purchase price of
approximately $43.0 million, including payments in connection with a
non-competition agreement and certain matters related to the lease on the
real property containing the radio tower (the "Texas Coast Acquisition").
SFX, on behalf of MMR, deposited in escrow $2.0 million to secure MMR's
obligation under the purchase agreement. MMR has agreed to transfer to SFX
its rights under the purchase agreement. Because of an identified
environmental problem related to the real property upon which the radio tower
is located, SFX has elected to lease the radio tower and obtain
indemnification secured by an insurance bond with respect to such property.
The consummation of the Texas Coast Acquisition is conditioned upon the
expiration or termination of any applicable waiting period under the HSR Act.
It is anticipated that the Texas Coast Acquisition will be consummated in the
first quarter of 1997.
The definition of "Pending Acquisitions," as used in the Joint Proxy
Statement/Prospectus, is revised to read as follows: "Pending Acquisitions"
means, collectively, the Merger, the Richmond Acquisition, the
S-2
<PAGE>
Albany Acquisition, the Charlotte Exchange, the Greensboro Acquisition, the
Houston Exchange, the Chancellor Exchange, the CBS Exchange, the Secret
Communications Acquisition, the Delsener/Slater Acquisition, the SFX Hartford
Acquisition and the Texas Coast Acquisition.
Upon consummation of the Pending Acquisitions (including the Merger) and
the Pending Disposition, SFX will own and operate or provide programming to
or sell advertising on behalf of 80 radio stations (62 FM and 18 AM radio
stations) in 23 markets. SFX is, and after the Pending Acquisitions and the
Pending Disposition will continue to be, diverse in terms of format and
geographic markets.
The following chart sets forth certain information with respect to SFX's
stations after giving effect to the Pending Acquisitions (other than the
Merger) and the Pending Disposition:
<TABLE>
<CAPTION>
NUMBER OF
STATIONS
FOLLOWING
PENDING
ACQUISITIONS 1995
NUMBER OF (OTHER THAN COMBINED COMBINED
STATIONS NUMBER OF THE MERGER) MARKET MARKET
MARKET CURRENTLY STATIONS TO AND AUDIENCE REVENUE
MARKET RANK OWNED(1) BE ACQUIRED DISPOSITION SHARE SHARE
- ------------------------------ ---------- ------------- ------------- -------------- ------------ ------------
AM FM
------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
NORTHEAST REGION
Providence, RI .............. 31 3 - 1 2 14.9% 28.3%
Hartford, CT ................ 41 3 1 1 3 17.9% 16.3%
Albany, NY .................. 57 4 1(2) 2 3 23.3% 32.4%
MID-SOUTH ATLANTIC REGION
Charlotte, NC ............... 37 1 3 - 4 21.6% 30.0%
Greensboro, NC .............. 42 3 1(2) 2 2 11.8% 13.7%
Nashville, TN ............... 44 2 - - 2 24.1% 27.3%
Greenville-Spartanburg, SC . 59 4 - 1 3 29.3% 43.4%
MID-ATLANTIC REGION
Pittsburgh, PA .............. 19 - 4 - 4 19.6% 25.5%
Cleveland, OH ............... 22 - 2 1 1 4.6% 13.0%
Indianapolis, IN ............ 36 - 3 1 2 16.9% 25.2%
Raleigh-Durham, NC .......... 50 4 - - 4 24.6% 35.8%
Richmond, VA ................ 56 1 4 - 5 30.0% 38.3%
SOUTHERN REGION
Jacksonville, FL ............ 53 4 2 2 4 30.7% 44.8%
Jackson, MS ................. 118 6 - 2 4 32.3% 56.0%
SOUTHWEST REGION
Dallas, TX .................. 7 - 2 - 2 4.9% 5.8%
Houston, TX ................. 9 1 3 1 3 14.6% 15.8%
San Diego, CA ............... 15 2 - - 2 6.4% 10.1%
Tucson, AZ .................. 62 4 - 2 2 22.1% 26.2%
Wichita, KS ................. 91 3 - 1 2 17.4% 21.0%
------------- ------------- ------ ------
Total ...................... 45 26 17 54
</TABLE>
- ------------
(1) Does not include eight radio stations, all of which are currently owned
by SFX, which are to be transferred by SFX in the Dallas Disposition,
the Houston Exchange, the Chancellor Exchange, the Charlotte Exchange
and the CBS Exchange.
(2) SFX currently provides programming and sells advertising pursuant to an
LMA on one station in the Greensboro, North Carolina market and
currently sells advertising pursuant to a JSA on one station in the
Albany, New York market.
S-3
<PAGE>
As a result of the additional acquisitions discussed above, the following
stations should be added to the chart which appears on pages 103 and 104 of
the Joint Proxy Statement/Prospectus;
<TABLE>
<CAPTION>
1995
STATION RANK STATION TOTAL NUMBER
MARKET STATION TARGET AMONG TARGET AUDIENCE REVENUE OF STATIONS IN
STATION (1) RANK FORMAT (2) DEMOGRAPHICS (2) DEMOGRAPHICS SHARE RANK MARKET
- ------------------- -------- ------------------- ---------------- -------------- ---------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
NORTHEAST REGION
Hartford, CT 41
WWYZ-FM (18) ....... Country Adults 25-54 2 7.6% NR 21
MID-ATLANTIC REGION
Pittsburgh, PA 19
WDVE-FM (19) ....... Rock Adults 25-54 1 9.2% 2 47
WDSY-FM (19) ....... Country Adults 25-54 2 7.6% 6 47
WXDX-FM (19) ....... Alternative Adults 18-34 5 2.8% 13 47
WJJJ-FM (19) ....... Smooth Jazz Adults 25-54 NR NR 15 47
Cleveland, OH 22
WLTF-FM (19) ....... AC Women 25-54 1 4.6% 5 29
WTAM-AM (19) ....... News/Talk Men 25-54 NR NR 9 29
Indianapolis, IN 36
WFBQ-FM (19) ....... Album Oriented Rock Adults 25-54 1 11.3% 1 30
WRZX-FM (19) ....... Alternative Adults 18-34 3 4.5% 8 30
WNDE-AM (19) ....... News/Talk Adults 25-54 14* 1.1% 13 30
SOUTHWEST REGION
Dallas, TX 7
KTXQ-FM (20) ....... Album Oriented Rock Adults 25-49 17 2.7% 15 47
KRRW-FM (20) ....... 70s Oldies Adults 25-54 12 2.2% 18 47
Houston, TX 9
KQUE-FM(21) ........ AC Adults 35 & over 1 5.1% 14 50
KNUZ-AM(21) ........ News/Talk Adults 35-64 NR NR NR 50
</TABLE>
- ------------
* Indicates ranking is tied with another station.
NR Not rated.
(18) To be acquired by SFX in the SFX Hartford Acquisition.
(19) To be acquired by SFX from Secret Communications, which owns or has
agreed to acquire each of the indicated stations.
(20) To be acquired by SFX in the CBS Exchange.
(21) To be acquired by SFX in the Texas Coast Acquisition.
In addition, WHFS-FM, serving the Washington, D.C./Baltimore, Maryland
markets, is deleted from the chart on page 103 of the Joint Proxy
Statement/Prospectus (along with footnote 12 to such chart), and footnote 15
(relating to KQUE-FM and KNUZ-FM, Houston, Texas) of the chart which appears
on pages 103 and 104 of the Joint Proxy Statement/Prospectus is deleted.
S-4
<PAGE>
FINANCING PLAN
SFX will be required to obtain additional financing in order to consummate
the Pending Acquisitions. SFX is currently exploring a number of
alternatives, including offerings of equity and/or debt securities and
borrowings under the New Credit Agreement. SFX's ability to issue preferred
stock or debt securities and to make borrowings under the New Credit
Agreement may be significantly impacted by the covenants in the New Credit
Agreement and/or the indenture relating to its 10.75% Senior Subordinated
Notes due 2006 ("Indenture").
SFX has made certain assumptions in the preparation of the Unaudited Pro
Forma Condensed Combined Financial Statements of SFX, as set forth on Annex A
attached hereto, with respect to the financing of the Pending Acquisitions,
including an offering of preferred stock and common stock and borrowings
under the New Credit Agreement. There can be no assurance that any financings
by SFX will be on the terms set forth in the assumptions referred to above.
In the event that SFX were to issue preferred stock pursuant to the
financing plan, as assumed in the pro forma financial information, the rights
of the holders of SFX Shares could be adversely affected with respect to
dividend, liquidation, conversion, voting or other rights. In the event that
SFX were to issue common stock, as assumed in the pro forma financial
statements, the voting rights of existing stockholders will be diluted and
the price at which the SFX Class A Shares trade may be adversely affected. In
the event that Proposal 2 is not approved by the SFX stockholders, SFX will
not have a sufficient number of authorized shares in order to consummate a
common stock offering.
SFX has received a firm commitment from its lender for a senior credit
facility of $225.0 million and expects to enter into the New Credit Agreement
relating to such facility. It is expected that SFX's obligations under the
New Credit Agreement will be secured by substantially all of its assets,
including property, stock of subsidiaries and accounts receivable, and will
be guaranteed by SFX's subsidiaries. It is expected that the New Credit
Agreement will prohibit SFX from utilizing funds available thereunder unless
SFX meets certain specified financial ratios, such as total leverage and
senior leverage ratios.
SFX's ability to implement the financing plan, as assumed in the pro forma
financial information (the combination of preferred stock and common stock
and borrowings under the New Credit Agreement), is dependent on improvements
in Broadcast Cash Flow of SFX's existing stations and the stations which SFX
has agreed to acquire and there can be no assurance that these improvements
will be realized. In the event that improvements in Broadcast Cash Flow are
not achieved, SFX may be required to alter the financing plan assumed in the
pro forma financial information.
RISK FACTORS
INCREASED SCRUTINY BY THE ANTITRUST AGENCIES. Adoption of the Recent
Legislation in February 1996 eliminated the national ownership limits and
liberalized the local ownership limits on radio station ownership by a single
company. However, the Antitrust Agencies have indicated that in certain cases
ownership of the number of radio stations permitted by the Recent Legislation
may result in the undue concentration of ownership within a market or
otherwise have an anti-competitive effect. The Antitrust Agencies are
increasingly scrutinizing acquisitions of radio stations and the entering
into of JSAs and LMAs. In particular, the Department of Justice ("DOJ") has
indicated that a prospective buyer of a radio station may not enter into an
LMA in connection with the acquisition of such station before expiration of
the applicable waiting period under the HSR Act. In a recent case, the DOJ
has also for the first time required the termination of a radio station JSA
that in the opinion of the DOJ would have given a radio station owner,
together with its proposed acquisition of other radio stations in the market,
control over more than 60% of the sales of radio advertising time in the
market. Certain of the Pending Acquisitions and the JSAs entered into by SFX
have been the subject of inquiries from the Antitrust Agencies. There can be
no assurance that future inquiries or policy and rule-making activities of
the Antitrust Agencies will not impact SFX's operations (including existing
stations or markets), expansion strategy or its ability to realize the
benefits management had anticipated obtaining following the adoption of the
Recent Legislation.
REVISION TO RISK FACTORS ENTITLED "SUBSTANTIAL LEVERAGE; INABILITY TO
SERVICE OBLIGATIONS" AND "HISTORICAL LOSSES." The following sentence
replaces, and is substituted for, the fifth and sixth sentences of the risk
factor entitled "Substantial Leverage; Inability to Service Obligations":
"For the year ended December 31, 1995 and the six months ended June 30, 1996,
on a pro forma basis after giving effect to the Recent Acquisitions and the
Transactions, as if all such transactions had occurred on January 1, 1995,
S-5
<PAGE>
SFX's earnings (defined as earnings before income taxes and fixed charges)
would have been insufficient to cover its fixed charges (defined as interest
on all indebtedness and amortization of deferred financing costs) by $22.3
million and $32.0 million, respectively, and would have been insufficient to
cover its combined fixed charges and preferred stock dividends by $48.7
million and $45.2 million, respectively."
The following sentence replaces, and is substituted for, the second
sentence of the risk factor entitled "Historical Losses": "On a pro forma
basis, after giving effect to the Recent Acquisitions and the Transactions,
as if such transactions had occurred on January 1, 1995, for the year ended
December 31, 1995 and the six months ended June 30, 1996 SFX would have had a
net loss of approximately $22.3 million and $32.0 million, respectively."
FINANCIAL INFORMATION
REVISED UNAUDITED PRO FORMA FINANCIAL INFORMATION OF SFX AND HISTORICAL
FINANCIAL INFORMATION OF CERTAIN BUSINESSES TO BE ACQUIRED. The "Unaudited
Pro Forma Condensed Combined Financial Statements of SFX" contained in the
Joint Proxy Statement/Prospectus have been revised, as set forth in Annex A
attached hereto, to reflect the CBS Exchange, the Secret Communications
Acquisition, the Delsener/Slater Acquisition, the SFX Hartford Acquisition
and the Texas Coast Acquisition. The "Summary Consolidated Financial Data of
SFX" and "Comparative Per Share Data" information contained in the "Summary"
of the Joint Proxy Statement/Prospectus have been revised, as set forth in
Annex B attached hereto, to reflect the new pro forma financial information.
Historical financial statements of certain of the acquisitions described in
this Supplement No. 1 are included in Annex C attached hereto.
The definition of "Broadcast Cash Flow," as used in the Joint Proxy
Statement/Prospectus, is revised to read as follows: "Broadcast Cash Flow"
means net revenues (including, where applicable, fees earned on a pro forma
basis by SFX pursuant to the SCMC Termination Agreement, and concert revenues
less concert costs of Delsener/Slater) less station operating expenses.
EXPERTS. The combined balance sheets of The Secret Stations: Cleveland,
Indianapolis, Pittsburgh as of June 30, 1996 and 1995 and the related
combined statements of operations and cash flows for the year ended June 30,
1996 and the eleven month period ended June 30, 1995, included in Annex C
attached hereto, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
included in reliance upon the authority of such firm as experts in giving
said report.
The financial statements of KTXQ-FM and KRRW-FM (divisions of CBS Inc.) at
December 31, 1995 and 1994 and for the years then ended, which are included
in Annex C attached hereto, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report appearing herein, and are
included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
The financial statements of Texas Coast Broadcasters, Inc. at December 31,
1995 and 1994 and for the years then ended, which are included in Annex C
attached hereto, have been audited by Mohle, Adams, Till, Guidry & Wallace,
LLP, independent auditors, as set forth in their report appearing herein, and
are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
NEW PROXY CARDS FOR SFX AND MMR
Enclosed herewith is a new proxy card for SFX or MMR, as appropriate. The
new proxy card should be completed and sent to the proxy tabulator in the
event that (i) a holder of SFX Shares or MMR Shares has not previously mailed
a proxy card or (ii) a holder of SFX Shares or MMR Shares has previously
mailed a proxy card and wishes to change his or her vote. In the event that a
holder of SFX Shares or MMR Shares has previously mailed a proxy card and
does not wish to change his or her vote, a new proxy card need not be
completed.
Due to a printer's error, the proxy card previously sent to holders of SFX
Shares contained the name of John F. Catanzaro as a nominee to the Board of
Directors of SFX. Mr. Catanzaro is not a nominee to the Board of Directors of
SFX nor has he agreed to serve as a director of SFX. The proxies named in the
proxy card previously sent to the stockholders of SFX intend to vote for all
nominees listed thereon other than Mr. Catanzaro.
S-6
<PAGE>
ANNEX A
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS OF SFX
The Unaudited Pro Forma Condensed Combined Balance Sheet at June 30, 1996
is presented as if SFX had completed (i) the Liberty Acquisition, including
the Washington Dispositions (as defined herein) and Chancellor Exchange (as
defined herein); (ii) the Prism Acquisition, including the Louisville
Dispositions (as defined herein); (iii) the Greensboro Acquisition (as
defined herein) and Jackson Acquisitions (as defined herein); (iv) the Dallas
Disposition (as defined herein); (v) the Richmond Acquisition (as defined
herein); (vi) the Charlotte Exchange (as defined herein); (vii) the Albany
Acquisition (as defined herein); (viii) the Merger, including the MMR
Hartford Acquisition, MMR Myrtle Beach Acquisition, MMR A Dispositions, and
exercise of all outstanding MMR Class A Warrants and the exchange of all
outstanding MMR Class B Warrants in the MMR Exchange Offer; (ix) the Secret
Communications Acquisition; (x) the Delsener/Slater Acquisition; (xi) the SFX
Hartford Acquisition; and (xii) the Texas Coast Acquisition. The transactions
set forth above are collectively referred to as the "Pending Transactions As
Of June 30, 1996." No adjustment has been made to the Unaudited Pro Forma
Condensed Combined Balance Sheet for the Houston Exchange or the CBS Exchange
as they will be recorded at historical cost.
The Unaudited Pro Forma Condensed Combined Statement of Operations for the
year ended December 31, 1995 and six months ended June 30, 1996 are presented
as if SFX had completed the Recent Acquisitions and the Transactions as of
January 1, 1995. The MMR Myrtle Beach Acquisition, the MMR Myrtle Beach
Disposition, and the Albany Acquisition have not been reflected in the
Unaudited Pro Forma Condensed Combined Statement of Operations as they would
not have a material impact.
In the opinion of management, all adjustments necessary to fairly present
this pro forma information have been made. The Unaudited Pro Forma Condensed
Combined Financial Statements are based upon, and should be read in
conjunction with, the historical financial statements and the respective
notes to such financial statements included in Annex C and those contained in
the Forms 8-K filed with the Commission on May 9, 1996 and May 30, 1996. Such
financial statements constitute all of the financial statements required by
the Commission to be included in the Unaudited Pro Forma Condensed Combined
Financial Statements of SFX. The pro forma information does not purport to be
indicative of the results that would have been reported had such events
actually occurred on the dates specified, nor is it indicative of SFX's
future results if the aforementioned transactions are completed. SFX cannot
predict whether the consummation of the Acquisitions or the Dispositions will
conform to the assumptions used in the preparation of the Unaudited Pro Forma
Condensed Combined Financial Statements.
The Unaudited Pro Forma Statement of Operations data include adjustments
to station operating expenses to reflect anticipated savings that management
believes it will be able to achieve through the implementation of its
strategy. No cost savings have been reflected for the Secret Acquisition and
certain other acquisitions. Management is currently evaluating potential cost
savings opportunities and anticipates that there will be additional savings
associated with these acquisitions. However, there can be no assurance that
SFX will be able to achieve such savings.
As used herein, (i) "Greensboro Acquisition" means the acquisition by SFX
of the assets of WHSL-FM, operating in Greensboro, North Carolina, for $6.0
million; (ii) "Jackson Acquisitions" means, collectively, the acquisitions by
SFX of the assets of WJDX-FM, WSTZ-FM and WZRX-AM, each operating in Jackson,
Mississippi; (iii) "Charlotte Exchange" means the exchange by SFX of WTDR-FM,
operating in Charlotte, North Carolina, and $64.8 million for WSSS-FM,
WRFX-FM and WKNS-FM, each operating in Charlotte, North Carolina; (iv)
"Chancellor Exchange" means the exchange by SFX of four radio stations,
operating in the Long Island, New York market, for two radio stations in the
Jacksonville, Florida market and a payment of $11.0 million; and (v)
"Additional Acquisitions" means, collectively, the acquisitions by SFX of all
of the assets of radio stations WROQ-FM, operating in Greenville, South
Carolina; WJDX-FM, WSTZ-FM and WZRX-AM, each operating in Jackson,
Mississippi; WTRG-FM and WRDU-FM, both operating in Raleigh-Durham, North
Carolina; and WHSL-FM, WMFR-AM, WMAG-FM and WTCK-AM, each operating in
Greensboro, North Carolina.
A-1
<PAGE>
SFX BROADCASTING, INC. UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
LIBERTY
ACQUISITION PRISM
INCLUDING ACQUISITION GREENSBORO
SFX WASHINGTON INCLUDING ACQUISITIONS OTHER
BROADCASTING, DISPOSITIONS & LOUISVILLE AND JACKSON ACQUISITIONS/ RICHMOND CHARLOTTE
INC. AS CHANCELLOR DISPOSITIONS ACQUISITIONS DISPOSITIONS ACQUISITION EXCHANGE
REPORTED EXCHANGE (1) (2) (3) (4) (5) (6)
------------- -------------- -------------- -------------- -------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets .. $405,381 $ 24,725 $ 7,904 $ 726 $10,541 $ 4,460 $(64,800)
Property and
equipment, net . 28,635 14,079 7,483 1,546 (1,193) 1,597 -
Intangible
assets, net .... 202,726 94,062 14,997 2,262 (9,061) 9,580 64,800
Other assets .... 24,710 -- -- -- (2) 66 --
- ----------------- ------------- -------------- -------------- -------------- -------------- ------------- ----------
Total assets .... $661,452 $132,866 $30,384 $4,534 $ 285 $15,703 $ --
============= ============== ============== ============== ============== ============= ==========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
PRO FORMA FOR
THE
TRANSACTIONS PRO FORMA FOR
SECRET AS OF JUNE THE PENDING
COMMUNICATIONS DELSENER/ PRO FORMA 30, 1996 TRANSACTIONS
ACQUISITION SLATER SFX HARTFORD TEXAS COAST ADJUSTMENTS (OTHER THAN MERGER AS OF JUNE
(7) ACQUISITION ACQUISITION ACQUISITION (8) THE MERGER) (9) 30, 1996
-------------- ----------- ------------ ----------- ------------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets .. $11,546 $11,688 $1,485 $2,408 $(212,500)(a) $ 98,896 $(43,245) $ 55,651
(81,487)(b)
(7,904)(b)
(6,200)(c)
(726)(c)
(38,800)(d)
(4,460)(d)
(6,285)(e)
(2,000)(f)
(1,000)(g)
145,101 (h)
300,000 (h)
(11,546)(i)
(300,000)(i)
(19,953)(j)
(25,500)(k)
(41,500)(l)
(2,408)(l)
Property and
equipment, net . 7,058 2,678 39 167 62,089 3,685 65,774
Intangible
assets, net .... 57,644 - - - 120,737 (a) 996,125 142,388 1,138,513
64,270 (b)
8,692 (c)
29,174 (d)
6,285 (e)
1,000 (g)
235,040 (i)
18,368 (j)
33,600 (k)
41,949 (l)
Other assets .... 258 37 -- 532 (5,263)(b) 14,038 (164) 13,874
(6,300)(c)
- ----------------- -------------- ----------- ------------ ----------- ------------- ------------- --------- -------------
Total assets .... $76,506 $14,403 $1,524 $3,107 $ 230,384 $1,171,148 $102,664 $1,273,812
============== =========== ============ =========== ============= ============= ========= =============
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
LIBERTY
ACQUISITION PRISM
INCLUDING ACQUISITION GREENSBORO
SFX WASHINGTON INCLUDING ACQUISITIONS OTHER
BROADCASTING, DISPOSITIONS & LOUISVILLE AND JACKSON ACQUISITIONS/ RICHMOND CHARLOTTE
INC. AS CHANCELLOR DISPOSITIONS ACQUISITIONS DISPOSITIONS ACQUISITION EXCHANGE
REPORTED EXCHANGE (1) (2) (3) (4) (5) (6)
------------- -------------- -------------- -------------- -------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Current
liabilities .... $ 18,579 $ 9,047 $ 2,399 $ 203 $ -- $ 799 $ --
Other liabilities 1,254 754 -- -- -- 996 --
Long-term debt
(incl. current
portion):
New Credit
Agreement ..... -- -- -- -- -- -- --
Senior
subordinated
notes ......... 450,000 -- -- -- -- -- --
Acquired company
debt .......... -- 71,517 15,695 -- -- 14,529 --
Other debt ...... 1,369 -- -- -- -- -- --
Deferred taxes .. 7,415 8,093 -- -- -- -- --
Minority interest -- -- -- -- -- -- --
Redeemable
preferred stock:
Preferred stock
offering ...... -- -- -- -- -- -- --
Series B Notes . 1,836 -- -- -- -- -- --
Series C
Preferred Stock 1,592 -- -- -- -- -- --
Series D
Preferred Stock 149,500 -- -- -- -- -- --
Stockholders'
equity ......... 29,907 43,455 12,290 4,331 285 (621) --
- ----------------- ------------- -------------- -------------- -------------- -------------- ------------- ----------
Total liabilities
and
stockholders'
equity ......... $661,452 $132,866 $30,384 $4,534 $285 $15,703 $--
============= ============== ============== ============== ============== ============= ==========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
PRO FORMA FOR
THE
TRANSACTIONS PRO FORMA FOR
SECRET AS OF JUNE THE PENDING
COMMUNICATIONS DELSENER/ PRO FORMA 30, 1996 TRANSACTIONS
ACQUISITION SLATER SFX HARTFORD TEXAS COAST ADJUSTMENTS (OTHER THAN MERGER AS OF JUNE
(7) ACQUISITION ACQUISITION ACQUISITION (8) THE MERGER) (9) 30, 1996
-------------- ----------- ------------ ----------- ------------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Current
liabilities .... $ 3,245 $ 26 $913 $198 $ (2,399)(b) $ 29,198 $ 2,423 $ 31,621
(203)(c)
(799)(d)
(3,245)(i)
214 (l)
419 (j)
(198)(l)
Other liabilities -- 9,826 -- -- (996)(d) 15,315 15,315
2,547 (j)
934 (l)
Long-term debt
(incl. current
portion):
New Credit
Agreement ..... -- -- -- -- 145,101 (h) 145,101 -- 145,101
Senior
subordinated
notes ......... -- -- -- -- -- 450,000 -- 450,000
Acquired company
debt .......... 46,994 -- -- (71,517)(a) -- -- --
(15,695)(b)
(14,529)(d)
(46,994)(i)
Other debt ...... -- -- -- -- -- 1,369 -- 1,369
Deferred taxes .. -- -- -- 27 23,209 (a) 47,428 13,116 60,544
8,711 (k)
(27)(l)
Minority interest -- -- -- -- 1,617 (d) 1,617 -- 1,617
Redeemable
preferred stock:
Preferred stock
offering ...... -- -- -- -- 150,000 (h) 150,000 -- 150,000
Series B Notes . -- -- -- -- -- 1,836 -- 1,836
Series C
Preferred Stock -- -- -- -- (1,592)(f) -- -- --
Series D
Preferred Stock -- -- -- -- -- 149,500 -- 149,500
Stockholders'
equity ......... 26,267 4,551 611 2,882 (43,455)(a) 179,784 87,125 266,909
(12,290)(b)
(4,331)(c)
621 (d)
(408)(f)
150,000 (h)
(26,267)(i)
(4,551)(j)
(611)(k)
(2,882)(l)
- ----------------- -------------- ----------- ------------ ----------- ------------- ------------- -------- -------------
Total liabilities
and
stockholders'
equity ......... $76,506 $14,403 $1,524 $3,107 $230,384 $1,171,148 $102,664 $1,273,812
============== =========== ============ =========== ============= ============= ======== =============
</TABLE>
A-3
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(1) Liberty Acquisition
Reflects the Liberty Acquisition for $237.5 million adjusted for the
Washington Dispositions of $25.0 million and the Chancellor Exchange (SFX
will receive $11.0 million in cash in the Chancellor Exchange). No gain
or loss was recognized in connection with the Washington Dispositions or
the Chancellor Exchange.
<TABLE>
<CAPTION>
LIBERTY AS WASHINGTON CHANCELLOR LIBERTY AS
REPORTED DISPOSITIONS EXCHANGE ADJUSTED
------------ -------------- ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current assets ............................... $ 13,725 $ -- $ 11,000 $ 24,725
Property and equipment, net .................. 15,439 (1,360) -- 14,079
Intangible assets, net ....................... 128,702 (23,640) (11,000) 94,062
------------ -------------- ------------ -------------
Total assets ............................... $157,866 $(25,000) $ 0 $132,866
============ ============== ============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities .......................... $ 9,047 $ -- $ -- $ 9,047
Other liabilities ............................ 754 -- -- 754
Long-term debt ............................... 71,517 -- -- 71,517
Deferred taxes ............................... 8,093 -- -- 8,093
Stockholders' equity ......................... 68,455 (25,000) -- 43,455
------------ -------------- ------------ -------------
Total liabilities and stockholders' equity $157,866 $(25,000) $ 0 $132,866
============ ============== ============ =============
</TABLE>
(2) Prism Acquisition
Reflects the Prism Acquisition for $105.25 million adjusted for the
Louisville Dispositions of $18.5 million. No gain or loss was recognized
on the Louisville Dispositions.
<TABLE>
<CAPTION>
PRISM AS LOUISVILLE PRISM AS
REPORTED DISPOSITIONS ADJUSTED
---------- -------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets ............................... $ 7,904 $ -- $ 7,904
Property and equipment, net .................. 9,122 (1,639) 7,483
Intangible assets, net ....................... 31,858 (16,861) 14,997
---------- -------------- -------------
Total assets ............................... $48,884 $(18,500) $30,384
========== ============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities .......................... $ 2,399 $ -- $ 2,399
Long-term debt ............................... 15,695 15,695
Stockholders' equity ......................... 30,790 (18,500) 12,290
---------- -------------- -------------
Total liabilities and stockholders' equity $48,884 $(18,500) $30,384
========== ============== =============
</TABLE>
A-4
<PAGE>
(3) Greensboro Acquisition and the Jackson Acquisitions
Reflects the acquisition of radio stations (i) WHSL-FM from HMW
Communications, Inc. in the Greensboro Acquisition for a purchase price
of approximately $6.0 million, (ii) WSTZ-FM and WZRX-AM from Lewis
Broadcasting, Inc. and WJDX-FM from Spur Jackson, L.P. in the Jackson
Acquisitions for a purchase price of $6.5 million. The aggregate
purchase price is $12.5 million.
<TABLE>
<CAPTION>
GREENSBORO
ACQUISITION
AND THE
GREENSBORO JACKSON JACKSON
ACQUISITION ACQUISITIONS ACQUISITION
------------- -------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets ............................... $ 484 $ 242 $ 726
Property and equipment, net .................. 1,164 382 1,546
Intangible assets, net ....................... 1,252 1,010 2,262
------------- -------------- -------------
Total assets ............................... $2,900 $1,634 $4,534
============= ============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities .......................... $ 171 $ 32 $ 203
Stockholders' equity ......................... 2,729 1,602 4,331
------------- -------------- -------------
Total liabilities and stockholders' equity $2,900 $1,634 $4,534
============= ============== =============
</TABLE>
(4) Other Acquisitions and Dispositions
To reflect the Dallas Disposition for $11.5 million which is net of
payment anticipated to be made to the seller of the station to SFX. See
note 8(f) for the effect of the related redemption of SFX's Series C
Preferred Stock.
<TABLE>
<CAPTION>
SALE PROCEEDS KTCK-AM ADJUSTMENT
--------------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets ............................... $11,500 $ (959) $10,541
Property and equipment, net .................. -- (1,193) (1,193)
Intangible assets, net ....................... -- (9,061) (9,061)
Other assets ................................. -- (2) (2)
--------------- ----------- ------------
Total assets ............................... $11,500 $(11,215) $ 285
=============== =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' equity ......................... 11,500 (11,215) 285
--------------- ----------- ------------
Total liabilities and stockholders' equity $11,500 $(11,215) $ 285
=============== =========== ============
</TABLE>
No adjustment has been made to the pro forma balance sheet for the Houston
Exchange or the CBS Exchange as they will be recorded at historical cost.
A-5
<PAGE>
(5) Richmond Acquisition
To reflect the acquisition of 96% interest in ABS, which will acquire
the assets of radio stations WKHK-FM, WBZU-FM and WVGO-FM/WLEE-FM, for
approximately $38.8 million.
<TABLE>
<CAPTION>
WVGO-FM/ RICHMOND
WKHK-FM WBZU-FM WLEE-FM ACQUISITION
--------- --------- ---------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current assets ............................... $ 2,530 $ 366 $1,564 $ 4,460
Property and equipment, net .................. 79 948 570 1,597
Intangible assets, net ....................... 4,855 1,057 3,668 9,580
Other assets ................................. 66 66
--------- --------- ---------- -------------
Total assets ............................... $ 7,464 $2,437 $5,802 $15,703
========= ========= ========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities .......................... $ 248 $ 113 $ 438 $ 799
Other liabilities ............................ 996 -- -- 996
Long-term debt ............................... 11,000 504 3,025 14,529
Stockholders' equity ......................... (4,780) 1,820 2,339 (621)
--------- --------- ---------- -------------
Total liabilities and stockholders' equity $ 7,464 $2,437 $5,802 $15,703
========= ========= ========== =============
</TABLE>
(6) Charlotte Exchange
To reflect the exchange of radio station WTDR-FM and $64.8 million cash
for WSSS-FM, WRFX-FM and WNKS-FM. No adjustment (other than to reflect
the cash paid) has been made for the Charlotte Exchange as it will be
recorded at historical cost.
<TABLE>
<CAPTION>
CHARLOTTE
EXCHANGE
--------------
(IN THOUSANDS)
<S> <C>
ASSETS
Current assets .............................. $(64,800)
Intangible assets, net ...................... 64,800
--------------
Total assets .............................. $ 0
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' equity ........................ $ 0
--------------
Total liabilities and stockholders' equity $ 0
==============
</TABLE>
A-6
<PAGE>
(7) The Secret Stations Acquisition
Reflects the combination of the Secret Stations balance sheet at June
30, 1996 with the balance sheet of the Third Party Stations to be
acquired by Secret Communications.
<TABLE>
<CAPTION>
THIRD PARTY TOTAL
SECRET STATIONS SECRET
--------- ------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets ............................... $10,041 $1,505 $11,546
Property and equipment, net .................. 5,994 1,064 7,058
Intangible assets, net ....................... 57,458 186 57,644
Other assets ................................. 258 258
--------- ------------- ---------
Total assets ............................... $73,751 $2,755 $76,506
========= ============= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities .......................... $ 3,245 $ 3,245
Long-term debt, including current portion ... 46,994 46,994
Stockholders' equity ......................... 23,512 $2,755 26,267
--------- ------------- ---------
Total liabilities and stockholders' equity $73,751 $2,755 $76,506
========= ============= =========
</TABLE>
(8) Pro Forma Adjustments
a. To reflect the Liberty Acquisition for $237,500,000 net of
proceeds received from the Washington Dispositions of $25,000,000,
the recording of the related excess of the purchase price paid
over the net book value of the assets carried on the adjusted
balance sheet of $120,737,000 and incremental deferred taxes of
$23,209,000 and the adjustments to remove the long-term debt of
$71,517,000 which is not being assumed, and the stockholders'
equity of $43,455,000 of the Liberty Acquisition.
b. To reflect the Prism Acquisition for $105,250,000 net of proceeds
received from the Louisville Dispositions of $18,500,000 and net
of deposit of $5,263,000, the recording of the related excess of
the purchase price paid over the net book value of the assets
carried on the adjusted balance sheet of $64,270,000 and
adjustments to remove the current assets of $7,904,000, current
liabilities of $2,399,000, long term debt of $15,695,000 and
stockholders' equity of $12,290,000.
c. To reflect the $12,500,000 purchase price of the Greensboro
Acquisition and the Jackson Acquisitions, net of deposit of
$6,300,000, the recording of the related excess of the purchase
price paid over the net book value of the assets carried on the
adjusted balance sheet of $8,692,000 and the adjustments to remove
the current assets of $726,000, current liabilities of $203,000,
and stockholders' equity of $4,331,000.
d. To reflect the Richmond Acquisition for $38,800,000, the recording
of the related excess of the purchase price paid over the net book
value of the assets carried on the adjusted balance sheet of
$29,174,000, the minority interest of $1,617,000 and adjustments
to remove the current assets of $4,460,000, current liabilities of
$799,000, other liabilities of $996,000, long term debt of
$14,529,000 and stockholders' deficit of $621,000.
e. To reflect additional acquisition costs related to the Pending
Acquisitions as of June 30, 1996 and deferred financing costs
related to the New Credit Agreement.
f. In connection with the Dallas Disposition, SFX expects to redeem
its Series C Redeemable Convertible Preferred Stock for
approximately $2 million, which will result in a corresponding
charge of $408,000 to the gain or loss on the Dallas Disposition.
g. To reflect the Albany Acquisition for $1,000,000.
A-7
<PAGE>
h. SFX expects to raise additional financing in the form of common
stock, redeemable preferred stock and funding under the New Credit
Agreement to finance the Pending Acquisitions. For purposes of the
pro-forma financial statements SFX has assumed that it will issue
3,500,000 shares of common stock to realize net proceeds of
approximately $150,000,000, issue 11% redeemable preferred stock
to realize net proceeds of $150,000,000, and borrow $145,101,000
under the New Credit Agreement. There can be no assurance that any
financings by SFX will be on the terms set forth in the
assumptions referred to above. (See "Financing Plan").
i. To reflect the Secret Communications Acquisition for $300,000,000,
the related excess of the purchase price paid over net book value
of the assets carried on the adjusted balance sheet of
$235,040,000 and the adjustments to remove $11,546,000 of current
assets, $3,245,000 of current liabilities and $46,994,000 of long
term debt which are not being assumed, and the equity of
$26,267,000.
j. To reflect the Delsener/Slater Acquisition for $22,919,000,
$19,953,000 in cash and future payments with a net present value
of $2,966,000 ($419,000 of which is payable within one year), the
recording of related excess of the purchase price paid over net
book value of the assets carried on the adjusted balance sheet of
$18,368,000, and an adjustment to remove stockholders' equity of
$4,551,000.
k. To reflect the SFX Hartford Acquisition for $25,500,000 (including
working capital), the recording of related excess of the purchase
price paid over net book value of the assets carried on the
adjusted balance sheet of $33,600,000 and the related incremental
deferred taxes of $8,711,000, and an adjustment to remove the
stockholders' equity of $611,000.
l. To reflect the Texas Coast Acquisition for $42,648,000,
$41,500,000 in cash and future payments with a net present value
of $1,148,000 ($214,000 of which is payable within one year), the
recording of the related excess of the purchase price paid over
the net book value of the assets carried on the adjusted balance
sheet of $41,949,000 and adjustments to remove current assets of
$2,408,000, current liabilities of $198,000, deferred taxes of
$27,000 and stockholders' equity of $2,882,000.
A-8
<PAGE>
(9) Merger
<TABLE>
<CAPTION>
MULTI-MARKET RADIO, INC.
--------------------------------------------------------------------------
MMR
AS MMR A HARTFORD PRO FORMA
REPORTED DISPOSITIONS(A) ACQUISITION(B) ADJUSTMENTS AS ADJUSTED
---------- --------------- -------------- -------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets ....................... $ 5,470 $ 5,600 $ -- $(18,000)(b) $(43,245)
13,200 (b)
(46,849)(c)
(2,666)(d)
Property and equipment, net .......... 3,649 (303) 339 -- 3,685
Intangible assets, net ............... 48,434 (3,797) 4,197 71,424 (e) 142,388
13,464 6,000 (c)
2,666 (d)
Other assets ......................... 7,256 (5,000) -- (2,420)(f) (164)
---------- --------------- -------------- -------------- -------------
Total assets ....................... $64,809 $(3,500) $18,000 $ 23,355 $102,664
========== =============== ============== ============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities .................. $ 4,843 -- $ -- $ (2,420)(f) $ 2,423
Other liabilities .................... 3,500 (3,500) -- -- 0
Long-term debt ....................... 40,849 -- -- (40,849)(c) 0
Deferred taxes ....................... 7,241 -- -- 5,875 (e) 13,116
Stockholders' equity ................. 8,376 -- 18,000 13,200 (b) 87,125
(18,000)(b)
(13,200)(e)
78,749 (e)
---------- --------------- -------------- -------------- -------------
Total liabilities and stockholders'
equity ............................ $64,809 $(3,500) $18,000 $ 23,355 $102,664
========== =============== ============== ============== =============
</TABLE>
- ------------
(a) Represents the sale of WRXR-FM and WKGB-FM which occurred in July 1996
for $5,000,000 and pending sale of KOLL-FM for $4,100,000. In the
aggregate, a loss of approximately $1,596,000 has been recognized during
the six months ended June 30, 1996 relating to the sales, principally
relating to WRXR-FM and WKBG-FM. Current assets include $5,600,000 of
proceeds to be received in connection with the dispositions (total sale
proceeds of $10,050,000 less $4,450,000 received in connection with the
KOLL-FM and WRSF-FM dispositions).
(b) To reflect the MMR Hartford Acquisition for $18,000,000, including
corresponding excess of purchase price paid, $13,464,000 over net book
value of assets acquired, and the adjustment to remove the stockholders'
equity of $18,000,000. SFX loaned MMR approximately $20.0 million
pursuant to the SFX Loan for the purposes of financing the MMR Hartford
Acquisition and for working capital. It is also assumed that the MMR
Class A Warrants will be exercised for net proceeds of approximately
$13,200,000.
(c) Repayment of $40,849,000 of existing MMR indebtedness and approximately
$6,000,000 related to prepayment premiums which will increase the
purchase price of MMR.
(d) Includes acquisition costs associated with the Merger of $1,666,000 and
the $1,000,000 purchase price of the MMR Myrtle Beach Acquisition.
(e) To reflect the Merger, assuming SFX's stock price is $44 per share, at an
estimated purchase price of $87,125,000 including the excess of the
purchase price paid over the net book value of the assets acquired,
including deferred taxes, of $71,424,000.
(f) To eliminate payable/receivable between SFX and MMR.
A-9
<PAGE>
SFX BROADCASTING, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
LIBERTY
ACQUISITION
INCLUDING
WASHINGTON PRISM
SFX DISPOSITIONS ACQUISITION OTHER
BROADCASTING, AND INCLUDING ACQUISITIONS/ RICHMOND CHARLOTTE
INC. CHANCELLOR LOUISVILLE ADDITIONAL DISPOSITIONS ACQUISITION EXCHANGE
AS REPORTED EXCHANGE(1) DISPOSITIONS(2) ACQUISITIONS(3) (4) (5) (6)
------------- ------------ ------------- ------------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net broadcast
revenues ... $ 47,554 $23,919 $12,404 $ 4,728 $(4,529) $ 4,548 $5,154
Concert
revenue, net
Station and
other
operating
expenses ... 33,177 16,059 10,175 2,869 (5,281) 4,150 3,580
Depreciation,
amortization
and
acquisition
related
costs ...... 4,648** 5,013 1,118 1,492 (188) 712 --
Corporate
expenses ... 2,790 452 746 111 60 401 129
Other ....... 27,489 -- -- -- (1,600) -- --
------------- ------------ ------------- ------------- ------------- ------------ ---------
Operating
income ..... (20,550) 2,395 365 256 2,480 (715) 1,445
Interest
expense,
including
amortization
of deferred
financing
costs ...... 9,588 3,319 714 382 (954) 638 13
Other expense
(income) ... (2,298) 5,934 -- (11,948) -- -- 8
Income tax
expense
(benefit) .. -- (3,380) -- 45 423 -- --
Minority
interest
income
(loss) .....
------------- ------------ ------------- ------------- ------------- ------------ ---------
Net income
(loss) ..... (27,840) (3,478) (349) 11,777 3,011 (1,353) 1,424
Preferred
stock
dividend
requirement 967 -- -- -- -- -- --
------------- ------------ ------------- ------------- ------------- ------------ ---------
Net loss
applicable
to common
shares ..... $(28,807) $(3,478) $ (349) $ 11,777 $ 3,011 $(1,353) $1,424
============= ============ ============= ============= ============= ============ =========
Net loss per
common share $ (3.87)
Average
common
shares
outstanding 7,448
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
PRO FORMA
FOR THE
SECRET DELSENER/ TRANSACTIONS PRO FORMA
COMMUNICATIONS SLATER TEXAS COAST CBS SFX HARTFORD PRO FORMA OTHER THAN FOR THE
ACQUISITION(7) ACQUISITION ACQUISITION EXCHANGE(8) ACQUISITION ADJUSTMENTS(9) THE MERGER MERGER(10) TRANSACTIONS
-------------- ----------- ----------- --------- ------------ ------------ ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net broadcast
revenues ... $20,719 $2,112 $ (577) $2,127 $ 2,770 (a) $ 120,929* $11,509 $ 132,438
Concert
revenue, net $3,507**** 3,507**** 3,507****
Station and
other
operating
expenses ... 14,600 1,427 572 1,727 (2,645)(b) 79,797 6,622 86,419
(75)(l)
(538)(m)
Depreciation,
amortization
and
acquisition
related
costs ...... 2,330 375 26 -- 3 2,609 (c) 19,078 1,726 20,804
391 (d)
162 (e)
279 (f)
108 (n)
Corporate
expenses ... 861 -- -- -- -- 953 (g) 3,743 626 4,369
(2,760)(g)
Other ....... 159 -- (43) (396) -- 25,609 546 26,155
-------------- ----------- ----------- --------- ------------ ------------ ------------ -------- ------------
Operating
income ..... 2,769 3,132 702 (753) 397 4,287 (3,791) 1,989 (1,802)
Interest
expense,
including
amortization
of deferred
financing
costs ...... 1,425 -- -- -- (3) 24,187 (h) 32,618 -- 32,618
799 (h)
(13,667)(h)
6,017 (h)
160 (o)
Other expense
(income) ... -- (37) -- (74) -- (5,934)(i) (2,429) -- (2,429)
11,920 (i)
Income tax
expense
(benefit) .. -- -- -- 423 -- 2,489 (i) -- -- --
Minority
interest
income
(loss) ..... (10) (k) (10) (10)
-------------- ----------- ----------- --------- ------------ ------------ ------------ -------- ------------
Net income
(loss) ..... 1,344 3,169 702 (1,102) 400 (21,675) (33,970) 1,989 (31,981)
Preferred
stock
dividend
requirement -- -- -- -- -- (j) 13,209 -- 13,209
-------------- ----------- ----------- --------- ------------ ------------ ------------ -------- ------------
Net loss
applicable
to common
shares ..... $ 1,344 $ 3,169 $ 702 $(1,102) $ 400 $(33,917) $ (47,179) $ 1,989 $ (45,190)
============== =========== =========== ========= ============ ============ ============ ======== ============
Net loss per
common share $ (4.31) $ (3.55)
Average
common
shares
outstanding 10,948*** 12,738
</TABLE>
* Includes $2,770,000 of fees from Triathlon; see Note 9(a).
** Includes $277,000 of acquisition related costs.
*** Represents total shares outstanding at 12/31/95 plus 3.5 million
additional shares assumed to be issued in connection with the
financing of the Additional Acquisitions described on
pages 1 through 3.
**** Comprised of $10,785,000 of Concert and related revenue, net of
concert costs of $7,278,000. The Company is currently evaluating
alternative classification presentations of the Delsener/Slater
Acquisition.
A-10
<PAGE>
SFX BROADCASTING, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
LIBERTY
ACQUISITION
INCLUDING
WASHINGTON PRISM
SFX DISPOSITIONS ACQUISITION OTHER
BROADCASTING, AND INCLUDING ADDITIONAL ACQUISITIONS/ RICHMOND CHARLOTTE
INC. CHANCELLOR LOUISVILLE ACQUISITIONS DISPOSITIONS ACQUISITIONS ACQUISITIONS
AS REPORTED EXCHANGE(1) DISPOSITIONS(2) (3) (4) (5) (6)
------------- ------------ ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net broadcast
Revenues ... $ 76,830 $46,636 $26,959 $18,463 $(9,967) $ 9,213 $11,601
Concert
revenue, net
Station and
other
operating
expenses ... 51,039 30,339 22,411 15,570 (9,689) 8,097 8,528
Depreciation,
amortization
and
acquisition
related
costs ...... 9,137** 8,817 2,232 2,947 (124) 1,410 497
Corporate
expenses ... 3,797 3,193 2,027 265 120 650 251
Other ....... 5,000 (5,000) -- --
------------- ------------ ------------- ------------- ------------- ------------- -------------
Operating
income ..... 7,857 4,287 289 (319) 4,726 (944) 2,325
Interest
expense,
including
amortization
of deferred
financing
costs ...... 12,903 7,258 1,565 948 (1,841) 1,415 101
Other expense
(income) ... (650) (200) (201) (498) 43 799
Income tax
expense
(benefit) .. (2,725) 562 -- --
Minority
interest
income
(loss) .....
------------- ------------ ------------- ------------- ------------- ------------- -------------
Net income
(loss) ..... (4,396) (246) (1,076) (1,628) 7,065 (2,402) 1,425
Preferred
stock
dividend
requirement 291 -- --
------------- ------------ ------------- ------------- ------------- ------------- -------------
Net loss
applicable
to common
shares ..... $ (4,687) $ (246) $(1,076) $(1,628) $ 7,065 $(2,402) $ 1,425
============= ============ ============= ============= ============= ============= =============
Net loss per
common share $ (0.71)
Average
common
shares
outstanding 6,596
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
PRO FORMA
FOR THE
SECRET DELSENER/ TRANSACTIONS PRO FORMA
COMMUNICATIONS SLATER TEXAS COAST CBS SFX HARTFORD PRO FORMA OTHER THAN FOR THE
ACQUISITION ACQUISITION ACQUISITION EXCHANGE(8) ACQUISITION ADJUSTMENTS(9) THE MERGER MERGER(10) TRANSACTIONS
-------------- ----------- ----------- --------- ------------ ------------ ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
NET BROADCAST
REVENUES ... $39,100 $4,081 $(1,086) $4,688 $ 5,035 (a) $ 231,553* $22,982 $ 254,535
CONCERT
REVENUE, NET $7,811**** 7,811**** 7,811****
STATION AND
OTHER
OPERATING
EXPENSES ... 24,812 7,426 2,981 2,118 4,773 1,323 (a) 159,320 13,064 172,384
(5,290)(b)
(1,454)(l)
(3,664)(m)
DEPRECIATION,
AMORTIZATION
AND
ACQUISITION
RELATED
COSTS ...... 4,611 750 53 -- 48 978 (a) 39,524 3,980 43,504
6,286 (c)
782 (d)
325 (e)
558 (f)
217 (n)
CORPORATE
EXPENSES ... 1,933 -- -- 214 -- 45 (a) 5,747 1,253 7,000
1,905 (g)
(8,653)(g)
OTHER ....... (802) -- (58) (2,673) 2 (3,531) 1,114 (2,417)
-------------- ----------- ----------- --------- ------------ ------------ ------------ -------- ------------
OPERATING
INCOME ..... 8,546 (365) 1,105 (745) (135) 11,677 38,304 3,571 41,875
INTEREST
EXPENSE,
INCLUDING
AMORTIZATION
OF DEFERRED
FINANCING
COSTS ...... 3,101 -- -- -- -- 48,375 (h) 65,549 -- 65,549
1,598 (h)
(22,282)(h)
12,034 (h)
374 (o)
OTHER EXPENSE
(INCOME) ... (36) (495) -- (152) -- (1,390) -- (1,390)
INCOME TAX
EXPENSE
(BENEFIT) .. -- 13 48 31 7 2,064 (i) -- -- --
MINORITY
INTEREST
INCOME
(LOSS) ..... 3 (k) 3 3
-------------- ----------- ----------- --------- ------------ ------------ ------------ -------- ------------
NET INCOME
(LOSS) ..... 5,481 117 1,057 (624) (142) (30,489) 25,858 3,571 (22,287)
PREFERRED
STOCK
DIVIDEND
REQUIREMENT 26,165 (j) 26,456 -- 26,456
-------------- ----------- ----------- --------- ------------ ------------ ------------ -------- ------------
NET LOSS
APPLICABLE
TO COMMON
SHARES ..... $ 5,481 $ 117 $1,057 $ (624) $ (142) $(56,654) $ (52,314) $ 3,571 $ (48,743)
============== =========== =========== ========= ============ ============ ============ ======== ============
NET LOSS PER
COMMON SHARE $ (4.78) $ (3.83)
AVERAGE
COMMON
SHARES
OUTSTANDING 10,948*** 12,738
</TABLE>
* Includes $3,584,000 of fees from Triathlon; see Note 9(a).
** Includes $1,400,000 of duopoly integration costs.
*** Represents total shares outstanding at 12/31/95 plus 3.5 million
additional shares assumed to be issued in connection with the financing
of the Additional Acquisitions described on pages 1 through 3.
**** Comprised of a $38,660,000 of concert and related revenue, net of
concert costs of $30,855,000. The Company is currently evaluating
alternative classification presentations for the Delsener/Slater
Acquisition.
A-11
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENTS OF OPERATIONS
(1) Liberty Acquisition
Reflects the net effect of the historical operations of the Liberty
Stations adjusted for the Washington Dispositions and the Chancellor
Exchange.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1996
---------------------------------------------------------------------------------------
LIBERTY AS WASHINGTON LONG ISLAND JACKSONVILLE LIBERTY AS
REPORTED DISPOSITIONS DISPOSITION ACQUISITION ADJUSTMENTS* ADJUSTED
- ------------------- ------------ -------------- ------------- -------------- -------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net broadcast
revenues .......... $25,966 $ (974) $(5,108) $4,035 $ -- $23,919
Station operating
expenses .......... 19,337 (1,563) (3,923) 2,208 16,059
Depreciation/amortization 5,926 (776) (1,429) 751 541 5,013
Corporate expenses 1,566 (88) (1,026) -- -- 452
------------ -------------- ------------- -------------- -------------- ------------
Operating income .. (863) 1,453 1,270 1,076 (541) 2,395
Interest expense .. 3,467 (141) (7) -- -- 3,319
Other expense
(income) .......... 5,935 -- (1) -- -- 5,934
Income tax expense
(benefit) ......... (3,378) -- (2) -- -- (3,380)
------------ -------------- ------------- -------------- -------------- ------------
Net income (loss) . $(6,887) $ 1,594 $ 1,280 $1,076 $(541) $(3,478)
============ ============== ============= ============== ============== ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------------------------------------------------------------------
LIBERTY AS BECK ROSS WASHINGTON LONG ISLAND JACKSONVILLE LIBERTY AS
REPORTED ACQUISITION** DISPOSITIONS DISPOSITION ACQUISITION ADJUSTMENTS* ADJUSTED
------------ --------------- -------------- ------------- -------------- -------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net broadcast
revenues .......... $51,407 $2,486 $(3,375) $(11,511) $7,629 $ -- $46,636
Station operating
expenses .......... 34,725 2,121 (4,065) (7,282) 4,840 -- 30,339
Depreciation/amortization 10,429 40 (1,377) (2,682) 1,491 916 8,817
Corporate expenses 4,653 -- -- (1,460) -- -- 3,193
------------ --------------- -------------- ------------- -------------- -------------- ------------
Operating income
(loss) ............ 1,600 325 2,067 (87) 1,298 (916) 4,287
Interest expense .. 7,373 -- (98) (17) -- -- 7,258
Income tax expense (2,725) -- -- -- -- -- (2,725)
------------ --------------- -------------- ------------- -------------- -------------- ------------
Net income (loss) . $ (3,048) $ 325 $ 2,165 $ (70) $1,298 $(916) $ (246)
============ =============== ============== ============= ============== ============== ============
</TABLE>
- ------------
* To reflect historic depreciation of the stations that are the subject
of the Long Island Disposition net of decrease in amortization due to
the exchange allocation.
** Represents the acquisition by Liberty of radio stations WBLI-FM,
WHCN-FM and WSNE-FM from Beck-Ross Communications, Inc. in 1995.
A-12
<PAGE>
(2) Prism Acquisition
Reflects the net effect of the historical operations of the Prism
Acquisition adjusted for the Louisville Dispositions.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1996
--------------------------------------
PRISM AS LOUISVILLE PRISM AS
REPORTED DISPOSITIONS ADJUSTED
---------- -------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Net broadcast revenues .... $15,752 $ (3,348) $12,404
Station operating expenses 12,651 (2,476) 10,175
Depreciation/amortization . 1,476 (358) 1,118
Corporate expenses ......... 746 -- 746
---------- -------------- ----------
Operating income ........... 879 (514) 365
Interest expense ........... 714 -- 714
---------- -------------- ----------
Net income (loss) .......... $ 165 $ (514) $ (349)
========== ============== ==========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
---------------------------------------
PRISM AS LOUISVILLE PRISM AS
REPORTED DISPOSITIONS ADJUSTED
---------- -------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Net broadcast revenues ................... $32,572 $(5,613) $26,959
Station operating expenses ............... 26,979 (4,568) 22,411
Depreciation/amortization ................ 2,946 (714) 2,232
Corporate expenses ....................... 2,027 -- 2,027
---------- -------------- -----------
Operating income/(loss) .................. 620 (331) 289
Interest expense including ...............
amortization of deferred financing costs 1,565 -- 1,565
Other expense (income) ................... (200) -- (200)
---------- -------------- -----------
Net loss ................................. $ (745) $ (331) $ (1,076)
========== ============== ===========
</TABLE>
A-13
<PAGE>
(3) Additional Acquisitions
Reflects the net effect of the combined historical operations of the
Greensboro Acquisition and radio stations WRDU-FM, WTRG-FM, WMAG-FM, WMFR-AM
and WTCK-AM acquired from HMW Communications, Inc. (collectively
"Raleigh-Greensboro Acquisitions"), radio station WROQ-FM acquired from ABS
Greenville Partners, L.P. (the "Greenville Acquisition") and the Jackson
Acquisitions.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
-------------------------------------------------------------
RALEIGH- ADDITIONAL
GREENSBORO GREENVILLE JACKSON ACQUISITIONS
ACQUISITIONS ACQUISITION ACQUISITIONS COMBINED
-------------- ------------- -------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net broadcast revenues .................. $3,619 $ 639 $470 $ 4,728
Station operating expenses .............. 2,264 271 334 2,869
Depreciation/ amortization .............. 1,168 244 80 1,492
Corporate expenses ...................... 4 107 -- 111
-------------- ------------- -------------- --------------
Operating income (loss) ................. 183 17 56 256
Interest expense, including amortization
of deferred financing costs ............ 59 323 -- 382
Other income ............................ (51) (11,897) -- (11,948)
Income tax expense ...................... 45 -- -- 45
-------------- ------------- -------------- --------------
Net income (loss) ....................... $ 130 $ 11,591 $ 56 $ 11,777
============== ============= ============== ==============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
----------------------------------------------------------------------------
ADDITIONAL
RALEIGH-GREENSBORO GREENVILLE JACKSON ACQUISITIONS
ACQUISITIONS ACQUISITION ACQUISITIONS COMBINED
---------------------------- ------------- -------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net broadcast revenues ....... $12,688 $4,074 $1,701 $18,463
Station operating expenses .. 10,982 3,238 1,350 15,570
Depreciation/amortization ... 2,325 514 108 2,947
Corporate expenses ........... -- 195 70 265
---------------------------- ------------- -------------- --------------
Operating income (loss) ..... (619) 127 173 (319)
Interest expense ............. 156 792 -- 948
Other expense (income) ....... (203) 2 -- (201)
Income tax expense (benefit) 562 -- -- 562
---------------------------- ------------- -------------- --------------
Net income (loss) ............ $ (1,134) $ (667) $ 173 $(1,628)
============================ ============= ============== ==============
</TABLE>
A-14
<PAGE>
(4) Other Acquisitions/Dispositions
To reflect the exchange of KRLD-AM and the Texas State Networks for
KKRW-FM in the Houston Exchange, and the sale of KTCK-AM in the Dallas
Disposition.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
-----------------------------------------------------------------------------
DISPOSITION ACQUISITION ADJUSTMENTS(*) NET
---------------------------------- ------------- -------------- ----------
KRLD-AM TSN KTCK-AM KKRW-FM
---------- ---------- ---------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net broadcast revenues ....... $(5,048) $(1,212) $(1,858) $3,589 $ -- $(4,529)
Station operating expenses .. (4,401) (1,006) (2,211) 2,337 -- (5,281)
Depreciation/amortization ... (686) (125) (188) 346 465 (188)
Corporate expenses ........... -- -- -- 60 -- 60
Other ........................ (1,600) 0 -- -- -- (1,600)
---------- ---------- ---------- ------------- -------------- ----------
Operating income ............. 1,639 (81) 541 846 (465) 2,480
Interest expense ............. (732) (218) (4) -- -- (954)
Income tax expense (benefit) -- -- -- 423 -- 423
---------- ---------- ---------- ------------- -------------- ----------
Net income (loss) ............ $ 2,371 $ 137 $ 545 $ 423 $(465) $ 3,011
========== ========== ========== ============= ============== ==========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
---------------------------------------------------------------------------------------------
DISPOSITIONS ACQUISITION ADJUSTMENTS(*) NET
--------------------------------------------------- ------------- -------------- ----------
KRLD-AM TSN KTCK-AM KKRW-FM
---------------------------- ---------- ---------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net broadcast
revenues .......... $(9,792) $(3,196) $(4,096) $7,117 $ -- $(9,967)
Station operating
expenses .......... (8,881) (2,261) (3,714) 5,167 -- (9,689)
Depreciation/amortization (1,350) (725) (124) 371 1,704 (124)
Corporate expenses -- -- -- 120 -- 120
Other .............. (5,000) -- -- -- -- (5,000)
---------------------------- ---------- ---------- ------------- -------------- ----------
Operating income .. 5,439 (210) (258) 1,459 (1,704) 4,726
Interest expense .. (1,433) (403) (5) -- -- (1,841)
Other income ....... -- -- (323) (175) -- (498)
---------------------------- ---------- ---------- ------------- -------------- ----------
Net income (loss) . $ 6,872 $ 193 $ 70 $1,634 $(1,704) $ 7,065
============================ ========== ========== ============= ============== ==========
</TABLE>
- ------------
(*) To reflect historical depreciation of KRLD-AM and TSN and disposition
of KTCK-AM.
A-15
<PAGE>
(5) Reflects the net effect of the combined historical operations of radio
stations WKHK-FM, WBZU-FM and WVGO-FM/WLEE-FM acquired in the Richmond
Acquisition.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
-----------------------------------------------
WVGO-FM/ RICHMOND
WKHK-FM WBZU-FM WLEE-FM ACQUISITION
--------- --------- ---------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net broadcast revenues .... $2,499 $ 499 $1,550 $ 4,548
Station operating expenses 1,818 671 1,661 4,150
Depreciation/amortization . 150 104 458 712
Corporate expenses ......... 165 52 184 401
--------- --------- ---------- -------------
Operating income ........... 366 (328) (753) (715)
Interest expense ........... 376 132 130 638
--------- --------- ---------- -------------
Net income (loss) .......... $ (10) $(460) $ (883) $(1,353)
========= ========= ========== =============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------------
WVGO-FM/ RICHMOND
WKHK-FM WBZU-FM WLEE-FM ACQUISITION
--------- ---------- ---------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net broadcast revenues .... $4,478 $ 849 $ 3,886 $ 9,213
Station operating expenses 3,154 1,561 3,382 8,097
Depreciation/amortization . 253 243 914 1,410
Corporate expenses ......... 245 77 328 650
--------- ---------- ---------- -------------
Operating income ........... 826 (1,032) (738) (944)
Interest expense ........... 811 287 317 1,415
Other expense .............. 43 43
--------- ---------- ---------- -------------
Net income (loss) .......... $ 15 $(1,319) $(1,098) $(2,402)
========= ========== ========== =============
</TABLE>
(6) To reflect the exchange of radio station WTDR-FM for radio stations
WSSS-FM, WRFX-FM and WNKS-FM in the Charlotte Exchange.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
--------------------------------------------------------------
ACQUISITIONS DISPOSITION
--------------------- -------------
WRFX-FM/
WSSS-FM WNKS-FM WTDR-FM ADJUSTMENTS* NET
--------- ---------- ------------- -------------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net broadcast revenues .... $1,930 $5,033 $(1,809) $ -- $5,154
Station operating expenses 1,381 3,240 (1,041) -- 3,580
Depreciation/amortization . 99 2,180 (248) (2,031) 0
Corporate expenses ......... 129 -- -- -- 129
--------- ---------- ------------- -------------- --------
Operating income ........... 321 (387) (520) 2,031 1,445
Interest expense ........... 13 13
Other expense .............. 8 -- -- -- 8
--------- ---------- ------------- -------------- --------
Net income (loss) .......... $ 300 $ (387) $ (520) $ 2,031 $1,424
========= ========== ============= ============== ========
</TABLE>
A-16
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
---------------------------------------------------------------
ACQUISITIONS DISPOSITION
--------------------- -------------
WRFX-FM/
WSSS-FM WNKS-FM WTDR ADJUSTMENTS* NET
--------- ---------- ------------- -------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net broadcast revenues .... $3,575 $10,624 $(2,598) -- $11,601
Station operating expenses 2,268 7,623 (1,363) -- 8,528
Depreciation/amortization . 208 3,120 (497) (2,334) 497
Corporate expenses ......... 251 251
--------- ---------- ------------- -------------- ---------
Operating income ........... 848 (119) (738) 2,334 2,325
Interest expense ........... 94 7 -- -- 101
Other expense (income) .... 191 608 -- -- 799
--------- ---------- ------------- -------------- ---------
Net income (loss) .......... $ 563 $ (734) $ (738) $ 2,334 $ 1,425
========= ========== ============= ============== =========
</TABLE>
- ------------
* To eliminate depreciation of WSSS-FM, WRFX-FM, and WNKS-FM and reflect
depreciation of WTDR-FM.
(7) The Secret Communications Acquisition
Reflects the Secret Communications Acquisition after the pending
acquisition of the Third Party Stations by Secret Communications. The
results of the Third Party Stations for the six months ended June 30,
1996 reflect five months of results under the current owner and one
month of operations under Secret Communications through an LMA, which
Secret entered with the current owner on June 1, 1996.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
-------------------------------------
SECRET THIRD PARTY
STATIONS STATIONS TOTAL
---------- -------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Net broadcast revenues .................................. $17,495 $3,224 $20,719
Station operating expenses .............................. 12,290 2,310 14,600
Depreciation, amortization and acquisition related costs 2,187 143 2,330
Other expenses (income) ................................. 170 (11) 159
---------- -------------- ---------
Net income .............................................. $ 2,848 $ 782 $ 3,630
========== ============== =========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-------------------------------------
SECRET THIRD PARTY
STATIONS STATIONS TOTAL
---------- -------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Net broadcast revenues .................................. $35,438 $3,662 $39,100
Station operating expenses .............................. 21,963 2,849 24,812
Depreciation, amortization and acquisition related costs 4,411 200 4,611
Other income ............................................ (802) -- (802)
---------- -------------- ---------
Operating income ........................................ 9,866 613 10,479
Other income ............................................ (36) -- (36)
---------- -------------- ---------
Net income .............................................. $ 9,902 $ 613 $10,515
========== ============== =========
</TABLE>
A-17
<PAGE>
(8) CBS Exchange
To reflect the net effect of the exchange of WHFS-FM for KTXQ-FM and
KRRW-FM in the CBS Exchange.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
------------------------------------------------
KTXQ-FM WHFS-FM
KRRW-FM DISPOSAL ADJUSTMENTS* NET
--------- ---------- -------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net broadcast revenues .................................. $4,568 $5,145 $ -- $ (577)
Station operating expenses .............................. 3,318 2,746 -- 572
Depreciation, amortization and acquisition related costs 467 798 331 --
Other ................................................... -- 396 -- (396)
--------- ---------- -------------- ---------
Operating income ........................................ 783 1,205 (331) (753)
Other expense (income) .................................. (74) -- -- (74)
Income tax expense ...................................... 423 -- -- 423
--------- ---------- -------------- ---------
Net income (loss) ....................................... $ 434 $1,205 $(331) $(1,102)
========= ========== ============== =========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-------------------------------------------------
KTXQ-FM WHFS-FM
KRRW-FM DISPOSAL ADJUSTMENTS* NET
--------- ---------- -------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net broadcast revenues .................................. $8,534 $9,620 $ -- $(1,086)
Station operating expenses .............................. 7,254 5,136 -- 2,118
Depreciation, amortization and acquisition related costs 1,129 1,638 509 --
Corporate expenses ...................................... 214 -- -- 214
Other expense (income) .................................. -- 2,673 -- (2,673)
--------- ---------- -------------- ----------
Operating income ........................................ (63) 173 (509) (745)
Other income ............................................ (152) -- -- (152)
Income tax expense ...................................... 31 -- -- 31
--------- ---------- -------------- ----------
Net income (loss) ....................................... $ 58 $ 173 $(509) $ (624)
========= ========== ============== ==========
</TABLE>
* To eliminate depreciation of KTXQ-FM and KRRW-FM and reflect
depreciation of WHFS-FM.
(9) Pro Forma Adjustments
a. Reflects the results of radio stations (located in San Diego, Charlotte
--WLYT only, and Dallas) acquired in the Recent Acquisitions during the
year ended December 31, 1995 and fees of $3,584,000 and $2,770,000
incurred by Triathlon and payable to SCMC for the year ended December
31, 1995 and the six months ended June 30, 1996, respectively of which
$2,584,000 and $2,020,000, respectively, represent fees based upon
acquisition and financing activities in the respective period. Future
fees may be lesser or greater based upon future acquisition and
financing activity by Triathlon. Minimum annual fees will be $1,000,000
per year commencing at such time as Triathlon spends an amount equal to
the net proceeds of its last public offering, of which $750,000 is due
in the first six months. See "Certain Relationships and Related
Transactions --Relationship of SFX with SCMC".
b. Reflects anticipated cost savings expected to be realized following the
Liberty Acquisition, the Chancellor Exchange, the Prism Acquisition,
the Jackson Acquisitions and the Richmond Acquisition, consisting
principally of the elimination of certain duplicative technical, sales
and general and administrative functions due to operating a cluster of
stations in each of its principal markets, a reduction of employee
benefit costs and commission rates and the elimination of programming
personnel due to automation and simulcasting.
A-18
<PAGE>
In addition to the cost savings identified above which are reflected in
the pro forma adjustments, SFX has identified certain additional expenses
of approximately $936,000 which are not expected to recur or are expected
to recur in reduced amounts. These expenses consist primarily of (i)
non-recurring marketing costs of approximately $471,000 related to SFX's
stations operating in San Diego, California, Charlotte, North Carolina
and Greenville-Spartanburg, South Carolina, incurred by the prior owners
of such stations, (ii) costs associated with barter arrangements of
approximately $98,000 related to SFX's stations operating in Raleigh,
North Carolina, (iii) costs of third party service providers of
approximately $272,000 related to the radio stations acquired in the
Prism Acquisition and retained by SFX, and (iv) employee relocation
expenses of approximately $95,000 incurred by the prior owners of Prism.
No cost savings have been reflected for the Secret Acquisition and
certain other pending acquisitions as management is evaluating these
potential savings. However, management does anticipate that there will be
additional savings associated with these acquisitions.
While management believes that such cost savings and the elimination of
non-recurring expenses are reasonably achievable, SFX's ability to
achieve such cost savings and to eliminate the non-recurring expenses is
subject to numerous factors, many of which are beyond SFX's control.
There can be no assurance that SFX will realize such cost savings.
c. Reflects increase (decrease) in amortization of intangible assets
resulting from the purchase price allocation and change in amortization
period:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996 YEAR ENDED DECEMBER 31, 1995
------------------------------------------- -------------------------------------------
INCREASE DUE DECREASE DUE INCREASE DUE DECREASE DUE
TO PURCHASE TO CHANGE IN TO PURCHASE TO CHANGE IN
PRICE AMORTIZATION NET INCREASE PRICE AMORTIZATION NET INCREASE
ALLOCATION PERIODS (DECREASE) ALLOCATION PERIODS (DECREASE)
------------ -------------- -------------- ------------ -------------- --------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Liberty Acquisition .......... $1,117 $(2,984) $(1,867) $2,235 $(4,799) $(2,564)
Prism Acquisition ............ 803 (592) 211 1,606 (1,186) 420
Greensboro Acquisition and
Jackson Acquisitions ........ 108 (5) 103 217 (10) 207
Richmond Acquisition ......... 364 (310) 54 729 (641) 88
Charlotte Exchange ........... 810 0 810 1,620 0 1,620
Additional Acquisitions other
than the Greensboro
Acquisition and the Jackson
Acquisition ................. 450 (639) (189) 1,018 (1,276) (258)
Albany Acquisition ........... 12 0 12 25 0 25
Secret Comm. Acquisition .... 2,938 (910) 2,028 5,876 (2,022) 3,854
Delsener/Slater Acquisition . 612 0 612 1,224 0 1,224
Texas Coast Acquisition ..... 524 0 524 1,048 0 1,048
SFX Hartford Acquisition .... 311 0 311 622 0 622
-------------- --------------
Net Increase $ 2,609 Net Increase $6,286
============== ==============
</TABLE>
d. Reflects $391,000 and $782,000 in amortization of goodwill arising from
the deferred taxes recorded in connection with the Liberty Acquisition
for the six months ended June 30, 1996 and year ended December 31,
1995, respectively.
e. Amortization of $162,000 and $325,000 for acquisition costs associated
with the Acquisitions for the six months ended June 30, 1996 and year
ended December 31, 1995, respectively.
f. To reflect $279,000 and $558,000 in amortization relating to the
present value of the Triathlon consulting fees assigned to SFX under
its agreement with SCMC for the six months ended June 30, 1996 and year
ended December 31, 1995, respectively.
A-19
<PAGE>
g. To record incremental corporate overhead charges of $953,000 and
$1,905,000 for the six months ended June 30, 1996 and year ended
December 31, 1995, respectively, relating to increases in personnel,
professional fees and administrative expenses associated with the
increased size of SFX due to the Acquisitions and the elimination of
$1,899,000 and $6,720,000 for the six months ended June 30, 1996 and
year ended December 31, 1995, respectively of the corporate overhead
of the sellers.
h. To reflect interest expense of $24,187,000 and $48,375,000 for the six
months ended June 30, 1996 and year ended December 31, 1995,
respectively, related to the $450,000,000 of Senior Subordinated Notes
at 10.75%, amortization of deferred financing costs of $799,000 and
$1,598,000 for the six months ended June 30, 1996 and year ended
December 31, 1995, respectively, interest expense of $6,017,000 and
$12,034,000 relating to the borrowings from the New Credit Agreement at
8.25% for the six months ended June 30, 1996 and year ended December
31, 1995, respectively, and elimination of existing interest expense
(net of interest on other debt) of $13,667,000 and $22,282,000 related
to SFX and the sellers for the six months ended June 30, 1996 and year
ended December 31, 1995, respectively.
i. Elimination of acquisition related costs of $5,934,000 recorded on the
income statement of Liberty for the six months June 30, 1996, gain on
the sale of assets of $11,920,000 recorded on the books of ABS
Greenville Partners, L.P. for the six months ended June 30, 1996 and
income tax benefits of $2,489,000 and $2,064,000 for the six months
ended June 30, 1996 and year ended December 31, 1995, respectively.
j. To record the incremental Series D Preferred Stock dividend and a
contemplated new redeemable preferred issuance to finance a portion of
the Pending Acquisitions at a rate of 6.5% and 11%, respectively, net
of the elimination of preferred dividends relating to the Series C
Preferred Stock.
k. To record minority interest income (loss) related to the Richmond
Acquisition of ($10,000) and $3,000 for the six months ended June 30,
1996 and year ended December 31, 1995, respectively.
l. To reflect elimination of expenses incurred by WWYZ (which is being
acquired as part of the SFX Hartford Acquisition) of $75,000 and
$1,454,000 for the six months ended June 30, 1996 and year ended
December 31, 1995, respectively, principally for salaries and related
expenses of employee-shareholders whose services are to be terminated
upon the acquisition.
m. To adjust Delsener/Slater officers salaries by $538,000 and $3,664,000
for the six months ended June 30, 1996 and the year ended December 31,
1995, respectively, to reflect new employment contracts.
n. Reflects $108,000 and $217,000 in amortization of goodwill arising from
the deferred taxes recorded in connection with the SFX Hartford
Acquisition for the six months ended June 30, 1996 and the year ended
December 31, 1995, respectively.
o. To record interest expense of $160,000 and $374,000 for the six months
ended June 30, 1996 and the year ended December 31, 1995, respectively,
in connection with the long-term payments due for the Delsener/Slater
Acquisition and the Texas Coast Acquisition.
A-20
<PAGE>
(10) Merger
Reflects the net effect of the historical operations of MMR as adjusted
for acquisitions and dispositions.
<TABLE>
<CAPTION>
MULTI-MARKET RADIO, INC.
SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS)
--------------------------------------------------------------------------
MMR A
DISPOSITIONS MMR HARTFORD PRO FORMA PRO FORMA AS
AS REPORTED (a) ACQUISITION ADJUSTMENTS ADJUSTED
------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net broadcast revenues ....... $10,144 $ (717) $2,082 $11,509
Station operating expenses .. 6,254 (810) 1,610 $ (432)(b) 6,622
Depreciation/amortization ... 810 (95) 247 744 (c) 1,726
20 (d)
Corporate expenses ........... 1,275 -- -- 626 (e) 626
(1,275)(e)
Non-cash compensation ........ 130 -- -- 416 (g) 546
------------- -------------- ------------- ------------- -------------
Operating income ............. 1,675 188 225 (99) 1,989
Interest expense ............. 2,609 -- 203 (2,812)(f) --
Other expense (income) ....... 5,657 (1,577) (12) (4,068)(f) --
Income tax expense (benefit) -- -- 7 (7)(f) --
------------- -------------- ------------- ------------- -------------
Net income (loss) ............ $(6,591) $ 1,765 $ 27 $ 6,788 $ 1,989
============= ============== ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
MULTI-MARKET RADIO, INC.
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
------------------------------------------------------------------------------------------
MMR A SOUTHERN STARR
DISPOSITIONS MMR HARTFORD --1ST QUARTER PRO FORMA
AS REPORTED (a) ACQUISITION 1995 ADJUSTMENTS AS ADJUSTED
------------- -------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net broadcast revenues ....... $18,288 $(2,422) $4,424 $2,692 $22,982
Station operating expenses .. 11,026 (2,247) 3,286 1,863 $ (864)(b) 13,064
Depreciation/amortization ... 1,750 (304) 539 327 1,627 (c) 3,980
41 (d)
Corporate expenses ........... 1,666 -- -- -- 1,253 (e) 1,253
(1,666)(e)
Non-cash compensation ........ 281 -- -- -- 833 (g) 1,114
------------- -------------- ------------- -------------- ------------- -------------
Operating income ............. 3,565 129 599 502 (1,224) 3,571
Interest expense, including
amortization of deferred
financing costs ............. 4,966 -- 502 -- (5,468)(f) --
Other expense (income) ....... (11) -- (14) -- 25 (f) --
Income tax expense (benefit) (59) -- 48 -- 11 (f) --
------------- -------------- ------------- -------------- ------------- -------------
Net income (loss) ............ $(1,331) $ 129 $ 63 $ 502 $ 4,208 $ 3,571
============= ============== ============= ============== ============= =============
</TABLE>
- ------------
(a) Reflects the elimination of the operations of stations WRSF-FM, sold in
March 1996, WRXR-FM and WKBG-FM, sold in July 1996, and the pending
sale of KOLL-FM.
(b) Reflects cost savings of $432,000 and $864,000 for the six months ended
June 30, 1996 and year ended December 31, 1995, respectively,
anticipated with the MMR Hartford Acquisition, consisting principally
of the elimination of certain duplicative technical sales and general
and administrative functions due to operating a cluster of stations in
the Hartford market and the elimination of programming personnel due to
automation.
A-21
<PAGE>
(c) Reflects $744,000 and $1,627,000 for the six months ended June 30, 1996
and year ended December 31, 1995, respectively, in amortization of
intangible assets recorded in connection with the Merger, MMR Myrtle
Beach Acquisition, related incremental deferred taxes and change in
amortization periods.
(d) Amortization of $20,000 and $41,000 for acquisition costs associated
with the Merger for the six months ended June 30, 1996 and year ended
December 31, 1995, respectively.
(e) To record incremental corporate overhead charges of $626,000 and
$1,253,000 associated with the Merger for the three months ended June
30, 1996 and year ended December 31, 1995, respectively, and to
eliminate MMR's existing corporate overhead of $1,275,000 and
$1,666,000 for the six months ended June 30, 1996 and year ended
December 31, 1995, respectively.
(f) Elimination of a nonrecurring loss (income) of $4,067,000 and ($25,000)
for the six months ended June 30, 1996 and year ended December 31,
1995, respectively, interest expense of and $2,812,000 and $5,468,000
the six months ended June 30, 1996 and year ended December 31, 1995,
respectively, and income tax expense (benefit) of $7,000 and ($11,000)
for the six months ended June 30, 1996 and year ended December 31,
1995, respectively.
(g) Reflects non-cash compensation charge for the issuance of shares of the
Series A and Series B Convertible Preferred Shares Stock of MMR. These
shares were issued in July 1996.
A-22
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA OF SFX
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The Summary Consolidated Financial Data of SFX and predecessors include
the historical financial statements of Capstar Communications, Inc., a
predecessor of SFX ("Capstar"), and the historical financial statements of
SFX since its formation on February 26, 1992. The Summary Consolidated
Financial Data as of June 30, 1996 and for the six months ended June 30, 1996
and 1995 have been derived from the unaudited consolidated financial
statements and notes thereto of SFX which are incorporated herein by
reference. The pro forma summary data as of June 30, 1996 and for the year
ended December 31, 1995 and the six months ended June 30, 1996 are derived
from the unaudited pro forma condensed combined financial statements which,
in the opinion of SFX, reflect all adjustments necessary for a fair
presentation of the transactions for which such pro forma financial
information is given. Operating results for the six months ended June 30,
1996 are not necessarily indicative of the results that may be achieved for
the fiscal year ending December 31, 1996. The historical consolidated
financial results for SFX are not comparable from year to year because of the
acquisition and disposition of various radio stations by SFX during the
periods covered. See "Unaudited Pro Forma Condensed Combined Financial
Statements of SFX" included as Annex A.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1991 1992 1993 1994 1995
-------- -------- --------- ------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues(1) ...................... $13,442 $15,003 $ 34,233 $55,556 $76,830
Concert revenue less concert costs .. -- -- -- -- --
Station operating expenses ........... 9,105 9,624 21,555 33,956 51,039
Depreciation, amortization, duopoly
integration costs and acquisition
related costs(2) .................... 3,726 3,208 4,475 5,873 9,137
Corporate expenses ................... 726 769 1,808 2,964 3,797
Corporate expenses-non-recurring
charge(3) ........................... -- -- 13,980 -- --
Write down of broadcast rights
agreement and other(4) .............. -- -- -- -- 5,000
-------- -------- --------- -------- --------
Operating income (loss) .............. (115) 1,402 (7,585) 12,763 7,857
Other (income) loss/net .............. (124) (17) 121 (650)
Interest expense, including
amortization of deferred financing
costs ............................... 4,241 3,610 7,351 9,332 12,903
Minority interest .................... -- -- -- -- --
-------- -------- --------- -------- --------
Income (loss) before income taxes,
extraordinary item and cumulative
effect of a change in accounting
principle ........................... (4,232) (2,208) (14,919) 3,310 (4,396)
Income tax expense (benefit) ......... -- -- 1,015 1,474 --
Extraordinary loss on debt retirement -- -- 1,665 -- --
Cumulative effect of a change
in accounting principle ............. -- -- 182 -- --
Net income (loss) .................... (4,232) (2,208) (17,781) 1,836 (4,396)
Redeemable preferred stock dividends
and accretion(5) .................... 302 385 557 348 291
-------- -------- --------- -------- ---------
Net income (loss) applicable to
common stock ........................ $(4,534) $(2,593) $(18,338) $ 1,488 $(4,687)
======== ======== ========= ======== ========
Net income (loss) per share .......... $ (3.85) $ (2.20) $ (7.08) $ 0.26 $ (0.71)
======== ======== ========= ======== ========
Weighted average common
shares outstanding .................. 1,179 1,179 2,589 5,792 6,596
======== ======== ========== ======== ========
OTHER OPERATING DATA:
Broadcast Cash Flow(6) ............... $ 4,337 $ 5,379 $ 12,678 $21,600 $25,791
EBITDA (6) ........................... 3,611 4,610 10,870 18,636 21,994
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------ ---------------------------------------------------
PRO FORMA FOR PRO FORMA FOR
THE RECENT THE RECENT
ACQUISITIONS ACQUISITIONS PRO FORMA FOR
AND THE PRO FORMA FOR AND THE THE RECENT
TRANSACTIONS THE RECENT TRANSACTIONS ACQUISITIONS
(OTHER THAN ACQUISITIONS (OTHER THAN AND THE
THE MERGER) AND THE THE MERGER) TRANSACTIONS
(7) TRANSACTIONS(7) (8) (8)
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
1995 1995 1995 1996 1996 1996
-------------- -------------- --------- --------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues(1) ...................... $231,553 $254,535 $34,441 $ 47,554 $120,929 $132,438
Concert revenue less concert costs .. 7,811 7,811 -- -- 3,507 3,507
Station operating expenses ........... 159,320 172,384 23,381 33,177 79,797 86,419
Depreciation, amortization, duopoly
integration costs and acquisition
related costs(2) .................... 39,524 43,504 3,684 4,648 19,078 20,804
Corporate expenses ................... 5,747 7,000 1,779 2,790 3,743 4,369
Corporate expenses-non-recurring
charge(3) ........................... -- -- -- -- -- --
Write down of broadcast rights
agreement and other(4) .............. (3,531) (2,417) 5,000 27,489 25,609 26,155
-------------- -------------- --------- --------- -------------- --------------
Operating income (loss) .............. 38,304 41,875 597 (20,550) (3,791) (1,082)
Other (income) loss/net .............. (1,390) (1,390) (99) (2,298) (2,429) (2,429)
Interest expense, including
amortization of deferred financing
costs ............................... 65,549 65,549 6,067 9,588 32,618 32,618
Minority interest .................... 3 3 -- -- (10) (10)
-------------- -------------- --------- --------- -------------- --------------
Income (loss) before income taxes,
extraordinary item and cumulative
effect of a change in accounting
principle ........................... (25,858) (22,287) (5,371) (27,840) (33,970) (31,981)
Income tax expense (benefit) ......... -- -- (2,300) -- -- --
Extraordinary loss on debt retirement -- -- -- 15,219
Cumulative effect of a change
in accounting principle ............. -- -- -- -- -- --
Net income (loss) .................... (25,858) (22,287) (3,071) (43,059) (33,970) (31,981)
Redeemable preferred stock dividends
and accretion(5) .................... 26,456 26,456 144 967 13,209 13,209
-------------- -------------- --------- --------- -------------- --------------
Net income (loss) applicable to
common stock ........................ $(52,314) $(48,743) $(3,215) $(44,026) $(47,179) $(45,190)
============== ============== ========= ========= ============== ==============
Net income (loss) per share .......... $ (4.78) $ (3.83) $ (0.54) $ (5.91) $ (4.31) $ (3.55)
============== ============== ========= ========= ============== ==============
Weighted average common
shares outstanding .................. 10,983 12,738 5,946 7,448 10,948 12,738
============== ============== ========= ========= ============== ==============
OTHER OPERATING DATA:
Broadcast Cash Flow(6) ............... $ 80,044 $ 89,962 $11,060 $ 14,377 $ 44,639 $ 49,526
EBITDA (6) ........................... 74,297 82,962 9,281 11,587 40,896 45,157
</TABLE>
B-1
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1991 1992 1993 1994 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents $ 96 $ 657 $ 10,287 $ 3,194 $ 11,893
Current assets ........... 3,065 4,515 31,273 28,367 32,505
Total assets ............. 37,367 36,127 152,871 145,808 187,337
Long-term debt (including
current portion) ........ 38,828 39,011 81,627 81,516 81,850
Redeemable preferred stock:
Preferred stock offering -- -- -- -- --
Series A Preferred Stock 2,839 3,892 917 -- --
Series B Preferred Stock 133 -- 2,784 2,466 1,735
Series C Preferred Stock -- -- -- -- 1,550
Series D Cumulative
Convertible Preferred
Stock .................. -- -- -- -- --
Stockholders' equity .... (6,951) (9,411) 48,598 48,856 83,061
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
JUNE 30, 1996
-------------------------------------------
PRO FORMA FOR
THE PENDING
TRANSACTIONS AS PRO FORMA FOR
OF JUNE 30, THE PENDING
1996 (OTHER TRANSACTIONS
THAN THE AS OF JUNE 30,
MERGER) (8) 1996(8)
ACTUAL (UNAUDITED) (UNAUDITED)
---------- --------------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents $378,794 $ 50,189 $ 2,396
Current assets ........... 405,381 98,896 55,651
Total assets ............. 661,452 1,171,148 1,273,812
Long-term debt (including
current portion) ........ 451,170 595,101 595,101
Redeemable preferred stock:
Preferred stock offering -- 150,000 150,000
Series A Preferred Stock -- -- --
Series B Preferred Stock 1,836 1,836 1,836
Series C Preferred Stock 1,592 -- --
Series D Cumulative
Convertible Preferred
Stock .................. 149,500 149,500 149,500
Stockholders' equity .... 29,907 179,784 266,909
</TABLE>
- ------------
(1) Net revenues on a pro forma basis includes $3,584,000 and $2,770,000 of
fees from Triathlon Broadcasting Company ("Triathlon") for the year
ended December 31, 1995 and six months ended June 30, 1996,
respectively, that would have been received by SFX had the SCMC
Termination Agreement been in effect as of January 1, 1995. Future fees
may be lesser or greater based upon future acquisition and financing
activities of Triathlon.
(2) Includes $1,400,000 of duopoly integration costs during the year ended
December 31, 1995.
(3) Represents the 1993 non-cash non-recurring charge related to the
valuation of the common stock issued to SFX's founders at SFX's initial
public offering in September 1993 and certain pooling costs related to
the merger of Capstar with and into a subsidiary of SFX.
(4) Amounts for the six months ended June 30, 1996 reflect non-recurring
charges related to the Hicks Agreement, Armstrong Agreement and the
SCMC Termination Agreement.
(5) Includes dividends on preferred stock which SFX redeemed in 1993,
accretion on outstanding redeemable preferred stock and assumed
dividends on the SFX Series D Preferred Shares (as defined herein).
(6) Broadcast Cash Flow means net revenues (including, where applicable,
fees earned on a pro forma basis by SFX pursuant to the SCMC
Termination Agreement, and concert revenues less concert costs of
Delsener/ Slater) less station operating expenses. For the year ended
December 31, 1995, on a pro forma basis after giving effect to the
Recent Acquisitions and the Transaction (other than the Merger) and the
Recent Acquisitions and the Transactions, Broadcast Cash Flow included
approximately $11.4 million attributable to fees earned pursuant to the
SCMC Termination Agreement and the operations of Delsener/Slater. For
the six months ended June 30, 1996, on a pro forma basis after giving
effect to the Recent Acquisitions and the Transaction (other than the
Merger) and the Recent Acquisitions and the Transactions, Broadcast
Cash Flow included approximately $6.3 million attributable to fees
earned pursuant to the SCMC Termination Agreement and the operations of
Delsener/Slater. EBITDA means net income (loss) before (i)
extraordinary items, (ii) provisions for income taxes, (iii) interest
(income) expense, (iv) other (income) expense, (v) cumulative effects
of changes in accounting principles, (vi) depreciation, amortization,
duopoly integration costs and acquisition related costs, and (vii)
non-recurring charges. The difference between Broadcast Cash Flow and
EBITDA is that EBITDA includes corporate expenses. Although Broadcast
Cash Flow and EBITDA are not measures of performance calculated in
accordance with GAAP, SFX believes that Broadcast Cash Flow and EBITDA
are accepted by the broadcasting industry as generally recognized
measures of performance and are used by analysts who report publicly on
the performance of broadcasting companies. In addition, EBITDA is the
basis for determining compliance with several covenants in certain of
SFX's debt instruments. Nevertheless, these measures should
B-2
<PAGE>
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 SFX's operating performance or liquidity
which is calculated in accordance with GAAP.
(7) The Unaudited Pro Forma Statement of Operations Data for the six months
ended June 30, 1996 and the year ended December 31, 1995 are presented
as if SFX had completed the Recent Acquisitions and the Transactions as
of January 1, 1995. The terms "Recent Acquisitions" and "Transactions"
are defined in the Glossary attached as Annex A to the Joint Proxy
Statement/Prospectus.
(8) The Unaudited Pro Forma Balance Sheet Data at June 30, 1996 is
presented as if SFX had completed as of June 30, 1996 the Pending
Transactions As Of June 30, 1996. The term "Pending Transactions As Of
June 30, 1996" is defined in the "Unaudited Pro Forma Condensed
Combined Financial Statements of SFX" and in the Glossary attached as
Annex A to the Joint Proxy Statement/Prospectus.
B-3
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical per share data and
combined per share data for the SFX Shares and the MMR Shares on an unaudited
pro forma basis after giving effect to the Merger as a purchase, assuming
that (i) the Exchange Ratio is 0.2842 (the ratio calculated as if the SFX
Class A Stock Price was $43.9875 per share), (ii) approximately 1,790,000 SFX
Class A Shares and SFX Class B Shares are issued in the Merger based on the
assumption that all MMR Class A Warrants are exercised prior to the Merger
and that all MMR Class B Warrants are exchanged for MMR Class A Shares prior
to the Merger and (iii) approximately 3,500,000 SFX Class A Shares are issued
in the contemplated financing of the Pending Acquisitions. The economic
rights of the different classes of the SFX Shares are identical and the
economic rights of the different classes of the MMR Shares are identical.
This data should be read in conjunction with the selected historical
financial data, the supplementary financial information regarding MMR, the
pro forma financial statements and the separate historical financial
statements of SFX and MMR and notes thereto, included elsewhere or
incorporated by reference in the Joint Proxy Statement/Prospectus. The
unaudited pro forma combined financial data are not necessarily indicative of
the operating results that would have been achieved had the transaction been
in effect as of the beginning of the periods presented and should not be
construed as representative of future operations.
<TABLE>
<CAPTION>
SFX MMR
---------------------------- --------------------------
PRO FORMA FOR
THE EQUIVALENT
HISTORICAL TRANSACTIONS HISTORICAL PRO FORMA
------------ -------------- ------------ ------------
<S> <C> <C> <C> <C>
Net income (loss) per share outstanding
for the year ended December 31, 1995 . $(0.71) $(3.83) $(0.48) $(0.99)
Net income (loss) per share outstanding
for the six months ended
June 30, 1996 ......................... (5.91) (3.55) (1.89) (1.13)
Book value per common share
as of June 30, 1996 ................... $ 4.10 $19.51 $ 2.40 $ 3.66
</TABLE>
B-4
<PAGE>
ANNEX C
INDEX TO ADDITIONAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
THE SECRET STATIONS: CLEVELAND, INDIANAPOLIS, PITTSBURGH
Report of Independent Public Accountants F-2
Combined Balance Sheets as of June 30, 1996 and 1995 F-3
Combined Statements of Operations for the year ended June 30, 1996 and for the
eleven months ended June 30, 1995 F-4
Combined Statements of Cash Flows for the year ended June 30, 1996 and for the
eleven months ended June 30, 1995 F-5
Notes to Combined Financial Statements F-6
KTXQ-FM AND KRRW-FM (DIVISIONS OF CBS INC.)
Report of Independent Auditors F-11
Combined Balance Sheet as of December 31, 1995 F-12
Combined Statement of Income and Divisional Equity for the year ended
December 31, 1995 F-13
Combined Statement of Cash Flows for the year ended December 31, 1995 F-14
Notes to Combined Financial Statements F-15
Condensed Combined Balance Sheet (unaudited) --June 30, 1996 F-18
Condensed Combined Statement of Income and Divisional Equity (unaudited) --six
months ended June 30, 1996 F-19
Condensed Combined Statement of Cash Flows (unaudited) --six months ended June
30, 1996 F-20
Notes to Condensed Combined Financial Statements (unaudited) F-21
TEXAS COAST BROADCASTERS, INC.
Independent Auditors' Report F-22
Balance Sheets as of December 31, 1995 and 1994 F-23
Statements of Income and Retained Earnings for the years ended December 31, 1995
and 1994 F-24
Statements of Cash Flows for the years ended December 31, 1995 and 1994 F-25
Notes to Financial Statements F-26
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Secret Communications Limited Partnership:
We have audited the accompanying combined balance sheets of THE SECRET
STATIONS: CLEVELAND, INDIANAPOLIS, PITTSBURGH, as further described in Note
1, as of June 30, 1996, and June 30, 1995, and the related combined
statements of operations and cash flows for the year ended June 30, 1996 and
the eleven month period ended June 30, 1995. These financial statements are
the responsibility of the Station'|Als management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the accompanying combined financial statements referred to
above present fairly, in all material respects, the financial position of THE
SECRET STATIONS: CLEVELAND, INDIANAPOLIS, PITTSBURGH as of June 30, 1996, and
June 30, 1995, and the results of their operations and their cash flows for
the year ended June 30, 1996 and the eleven month period ended June 30, 1995,
in conformity with generally accepted accounting principles.
Arthur Anderson LLP
Chicago, Illinois,
October 28, 1996
F-2
<PAGE>
THE SECRET STATIONS: CLEVELAND, INDIANAPOLIS, PITTSBURGH
COMBINED BALANCE SHEETS
AS OF JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS
- -----------------------------------------------------------
1996 1995
------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ................................. $ 390,373 $ 271,862
Accounts receivable (net of allowance for doubtful
accounts
of $274,311 and $308,083 for 1996 and 1995, respectively) 8,839,769 8,403,018
Trade receivables ......................................... 339,816 294,190
Prepaid expenses and other assets ......................... 471,175 384,590
------------- -------------
Total current assets ..................................... 10,041,133 9,353,660
------------- -------------
PROPERTY AND EQUIPMENT, net (note 3) ....................... 5,994,247 5,558,988
INTANGIBLE ASSETS, net (note 4) ............................ 57,457,846 47,124,724
OTHER ASSETS ............................................... 257,545 288,770
------------- -------------
TOTAL ASSETS ............................................... $73,750,771 $62,326,142
============= =============
LIABILITIES AND PARTNERS' CAPITAL
- -----------------------------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses ..................... $ 2,721,888 $ 2,379,736
Trade payables ............................................ 240,135 237,796
Interest payable .......................................... 282,629 379,730
Current maturities of long-term debt ...................... 3,746,218 0
------------- -------------
Total current liabilities ................................ 6,990,870 2,997,262
------------- -------------
LONG-TERM DEBT, less current maturities (note 5) .......... 43,247,681 38,134,680
COMMITMENTS AND CONTINGENCIES (note 6) .....................
PARTNERS' CAPITAL AND STATION EQUITY:
Balance, beginning of period .............................. 21,194,200 0
Net amounts transferred to central office ................. 2,598,555 (8,828,048)
Contributed capital ....................................... (3,975,956) 27,377,402
Net income for the period ................................. 3,695,421 2,644,846
------------- -------------
Balance, end of period .................................... 23,512,220 21,194,200
------------- -------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL .................... $73,750,771 $62,326,142
============= =============
</TABLE>
The accompanying notes to combined financial statements are an integral part
of these balance sheets.
F-3
<PAGE>
THE SECRET STATIONS: CLEVELAND, INDIANAPOLIS, PITTSBURGH
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1996
AND FOR THE ELEVEN MONTHS ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
GROSS REVENUES ..................................... $44,233,662 $38,774,517
Less: agency commissions .......................... 5,374,238 4,939,852
------------- -------------
Net revenues ..................................... 38,859,424 33,834,665
------------- -------------
OPERATING EXPENSES:
Station operating expenses excluding depreciation
and amortization ................................. 25,657,225 21,256,349
Depreciation and amortization ..................... 4,720,615 5,213,252
Central office general and administrative (note 7) 1,881,909 1,722,932
------------- -------------
Operating expenses ............................... 32,259,749 28,192,533
------------- -------------
OPERATING INCOME ................................... 6,599,675 5,642,132
NONOPERATING EXPENSE:
Interest expense (note 5) ......................... 2,858,549 2,968,509
------------- -------------
Non operating expense ............................ 2,858,549 2,968,509
------------- -------------
Income before taxes ................................ 3,741,126 2,673,623
Provision for city income taxes (note 2) .......... 45,705 28,777
------------- -------------
Net income ......................................... $ 3,695,421 $ 2,644,846
============= =============
</TABLE>
The accompanying notes to combined financial statements are an integral part
of these statements.
F-4
<PAGE>
THE SECRET STATIONS: CLEVELAND, INDIANAPOLIS, PITTSBURGH
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1996
AND FOR THE ELEVEN MONTHS ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ............................................... $ 3,695,421 $ 2,644,846
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ........................... 4,720,615 5,213,252
Loss (gain) on sale of equipment ........................ 11,510 (19,464)
Changes in assets and liabilities:
(Increase) in receivables, net ......................... (482,377) (1,126,237)
(Increase) decrease in prepaid expenses and other
assets ................................................... (55,360) 47,415
Increase in payables and accrued expenses .............. 344,491 1,624,879
(Decrease) increase in interest payable ................ (97,101) 379,730
-------------- --------------
Net cash provided by operating activities ........... 8,137,199 8,764,421
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of radio stations ............................ (14,044,983) (57,430,078)
Acquisition of working capital ........................... -- (7,299,093)
Capital expenditures ..................................... (1,462,523) (538,897)
Proceeds from sale of equipment .......................... 7,000 91,475
-------------- --------------
Net cash used in investing activities ................ (15,500,506) (65,176,593)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in amounts transferred to central office ..... 2,598,555 (8,828,048)
Net (payments) borrowings of long-term debt .............. 8,859,219 38,134,680
Capital (distributions) contributions .................... (3,975,956) 27,377,402
-------------- --------------
Net cash provided by financing activities ........... 7,481,818 56,684,034
-------------- --------------
NET INCREASE IN CASH AND CASH EQUIVALENTS ................. 118,511 271,862
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ......... 271,862 --
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................ $ 390,373 $ 271,862
============== ==============
</TABLE>
The accompanying notes to combined financial statements are an integral part
of these statements.
F-5
<PAGE>
THE SECRET STATIONS: CLEVELAND, INDIANAPOLIS, PITTSBURGH
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) BUSINESS AND BASIS OF PRESENTATION:
Secret Communications Limited Partnership ("Secret") owns, among others,
the following radio stations: WLTF-FM/WTAM-AM, licensed to Cleveland, Ohio;
WFBQ-FM/WRZX-FM/WNDE-AM licensed to Indianapolis, Indiana; and
WDVE-FM/WXDX-FM, licensed to Pittsburgh, Pennsylvania (collectively, the
"Stations"). The accompanying combined financial statements include the
accounts of the Stations after eliminating all significant intercompany
accounts and transactions.
Secret was formed in 1994 and on August 1, 1994, the general partners of
Secret contributed substantially all of the assets and debt of several radio
stations to Secret. The Stations were among those included in this initial
contribution with the exception of WXDX-FM, which was purchased by Secret in
January 1996.
As further described in Note 9, Secret has entered into an agreement to
sell substantially all of the assets of the Stations to SFX Broadcasting,
Inc. ("SFX").
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) Cash Equivalents
Cash equivalents include overnight repurchase agreements backed by United
States securities.
(b) Trade Agreements
The Stations have entered into trade agreements which provide for the
exchange of advertising time for merchandise or services and are recorded at
the estimated fair market value of the goods or services to be received.
Trade receivables and trade payables represent the outstanding obligations of
the parties to the trade agreements as of the end of the year. Trade revenues
are recognized as the advertisements are broadcast. Trade expenses are
recognized as the services or merchandise is used.
(c) Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated
useful lives of the assets. Repair and maintenance costs are charged to
expense when incurred.
(d) Intangible Assets
Intangible assets are recorded at their appraised values and are amortized
using the straight-line method over estimated periods of benefit up to 40
years. Should events or circumstances occur subsequent to the acquisition of
a station which bring into question the realizable value or impairment of the
related goodwill and intangibles, Secret will evaluate the remaining useful
life and balance of intangibles and make appropriate adjustments. Secret's
principal considerations in determining impairment include the strategic
benefit to Secret of the particular station and the current and expected
future operating income and cash flow levels of that particular station.
(e) Revenue Recognition
Advertising revenues are recognized as advertisements are broadcast.
(g) Income Taxes
The accompanying combined financial statements do not reflect provisions
for federal income taxes which are reported by the partners of Secret. The
income taxes reported in the accompanying statements of operations are
Cleveland city income taxes paid by Secret instead of the partners.
F-6
<PAGE>
THE SECRET STATIONS: CLEVELAND, INDIANAPOLIS, PITTSBURGH
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
(h) Statement of Cash Flows
Cash of $2,868,057 and $2,588,779 was paid for interest during the year
ended June 30, 1996, and for the eleven months ended June 30, 1995,
respectively. Cash of $22,000 and $48,500 was paid for city income taxes
during the year ended June 30, 1996, and for the eleven month period ended
June 30, 1995, respectively.
(i) Use of Estimates
The preparation of these combined financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those
estimates.
(3) PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following at June 30, 1996, and
1995:
<TABLE>
<CAPTION>
ESTIMATED
1996 1995 USEFUL LIVES
------------- ------------- --------------
<S> <C> <C> <C>
Land ................................. $ 494,862 $ 494,743 --
Buildings and leasehold improvements 2,460,052 2,022,116 5-31.5 years
Broadcasting equipment ............... 4,349,516 3,633,636 5-15 years
Furniture and fixtures ............... 864,891 743,352 5 years
Business equipment ................... 398,513 270,150 5 years
Vehicles ............................. 300,818 227,339 5 years
------------- -------------
8,866,652 7,391,336
Less: Accumulated depreciation ...... (2,874,405) (1,832,348)
------------- -------------
$ 5,994,247 $ 5,558,988
============= =============
</TABLE>
(4) INTANGIBLE ASSETS:
Intangible assets consisted of the following at June 30, 1996, and 1995:
<TABLE>
<CAPTION>
ESTIMATED
1996 1995 USEFUL LIVES
-------------- ------------- --------------
<S> <C> <C> <C>
FCC Licenses ................... $ 54,454,944 $40,820,598 25 years
Network affiliations ........... 6,334,710 6,334,710 10-25 years
Advertiser relationships ...... 4,665,873 4,410,873 7 years
Noncompete agreement ........... 3,340,279 3,240,279 5 years
Goodwill ....................... 1,059,687 1,045,200 40 years
-------------- -------------
69,855,493 55,851,660
Less: Accumulated amortization (12,397,647) (8,726,936)
-------------- -------------
$ 57,457,846 $47,124,724
============== =============
</TABLE>
(5) LONG-TERM DEBT
Long-term debt consisted of a senior reducing revolving credit facility at
June 30, 1996, and 1995, which was used to recapitalize debt and to fund
working capital for Secret at August 1, 1994. The debt was allocated to the
Stations based on the ratio of the Station's|Al fair market value as compared
to the total
F-7
<PAGE>
THE SECRET STATIONS: CLEVELAND, INDIANAPOLIS, PITTSBURGH
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(5) LONG-TERM DEBT (Continued)
fair market value of Secret at August 1, 1994. Additional borrowings and
repayments were allocated based on the same ratio if these borrowings and
repayments were related to the general operations of all the Secret stations.
Interest expense for the year ended June 30, 1996, and the eleven month
period ended June 30, 1995, was allocated to the Stations based on the same
ratio.
Borrowings under the revolving loans bear interest, at the option of
Secret at LIBOR or prime, plus a margin. The margin over LIBOR or prime
varies from time to time depending on Secret's ratio of debt to cash flow as
defined in the agreement. The interest rate on the reducing revolver at June
30, 1996, ranged from 6.49% to 8.25%, with a weighted interest rate of 6.54%.
Amounts outstanding under the reducing revolver are payable in quarterly
installments beginning as early as June 30, 1995, and ending December 31,
2001. The amounts payable depend on the amounts then outstanding and
correspondingly reduce the amount available to be borrowed. Based on debt
outstanding during the period from August 1, 1994, through June 30, 1996,
there were no amortization payments required to be made. Amounts outstanding
under the revolving credit/term loan convert on June 30, 1997, to a term loan
payable in quarterly installments ending December 31, 2001. In addition to
scheduled amortization, Secret is required to repay revolving credit
borrowings each calendar year of up to 50% of the excess cash flow for that
calendar year as defined in the agreement, commencing with the year ending
December 31, 1995. Based on financial ratios at December 31, 1995, there is
no excess cash flow repayment due in 1996.
The senior credit facility limits indebtedness, capital expenditures, and
payment of distributions and requires certain financial ratios to be
maintained among other restrictions. At June 30, 1996, Secret was in
compliance with all provisions of its credit agreement. The senior credit
facility is secured by substantially all of the assets of Secret.
The future maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 ......... $ 3,746,218
1998 ......... 7,677,861
1999 ......... 8,321,742
2000 ......... 9,683,901
2001 ......... 11,397,266
Thereafter .. 6,166,911
------------
$46,993,899
============
</TABLE>
The fair value of the debt is equal to its carrying value.
F-8
<PAGE>
THE SECRET STATIONS: CLEVELAND, INDIANAPOLIS, PITTSBURGH
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(6) COMMITMENTS AND CONTINGENCIES:
The Stations have entered into operating leases with initial or remaining
non-cancelable terms in excess of one year. The future minimum rental
payments required for all such leases as of June 30, 1996, are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
JUNE 30,
- --------------------------------
<S> <C>
1997 ............................ $ 563,560
1998 ............................ 509,252
1999 ............................ 469,384
2000 ............................ 448,204
2001 ............................ 377,049
Future years .................... 900,144
-----------
Total minimum payments required $3,267,593
===========
</TABLE>
Rent expense was $605,266 and $500,683 for the year ended June 30, 1996,
and for the eleven month period ended June 30, 1995, respectively.
(7) RELATED PARTY TRANSACTIONS:
Central office general and administrative expenses represent an allocation
of charges incurred by Secret's headquarters for various administrative and
management services, including, but not limited to, salaries, bonuses,
management fees and service fees. The charges are allocated to the Stations
based on the total number of markets in which Secret owns stations. Amounts
charged to the Stations do not necessarily represent the amounts that would
have been incurred had the Stations operated as an unaffiliated entity.
However, management believes that these charges result in a reasonable level
of general and administrative expenses for the Stations.
Included in the central office general and administrative expenses are
fees charged to Secret by the two general partners for management and
consulting services provided to Secret. In addition, Lane Industries, Inc., a
related party to the administrative general partner of Secret, provides
certain tax, legal, financial, risk management and employee benefits services
for an annual fee. The amount allocated to the Stations for all such services
provided by the general partners amounted to $526,551 and $461,334 for the
year ended June 30, 1996, and the eleven months ended June 30, 1995,
respectively.
As described in Note 5, a portion of Secret's senior debt and interest
expense has been allocated to the Stations as of June 30, 1996, and 1995, and
for the periods then ended.
The Partners' Capital and Station Equity section of the Balance Sheet
consists of intercompany accounts, capital contributed by the partners and
retained earnings. These accounts reflect the original acquisition of the
Stations and the activity between the Stations and Secret, such as cash
transfers and expense allocations.
(8) DEFERRED SAVINGS PLAN:
Secret maintains a 401(k) savings plan in which the employees of the
Stations participate. Employees must have reached age 21 and have completed
one year of consecutive service to participate in the plan. Employees may
contribute up to 15% of their salaries in accordance with IRS limitations.
Secret matches employee contributions at a rate of 75% (up to 6%) of the
employees salary. Secret's contribution to the plan related to the Stations
was $277,570 and $284,634 for the year ended June 30, 1996, and for the
eleven month period ended June 30, 1995, respectively.
F-9
<PAGE>
THE SECRET STATIONS: CLEVELAND, INDIANAPOLIS, PITTSBURGH
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(9) SUBSEQUENT EVENT:
On October 15, 1996, Secret entered into a definitive agreement to sell
substantially all of the assets of the Stations and substantially all of the
assets of WDSY-FM/WJJJ-FM, serving Pittsburgh, Pennsylvania, to SFX. The
assets to be sold include the fixed assets and the intangible assets. In
addition, Secret will enter into a two-year noncompete agreement covering the
Stations' markets. In consideration for the assets of the Stations and
WDSY-FM/WJJJ-FM and for the noncompete agreement, SFX will pay Secret
$300,000,000 on the closing date. The sale of the Stations and
WDSY-FM/WJJJ-FM is subject to regulatory approval.
F-10
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
CBS, Inc.
We have audited the accompanying combined balance sheet of KTXQ-FM and
KRRW-FM (divisions of CBS, Inc.) (the "Stations") as of December 31, 1995,
and the related statements of income and divisional equity and cash flows for
the year then ended. These financial statements are the responsibility of the
Stations management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of KTXQ-FM and KRRW-FM
(divisions of CBS, Inc.) at December 31, 1995, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
Ernst & Young LLP
New York, New York
October 4, 1996
F-11
<PAGE>
KTXQ-FM AND KRRW-FM
(DIVISIONS OF CBS, INC.)
COMBINED BALANCE SHEET
DECEMBER 31, 1995
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Current assets:
Cash .................................................................. $ 67,000
Accounts receivable, net of allowance for doubtful accounts of $56,000 1,680,000
Prepaids and other .................................................... 95,000
-------------
Total current assets ................................................ 1,842,000
Property and equipment, net ............................................ 1,862,000
Intangible assets:
FCC licenses .......................................................... 28,300,000
Less accumulated amortization ......................................... (68,000)
-------------
Total assets ......................................................... $31,936,000
=============
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable --trade .............................................. $ 32,000
Accrued salaries and wages ............................................ 60,000
Accrued taxes ......................................................... 30,000
Other accrued expenses ................................................ 39,000
Deferred income ....................................................... 35,000
-------------
Total current liabilities ............................................ 196,000
Division equity ........................................................ 31,740,000
-------------
Total liabilities and equity ......................................... $31,936,000
=============
</TABLE>
See accompanying notes.
F-12
<PAGE>
KTXQ-FM AND KRRW-FM
(DIVISIONS OF CBS, INC.)
COMBINED STATEMENT OF INCOME AND DIVISIONAL EQUITY
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Net revenues ......................... $ 8,534,000
Operating expenses:
Station operating expenses .......... 7,254,000
Corporate expenses .................. 214,000
Depreciation and amortization ...... 1,129,000
-------------
Total operating expenses ........... 8,597,000
-------------
Loss from operations ................. (63,000)
Other (income) ....................... (152,000)
Income before taxes .................. 89,000
Federal income taxes ................. (31,000)
-------------
Net income ........................... 58,000
Division equity, beginning of period 32,813,000
Net transfers to parent .............. (1,131,000)
-------------
Division equity, end of period ...... $31,740,000
=============
</TABLE>
See accompanying notes.
F-13
<PAGE>
KTXQ-FM AND KRRW-FM
(DIVISIONS OF CBS, INC.)
COMBINED STATEMENT OF CASH FLOWS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
OPERATING ACTIVITIES
Net income ....................................................................... $ 58,000
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization .................................................. 1,129,000
Loss on sale of property and equipment ......................................... 22,000
Changes in assets and liabilities:
Decrease in accounts receivable ............................................... 126,000
Decrease in prepaid expenses and other assets ................................. 35,000
Decrease in accounts payable and accrued expenses ............................. (91,000)
-------------
Net cash provided by operating activities ........................................ 1,279,000
INVESTING ACTIVITIES
Purchases of property and equipment .............................................. (105,000)
Net cash used in investing activities ............................................ (105,000)
FINANCING ACTIVITIES
Net transfers from (to) parent ................................................... (1,131,000)
-------------
Net cash used in financing activities ............................................ (1,131,000)
Net increase in cash ............................................................. 43,000
Cash at beginning of period ...................................................... 24,000
-------------
Cash at end of period ............................................................ $ 67,000
=============
</TABLE>
See accompanying notes.
F-14
<PAGE>
KTXQ-FM AND KRRW-FM
(DIVISIONS OF CBS, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. ORGANIZATION AND BASIS OF PRESENTATION
KTXQ and KRRW (the "Stations") are radio stations located in Dallas,
Texas, owned and operated by CBS Radio Station Group, a division of CBS, Inc.
In November 1995, CBS, Inc. was acquired by Westinghouse Electric
Corporation (Westinghouse). For financial statement purposes, the acquisition
was accounted for using the purchase method, with the aggregate purchase
price allocated to the tangible and identifiable intangible assets based upon
current estimated fair market values. The preliminary allocation resulted in
a new basis of accounting for the Stations, including an decrease in the
carrying amount of broadcast license of approximately $592,000, and an
increase in the carrying amount of property and equipment of approximately
$896,000. There were no other adjustments made to the carrying amount of
assets or liabilities as a result of the acquisition. The results of
operations of the Stations from the date of acquisition through December 31,
1995 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Net revenues ................... $ 547,000
Operating expenses:
Station operating expenses ... 532,000
Corporate expenses ............ 18,000
Depreciation and amortization 102,000
-----------
Total operating expenses .... 652,000
-----------
Operating loss ................. $(105,000)
===========
</TABLE>
The purchase price allocation is preliminary and is subject to change.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONCENTRATION OF CREDIT RISK
The Stations revenue and accounts receivable primarily relate to
advertising of products and services within the radio station's broadcast
area in Dallas, Texas. Credit is extended based on an evaluation of the
customers financial condition, and generally, collateral is not required.
Credit losses are provided for in the financial statements and consistently
have been within managements expectations.
PROPERTY AND EQUIPMENT AND BROADCAST LICENSE AND GOODWILL
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are amortized over the shorter of the lease term or
estimated useful lives of the assets. Broadcast license and goodwill are
amortized using the straight-line method over 40 years.
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which
requires impairment losses to be recognized for long-lived assets used in
operations when indicators of impairment are present and the undiscounted
cash flows are not sufficient to recover the assets carrying amount. The
adoption of Statement 121 in 1996 is not expected to have a material effect
on the financial statements.
FEDERAL INCOME TAXES
The Stations are included in the consolidated federal income tax return of
CBS, Inc. or Westinghouse. For purposes of the accompanying financial
statements, income taxes have been calculated on a
F-15
<PAGE>
KTXQ-FM AND KRRW-FM
(DIVISIONS OF CBS, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
separate company basis. The difference between income taxes computed on
income before taxes at the statutory federal rate and the provision for
income taxes for 1995 relates primarily to nondeductible amortization for
federal income tax purposes. Deferred taxes are included in the division
equity account.
BARTER TRANSACTIONS
The Stations barter unsold advertising time for products and services.
Such transactions are recorded in the financial statements at the estimated
fair value of the products or services received. Barter revenue is recorded
when commercials are broadcast and related expenses are recorded when the
bartered product or service is used. For the year ended December 31, 1995,
the Stations recorded barter revenue of approximately $251,000 and barter
expense of approximately $233,000.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. COMMITMENTS
The Stations lease office space and various equipment under operating
leases. Total rent expense was $311,000 for the year ended December 31, 1995.
Future minimum payments in the aggregate for all noncancelable operating
leases with initial terms of one year or more consist of the following at
December 31, 1995:
<TABLE>
<CAPTION>
<S> <C>
1996 ........................... $ 266,000
1997 ........................... 329,000
1998 ........................... 312,000
1999 ........................... 307,000
2000 ........................... 308,000
-----------
Total minimum lease payments $1,522,000
===========
</TABLE>
4. EMPLOYEE BENEFIT PLANS
Employees of the Stations who elect to participate and who have met
certain eligibility requirements are covered by the employee benefit plans
offered by CBS, Inc., including medical, disability and dental insurance, a
defined contribution plan (i.e., an employee savings plan), and a defined
pension plan. Under the defined contribution plan, employees may contribute
up to 12.5% of their annual compensation subject to Internal Revenue Code
limitations. The stations recorded expenses of $516,000 in 1995 related to
benefits provided to employees under the benefit plans. In addition, the
Stations paid approximately $12,000 in 1995 for plan administration costs.
F-16
<PAGE>
KTXQ-FM AND KRRW-FM
(DIVISIONS OF CBS, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
5. RELATED PARTY TRANSACTIONS
CBS, Inc. provides certain services and pays certain costs related to the
operations of the Stations, including but not limited to, benefits
administration, payroll services, legal services and data processing charges.
Corporate expenses charged to the Stations for the year ended December 31,
1995 (excluding the benefit expenses in Note 4) were $214,000.
6. SUBSEQUENT EVENT
In May 1996, CBS, Inc. entered into an agreement to exchange certain
assets of the Stations for certain assets of radio station WHFS, Washington,
D.C., owned by SFX Broadcasting, Inc. The transaction is expected to be
accounted for as a like-kind exchange of assets under the provisions of the
Internal Revenue Code and be substantially tax free and accounted for as a
non-monetary transaction for financial statement purposes.
F-17
<PAGE>
KTXQ-FM AND KRRW-FM
(DIVISIONS OF CBS, INC.)
CONDENSED COMBINED BALANCE SHEET (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets:
Accounts receivable, net of allowance for doubtful accounts of
$47,000 .............................................................. $ 2,458,000
Prepaids and other ................................................... 253,000
-------------
Total current assets ................................................ 2,711,000
Property and equipment, net ........................................... 1,703,000
Intangible assets:
FCC licenses ......................................................... 28,300,000
Less accumulated amortization ........................................ (422,000)
-------------
Total assets ........................................................ $32,292,000
=============
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable --trade ............................................. $ 28,000
Accrued salaries and wages ........................................... 90,000
Accrued taxes ........................................................ 423,000
Other accrued expenses ............................................... 134,000
-------------
Total current liabilities ........................................... 675,000
Division equity ....................................................... 31,617,000
-------------
Total liabilities and equity ........................................ $32,292,000
=============
</TABLE>
See accompanying notes.
F-18
<PAGE>
KTXQ-FM AND KRRW-FM
(DIVISIONS OF CBS, INC.)
CONDENSED COMBINED STATEMENT OF INCOME AND DIVISIONAL EQUITY (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
<S> <C>
Net revenues ........................ $ 4,568,000
Operating expenses:
Station operating expenses ......... 3,318,000
Depreciation and amortization ..... 531,000
------------
Total operating expenses .......... 3,721,000
------------
Income from operations .............. 719,000
Other (income) ...................... (74,000)
Income before taxes ................. 793,000
Federal income taxes ................ (423,000)
------------
Net income .......................... 370,000
Division equity, beginning of period 31,740,000
Net transfers to parent ............. (493,000)
------------
Division equity, end of period ..... $31,617,000
============
</TABLE>
See accompanying notes.
F-19
<PAGE>
KTXQ-FM AND KRRW-FM
(DIVISIONS OF CBS, INC.)
CONDENSED COMBINED STATEMENT OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
<S> <C>
Net cash provided by operating activities $ 444,000
INVESTING ACTIVITIES
Purchase of property and equipment ....... (18,000)
-----------
Net cash provided by investing activities (18,000)
FINANCING ACTIVITIES
Net transfers from (to) parent ............ (493,000)
-----------
Net cash used in financing activities .... (493,000)
Net decrease in cash ...................... (67,000)
Cash at beginning of period ............... 67,000
-----------
Cash at end of period ..................... $ --
===========
</TABLE>
See accompanying notes.
F-20
<PAGE>
KTXQ-FM AND KRRW-FM
(DIVISIONS OF CBS, INC.)
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1996
1. BASIS OF PRESENTATION
The condensed combined unaudited financial statements included herein have
been prepared by KTXQ and KRRW (the "Stations") pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. These condensed
combined financial statements should be read in conjunction with the audited
financial statements and notes thereto of the Stations for the year ended
December 31, 1995.
The financial information included herein reflects all adjustments
(consisting of normal recurring adjustments) except for the allocation of
corporate expenses which are provided by Westinghouse Electric Corporation
only on an annual basis. The adjustments are, in the opinion of management,
necessary to a fair presentation of the results for interim periods. The
results of operations for the six month period ended June 30, 1996 are not
necessarily indicative of the results to be expected for the full year.
2. PENDING TRANSACTION
In May 1996, CBS, Inc. entered into an agreement to exchange certain
assets of the Stations for certain assets of radio station WHFS, Washington,
D.C., owned by SFX Broadcasting, Inc. The transaction is expected to be
accounted for as a like-kind exchange of assets under the provisions of the
Internal Revenue Code and be substantially tax free and accounted for as a
non-monetary transaction for financial statement purposes.
F-21
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
of Texas Coast Broadcasters, Inc.:
We have audited the accompanying balance sheets of Texas Coast Broadcasters,
Inc. as of December 31, 1995 and 1994, and the related statements of income
and retained earnings, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Texas Coast Broadcasters,
Inc. as of December 31, 1995 and 1994, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ Mohle, Adams, Till, Guidry & Wallace LLP
Certified Public Accountants
March 6, 1996
F-22
<PAGE>
TEXAS COAST BROADCASTERS, INC.
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents ....................................... $ 867,722 $1,511,912
Accounts receivable --trade (less allowance for doubtful
accounts of $38,100 and $40,000) ............................... 810,778 732,500
Other current assets ............................................ 42,781 31,790
Short-term investments (Note 2) ................................. -- 50,207
Environmental escrow account (Note 5) ........................... 500,000 --
------------ ------------
Total current assets .......................................... 2,221,281 2,326,409
Investments (Note 2) ............................................ 472,646 116,318
Property and equipment (Note 3) ................................. 192,924 240,250
------------ ------------
Total assets .................................................. $2,886,851 $2,682,977
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ........................... $ 244,361 $ 209,540
Deferred income taxes (Note 4) .................................. 27,059 24,640
------------ ------------
Total current liabilities ..................................... 271,420 234,180
------------ ------------
Shareholders' equity:
Common stock--par $10, 100,000 shares authorized, ...............
10,000 shares issued and outstanding ............................ $ 100,000 $ 100,000
Additional paid in capital ...................................... 111,153 111,153
Retained earnings ............................................... 2,404,278 2,237,644
------------ ------------
Total shareholders' equity .................................... 2,615,431 2,448,797
------------ ------------
Total liabilities and shareholders' equity .................... $2,886,851 $2,682,977
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-23
<PAGE>
TEXAS COAST BROADCASTERS, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Revenues ................................ $4,538,630 $4,871,684
Less agency commissions ................. 458,072 563,482
------------ ------------
Net revenues .......................... 4,080,558 4,308,202
Station operating expenses .............. 2,981,120 2,853,213
Depreciation ............................ 52,618 78,190
------------ ------------
Total operating expenses .............. 3,033,738 2,931,403
------------ ------------
Operating income ........................ 1,046,820 1,376,799
Other Income ............................ 58,137 38,652
------------ ------------
Income before income taxes ............ 1,104,957 1,415,451
Income taxes (Note 4) ................... 48,323 62,611
------------ ------------
Net income ............................ $1,056,634 $1,352,840
============ ============
Retained earnings at beginning of period $2,237,644 $1,814,804
Net income .............................. 1,056,634 1,352,840
Dividends paid .......................... (890,000) (930,000)
------------ ------------
Retained earnings at end of period ..... $2,404,278 $2,237,644
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-24
<PAGE>
TEXAS COAST BROADCASTERS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Operating Activities:
Net income ................................................ $1,056,634 $1,352,840
Adjustments to reconcile net income to net cash provided
by operating activities ..................................
Amortization of zero coupon bond interest ............... (3,608) (3,765)
Depreciation ............................................ 52,618 78,190
Gain on sale of investments ............................. (3,929) --
Changes in assets and liabilities:
Increase in receivables ................................ (78,278) 33,925
Increase in other current assets ....................... (12,543) (1,768)
Increase in accounts payable and accrued expenses ..... 34,821 (13,755)
Increase in deferred income taxes ...................... 2,419 (26)
------------ ------------
Net cash provided by operating activities ............. 1,048,134 1,445,641
------------ ------------
Investing Activities:
Purchases of equipment .................................... (5,292) (15,358)
Collections of other current assets ....................... 1,552 11,033
Transfer of funds to environmental escrow account ........ (500,000) --
Purchases of investments .................................. (453,856) --
Proceeds from sale of investments ......................... 155,272 --
------------ ------------
Net cash (used) by investing activities ............... (802,324) (4,325)
------------ ------------
Financing Activities:
Dividends paid ............................................ (890,000) (930,000)
------------ ------------
Net cash (used) by financing activities ............... (890,000) (930,000)
------------ ------------
Net (decrease) in cash .................................... (644,190) 511,316
Cash and cash equivalents at beginning of year ........... 1,511,912 1,000,596
------------ ------------
Cash and cash equivalents at end of year .................. $ 867,722 $1,511,912
============ ============
Supplemental disclosures:
Amounts paid for franchise taxes .......................... $ 62,637 $ 36,545
Amounts paid for interest ................................. -- --
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-25
<PAGE>
TEXAS COAST BROADCASTERS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Texas Coast Broadcasters, Inc. (the "Company") operates two radio stations
(KQUE and KNUZ)in the Houston, Texas market.
Cash and Cash Equivalents
All highly liquid investments with original maturity of less than three
months are classified as cash equivalents.
Investments
Investments consist of debt securities carried at cost net of amortized
premium or discount. Interest income is reflected in the Statement of Income
and Retained Earnings as other income. Realized gain or loss is calculated
using historical cost determined under specific identification. Unrealized
gain or loss as well as the change in unrealized gain or loss is not included
in these financial statements other than as a disclosure item.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided
primarily on accelerated methods over the estimated useful lives of the
assets as follows:
<TABLE>
<CAPTION>
<S> <C>
Buildings and improvements ... 10 -25 years
Equipment and furniture ...... 5 -7 years
</TABLE>
Barter Transactions
The Company barters advertising time for products and services. Such
transactions are recorded in the financial statements at the estimated fair
value of the products or services received.
Income Taxes
The Company, with the consent of its shareholders, has elected to be an S
Corporation under the Internal Revenue Code. Under those provisions, the
Company does not incur federal corporate income taxes on its taxable income.
Instead, the shareholders are liable for individual federal income taxes on
their proportionate shares of the Company's taxable income.
The Company has adopted FAS No. 109, "Accounting for Income Taxes." FAS
109 requires the use of the liability method of computing deferred income
taxes.
The provision for income taxes consists primarily of the current and
deferred portions of state franchise taxes imposed by the State of Texas
which are calculated on income.
Accounting Changes
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities." The Company adopted the provisions of the new
standard for investments held as of or acquired after January 1, 1994. No
cumulative effect adjustment was recorded at adoption.
F-26
<PAGE>
TEXAS COAST BROADCASTERS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Estimates
The presentation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
The most significant estimates or assumptions contained in these financial
statements are the following:
1. Management's estimate of the allowance for bad debts.
2. The estimated useful lives of property and equipment.
3. Estimates concerning loss contingencies including the environmental
clean up matter.
(2) INVESTMENTS
Investments at December 31, 1995 and 1994, are classified as held to
maturity consistent with the Company's ability and intent to hold the
securities until maturity and are presented as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Debt securities ..........
Cost .................... $472,646 $166,525
Estimated market value . 478,816 163,368
Unrealized gains
(losses) ............... 6,170 (3,157)
Change in unrealized
gain ................... 9,327 N/A
</TABLE>
The securities are composed primarily of municipal bonds and municipal
bond investment trusts with estimated market values determined from broker
statements. One of the bonds with a face value of $45,000 matures in 1997.
The balance of the cost of securities will mature in stages over the next
5-10 years.
(3) PROPERTY AND EQUIPMENT
Property and Equipment at December 31, 1995 and 1994, consist of the
following:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Land ...................... $ 95,590 $ 95,590
Buildings and improvements 158,392 158,392
Equipment and furnishings 1,360,487 1,355,195
----------- -----------
1,614,469 1,609,177
Accumulated depreciation . 1,421,545 1,368,927
----------- -----------
$ 192,924 $ 240,250
=========== ===========
</TABLE>
F-27
<PAGE>
TEXAS COAST BROADCASTERS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1994
(4) INCOME TAXES
The income tax provision consists of the following:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
State current $45,904 $62,637
State deferred 2,419 (26)
--------- ---------
$48,323 $62,611
========= =========
</TABLE>
The net deferred tax liability at December 31, 1995 and 1994, results from
the Company utilizing the cash basis of accounting for income tax purposes
versus the accrual basis for financial statement purposes and is reflected in
detail as follows:
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Deferred Tax Assets ..................
Accounts payable and accrued
expenses ........................... $ 10,192 $ 9,429
Valuation allowance ................. -- --
----------- ----------
Total deferred tax assets .......... 10,192 9,429
----------- ----------
Deferred Tax Liabilities .............
Accounts receivable ................. (36,485) (32,962)
Other current assets ................ (766) (1,107)
----------- ----------
Total deferred tax liabilities .... (37,251) (34,069)
----------- ----------
Net deferred tax liabilities ...... $(27,059) $(24,640)
=========== ==========
</TABLE>
A reconciliation between the effective tax rate versus the statutory state
rate of 4.5% is as follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Income taxes at statutory rate $49,723 $63,695
Non-taxable municipal interest (302) (383)
Other ......................... (1,098) (701)
--------- ---------
$48,323 $62,611
========= =========
</TABLE>
(5) COMMITMENTS AND CONTINGENCIES
The Company has entered into various broadcast rights agreements as well
as service contracts and employment contracts. Future minimum payments in the
aggregate for all employment agreements and service contracts consist of the
following at December 31, 1995:
<TABLE>
<CAPTION>
<S> <C>
1996 ..................... $273,301
1997 ..................... 231,632
1998 ..................... 173,301
1999 ..................... 43,325
2000 ..................... --
----------
$721,559
==========
</TABLE>
F-28
<PAGE>
TEXAS COAST BROADCASTERS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1994
(5) COMMITMENTS AND CONTINGENCIES (Continued)
The Company has discovered some possibility of environmental
contamination on one of its tower sites. An investigation and site study is
in the initial stages. Presently management's intention is to attempt to
remediate the site, if any contamination is discovered in the site study. An
escrow fund has been established with $1,000,000 in 1995 for possible clean
up costs. Texas Coast Broadcasters, Inc. has deposited $500,000 into the
escrow fund and SFX Broadcasting Inc. has also deposited $500,000. A reliable
estimate of the total clean up costs, if any, can not be made at this time
but managements believes the $1,000,000 escrow fund should be more than
sufficient to cover the costs.
(6) PENDING SALE
In late 1995, the Company entered into an agreement with SFX Broadcasting,
Inc. whereby SFX will purchase the license, property and equipment of both
radio stations KQUE and KNUZ for $38,000,000 pending regulatory approval. The
sale is expected to be consummated in the spring of 1996.
(7) CONCENTRATION OF CREDIT RISK
The Company's revenue and accounts receivable primarily relate to
advertising of products and services within the radio stations' broadcast
areas in Houston, Texas. Credit is extended based on an evaluation of the
customer's financial condition, and collateral is not generally required. The
Company also maintains cash in deposit accounts with financial institutions
in excess of the insured amounts.
F-29
[SFX Broadcasting, Inc. Letterhead]
FOR IMMEDIATE RELEASE For further information:
Cynthia A. Bond
Director, Investor Relations
(212) 407-9126
SFX BROADCASTING TO SWAP DC-BASED WHFS(FM)
FOR TWO CBS DALLAS FM STATIONS
NEW YORK, September 26, 1996 -- SFX Broadcasting, Inc. (NASDAQ: SFXBA) and CBS
Radio, a division of CBS Inc., today jointly announced that they have agreed
to exchange SFX's WHFS(FM) serving the Baltimore, Maryland and District of
Columbia markets for CBS' KTXQ(FM) and KRRW(FM) serving the Dallas market. It
is anticipated that this transaction will be a tax-free, like-kind exchange.
SFX previously agreed to exchange radio station KRLD-AM and the Texas State
Networks in Dallas for CBS' sister station KKRW(FM) in Houston, which has the
same format as KRRW(FM).
Commenting on the transaction, Robert F. X. Sillerman, Executive Chairman of
SFX Broadcasting, said, "This swap is consistent with our strategy of exiting
markets where we operate only a single station, and building groups of strong
FM stations in markets. These two excellent Dallas FMs will complement our
number one revenue generating Houston group in the southwest region."
Radio station KRRW(FM) has been one of four CBS ARROW formatted stations,
playing a classic rock/oldies format since November 1993. KTXQ(FM) has an
album oriented rock format. Dallas is the seventh ranking market.
The transaction is subject to regulatory approval, satisfactory completion of
due diligence by both parties and other customary conditions.
Paul Leonard of Dallas-based Star Media Group, Inc. was a broker of this
transaction.
With the anticipated consummation of all previously announced transactions,
SFX will own and operate or provide services to the following radio stations:
- list of stations follows -
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Dallas, TX Charlotte, NC Tucson, AZ
- ---------- ------------- ----------
KTXQ(FM) WLYT(FM) KWFM(FM)
KRRW(FM) WSSS(FM) KRQQ(FM)
WRFX(FM) KNST-AM
Houston, TX WNKS(FM) KCEE-AM
- -----------
KKRW(FM) Raleigh, NC Springfield/North, MA
KODA(FM) ----------- ---------------------
KQUE(FM) WZZU(FM) WHMP(FM)
KNUZ-AM WTRG(FM) WPKX(FM)
WDCG(FM) WHMP-AM
WRDU(FM)
New Haven, CT
Richmond, VA -------------
San Diego, CA ------------ WPLR(FM)
- ------------- WMBX(FM) WYBC(FM)*
KPLN(FM) WVGO(FM)
KYXY(FM) WLEE(FM) Daytona Beach, FL
WKHK(FM)** -----------------
Providence, RI WBZU(FM)** WGNE(FM)
- --------------
WSNE(FM) Albany, NY Augusta, GA
WHJY(FM) ----------- -----------
WHJJ-AM WGNA(FM) WCHZ(FM)*
WPYX(FM)
Hartford, CT WYSR(FM)
- ------------ WGNA-AM Jackson, MS
WHCN(FM) WTRY-AM -----------
WMRQ(FM) WKTF(FM)
WKSS(FM) Greenville-Spartanburg, SC WMSI(FM)
WPOP-AM -------------------------- WSTZ(FM)
WMYI(FM) WJDX(FM)
Greensboro, NC WSSL(FM) WJDS-AM
- -------------- WROQ(FM) WZRX-AM
WMAG(FM) WGVL-AM
WHSL(FM)**
WTCK-AM Wichita, KS Biloxi, MS
WMFR-AM ------------ ----------
KRZZ(FM) WKNN(FM)
Nashville, TN KKRD(FM) WMJY(FM)
- ------------- KNSS-AM
WSIX(FM) Myrtle Beach, SC
WRVW(FM) ----------------
WVCO(FM)**
Jacksonville, FL WYAK(FM)
- ---------------- WMYB(FM)
WFYV(FM)**
WAPE(FM)**
WKQL(FM)
WIVY(FM)
WOKV-AM
WPDQ-AM
</TABLE>
* Joint Selling Agreement (JSA)
** JSA with option to buy
*** Local Marketing Agreement
Under contract to be sold or swapped by SFX are the Texas State Networks, a
group of regional radio networks; KRLD-AM and KTCK-AM in Dallas, TX;
WHFM(FM), WBAB(FM), WBLI(FM) and WGBB-AM in Long Island, NY; WTFX(FM) and
WVEZ-AM in Louisville, KY; WHFS(FM) in Washington, DC/Baltimore, MD; and
KOLL(FM) in Little Rock, KY.
FOR IMMEDIATE RELEASE For further information:
Cynthia A. Bond
Director, Investor Relations
SFX Broadcasting, Inc.
(212) 407-9126
SFX BROADCASTING TO ACQUIRE SECRET COMMUNICATIONS
FOR $300 MILLION
Adding Nine Stations in Three New Markets
NEW YORK, October 15, 1996 -- SFX Broadcasting, Inc. (NASDAQ: SFXBA) today
announced that it has entered into a definitive purchase agreement to acquire
the assets of privately-owned Secret Communications, L.P., an owner/operator of
nine radio stations in three markets for $300 million. With this acquisition
the Company will add station clusters in three new major markets.
The markets and the radio stations to be acquired are:
Pittsburgh: WDVE(FM), WXDX(FM), WDSY(FM) and WJJJ(FM)
Cleveland: WLTF(FM) and WTAM-AM
Indianapolis: WFBQ(FM), WRZX(FM) and WNDE-AM
Stations WDSY(FM) and WJJJ(FM) are currently under contract to be acquired by
Secret, and it is anticipated that they will be acquired prior to closing SFX's
acquisition of Secret.
Commenting on the transaction, Robert F. X. Sillerman, Executive Chairman of
SFX Broadcasting, Inc., said, "This is an excellent group of stations and we
are extremely excited to be entering three new markets, particularly since we
will enter Pittsburgh with the top two stations and Indianapolis with the
number one station. In terms of revenue, our station groups will rank number
one in Pittsburgh and Indianapolis, and number two in Cleveland. Frank Wood has
done a superb job in building this station group, and our intention is to stay
on the same track and keep taking these stations higher. This represents our
first foray into the Midwest and we can think of no better entrance than with
stations of this caliber.
"Having closed two major acquisitions earlier this year and anticipating
closing Multi-Market Radio in November, we are pleased to again be able to add
a major new group of stations to our roster. We recently created a new team of
regional managers to which we will add one more member to oversee
<PAGE>
- more -
this geographic group. At the present time we are evaluating our financing
needs and considering various options."
Pittsburgh is the nineteenth largest market in the country. WDVE(FM) is the
number two ranking station in terms of revenue, and number one in the 25-54
audience share; it plays album oriented rock. WDSY(FM) ranks second in 25-54,
and fifth in revenues; the station plays hot country. WXDX(FM), formerly
WWKS(FM), has an alternative format. WJJJ(FM), formerly WNRQ(FM), has a smooth
jazz format.
Cleveland is the twenty-second largest market. WLTF(FM) has an adult
contemporary format and ranks sixth in revenues. WTAM-AM, formerly WWWE-AM, has
a news/talk format
The Indianapolis market ranks thirty-sixth. WFBQ(FM) ranks first in revenue
share and 25-54, and plays album oriented rock. WRZX(FM) has an
alternative/modern rock format and ranks seventh.
WNDE-AM has a talk format.
This transaction is subject to the approval of the Federal Communications
Commission and the pre-merger notification requirements of the
Hart-Scott-Rodino Act.
With the consummation of all pending transactions, SFX Broadcasting will own,
operate or provide services to the following stations:
- list of stations follows -
FOR IMMEDIATE RELEASE For further information on SFX:
Cynthia A. Bond
Director, Investor Relations
SFX Broadcasting, Inc.
(212) 407-9126
For further information on Delsener/Slater
Sean Cassidy
Dan Klores Associates, Inc.
(212) 685-4300
SFX BROADCASTING TO ACQUIRE LEADING CONCERT
PROMOTION/PRODUCTION COMPANY
Moves into Analogous Field Through Acquisition of Delsener/Slater
NEW YORK, October 16, 1996 -- SFX Broadcasting, Inc. (NASDAQ: SFXBA) today
announced that it has entered into a definitive purchase agreement to acquire
privately-owned Delsener/Slater Enterprises, Ltd. for an undisclosed sum. Based
in New York City and founded in 1966, Delsener/Slater is a leading promoter of
contemporary music concerts and one of the nation's five largest concert
production companies. Delsener/Slater will become an independent division of
SFX and will retain its current name, management and corporate location. Ron
Delsener and Mitch Slater will each hold the title of Co-President and Co-Chief
Executive Officer.
Commenting on the transaction, Robert F. X. Sillerman, Executive Chairman of
SFX Broadcasting, Inc., said, "This investment is highly compatible with our
focus on contemporary music, as it will combine the live music component with
our traditional area of expertise, recorded music. SFX stations are adept at
figuring out musical tastes and presenting a successful program of recorded
music. Delsener/Slater's expertise rests in similar strengths, but in live
music, and the two entities working together will be able to create great
opportunities for promotional tie-ins. While this acquisition is immediately
attractive on its own, it has the added dimension of benefitting all of our
radio stations with a direct association with leading concert tours and shows.
"We have known Ron and Mitch for several years and witnessed their rise to the
top of the live contemporary music promotion business in the Northeast. With
the financial and professional resources of SFX and our radio stations across
the country behind them, we intend to expand their winning formula, both in the
Northeast as well as new geographic areas. Financially, Delsener/Slater
<PAGE>
- more -
represents an extremely well-managed and attractive entity and we look forward
to growing together. This acquisition represents new and creative challenges
for SFX and Delsener/Slater, and a synergistic first for our industry."
Ron Delsener, the founder and Co-President of Delsener/Slater, stated, "Over
the past thirty years, we have strived to build our company to a point where it
is truly synonymous with excellence in the concert promotion field. With SFX
behind us, we will aim to reach even higher levels of national prominence."
Mitch Slater, Co-President of Delsener/Slater, added, "This is an outstanding
opportunity for our company. We have had a major influence on the contemporary
music industry and our association with SFX will enable us to continue our
influence on an even greater scale in the years ahead."
Having produced more outdoor concert events than any other company in the
United States, Delsener/Slater has achieved national prominence in the
contemporary music business. Their legendary accomplishments include the
creation of the popular "free concerts" in New York City's Central Park Sheep
Meadow and on the Great Lawn, as well as the $1.00 summer concert events at the
Wollman Rink, also in Central Park.
Delsener/Slater has promoted and produced concerts by such world-renown artists
as Billy Joel, The Rolling Stones, Paul McCartney, Elton John, The Eagles, Pink
Floyd and Kiss at venues throughout the northeastern United States. Many of
these concerts have been staged at arenas including New York's Giants Stadium,
Yankee Stadium and Shea Stadium and the Carrier Dome in Syracuse, New York.
With the consummation of all pending transactions, SFX Broadcasting will own,
operate or provide services to the following stations.
- list of stations follows -
FOR IMMEDIATE RELEASE For further information:
Cynthia A. Bond
Director, Investor Relations
SFX Broadcasting, Inc.
(212) 407-9126
SFX BROADCASTING TO ADD FOURTH HARTFORD FM
Buying WWYZ(FM) for $25.25 Million
NEW YORK, October 24, 1996 -- SFX Broadcasting, Inc. (NASDAQ: SFXBA) announced
today that it has agreed to acquire the stock of radio station WWYZ(FM),
serving the Hartford, Connecticut market from the Gilmore family for $25.25
million.
SFX currently owns and operates WMRQ(FM), WHCN(FM) and WPOP-AM, and will acquire
WKSS(FM) as part of its acquisition of Multi-Market Radio, Inc. (NASDAQ: RDIOA).
Commenting on the transaction, Robert F. X. Sillerman, Executive Chairman of
SFX Broadcasting, said, "We are extremely excited to be adding this excellent
station to our Hartford roster. Not only has WWYZ consistently been one of the
top three stations in Hartford, it is widely recognized as the top country
station in the Northeast. Given SFX's proven success with country music
stations, we are eager to combine our resources with the formidable franchise
Preston Gilmore has created in Hartford. We anticipate superb results from this
talented collaboration. The addition of this station, our fourth FM in
Hartford, strengthens the powerhouse of radio we've created on the New
Haven-Hartford-Springfield corridor."
Hartford is the forty-first largest metro market. Country-formatted WWYZ(FM)
consistently ranks in the top three stations in terms of revenue and market
share.
Kevin Cox of Philadelphia-based Media Services Group brokered the transaction.
This transaction is subject to the approval of the Federal Communications
Commission and the notification requirements of the Hart-Scott-Rodino Act.
With the anticipated consummation of all previously announced transactions, SFX
will own and operate or provide services to the following radio stations.
- list of stations follows -
