U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to _______________________.
Commission file number: 0-22486
SFX BROADCASTING, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3649750
(State of Incorporation) (I.R.S. Employer
Identification No.)
150 East 58th Street, 19th Floor
New York, New York 10155
(Address of principal executive offices)
Registrant's telephone number, including area code: (212)-407-9191
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $.01 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--------- -----------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of March 28, 1996, the
number of shares outstanding of the Registrant's Class A Common Stock, $.01
par value, and Class B Common Stock, $.01 par value, was 6,458,215 and
1,000,000 respectively.
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SFX BROADCASTING, INC. AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 1996
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PART I FINANCIAL INFORMATION
Page
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) Number
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Consolidated Balance Sheets at March 31, 1996 and December 31, 1995.............................. 3
Consolidated Statements of Operations for Three Months Ended March 31, 1996
and 1995......................................................................................... 4
Consolidated Statements of Cash Flows for Three Months Ended March 31, 1996
and 1995 ....................................................................................... 5
Notes to Consolidated Financial Statements ...................................................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................................................... 10
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS............................................................................. 16
ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K.............................................................. 17
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SIGNATURES
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SFX BROADCASTING, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
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March 31, December 31,
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ASSETS (Unaudited) (Note)
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Current Assets:
Cash and cash equivalents..................................................... $ 3,349 $ 11,893
Accounts receivable, net...................................................... 16,805 18,034
Prepaid broadcast rights and other current assets............................. 2,596 2,578
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Total current assets..................................................... 22,750 32,505
Property and equipment, at cost, less accumulated depreciation................ 18,157 16,767
Broadcast licenses and other intangible assets, less accumulated amortization. 154,256 129,543
Notes receivable from related parties, including accrued interest............. 4,518 4,439
Deposits on station acquisitions.............................................. 300 3,000
Other assets.................................................................. 2,871 1,083
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Total assets............................................................. $ 202,852 $ 187,337
================== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses......................................... $ 8,969 $ 8,741
Accrued interest.............................................................. 283 2,303
Current portion of capital lease obligations.................................. 297 311
Current portion of debt....................................................... 3,053 260
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Total current liabilities................................................... 12,602 11,615
Deferred income taxes payable................................................. 7,415 7,415
Capital lease obligations, less current portion............................... 583 670
Debt, less current portion.................................................... 16,252 609
Subordinated notes............................................................ 80,000 80,000
Other liabilities............................................................. 704 682
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Total liabilities........................................................ 117,556 100,991
Redeemable preferred stock.................................................... 3,356 3,285
Shareholders' equity:
Common Stock.................................................................. 74 74
Additional paid-in-capital.................................................... 115,048 115,184
Accumulated deficit........................................................... (33,182) (32,197)
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Total shareholders' equity............................................... 81,940 83,061
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Total liabilities and shareholders' equity............................... $ 202,852 $ 187,337
================== ================
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Note: The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
See accompanying notes to consolidated financial statements
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SFX BROADCASTING, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except share and per share amounts)
(Unaudited)
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Three Months Ended March 31,
1996 1995
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Revenue.................................................................... $ 22,405 $ 15,606
Less: agency commissions................................................... 2,605 1,889
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Net revenue................................................................ 19,800 13,717
Station operating expenses................................................. 14,056 9,676
Depreciation, amortization and acquisition related costs................... 2,299 1,697
Corporate expenses......................................................... 1,210 807
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Total operating expenses................................................... 17,565 12,180
Operating income........................................................... 2,235 1,537
Investment (income) loss................................................... (164) 3
Interest expense........................................................... 3,384 2,432
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Loss before income taxes................................................... (985) (898)
Income tax benefit......................................................... -- (377)
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Net loss................................................................... (985) (521)
Accretion of redeemable preferred stock.................................... 136 71
---------------- ----------------
Net loss applicable to common stock....................................... $(1,121) $ (592)
================ ================
Net loss per common share....................................................... $ (0.15) $ (0.10)
================ ================
Weighted average common shares outstanding...................................... 7,458,215 5,916,445
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See accompanying notes to consolidated financial statements
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SFX BROADCASTING, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
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Three Months Ended March 31,
1996 1995
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Operating Activities:
Net loss.......................................................................... $ (985) $ (521)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization................................................ 2,022 1,697
Interest on notes receivable from related parties............................ (79) (55)
Deferred tax benefit......................................................... -- (377)
Loss on sale of investments.................................................. -- 84
Changes in assets and liabilities:
Decrease in accounts receivable.............................................. 1,229 526
Increase in prepaid broadcast rights and other assets........................ (1,788) (640)
Decrease in accrued interest payable......................................... (2,020) (2,258)
Increase in accounts payable, accrued expenses and other liabilities......... -- 2
---------------- ----------------
Net cash used in operating activities (1,621) (1,542)
Investing activities:
Deposits on station acquisition................................................... (300) --
Purchase of stations, net of cash acquired........................................ (22,487) --
Proceeds from the sale of short term investments.................................. -- 7,918
Issuance of related party note receivable......................................... -- (2,000)
Proceeds from sale of assets...................................................... -- 300
Purchase of property, plant and equipment......................................... (351) (5,151)
Increase in other intangibles..................................................... (2,055) --
---------------- ----------------
Net cash (used in) provided by investing activities............................... (25,193) 1,067
Financing activities:
Additions to debt issuance costs.................................................. -- (1,685)
Proceeds from senior loans........................................................ 18,500 2,000
Payments on senior loans and capital lease obligations........................... (165) (132)
Decrease in accrued stock acquisition cost........................................ -- (1,150)
Dividends paid on preferred stock................................................. (65) --
---------------- ----------------
Net cash provided by (used in) financing activities............................... 18,270 (967)
Net decrease in cash and cash equivalents......................................... (8,544) (1,442)
Cash and cash equivalents at beginning of period.................................. 11,893 3,194
---------------- ----------------
Cash and cash equivalents at end of period........................................ $ 3,349 $ 1,752
================ ================
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See accompanying notes to consolidated financial statements
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SFX BROADCASTING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
Information with respect to the three months ended March 31, 1996 and
1995 is unaudited. The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with Rule 10-01 of Regulation
S-X. Accordingly, they do not include all the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, the unaudited interim financial
statements contain all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation of the financial position of the Company,
results of operations and cash flows for the periods presented.
The results of operations for the three month period are not necessarily
indicative of the results of operations for the full year. For further
information refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995.
NOTE 2 - ACQUISITIONS AND DISPOSITIONS
In November 1995, the Company entered into an agreement to acquire
Liberty Broadcasting, Incorporated ("Liberty") for a purchase price of
approximately $236,000,000, subject to adjustment (the "Liberty Acquisition").
Liberty is a privately-held radio broadcasting company that owns and operates,
provides programming to or sells advertising on behalf of 14 FM and six AM
radio stations located in six markets: Washington, DC/Baltimore, Maryland;
Nassau-Suffolk, New York; Providence, Rhode Island; Hartford, Connecticut;
Albany, New York and Richmond, Virginia. The Company entered into an agreement
to sell three of the Liberty stations that operate in the Washington,
DC/Baltimore, Maryland market for $25,000,000 (the "Washington Dispositions").
In November 1995, the Company and Multi Market Radio, Inc., a
publicly-held radio broadcasting company and an affiliate of the Company's
Executive Chairman, ("MMR") entered into an exchange agreement (the "Letter
Agreement") pursuant to which MMR agreed to acquire seven FM and four AM radio
stations owned by Liberty and to assume a joint sales agreement ("JSA") from
Liberty with respect to one FM station following the Company's acquisition of
Liberty, in exchange for ten radio stations to be acquired by MMR (the
"Exchange"). Pursuant to the MMR Merger Agreement (as defined herein), the
Company and MMR canceled the Letter Agreement and MMR agreed to use its
commercially reasonable efforts to transfer to the Company its rights under
the following purchase agreements for the stations originally to be acquired
by MMR and exchanged with the Company (the "Additional Acquisitions"). In
addition, on December 27, 1995, MMR entered into a purchase agreement to acquire
subtantially all of the assets of KQUE-FM and KNUZ-AM, both operating in
Houston, Texas, for a purchase price of $38.0 million. Based upon an audit
conducted by an environmental consultant of one of the sites used in connection
KQUE-FM's and KNUZ-AM's business, MMR may elect to terminate such purchase
agreement on or before June 15, 1996. the Company has been advised by MMR that
although MMR has not elected to terminate the purchase agreement, it is unlikely
that the purchase agreement will be completed on the terms set forth therein,
and that MMR may attempt to negotiate a purchase agreement with the seller that
reflects the environmental contamination at the site. There can be no assurance
that MMR and the seller will be able to enter into an agreement with respect to
the purchase of such stations. On January 26, 1996, MMR entered into an
agreement to acquire substantially all of the assets of WSTZ-FM and WZRX-AM,
both operating in Jackson, Mississippi, for a purchase price of $3.5 million. On
January 22, 1996, MMR entered into an agreement to acquire substantially all of
the assets of WROQ-FM, operating in Greenville, South Carolina, for a purchase
price of $14.0 million. On January 18, 1996, MMR entered into an agreement to
acquire substantially all of the assets of WTRG-FM and WRDU-FM, both operating
in the Raleigh, North Carolina market, and WMFR-AM, WMAG-FM, and WTCK-AM
(formerly, WWWB-AM), each operating in the Greensboro, North Carolina market,
for an aggregate purchase price of approximately $38.0 million, subject to
adjustment based on the broadcast cash flow of WTRG-FM and WRDU-FM. The Company
posted $300,000 in cash and $6,750,000 in letters of credit as deposits for
these purchase agreements. The Company and MMR have agreed that the Company will
finance the purchase of such stations and that MMR will immediately thereafter
transfer the purchased assets to the Company. MMR has entered into local
marketing agreements(" LMAs") with the current owners of the stations operating
in the Greenville, South Carolina, and Jackson, Mississippi markets,and
concurrently therewith, MMR has entered into JSAs with the Company pursuant to
which the Company was granted exclusive right to sell advertising on behalf of
all but one of the stations in such markets. MMR has also entered into a JSA
with the current owner of the stations operating in the Greensboro, North
Carolina market, and concurrently therewith, the Company entered into a JSA with
MMR with respect to such stations.
In January 1996, the Company entered into an agreement granting it an
option to acquire substantially all of the assets of radio station WHSL-FM,
operating in Greensboro, North Carolina from HMW Communications, Inc. ("HMW"),
for an aggregate purchase price of approximately $4,500,000 cash or 150,000
shares of Class A Common Stock of the Company (the "WHSL-FM Acquisition").
Concurrently therewith, the Company entered into a JSA with HMW with respect
to such station.
In February 1996, the Company exercised its option to acquire all of the
assets used in the operation of WJDX-FM for a purchase price of $3,000,000
pursuant to the provisions of an option agreement dated as of December 15,
1993.
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In February 1996, the Company acquired all of the assets of WTDR-FM and
WLYT-FM in Charlotte, North Carolina (the "Charlotte Acquisition") for
aggregate consideration of approximately $24,750,000. The Company had provided
programming and sold advertising on the stations pursuant to a LMA since April
1, 1995.
In February 1996, the Company entered into an agreement to acquire from
Prism Radio Partners, L.P. ("Prism"), a privately-held radio broadcasting
company, substantially all of the assets used in the operation of ten FM and
six AM radio stations, for approximately $105,250,000 (the "Prism
Acquisition"). The Prism stations are located in five markets: Louisville,
Kentucky; Jacksonville, Florida; Raleigh, North Carolina; Tucson, Arizona and
Wichita, Kansas. In April 1996, the Company entered into a letter of intent to
sell three of the Prism stations that operate in the Louisville, Kentucky
market for $19,500,000 (the "Louisville Dispositions") .
The Liberty Acquisition, the Additional Acquisitions, the Prism Acquisition
and the WHSL-FM Acquisition are hereinafter referred to collectively as the
"Acquisitions". The Washington Dispositions, the Louisville Dispositions and the
Dallas Disposition (as defined below) are referred to herein collectively as the
"Dispositions".
The timing and completion of the Acquisitions and the Dispositions are
subject to a number of conditions, certain of which are beyond the Company's
control, and there can be no assurance that such transactions will be approved
by the FCC or completed on the terms described herein, or at all.
NOTE 3 - WRITE DOWN OF BROADCAST RIGHTS AGREEMENT
In August 1994, the Company entered into an agreement to broadcast Texas
Rangers baseball games on KRLD-AM and to syndicate the games through Texas
State Networks, for a period of four years, commencing with the 1995 season.
While the contract contemplated the possibility of a baseball work stoppage,
and contained certain provisions affording the Company partial relief from the
payment of rights fees under certain specified conditions related to work
stoppages, the nature of the major league baseball strike and consequently the
damage to the value of the Texas Rangers broadcast rights has been more
material than management had anticipated. The total rights fees under the
four-year agreement, subject to adjustment, were stated at $17,000,000. In the
second quarter of 1995, the Company recorded a charge of $5,000,000 with
respect to the estimated diminished value of the contract.
In March of 1996, the Company made its annual rights fee payment relating
to the broadcast of Texas Rangers baseball games, reducing such payment by an
amount calculated to reflect the adjustment provisions contained in the rights
agreement with respect to the major league baseball labor dispute which
resulted in the work stoppages during the 1994 and 1995 major league baseball
seasons. The Company has received notice from the Texas Rangers disputing the
adjustment and credits taken by the company. On April 11, 1996, in order to
facilitate the Houston Exchange (as defined herein), the Company and the Texas
Rangers amended the radio broadcast rights agreement. The amended terms
provide for the termination of the agreement no later than November 30, 1996.
The Company's estimate as to the carrying value of the contract is based
on among other things, the projected revenue to be derived during the term.
Due to the ongoing uncertainty surrounding major league baseball and related
broadcast revenue, it is reasonable possible that the estimates may change.
NOTE 4 - SUBSEQUENT EVENTS
In April 1996, the Company entered into an amended and restated agreement
and plan of merger (the "MMR Merger") pursuant to which it has agreed to
acquire Multi-Market Radio, Inc. ("MMR"). Following completion of the MMR
Merger, MMR will become a wholly-owned subsidiary of the Company. MMR is a radio
broadcasting company which owns and operates, provides programming to or sells
advertising on behalf of 16 FM stations and one AM station located in seven
markets: New Haven, Connecticut; Springfield/Northampton, Massachusetts; Daytona
Beach, Florida; Augusta, Georgia; Biloxi, Mississippi; Little Rock, Arkansas and
Myrtle Beach, South Carolina. MMR has entered into agreements or letters of
intent to acquire WKSS-FM, Hartford, Connecticut, and WMYB-FM, Myrtle Beach,
South Carolina, and to sell KOLL-FM, Little Rock, Arkansas, and
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WRXR-FM and WKBG-FM, both operating in Augusta, Georgia (collectively the" MMR
Dispositions"). MMR is currently negotiating the termination of a JSA with
WCHZ-FM and LMA with WAEG-FM and WAEJ-FM, each operating in Augusta, Georgia.
Upon consummation of the MMR Merger and subject to certain conditions,
the outstanding securities of MMR will be converted into shares of common
stock of the Company, as follows: (i) the 3,216,500 shares of Class A Common
Stock of MMR and the 200,000 shares of Series B Convertible Preferred Stock of
MMR will be converted into that number of shares of Class A Common Stock of
the Company determined on the basis of the Exchange Ratio (as defined below)
and (ii) the 140,000 shares of Class B Common Stock of MMR, the 360,000 shares
of Class C Common Stock of MMR and 200,000 shares of Original Preferred Stock
of MMR will be converted into the number of shares of Class B Common Stock of
the Company determined on the basis of the Exchange Ratio.
Exchange Ratio means the number of shares of Class A Common Stock or
Class B Common Stock of the Company, as the case may be, to be issued in the
MMR Merger equal to the quotient obtained by dividing $11.50 by the average
price of the Company's Common Stock for the 20 consecutive trading days ending
on the fifth trading day prior to the closing; provided, however, that (1) in
the event that the Class A Common Stock Price exceeds $42.00 but is equal to
or less than $44.00, then the Exchange Ratio shall be the quotient obtained by
dividing (i) the sum of (A) $11.50, plus (B) the product of (I) twenty-five
percent (25%) multiplied by (II) the difference between the Common Stock Price
and $42.00 by (ii) the Common Stock Price, (2) in the event that the Common
Stock Price exceeds $44.00, then the Exchange Ratio shall be the quotient
obtained by dividing (i) the sum of (A) $12.00, plus (B) the product of (I)
thirty percent (30%) multiplied by (II) the difference between the Class A
Common Stock Price, or (3) in the event that the Class A Common Stock Price is
less than $32.00 then the Exchange Ratio shall be .3593.
Upon the completion of the MMR Merger, each outstanding option (the "MMR
Options") or stock appreciation right (the "MMR SARs") issued pursuant to
MMR's stock option plans, whether vested or unvested, will be assumed by the
Company.
Additionally, each outstanding (i) Class A Warrant (the "MMR Class A
Warrants") and Class B Warrant (the "MMR Class B Warrants") of MMR issued in
connection with MMR's public ofering in March 1994, (ii) option issued
pursuant to the unit purchase options issued to the underwriters of MMR's
public offering in March 1994, (iii) warrant issued to the underwriters of
MMR's initial public offering in July 1993, (iv) warrant issued to The Huff
Alternative Income Fund, L.P. and (v) options issued to Robert F.X. Sillerman
outside MMR's stock option plans (collectively, the "MMR Warrants"), shall be
assumed by the Company. Each holder of a MMR warrant will be entitled to that
number of warrants of the Company, determined in the same manner as set forth
above with respect to MMR Options assumed by the Company. For further
information regarding the MMR Merger, see Form 8-K dated May 9, 1996 and filed
with the Securities and Exchange Commission.
The Company has entered into an agreement to exchange radio station
KRLD-AM, operating in Dallas, Texas and the Texas State Networks, for radio
station KKRW-FM, operating in Houston, Texas (the "Houston Exchange"), and has
entered into a non-binding letter of intent to sell radio station KTCK-AM,
operating in Dallas, Texas for approximately $14,000,000 (the" Dallas
Disposition"). The Company estimates that it will pay $2,500,000 to the entity
that sold it KTCK-AM in satisfaction of its contingent payment right and will
redeem the Series C Redeemable Preferred Stock for $2,000,000.
The Company has initiated a tender offer to repurchase all of its $80
million of senior subordinated notes (the"Old Notes"). The Company intends to
finance the aforementioned transactions with private placements of senior
subordinated notes (the "Note Offering") (the "Notes") and preferred stock
(collectively, the "Financing").
In April 1996, the Company and SCMC entered into a termination agreement
pursuant to which the consulting arrangement between such parties was
terminated in consideration for the assignment by SCMC to the Company of the
right to receive certain consulting fees payable by MMR and Triathlon
Broadcasting Company ("Triathlon"), the agreement to cancel $2.0 million of
indebtedness plus accrued interest thereon owing from SCMC to the Company upon
completion of the MMR Merger and the issuance of warrants to SCMC to purchase
up to 600,000 shares of Class A Common Stock at an exercise price of $33 3/4
per share. Warrants in respect of 300,000 shares have vested and warrants in
respect of the remaining 300,000 shares shall vest upon receipt of approval of
the Company's stockholders. In connection with such agreement, the Company will
recognize a non-recurring, non-cash charge to earnings of approximately $4.5
million during the second quarter of 1996, and $1.1 million upon completion of
the MMR Merger, based upon the value of the warrant ($9.0 million) and the
forgiveness of debt ($2.2 million) offset by the value of recurring consulting
fees that will become payable by Triathlon to the Company ($5.6 million).
On April 16, 1996, the Company entered into an agreement with R. Steven
Hicks, the current President, Chief Executive Officer and Chief Operating
Officer of the Company, pursuant to which they have agreed to terminate Mr.
Hicks' employment agreement with the Company concurrently with the completion
of the MMR Merger and to make certain payments in the aggregate amount of
approximately $14.9 million to Mr. Hicks (the "the Hicks Agreement"). Mr.
Hicks has agreed to serve as a consultant to the Company during the five-year
period commencing on the completion of the MMR Merger and the
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Company has agreed to compensate him for such services at the rate of $150,000
per year. In addition, Mr. Hicks' employment agreement provides that the
Company will repurchase Mr. Hicks' shares of Class A Common Stock at Mr.
Hicks' option at any time during the five-year period from the consummation of
the MMR Merger at a price equal to the greater of $40.00 or the average
closing price of the Class A Common Stock for the five business days preceding
the repurchase. In additional, the Hicks Agreement provides that the Company
forgive the $2.0 million loan made by the Company to Mr. Hicks and all accrued
but unpaid interest thereon upon the termination of the Hicks Agreement, even if
such termination is per cause.
The Company entered into an agreement with D. Geoffrey Armstrong,
Executive Vice President and Chief Financial Officer of the Company, pursuant
to which the Company has agreed to make certain payments to Mr. Armstrong in
the aggregate amount of $4.6 million and Mr. Armstrong has, among other
things, agreed to serve as the Chief Operating Officer of the Company
following the MMR Merger (the " Armstrong Agreement"). In addition, the
Company and Mr. Armstrong each have the right to terminate Mr. Armstrong's
employment with the Company one year after the consummation of the MMR Merger.
In the event of such termination, Mr. Armstrong will receive $1.2 million and
the Company will repurchase all of the stock options granted to Mr. Armstrong
pursuant to the Company's Stock Option Plans.
A charge to earnings of approximately $20.9 million will be taken in the
second quarter in connection with these agreements.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the consolidated
financial statements and related notes thereto. The following discussion
contains certain forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, risks and uncertainties relating to leverage,
the need for additional funds, consummation of the Acquisitions or the
Dispositions, integration of the Acquisitions, the ability of the Company to
achieve certain cost savings, the management of growth, the popularity of
radio as a broadcasting and advertising medium and changing consumer tastes.
CERTAIN EFFECTS OF THE ACQUISITIONS AND THE DISPOSITIONS
The Company currently owns and operates, provides programming to or sells
advertising on behalf of 22 radio stations located in eight markets. Following
completion of the Acquisitions and the Dispositions, the Company will own and
operate, provide programming to or sell advertising on behalf of 69 radio
stations (53 FM and 16 AM) located in 23 markets. The Company intends to
finance the Acquisitions from the proceeds of the Financing and the
Dispositions.
Certain Charges. In April 1996, the Company and SCMC entered into the
SCMC Termination Agreement pursuant to which the consulting arrangement
between such parties was terminated in consideration for the assignment by
SCMC to the Company of the right to receive certain consulting fees payable by
MMR and Triathlon, the agreement to cancel $2.0 million of indebtedness plus
accrued interest thereon owing from SCMC to the Company upon completion of the
MMR Merger and the issuance of warrants to SCMC to purchase up to 600,000
shares of Class A Common Stock at an exercise price of $33 3/4 per share. In
connection with such agreement, the Company will recognize a non-recurring,
non-cash charge to earnings of approximately $4.5 million during the
three-month period ended June 30, 1996, and $1.1 million upon completion of
the MMR Merger based upon the value of the warrant ($9.0 million) and the
forgiveness of debt ($2.2 million) offset by the value of recurring consulting
fees ($5.6 million) that will become payable by Triathlon to the Company .
The Company has allocated approximately $14.9 million and $4.6 million of
the proceeds of the Financing to make payments to R. Steven Hicks, the current
President and Chief Executive Officer of the Company, pursuant to the Hicks
Agreement and D. Geoffrey Armstrong, Executive Vice President and Chief
Financial Officer of the Company, pursuant to the Armstrong Agreement,
respectively. In addition, the Hicks Agreement provides for a five-year
consulting arrangement with Mr. Hicks at an annual consulting fee of $150,000
and for the repurchase of certain securities owned by Mr. Hicks for a purchase
price of not less than $40.00 per share. The Company will recognize a
non-recurring charge to earnings of approximately $20.0 million during the
second quarter of 1996 as a result of the implementation of the Hicks
Agreement and the Armstrong Agreement.
In connection with financing the Acquisitions, the Company will use
approximately $21.5 million of the proceeds of the Financing to repay all
amounts owing under the Company's Old Credit Agreement (as defined herein). In
addition, on May 2, 1996, the Tender Offer was commenced to purchase for cash
up to all (but not less than a majority in principal amount) of the Old Notes
(as defined herein) and the related Consent Solicitation to modify certain
terms of the related indenture(the "Old Indenture"). The Company will
recognize an extraordinary loss if all of the Old Notes are tendered, of
approximately $12.1 million relating to the write-off of deferred financing
costs of the Old Credit Agreement (as defined herein) and the costs of the
Tender Offer during the quarterly period in which such payments are made.
The Company expects that the Acquisitions will be accounted for using the
purchase method of accounting and that the intangible assets created in the
purchase transactions will be amortized against future earnings of the
combined companies, that such amounts will be substantial and that they will
continue to affect the Company's operating results in the future. These
expenses, however, do not result in an outflow of cash by the Company and do
not impact the Company's Broadcast Cash Flow (as defined herein).
GENERAL
The following analysis of the financial condition and results of
operations of the Company should be read in conjunction with the Company's
consolidated financial statements and notes thereto.
The performance of a radio station group, such as the Company, is
customarily measured by its ability to generate Broadcast Cash Flow. Broadcast
Cash Flow is defined as net revenues (including, where applicable, fees earned
by the Company pursuant to the SCMC Termination Agreement) less station
operating expenses. Although Broadcast Cash Flow is not a measure of
performance calculated in accordance with generally accepted accounting
principles ("GAAP"), the
- 10 -
<PAGE>
Company believes that Broadcast Cash Flow is accepted by the broadcasting
industry as a generally recognized measure of performance and is used by
analysts who report publicly on the performance of broadcasting companies.
Nevertheless, this measure should not be considered in isolation or as a
substitute for operating income, net income, net cash provided by operating
activities or any other measure for determining the Company's operating
performance or liquidity which is calculated in accordance with GAAP.
The primary source of the Company's revenues is the sale of advertising
time on its radio stations. The Company's most significant station operating
expenses are employee salaries and commissions, programming expenses and
advertising and promotional expenditures. The Company strives to control these
expenses by working closely with local station management.
The Company's revenues are primarily affected by the advertising rates
its radio stations charge. The Company's advertising rates are in large part
based on a station's ability to attract audiences in the demographic groups
targeted by its advertisers, as measured principally by Arbitron (an
independent rating service) on a quarterly basis. Because audience ratings in
local markets are crucial to a station's financial success, the Company
endeavors to develop strong listener loyalty. The Company believes that the
diversification of formats on its stations helps to insulate it from the
effects of changes in the musical tastes of the public in any particular
format.
The number of advertisements that can be broadcast without jeopardizing
listening levels (and the resulting ratings) is limited in part by the format
of a particular station. The Company's stations strive to maximize revenue by
constantly managing the number of commercials available for sale and adjusting
prices based upon local market conditions. In the broadcasting industry, radio
stations often utilize trade (or barter) agreements which exchange advertising
time for goods or services (such as travel or lodging), instead of for cash.
The Company seeks to minimize its use of trade agreements.
The Company's advertising contracts are generally short-term. The Company
generates most of its revenue from local advertising, which is sold primarily
by a station's sales staff. For the three months ended March 31, 1996,
approximately 77% of the Company's revenues were from local advertising. To
generate national advertising sales, the Company engages independent
advertising sales representatives that specialize in national sales for each
of its stations.
The Company's revenues vary throughout the year. As is typical in the
radio broadcasting industry, the Company's first calendar quarter generally
produces the lowest revenues for the year, and the fourth calendar quarter
generally produces the highest revenues for the year. The Company's operating
results in any period may be affected by the incurrence of advertising and
promotion expenses that do not necessarily produce commensurate revenues until
the impact of the advertising and promotion is realized in future periods.
Fee revenue from the SCMC Termination Agreement will fluctuate
principally based upon the level of acquisition and financing activity of
Triathlon above the minimum annual fees of $800,000 (which minimum fees shall
increase to $1.0 million at such time as Triathlon has used an amount equal to
the net proceeds of its last public offering in the manner contemplated by the
registration statement filed in connection therewith) of which $625,000 is due
in the first calendar quarter.
RESULTS OF OPERATIONS
The Company's consolidated financial statements tend not to be directly
comparable from period to period due to the Company's acquisition activity.
The Company's acquisitions are generally accounted for using the purchase
method of accounting.
Three Months Ended March 31, 1996 Compared to Three Months Ended March 31, 1995
The Company's net revenues increased 44% to $19.8 million from $13.7
million, for the three months ended March 31, 1996 ("1996 quarter") and 1995
("1995 quarter"), respectively, due to revenue increases at all of the
Company's markets, $1.6 million of net revenues related to the inclusion of
KYXY-FM, San Diego, California and KTCK-AM, Dallas, Texas, for the full 1996
quarter, $2.2 million of net revenues related to the JSA's of WMAG-FM,
WTCK-AM, WMFR-AM, WHSL-FM, Greensboro, North Carolina, WSTZ-FM, Jackson,
Mississippi, and WROQ-FM, Greenville, South Carolina, which were implemented
in the 1996 quarter, and $1.9 million of net revenues for WTDR-FM and WLYT-FM,
both operating in Charlotte, North Carolina, which the Company operated
pursuant to an LMA since April 1, 1995 and which were acquired by the Company
on February 1, 1996. The increase in net revenue from existing operations were
related to strong radio advertising growth averaging approximately 8% in the
Company's markets, combined with improved inventory management, ratings and
other factors generally affecting sales and rates.
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<PAGE>
Station operating expenses increased 45% to $14.1 million from $9.7
million in the 1995 quarter primarily due to the inclusion of expenses of $2.4
million related to KYXY-FM, San Diego, California, KTCK-FM, Dallas, Texas, and
WTDR-FM and WLYT-FM, both operating in Charlotte, North Carolina, for the full
1996 quarter, and $1.8 million related to the JSA's discussed above.
Depreciation, amortization and acquisition related costs increased 35% to
$2.3 million from $1.7 million due to the inclusion of depreciation and
amortization related to the San Diego and Dallas Acquisitions, and to $277,000
of certain one time acquisition related costs in Charlotte.
Corporate, general and administrative expenses were $1.2 million and
$807,000 for the 1996 quarter and 1995 quarter, respectively. Corporate,
general and administrative expense as a percentage of net revenue was
approximately 6% for both 1996 and 1995 quarter. Legal fees, audit fees and
other professional fees increased by $85,000 over 1995 quarter and franchise
taxes and other capital based taxes increased by $49,000 over 1995 quarter.
Additionally, salaries, bonuses and deferred compensation for the Company's
executive officers increased by $133,000 over 1995 quarter.
Operating income was $2.2 million for the 1996 quarter as compared to
income of $1.5 million for the 1995 quarter due to the results discussed
above.
Interest expense, net of investment income (loss), increased 32% to $3.2
million from $2.4 million in 1995 quarter, primarily due to the inclusion of
$614,000 in LMA payments relating to the Charlotte Acquisition and JSA
payments in Greensboro, Jackson and Greenville representing financing payments
to the current owners compared to $50,000 in LMA payments for Dallas in the
1995 quarter. These payments will terminate upon acquisition of the stations
but may be replaced by interest on debt that may be incurred as a result of
the acquisitions. Additionally, interest on borrowings of $18.5 million
related to the Charlotte Acquisition contributed to the increase.
The Company recorded no income tax expense for the 1996 quarter compared
to income tax benefit of $377,000 for the 1995 quarter. The Company has
considered prudent and feasible tax planning strategies in assessing the need
for a valuation allowance and has assumed $650,000 of benefit attributable to
such strategies. In event the Company were to determine that such strategies
would not be implemented, an adjustment to the deferred tax liability would be
charged to income in the period such determination was made.
The Company's net loss was $985,000 for the 1996 quarter compared to a net
loss of $521,000 for the 1995 quarter due to the factors discussed above.
Broadcast Cash Flow increased 42% to $5.7 million for the 1996 quarter
from $4.0 million for the 1995 quarter. The increase was a result of growth in
Broadcast Cash Flow in all of the Company's markets after consideration for
the inclusion in the 1996 quarter of the results of the KYXY-FM, KTCK-AM,
WTDR-FM, WLYT-FM, WROQ-FM, WSTZ-FM, WMAG- FM, WTCK-FM, WMFR-AM and WHSL-FM for
the portion of the year the Company owned and operated, provided programming
to or sold advertising on behalf of the stations.
Results for the 1996 quarter include WLYT-FM and WTDR-FM, Charlotte,
North Carolina, for which the Company had provided programming and sold
advertising time pursuant to an LMA prior to its acquisition; KYXY-FM, San
Diego, California, for which the Company had provided programming and sold
advertising time pursuant to an LMA since January 1995 and was acquired on
April 13, 1995; and KTCK-AM, Dallas, Texas for which the Company had provided
programming and sold advertising time pursuant to an LMA since March 1995 and
was acquired on September 14, 1995 and WMAG-FM, WTCK-AM, WMFR-AM and WHSL-FM,
each operating in Greensboro, North Carolina; WSTZ-FM, Jackson, Mississippi;
WROQ-FM, Greenville, South Carolina; for which the Company had sold
advertising pursuant to a JSA beginning in the 1996 quarter.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal need for funds has historically been to fund the
acquisition of radio stations, and to a lesser extent, capital expenditures
and the redemption of outstanding securities. The Company's principal sources
of funds for these requirements have historically been the proceeds from the
public offerings of equity and debt securities, borrowings under credit
agreements and, to a significantly lesser extent, cash flows from operations.
Statements of Cash Flows. Net cash used in operating activities was $1.6
million for the 1996 quarter as compared to $1.5 million for the 1995 quarter.
- 12 -
<PAGE>
Net cash used in investing activities was $25.2 million in the 1996
quarter as compared to $1.1 million of cash provided by investing activities
in the 1995 quarter. The cash used in investing activities in 1996 relates
primarily to the Charlotte Acquisitions while the cash provided by investing
activities in 1995 relates to the sale of investments offset by the purchase
of a building in San Diego.
Net cash provided by financing activities was $18.3 million for the 1996
quarter as compared to net cash used in financing activities of $967,000 in
the 1995 quarter. The net cash provided by financing activities was primarily
due to drawings under the Old Credit Agreement to fund the Charlotte
Acquisitions.
Historical Acquisitions and Dispositions. During the three months ended
March 31, 1996, the Company acquired radio stations WTDR-FM and WLYT-FM
(formerly WEZC-FM), both operating in Charlotte, North Carolina, for an
aggregate purchase price of $24.8 million. The primary sources of funds for
this acquisition were proceeds from the Company's public offering in June 1995
and funds available under the Old Credit Agreement.
Pending Acquisitions and Dispositions. In November 1995, the Company
entered into the Liberty Acquisition agreement pursuant to which it has agreed
to acquire Liberty for a purchase price of $236.0 million. If Liberty's net
working capital at the closing exceeds $8.25 million, such purchase price will
be correspondingly increased. If such working capital is less than $8.25
million, the purchase price will be correspondingly reduced. In May 1996, the
Company entered into an agreement to sell three stations to be acquired from
Liberty (WXTR-FM, WXVR-FM and WQSI-AM, each operating in Washington, DC
market) following completion of the Liberty Acquisition for $25.0 million.
In February 1996, the Company entered into an agreement with Prism to
acquire the Prism Stations for a purchase price of approximately $105.3
million (the "Prism Purchase Agreement") . The Company has deposited an
irrevocable letter of credit in the amount of $5.3 million to secure its
obligations under the Prism Purchase Agreement, which amount may be forfeited
in the event the Company fails to complete the Prism Acquisition. In April
1996, the Company entered into an agreement to sell three stations to be
acquired from Prism (WVEZ-FM, WTFX-FM and WWKY-AM, each operating in
Louisville, Kentucky) following completion of the Prism Acquisition for
aggregate consideration of $19.5 million.
In April 1996, the Company entered into the MMR Merger pursuant to which
it has agreed to acquire MMR in exchange for capital stock of the Company
having a value estimated at approximately $72.0 million assuming the reported
price is between $33.00 and $40.00 per share and an MMR Class A Common Stock
price of $11.50 per share. In addition, MMR has entered into an agreement to
acquire radio station WKSS-FM, Hartford, Connecticut, for a purchase price of
$18.0 million of which $1.8 million was placed in escrow as a deposit by MMR
(the "MMR Hartford Acquisition"). The Company has agreed to repay
approximately $64.4 million of indebtedness of MMR, which includes
indebtedness to be used to acquire WKSS-FM and WMYB-FM, Myrtle Beach, South
Carolina, from the proceeds of the Financing and the anticipated exercise of
MMR's Class A Warrants. The Company expects that MMR's outstanding Class A
Warrants to purchase 1,839,500 shares of MMR Class A Common Stock will be
exercised at an exercise price of $7.75 per share. MMR is entitled to call such
warrants for redemption at a nominal price in the event that the trading price
of MMR's Class A Common Stock exceeds $10.75 per share, on average, for twenty
consecutive trading days following notice and a thirty-day opportunity to
exercise such warrants. The Company anticipates that such notice will be issued
and the warrants will be exercised within ninety days. Such exercise would
result in net proceeds of approximately $13.6 million which would be used to
fund a portion of the MMR Hartford Acquisition. In the event such exercise fails
to occur, MMR's borrowing under its credit agreement would be repaid by the
Company with additional borrowings under the New Credit Agreement at the time of
the MMR Merger.
MMR has also entered into agreements to acquire WROQ-FM, Greenville,
South Carolina, WSTZ-FM and WZRX-AM, both operating in Jackson, Mississippi,
WTRG-FM and WRDU-FM, both operating in Raleigh, North Carolina and WMFR- AM,
WMAG-FM and WTCK-AM, each operating in Greensboro, North Carolina. The Company
and MMR have agreed that the Company will finance the purchase of such
stations and MMR will immediately thereafter transfer the purchased assets to
the Company simultaneously with the purchase of such stations. The Company has
entered into an agreement pursuant to which it has an option to acquire WHSL-FM,
Greensboro, North Carolina, for a purchase price of $4.5 million or, at the
seller's option, 150,000 shares of Class A Common Stock and has entered into an
agreement to acquire WJDX-FM, Jackson, Mississippi, for a purchase price of $3.0
million. The aggregate purchase price for the Additional Acquisitions is
approximately $63.5 million.
In the event that the Company fails to consummate the Liberty Acquisition
and the MMR Merger is terminated, the Company will be required, except in
certain circumstances, to pay $3.5 million to MMR. In addition, the Company will
be required to pay MMR $1.0 million in the event the majority of the combined
voting power of SFX votes with respect to, but does not vote in favor of, the
MMR merger.
The Company has entered into an agreement to exchange its radio station
KRLD-AM, Dallas, Texas, and the Texas State Networks for radio station
KKRW-FM, Houston, Texas in the Houston Exchange, and has entered into a letter
of intent to sell radio station KTCK-AM, Dallas, Texas for consideration of
$14.0 million. The Company estimates that it will pay $2.5 million to the
entity that sold KTCK-AM in satisfaction of its contingent payment right and
will redeem the Series C Redeemable Preferred Stock issued to such entity for
$2.0 million.
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<PAGE>
The Company intends to finance the Acquisitions, including the repayment
of indebtedness of MMR, from the proceeds of the Financing, the Dispositions,
the MMR Dispositions and the exercise of the MMR Class A Warrants and
available cash.
The Company anticipates that it will consummate all of the pending
Acquisitions and Dispositions within 60 days of the closing of the Financing
except for the MMR Merger, which is subject to stockholder approval and which
the Company expects to complete during the third quarter of fiscal 1996, and
the Houston Exchange, which the Company expects to complete within 120 days of
the closing of the Financing. However, the closing of each of the transactions
is subject to certain closing conditions, certain of which are beyond the
Company's control, and there can be no assurance as to when such transactions
will be completed or that they will be completed on the terms described
herein, or at all. In the event that the Dispositions and exercise of MMR's
Class A Warrants are not consummated in a timely manner, the Company my be
required to seek additional financing. There can be no assurance that such
financing will be available to the Company on commercially acceptable terms,
if at all.
The Company has allocated approximately $19.5 million of the proceeds of
the Financing to make payments to Mr. Hicks pursuant to the Hicks Agreement
and Mr. Armstrong pursuant to the Armstrong Agreement.
The Company is also required to make annual payments of $1.0 million in
each of 1996 and 1997 to redeem the series B Redeemable Preferred Stock.
Sources of Liquidity. In March 1995, the Company entered into an amended
$50.0 million senior credit facility (the "Old Credit Agreement") pursuant to
which it has available a revolving line of credit of $45.0 million until
September 30, 1996, at which time any outstanding indebtedness under the
revolving line of credit converts to a term loan, and a working capital
revolving loan of $5.0 million. The Company's obligations under the Old Credit
Agreement are secured by substantially all of its assets in which a security
interest may lawfully be granted, including property, stock of subsidiaries
and accounts receivable, and are guaranteed by the subsidiaries of the
Company. As of March 31, 1996, $18.5 million was outstanding under the Old
Credit Agreement. In April 1996, the Company borrowed an additional $3.0
million for working capital. Upon completion of the Financing, the Company
will repay all amounts owing under the Old Credit Agreement. In May 1996, the
Company received a commitment from a lending institution to underwrite a new
$150 million senior credit facility (the "the New Credit Agreement").
In October 1993, the Company issued $80.0 million in aggregate principal
amount of the subordinated notes (the "Old Notes") which have a maturity date
of October 1, 2000. The Old Notes are senior subordinated obligations of the
Company and are subordinated in right of payment to all existing and future
Senior Debt of the Company (including the Old Credit Agreement). On May 2,
1996, the Company commenced the Tender Offer to purchase for cash up to all
(but not less than a majority in principal amount) of the Old Notes and the
related Consent Solicitation to modify certain terms of the Old Indenture. The
Company intends to repurchase all of the Old Notes that are tendered pursuant
to the Tender Offer from proceeds of the Financing. If less than all of the
Old Notes that are tendered in the Tender Offer, the Company may use funds
available under the New Credit Agreement to repurchase or retire all such
remaining Old Notes on or prior to their maturity.
<PAGE>
The Company is offering $440.0 in aggregate principal amount of the New
Notes. Interest on the New Notes will accrue from their date of original
issuance and will be payable semi-annually. The New Notes will be general
unsecured obligations of the Company and will be subordinated in right of
payment to senior debt of the Company. The New Notes are subject to
redemption by the Company on or after 2001. The New Notes will be guaranteed
on a senior subordinated basis by each of the Company's current and future
subsidiaries. The indenture governing the New Notes will contain certain
covenants that limit the ability of the Company and certain of its
subsidiaries to, among other things, incur additional indebtedness, pay
dividends or make certain other restricted payments, consummate certain asset
sales, enter into certain transactions with affiliates, incur indebtedness
that is subordinate in right of payment to any senior debt and senior in
right of payment to the New Notes, incur liens, impose restrictions on the
ability of a subsidiary to pay dividends or make certain payments to the
Company and its subsidiaries, merge or consolidate with any other person or
sell, assign, transfer, lease, convey, or otherwise dispose of all or
substantially all of the assets of the Company.
The Company is offering $120.0 million in aggregate liquidation preference
of the Series D Preferred Stock. Dividends on the Series D Preferred Stock
are payable quarterly in cash. The Series D Preferred Stock will be
convertible into shares of Class A Common Stock at any time prior to the
close of business on the maturity date, unless previously redeemed or
repurchased, at the conversion price set forth in the Certificate of
Designations. The Series D Preferred Stock is exchangeable in full but not in
part, at the Company's option for Convertible Subordinated Exchange Notes due
2007. The Certificate of Designations will contain certain covenants that
will, among other things, limit the ability of the Company and its
subsidiaries to engage in transactions with their affiliates.
The Company received a commitment from its lender with respect to the
New Credit Agreement to increase availability under this facility from $50.0
million to up to $150.0 million for additional acquisitions and for working
capital to the extent that the Dispositions and the exercise of the MMR Class
A Warrants do not occur within 60 days of the closing of the Financing, as
currently expected, borrowings will be required under the New Credit
Agreement.
The Company expects that any additional acquisitions of radio stations
will be financed through funds generated from operations, cash on hand, funds
which may be available under the New Credit Agreement and additional debt and
equity financing. The availability of additional acquisition financing cannot
be assured, and, depending on the terms of the proposed acquisition financing,
could be restricted by the New Credit Agreement and/or the debt incurrence
test under the Indenture.
The Company's ability to make scheduled payments of principal of, or to
pay interest on or to refinance, its debt (including the Old Notes, to the
extent not tendered in the Tender Offer, and the Notes) and to make dividend
payments on the Series D Preferred Stock and to redeem the Series B Redeemable
Preferred Stock depends on its future financial performance, which, to a certain
extent, is subject to general economic, financial, competitive, legislative,
regulatory and other factors beyond its control, as well as the success of the
radio stations to be acquired and the integration of such stations into the
Company's operations. Based upon the Company's current level of operations and
anticipated improvements, management believes that cash flow from operations,
together with the net proceeds of the Financing, the Dispositions, the MMR
Dispositions, the exercise of the MMR Class A Warrants and available
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<PAGE>
borrowings under the New Credit Agreement, will be adequate to meet the
Company's anticipated future requirements for working capital, capital
expenditures, scheduled payments of interest on its debt and to make dividend
payments on the Series D Preferred Stock and to redeem the Series B Redeemable
Preferred Stock. Three can be no assurance that the Dispositions and the
exercise of the MMR Class A Warrants will occur or that the Company's business
will generate sufficient cash flow from operations, that anticipated
improvements in operating results will be achieved or that future working
capital borrowings will be available in an amount sufficient to enable the
Company to service its debt, to make dividend payments on the Series D Preferred
Stock or to make necessary capital or other expenditures. The Company may be
required to refinance a portion of the principal amount of the Old Notes, to the
extent not tendered in the Tender Offer, and the Notes or the aggregate
liquidation preference of the Series D Preferred Stock prior to their respective
maturities. There can be no assurance that the Company will be able to raise
additional capital through the sale of securities, the disposition of radio
stations or otherwise for any such refinancing.
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<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In a complaint (Civil Action No. 96602056) dated April 18, 1996, Paul
Pops, who purports to be a stockholder of MMR, brought suit in the Supreme
Court of the State of New York against MMR, each of the directors of MMR, the
Company and Robert F.X. Sillerman seeking to enjoin the MMR Merger or, in the
alternative, seeking monetary damages. The suit alleges that the consideration
to be paid to the MMR stockholders in the MMR Merger is unfair and grossly
inadequate. The suit also alleges that in connection with entering into the
MMR Merger Agreement, the directors of MMR violated their fiduciary duties to
MMR and its stockholders and that the Company aided and abetted such
violation. The plaintiff is seeking to have his suit certified as a class
action representing the interests of the stockholders of MMR. The Company
has been informed that MMR believes the suit to be without substantial merit and
intends to vigorously defend the action.
In the opinion of management, there are no other material threatened or
pending legal proceedings against the Company or any entity affiliated with
Messrs. Sillerman or Hicks, which, if adversely decided, would have a material
effect on the financial condition or prospects of the Company.
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<PAGE>
<TABLE>
<CAPTION>
ITEM 6. EXHIBITS AND REPORTS ON REPORT 8-K
<S> <C>
(a) Exhibits
4.1 Certificate of Designations, Preferences and Relative, Participating, Optional and Other Special
Rights of Preferred Stock and Qualifications Limitations and Restrictions thereof of the Company's
Series B Redeemable Preferred Stock.
4.2 Certificate of DesignationsPreferences and Relative, Participating, Optional and Other Special
Rights of Preferred Stock and Qualifications Limitations and Restrictions thereof of the Company's
Series C Redeemable Preferred Stock.
10.1 Option Agreement by and between the Capstar Communications of Mississippi, Inc. And SPUR
Capital Inc. dated December 15, 1993.
10.2 Letter of Intent by and between the Company and Clear Channel Radio, Inc. Dated April 23, 1996.
10.3 Letter of Intent by and between the Company and Susquehanna Radio Corp. dated April 11, 1996.
10.4 Addendum to Employment Agreement by and between the Company and D. Geoffrey Armstrong dated
September 5, 1995.
10.5 Amendment No. 1 to Amended and Restated Agreement and Plan of Merger (Incorporated by
Reference to Exhibit 10.9 to Multi-Market Radio, Inc.'s Form 10-Q for the quarter ended March 31,
1996).
11.1 Statement Regarding Calculation of Per Share Earnings
99.1 Asset Purchase Agreement by and between Multi-Market Radio, Inc. and Puritan Radiocasting
Company (Incorporated by Reference to Exhibit 10.1 to Multi-Market Radio, Inc.'s 10-Q for the
quarter ended March 31, 1996).
99.2 Programming Agreement by and between Multi-Market Radio, Inc. and Puritan Radiocasting
Company (Incorporated by Reference to Exhibit 10.2 to Multi-Market Radio, Inc.'s 10-Q for the
quarter ended March 31, 1996).
99.3 Asset Purchase Agreement by and between Multi-Market Radio, Inc. and Wilks Broadcast
Acquisitions, Inc. (Incorporated by Reference to Exhibit 10.3 to Multi-Market Radio, Inc.'s 10-Q
for the quarter ended March 31, 1996).
99.4 Local Marketing Agreement by and between Multi-Market Radio, Inc. and Wilks Broadcast
Acquisitions, Inc. (Incorporated by Reference to Exhibit 10.4 to Multi-Market Radio, Inc.'s 10-Q
for the quarter ended March 31, 1996).
99.5 Letter Agreement by and between Multi-Market Radio, Inc. and Jones Eastern Radio of Augusta,
Inc. (Incorporated by Reference to Exhibit 10.5 to Multi-Market Radio, Inc.'s 10-Q for the
quarter ended March 31, 1996).
99.6 Local Market Agreement by and between Multi-Market Radio, Inc. and Jones Eastern Radio of
Augusta, Inc. (Incorporated by Reference to Exhibit 10.6 to Multi-Market Radio, Inc.'s 10-Q for the
quarter ended March 31, 1996).
99.7 Local Market Agreement by and between Southern Starr of Arkansas, Inc. and Triathlon
Broadcasting of Little Rock, Inc. (Incorporated by Reference to Exhibit 10.9 to Multi-Market
Radio, Inc.'s 10-Q for the quarter ended March 31, 1996).
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<PAGE>
99.10 Advertising Brokerage Agreement by and between GMR Broadcasting, Inc. and Multi-Market
Radio of Augusta, Inc. (Incorporated by Reference to Exhibit 10.53 to Multi-Market Radio, Inc.'s
Annual Report on Form 10-KSB for the year ended December 31, 1995).
99.11 Time Sales Agreement by and between Morey Organization, Inc. and Liberty Broadcasting Inc.
(Incorporated by Reference to Exhibit 10.59 to Multi-Market Radio, Inc.'s Annual
Report on Form 10-KSB for the year ended December 31, 1995).
99.12 Local Marketing Agreement by and between Yale Broadcasting Company, Inc. and General
Broadcasting of Connecticut, Inc. (Incorporated by Reference to Exhibit 10.53 to Multi-Market
Radio, Inc.'s Annual Report on Form 10-KSB for the year ended December 31, 1995).
(b) Reports on Form 8-K
A report on form 8-K was filed on April 18, 1996 under item 5 thereof (other events) to disclose
the execution of an Agreement and Plan of Merger, dated April 15, 1996, among the Company, Multi-Market
Radio, Inc. and a wholly-owned subsidiary of SFX.
A report on Form 8-K was filed on May 9, 1996 under item 5 thereof (other events) to disclose the
commencement of the tender offer and consent solicitation for the company's outstanding 11 3/8% Senior
Subordinated Notes, the execution of the Amended and Restated Agreement and Plan of Merger and the
commencement of certain private placements.
</TABLE>
See accompanying notes to consolidated financial statements
- 18 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SFX BROADCASTING, INC.
Date: May 15, 1996 By: /s/ Howard Tytel
----------------------------------
Howard J. Tytel
Executive Vice President and
Secretary
Date: May 15, 1996 By: /s/ D. Geoffrey Armstrong
-----------------------------------
D. Geoffrey Armstrong
Vice President, Treasurer, and
Chief Financial Officer
<PAGE>
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL
AND OTHER SPECIAL RIGHTS OF PREFERRED
STOCK AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
OF
SFX BROADCASTING, INC.
SERIES B REDEEMABLE PREFERRED STOCK
----------------
PURSUANT TO SECTION 151
OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
The following resolution has been duly adopted by the Board of Directors
(such Board, including any committee thereof duly authorized to act on behalf
of such Board, herein referred to as the "Board") of SFX Broadcasting, Inc.,
a Delaware corporation (the "Corporation"), pursuant to the provisions of
Section 151 of the General Corporation Law of the State of Delaware, which
resolution remains in full force and effect as of the date hereof:
WHEREAS, the Board is authorized, within the limitations and restrictions
stated in the Restated Certificate of Incorporation of the Corporation, to
fix by resolution or resolutions the voting rights, if any, of each series of
Preferred Stock, par value $.01 per share (the "Preferred Stock"), of the
Corporation and the designations, preferences and relative, participating,
optional and other special rights and qualifications, limitations and
restrictions thereof; and
WHEREAS, it is the desire of the Board, pursuant to its authority as
aforesaid, to authorize and fix the terms of a series of Preferred Stock and
the number of shares constituting such series:
RESOLVED, that there is hereby authorized and created a series of
Preferred Stock on the terms and with the provisions (in addition to those
set forth in the Restated Certificate of Incorporation of the Corporation
that are applicable to all Preferred Stock) as follows:
Section 1. Designation and Number of Shares.
The series of Preferred Stock shall be designated the "Series B
Redeemable Preferred Stock" (the "Series B Preferred Stock"). The number of
authorized shares of Series B Preferred Stock shall be four thousand (4,000).
Section 2. Rank.
The Series B Preferred Stock shall, as to the distribution of assets
upon the liquidation, dissolution or winding up of the Corporation, rank (i)
prior to the "Common Shares" of the Corporation, as defined in Section 4.1(c)
of the Corporation's Restated Certificate of Incorporation, and any other
capital stock of the Corporation (other than (a) the Series A Redeemable
Preferred Stock; par value $.01 per share, of the Corporation (the "Series A
Preferred Stock"); and (b) any other class or series of a class of capital
stock of the Corporation the terms of which expressly provide that the shares
thereof rank senior or on a parity as to the payment of dividends and the
distribution of assets upon the liquidation, dissolution or winding up of the
Corporation with the shares of the Series B Preferred Stock) (such
securities, other than those described in the immediately preceding
parenthetical clause, collectively referred to herein as the "Junior
Securities") and (ii) on a parity with the Series A Preferred Stock and any
other class or series of a class of capital stock of the Corporation the
terms of which expressly provide that the shares thereof rank on a parity as
to the payment of dividends and the distribution of assets upon the
liquidation, dissolution or winding up of the Corporation with the shares of
the Series B Preferred Stock (the "Parity Securities").
Section 3. Dividends.
The holders of the Series B Preferred Stock shall not be entitled to
receive any dividends.
Section 4. Redemption.
(a) The Corporation shall redeem one thousand shares of Series B
Preferred Stock on each of the second, third, fourth and fifth anniversaries
of the closing of the Corporation's initial public offering of its shares
of Class A Common Stock, or if any such date is not a business day in
new York, New York, then on the next succeeding date that is such a
business day (the "Redemption Date") at the redemption price per share equal
to one hundred per cent (100%) of the Liquidation Preference (as define din
Section 5 hereof) per share, without interest. The Board of Directors of the
Corporation shall select the shares of the Series B Preferred Stock to be
redeemed from the outstanding shares not previously called for redemption by
lot or pro rata as determined by the Board of Directors of the Corporation in
their sole discretion.
(b) At least 10 days but not more than 20 days prior to the Redemption
Date, a written notice shall be mailed to each holder of record of shares of
the Series B Preferred Stock to be redeemed in a postage prepaid envelope
addressed to such holder at such holder's post office address as shown on the
records of the Corporation, notifying such holder of the redemption of its
shares, stating the Redemption Date, the redemption price to be paid
therefor, and calling upon such holder to surrender its certificate or
certificates for its shares to the Corporation on the Redemption Date at the
place
- 2-
designated in such notice of redemption. On or after the Redemption
Date each holder of shares of the Series B Preferred Stock to be redeemed
shall present and surrender its certificate or certificates for such shares
to the Corporation at the place designated in such notice and thereupon the
redemption price of such shares shall be paid to or on the order of the
person whose name appears on such certificate or certificates as the owner
thereof and each surrendered certificate shall be cancelled. From and after
the redemption Date (unless default shall be made by the Corporation in
payment of the redemption price), all rights of the holders of the Series B
Preferred Stock to be redeemed as stockholders of the Corporation, except the
right to receive the redemption price thereof upon the surrender of
certificates representing the same, shall cease and terminate and such shares
shall not thereafter be transferred (except with the consent of the
Corporation) on the books of the Corporation, and such shares shall not be
deemed to be outstanding for any purpose whatsoever.
(c) If the Corporation shall fail to discharge any of its obligations
to redeem shares of Series B Preferred Stock pursuant to Section (4)(b)
(each, a "Mandatory Redemption Obligation"), the applicable Mandatory
Redemption Obligation shall be discharged as soon as the Corporation is able
to discharge such Mandatory Redemption Obligation. If and for so long as any
Mandatory Redemption Obligation shall not have been fully discharged, the
Corporation shall not (i) declare, pay or set apart for payment dividends or
make any other distribution on or with respect to any Parity Securities or
Junior Securities, other than dividends paid or distributions made in shares
of Junior Securities; or (ii) redeem, purchase, retire or otherwise acquire
for any consideration, or make any payment on account of a sinking fund or
other similar fund for redemption, purchase, retirement or acquisition of,
any Junior Securities or any Parity Securities, or any warrant, right or
option to purchase any thereof, or make any distribution in respect thereof,
directly or indirectly, whether in cash, obligations or securities of the
Corporation or other property, except, (x) in the case of Junior Securities,
redemptions, purchases, retirements, acquisitions or distributions made in
shares of Junior Securities and (y) in the case of Parity Securities, pro
rata so that the amounts redeemed, purchased, retired or otherwise acquired
or paid or distributed in respect thereof, as the case may be, per share on
the Series B Preferred Stock and such other Parity Securities in all cases
bear to each other the same ratio that required redemption payments per share
on the shares of Series B Preferred Stock and such other Parity Securities
bear to each other.
(d) Any cash payment to a holder of shares of Series B Preferred Stock
on the Redemption Date shall be made in coin or currency of the United States
that as of the date of payment shall be legal tender for payment of public
and private debts by mailing a check to such holder at the address as shown
on the stock books of the Corporation.
- 3 -
Section 5. Liquidation.
The shares of Series B Preferred Stock shall rank prior to the shares
of Junior Securities upon liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary (a "Liquidation Transaction"),
so that in the event of any Liquidation Transaction, the holders of shares of
Series B Preferred Stock then outstanding shall be entitled to receive out of
the assets or surplus funds of the Corporation available for distribution to
its stockholders, or proceeds thereof, whether from capital, surplus or
earnings, before any distribution is made to holders of any Junior Securities,
a liquidation preference (the "Liquidation Preference") in the amount per
share of Series B Preferred Stock equal to One Thousand ($1,000) Dollars. If,
upon any Liquidation Transaction, the assets or surplus funds of the
Corporation, or proceeds thereof, whether from capital, surplus or earnings,
distributable among the holders of shares of Series B Preferred Stock and any
Parity Securities then outstanding are insufficient to pay in full the
preferential liquidation payments due to such holders, such assets or proceeds
shall be distributable among such holders ratably in accordance with the amounts
that would be payable on such shares of Series B Preferred Stock and Parity
Securities if all amounts payable thereon were payable in full. In the event of
a Liquidating Transaction, the Corporation shall give written notice to the
holders of shares of Series B Preferred Stock, by first class mail to such
holders' respective addresses as shown on the stock books of the Corporation.
Neither the consolidation, merger or other business combination of the
Corporation with or into any other person or persons nor the sale of all or
substantially all the assets of the Corporation shall be deemed to be a
Liquidation Transaction.
Section 6. Voting Rights.
The holders of shares of Series B Preferred Stock shall not be
entitled to any voting rights except as required by law.
- 4 -
IN WITNESS WHEREOF, SFX Broadcasting, Inc. has caused this Certificate of
Designations, Preferences and Relative, Participating Optional and other
Special Rights of Preferred Stock and Qualifications, Limitations and
Restrictions thereof of its Series B Redeemable Preferred Stock to be duly
executed by its Executive Vice President and Secretary attested to by its
Assistant Secretary and has caused its corporate seal to be affixed hereto,
as of this 28th day of September, 1993.
/s/ Howard J. Tytel
----------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
and Secretary
ATTEST:
/s/ Richard A. Liese
- -----------------------------------
Name: Richard A. Liese
Title: Assistant Secretary
- 5 -
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
----------------
I. EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "SFX BROADCASTING, INC.," FILED IN THIS OFFICE ON THE TWENTY-NINTH DAY OF
JULY, A.D. 1994, AT 1 O'CLOCK P.M.
/s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 7553308
DATE: June 26, 1995
<PAGE>
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
SFX BROADCASTING, INC.
SFX Broadcasting, Inc. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "DGCL"),
DOES HEREBY CERTIFY:
FIRST: That a meeting of the Board of Directors of the Corporation,
resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of said corporation, declaring said amendments
to be advisable and directing that the proposed amendment be considered at
the next annual meeting of the stockholders of said corporation. The
resolution setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by changing Article Five thereof so that, as amended, said
Article shall be and read as follows:
"ARTICLE FOUR
CAPITAL STRUCTURE
4.1 Authorized Shares. The total number of shares of stock which the
Corporation shall have authority to issue is 22,210,000 shares,
consisting of the following:
(a) 10,000,000 shares of Class A Common Stock par value $.01 per
share (the "Class A Shares");
(b) 1,000,000 shares of Class B Common Stock, par value $.01 per
share (the "Class B Shares");
(c) 1,200,000 shares of Class C Common Stock, par value $.01 per
share (the "Class C Shares" and together with the Class A Shares and
Class B Shares, the "Common Shares"); and
(d) 10,010,000 shares of Preferred Stock, par value $0.1 per
share (the "Preferred Shares").
4.2 Designations, Preferences, etc. The designations, preferences,
powers, qualifications, and special or relative rights or privileges
of the capital stock of the Corporation shall be as set forth in
ARTICLE FIVE and ARTICLE SIX below.
SECOND: That thereafter, pursuant to resolution of its Board of Directors, an
annual meeting of the stockholders of said corporation was duly called and
held, upon notice in accordance with Section 222 of the DGCL at which meeting
the necessary number of shares as required by statute were voted in favor of
the amendment.
THIRD: That said amendment was duly adopted in accordance with the provisions
of Section 242 of the DGCL.
IN WITNESS WHEREOF, said Corporation has caused this certificate to be signed
by R. Steven Hicks, its President, and Howard J. Tytel, its Secretary on this
20th day of July, 1994.
By: /s/ R Steven Hicks
--------------------------------
R. Steven Hicks
President
ATTEST:
/s/ Howard J. Tytel
- --------------------------------
Howard J. Tytel
Secretary
CERTIFICATE OF DESIGNATIONS PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL
AND OTHER SPECIAL RIGHTS OF PREFERRED
STOCK AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
OF
SFX BROADCASTING, INC.
SERIES C REDEEMABLE CONVERTIBLE PREFERRED STOCK
-----------------------
PURSUANT TO SECTION 151
OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
The following resolution has been duly adopted by the Board of Directors
(such Board, including any committee thereof duly authorized to act on behalf
of such Board, herein referred to as the "Board") of SFX Broadcasting, Inc., a
Delaware corporation (the "Corporation"), pursuant to the provisions of
Section 151 of the General Corporation Law of the State of Delaware, which
resolution remains in full force and effect as of the date hereof;
WHEREAS, the Board is authorized, within the limitations and
restrictions stated in the Restated Certificate of Incorporation of the
Corporation, to fix by resolution or resolutions the voting rights, if any, of
each series of Preferred Stock, par value $.O1 per share (the "Preferred
Stock"), of the Corporation and the designations, preferences and relative,
participating, optional and other special rights and qualifications
limitations and restrictions thereof; and
WHEREAS, it is the desire of the Board, pursuant to its authority as
aforesaid, to authorize and fix the terms of a series of Preferred Stock and
the number of shares constituting such series:
RESOLVED, that there is hereby authorized and created a series of
Preferred Stock on the terms and with the provisions (in addition to those set
forth in the Restated Certificate of Incorporation of the Corporation that are
applicable to all Preferred Stock) as follows:
Section 1. Designation and Number of Shares.
The series of Preferred Stock shall be designated the
"Series C Redeemable Convertible Preferred Stock" (the "Series C Preferred
Stock"). The number of authorized shares of Series C Preferred Stock shall be
two thousand (2,000).
<PAGE>
Section 2. Rank.
The Series C Preferred Stock shall, as to the distribution
of assets upon liquidation, dissolution or winding up of the Corporation, rank
(i) prior to the "Class A Shares" of the Corporation, as defined in Section
4.1(a) of the Corporation's Restated Certificate of Incorporation and any
other capital stock of the Corporation (other than (a) the Series A
Redeemable Preferred Stock, par value $.O1 per share, of the Corporation (the
"Series A Preferred Stock"); (b) the Series B Redeemable Preferred Stock, par
value $.01 per share, of the Corporation (the "Series B Preferred Stock"); and
(c) any other class or series of a class of capital stock of the Corporation
the terms of which expressly provide that the shares thereof rank senior or on
a parity as to the payment of dividends and the distribution of assets upon
the liquidation, dissolution or winding-up of the Corporation with the shares
of the Series C Preferred Stock) (such securities, other than those described
in the immediately preceding parenthetical clause, collectively referred to
herein as the "Junior Securities") and (ii) on a parity with the Series A
Preferred Stock and the Series B Preferred Stock and any other class or series
of a class of capital stock of the Corporation the terms of which expressly
provide that the shares thereof rank on a parity as to the payment of
dividends and the distribution of assets upon the liquidation, dissolution or
winding-up of the Corporation with the shares of the Series C Preferred Stock
(the "Parity Securities").
Section 3. Dividends.
(a) The holders of the Series C Preferred Stock shall be
entitled to share equally in, and to receive, in accordance with the number of
Series C Preferred Stock held by each such holder, cumulative dividends equal
to six percent (6%) per annum of the Liquidation Preference (as defined in
Section 6 hereof) of each share of Series C Preferred Stock. Dividends shall
be payable by the Corporation in arrears for each calendar quarter during
which the Series C Preferred Stock is outstanding and shall be paid on or
before the first business day of each calendar quarter commencing with the
second full calendar quarter following the calendar quarter in which the closing
(the "Closing") of the acquisition by SFX Broadcasting of Texas (KTCK), Inc.
("SFX of Texas") of radio station KTCK-AM Dallas, Texas, occurs.
(b) The Corporation's obligation to pay such dividends to
the holders of the Series C Preferred Stock is subject to and contingent upon
the absence of a material default under the terms of the Corporation's then
existing senior credit facility; provided, however, that such dividends shall
continue to accrue during the period of any such default and shall be payable
by the Corporation on the first business day of the calendar quarter following
the calendar quarter in which such default is cured.
(c) For so long as any of the shares of Series C Preferred
Stock shall remain outstanding, no dividends, whether in cash or property, may
be paid or declared by the Corporation, nor may any distribution be made for
any other class or series of capital stock of the Corporation, nor may any
other class or series of capital stock of the Corporation be purchased or
acquired for value by the Corporation, unless all accrued dividends payable
for the shares of Series C Preferred Stock for all previous quarterly periods
and for the then current quarterly period shall
-2-
<PAGE>
have been paid.
(d) Notwithstanding anything to the contrary contained
herein, no dividends on Series C Preferred Stock shall be paid or set apart
for payment by the Corporation at any time that such payment or setting apart
is prohibited by applicable law.
Section 4. Redemption.
(a) The Corporation shall be entitled, at its option, to
redeem the Series C Preferred Stock, in whole or in part at any time, and from
time to time, after the third anniversary of the date of the Closing at a
redemption price per share equal to one hundred per cent (100%) of the
Liquidation Preference (as defined in Section 6 hereof) per share, together
with all accrued and unpaid dividends for the shares of Series C Preferred
Stock so redeemed (collectively, the "Redemption Price").
(b) The Corporation shall mail to each holder of Series C
Preferred Stock to be redeemed, in a postage prepaid envelope bearing the name
and post office address of such holder as shown on the records of the
Corporation, a written notice of redemption of such shares of Series C
Preferred Stock stating the date fixed for redemption of any shares of Series
C Preferred Stock, which date shall be the first business day of the calendar
quarter immediately following the expiration of 60 days after the date of such
notice (each a "Redemption Date"), and the Redemption Price to be paid for
such shares and calling upon such holder to surrender its certificate or
certificates for such shares to the Corporation on the Redemption Date at the
place designated in such notice of redemption. On or after the Redemption
Date, each holder of Series C Preferred Stock which is to be redeemed shall
present and surrender its certificate or certificates for such shares to the
Corporation at the place designated in such notice and thereupon the
Redemption Price of such shares shall be paid to or on the order of the person
whose name appears on such certificate or certificates as the owner thereof
and each surrendered certificate shall be cancelled. From and after the
Redemption Date (unless default shall be made by the Corporation in payment
of the redemption price), all rights of the holders of the Series C Preferred
Stock so redeemed, as stockholders of the Corporation, except the right to
receive the Redemption Price thereof upon the surrender of certificates
representing the same, shall cease and terminate and such shares shall not
thereafter be transferred (except with the consent of the Corporation) on the
books of the Corporation, and such shares shall not be deemed to be
outstanding for any purpose whatsoever.
(c) The holders of Series C Preferred Stock shall be
entitled, at their option, to cause the Corporation to purchase the Series C
Preferred Stock, in whole or in part at any time, and from time to time, after
the fifth anniversary of the date of the Closing at the Redemption Price.
(d) The holders of Series C Preferred Stock to be purchased
by the Corporation shall mail to the Corporation in a postage prepaid
envelope a written notice thereof stating the date fixed for the Corporation's
purchase of any shares of Series C Preferred Stock, which date shall be the
first business day of the calendar quarter immediately following the
expiration of 60 days after the date of such notice (each a "Purchase Date"),
and the Redemption Price to be paid for such shares and calling upon the
Corporation to purchase such shares on the
-3-
<PAGE>
Purchase Date at the offices of the Corporation. On or after the Purchase
Date, each holder of Series C Preferred Stock which is to be purchased shall
present and surrender its certificate or certificates for such shares to the
Corporation at the offices of the Corporation and thereupon the Redemption
Price of such shares shall be paid to or on the order of the person whose name
appears on such certificate or certificates as the owner thereof and each
surrendered certificate shall be cancelled. From and after the Purchase Date
(unless default shall be made by the Corporation in payment of the Redemption
Price), all rights of the holders of the Series C Preferred Stock so
purchased, as stockholders of the Corporation, except the right to receive the
Redemption Price thereof upon the surrender of certificates representing the
same, shall cease and terminate and such shares shall not thereafter be
transferred (except with the consent of the Corporation) on the books of the
Corporation, and such shares shall not be deemed to be outstanding for any
purpose whatsoever.
(e) Any cash payment to a holder of shares of Series C
Preferred Stock on the Redemption Date or the Purchase Date shall be made in
immediately available funds in coin or currency of the United States of
America which as of the date of payment shall be legal tender for the payment
of public and private debts
Section 5. Convertibility.
(a) Upon the occurrence of an Event of Default under (and
as defined in) Section 5.5 of that certain Asset Purchase Agreement dated
April 24, 1995 by and among Cardinal Communications Partners L.P., SFX of
Texas and the Corporation, which Event of Default is not cured within ninety
(90) days after receipt of notice of such default as provided therein, the
holders of the Series C Preferred Stock shall be entitled to convert their
shares of Series C Preferred Stock then outstanding into the number of shares
of Class A Shares that shall be determined by dividing the number of shares
of Series C Preferred Stock then outstanding by the product of seventy-five
percent (75%) multiplied by the average closing bid and ask price per share
for the Class A Shares quoted on the NASDAQ National Market or any successor
exchange on which the Class A Shares are listed for the thirty (30) day period
immediately prior to the effective date of the conversion.
(b) Any holder of Series C Preferred Stock which is
thereafter eligible for conversion may surrender the certificate or
certificates therefor, duly endorsed in blank or accompanied by proper
instruments of transfer, at the office of the Corporation, and shall give
written notice to the Corporation at such office (i) stating that their shares
of Series C Preferred Stock are being returned to the Corporation for
conversion into shares of Class A Shares as provided in subparagraph (a)
above, (ii) identifying the number of shares of Series C Preferred Stock so
converted, and (iii) setting forth the name or names (with addresses) in which
the certificate or certificates for shares of Class A Shares shall be issued
and shall include instructions for delivery thereof. Delivery of such notice
together with the certificates representing such shares of Series C Preferred
Stock shall obligate the Corporation to issue such shares of Class A Shares
and the Corporation shall be justified in relying upon the information and
certifications contained in such notice and shall not be liable for the result
of any inaccuracy with respect thereto. Thereupon the Corporation shall
promptly issue and deliver at such stated address to such holder a certificate
or certificates for the number of shares of Class A Shares to which such
holder is entitled, registered
-4-
<PAGE>
in the name of such holder or the designee of such holder as specified In such
notice. The Class A Shares so issued shall be freely tradeable pursuant to a
registration or an exemption from registration under applicable federal
securities laws.
(c) Series C Preferred Stock that is converted into Class A
Shares as provided herein shall be retired and cancelled and shall not be
reissued.
Section 6. Liquidation.
The shares of Series C Preferred Stock shall rank prior to
the shares of Junior Securities upon Liquidation, dissolution or winding-up of
the Corporation, whether voluntary or involuntary (a "Liquidation
Transaction"), so that in the event of any Liquidation Transaction the holders
of shares of Series C Preferred Stock then outstanding shall be entitled to
receive out of the assets or surplus funds of the Corporation available for
distribution to its stockholders, or proceeds thereof, whether from capital,
surplus or earnings, before any distribution is made to holders of any Junior
Securities, a Liquidation preference (the "Liquidation Preference") in the
amount per share of Series C Preferred Stock equal to One Thousand Dollars
($1,000). If, upon any Liquidation Transaction, the assets or surplus funds of
the Corporation, or proceeds thereof, whether from capital, surplus or
earnings, distributable among the holders of shares of Series C Preferred
Stock and any Parity Securities then outstanding are insufficient to pay in
full the preferential liquidation payments due to such holders, such assets or
proceeds shall be distributable among such holders ratably in accordance with
the amounts that would be payable on such shares of Series C Preferred Stock
and Parity Securities if all amounts payable thereon were payable in full. In
the event of a Liquidating Transaction, the Corporation shall give written
notice to the holders of shares of Series C Preferred Stock, by first class
mail to such holders' respective addresses as shown on the stock books of the
Corporation. Neither the consolidation, merger or other business combination
of the Corporation with or into any other person or persons nor the sale of
all or substantially all of the assets of the Corporation shall be deemed to
be a Liquidation Transaction.
Section 7. Voting Rights.
The holders of shares of Series C Preferred Stock shall not
be entitled to any voting rights except as required by law.
Section 8. Transfer.
The holder of shares of Series C Preferred Stock shall be prohibited from
selling, giving or in any way transferring any shares of Series C Preferred
Stock held by each of them; provided however, that any such holder of Series C
Preferred Stock shall be entitled to sell, give or in any way transfer such
shares of Series C Preferred Stock to a member of such holders immediate
family.
-5-
<PAGE>
IN WITNESS WHEREOF, SFX Broadcasting, Inc. has caused this Certificate of
Designations, Preferences and Relative, Participating, Optional and other
Special Rights of Preferred Stock and Qualifications, Limitations and
Restrictions thereof of its Series C Preferred Stock to be duly executed by
its Secretary and has caused its corporate seal to be affixed hereto, as of
this 12th day of September, 1995.
By: /s/ Howard J. Tytel
-----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
and Secretary
Attest:
/s/ Richard A. Liese
- --------------------------
Name: Richard A. Liese
Title: Assistant Secretary
-6-
OPTION AGREEMENT
THIS OPTION AGREEMENT, made and entered into as of this 15th day of
December, 1993 ("Agreement"), is by and between SPUR Capital Inc., a Texas
Corporation ("SPUR"), and Capstar Communications of Mississippi, Inc., a
Delaware corporation ("Capstar").
W I T N E S S E T H:
WHEREAS, SPUR is general partner of the owner and operator of Radio
Broadcast Station WJDX-FM, Jackson, Mississippi ("Station"); and
WHEREAS, Capstar wishes to acquire an option to purchase from SPUR the
assets, properties and rights used by SPUR in the operation of the Station;
and
WHEREAS, SPUR wishes to grant Capstar an option to purchase said assets,
properties and rights;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, SPUR and Capstar agree as follows:
1. Option.
1.1. Grant. Upon the terms and subject to the conditions of this
agreement, Capstar is hereby granted the right ("Option") to purchase from
SPUR , at any time from January 1, 1994 until 5:00 pm., Austin, Texas time,
on December 31, 1998 ("Option Term"), all of the assets, properties and rights
of SPUR, whether tangible, intangible, real, personal or mixed, and wherever
located (other than the Excluded Assets, as defined herein), used by SPUR in
the rights being herein collectively referred to as the "Assets"), including,
without limitation, the following:
(a) all fixtures, equipment, furniture and other tangible property
(collectively, the "Fixtures and Equipment") used by SPUR in the
operation of the Station;
(b) all of SPUR's rights under the lease agreements, marketing
agreements, supply agreements, utility agreements, service agreements,
employment agreements and other agreements, whether written or oral,
to which SPUR is a party and which relate to the operation of the
Station (collectively, the "Business Arrangements");
<PAGE>
(c) all licenses, permits, authorizations or other rights granted
by the Federal Communications Commission and other governmental
authorities and all certificates of convenience or necessity, immunities,
privileges, easements, consents, grants, ordinances and other rights of
every character whatsoever that are used by Spur in or associated with
the operation of the Station;
(d) all supplier lists and supplier data relating
to the operation of the Station;
(e) all customer records and files relating to the
operation of the Station;
(f) all rights under express or implied warranties from the sellers
of goods and services used in or associated with the operation of the
Station; and
(g) all books, records and other documents used in or associated
with the operation of the Staton or the employees and former employees
engaged in work in connection with the Station
.
1.2. Assets Not Subject to Option. Notwithstanding any other
provision of this Agreement, the Assets subject to the option granted hereby
shall not include the following assets, properties and rights of Spur, which
might otherwise be considered as used in, constituting or associated with the
operation of the Station (collectively, the "Excluded Assets"):
(a) all of the assets, properties and rights of Spur, whether
tangible, intangible, real, personal or mixed, and wherever located, that
are used by Spur in the operation of Radio Broadcast Station WSLI-AM,
Jackson, Mississippi ("WSLI-AM"), including, without limitation, all
contracts and other agreements between Spur and any other person or
entity respecting the operation of WSLI-AM, all rights to the payment of
money or other forms of consideration of any kind that result from or
derive from the operation of WSLI-AM, all fixtures, equipment, furniture
and other tangible property of every kind and description and all real
property or interest therein used in the operation of WSLI-AM, and the
licenses, permits and authorizations that Spur has received from the
Federal Communications Commission with respect to the acquisition and
operation of WSLI-AM (collectively, the "WSLI-AM Assets");
-2-
<PAGE>
(b) all cash, cash-equivalents, securities and bank
deposits, of whatever description;
(c) all accounts receivable;
(d) the rights to any of Spur's claims for any
federal, state, local or foreign tax refunds;
(e) the rights which accrue or will accrue to Spur
under this Agreement; and
(f) the rights to carry forward, carry back or otherwise utilize
any of Spur's net operating losses for federal and state income tax
purposes.
1.3. Consideration for Option. In consideration of the Option
granted hereby, Capstar agrees to pay Spur, commencing on January 1, 1994,
and continuing on the first day of each month thereafter until the expiration
of the Option Term, and irrespective of whether Capstar elects to exercise
said Option, the sum of $5,000.00 per month.
1.4. Exercise of Option. In the event Capstar elects to exercise
the Option granted hereby, Capstar shall provide Spur written notice ("Option
Exercise Notice") of said election prior to the expiration of the Option Term.
2. Purchase Price. The purchase price ("Purchase Price") payable by
Capstar to Spur for the Assets shall be determined as follows:
If Spur Receives the
Option Exercise Notice Then the Purchase
during the period: Price shall be:
---------------------- -----------------
January 1, 1994 through
December 31, 1994 $2,500,000
January 1, 1995 through
December 31, 1995 $2,750,000
January 1, 1996 through
December 31, 1996 $3,000,000
January 1, 1997 through
December 31, 1997 $3,250,000
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<PAGE>
If Spur Receives the
Option Exercise Notice Then the Purchase
during the period: Price shall be:
January 1, 1998 through $3,500,000
December 31, 1998
3. The Closing.
3.1. Closing and Closing Date. The closing (the "Closing") of the
sale and purchase of the Assets contemplated hereby shall be held on the
fifteenth business day following the day on which Spur shall receive the
Option Exercise Notice, at 10:00 a.m., Austin, Texas time at the offices of
Bracewell & Patterson, L.L.P., 100 Congress Avenue, Suite 1900, Austin, Texas
78701-4052, provided, however, that if the conditions precedent to the
Closing, as set forth in Section 5 of this Agreement, shall not have been
satisfied or waived on said date, the Closing shall take place on the fifth
business day following said satisfaction or waiver of such conditions, or on
such other date as Spur and Capstar shall agree upon in writing. The time and
date of closing is referred to herein as the "Closing Date."
3.2. Title, Possession, Risk of Loss. Title to,
possession of and risk of loss or destruction or damage to the
Assets shall pass to Capstar at the Closing.
3.3. Items to be Delivered at Closing by Spur. At
the Closing, and subject to the terms and conditions herein
contained, Spur shall deliver to Capstar the following:
(a) a Bill of Sale, General Assignment and Conveyance in the form
set forth as Exhibit "A" hereto, duly executed by Spur; and
(b) such other good and sufficient instruments and documents of
conveyance and transfer, in a form reasonably satisfactory to Capstar and
its counsel, as shall be necessary and effective to transfer and assign
to, and vest in, Capstar all of Spur's right, title and interest in and
to the Assets.
Simultaneously with such delivery, all such steps will be taken by Spur as may
be reasonably required to put Capstar in actual possession and operating
control of the Assets.
3.4. Items to be Delivered at Closing by Capstar.
At the Closing, and subject to the terms and conditions herein
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<PAGE>
contained, Capstar shall deliver to Spur, by wire transfer, immediately
available funds equal to the Purchase Price.
4. Covenants or Spur and Capstar; Representations and
Warranties.
4.1. Access to Properties and Records. From and after the date on
which Spur shall receive the Option Exercise Notice and continuing thereafter
until the closing, Spur will (i) keep Capstar advised of all developments
relevant to the consummation of the sale and purchase of Assets contemplated
by this Agreement and the operation of Station; cooperate fully, both in
permitting Capstar and Capstar's representatives, advisers, employees,
consultants, auditors and other experts to make a full investigation, at
Capstar's sole cost and expense, and at reasonable times and upon reasonable
notice, of the properties, operations and financial condition of the Station,
and in bringing about the consummation of the sale and purchase of Assets
contemplated hereby; and (ii) afford Capstar and Capstar's representatives,
advisers, employees, consultants, auditors and other experts, at Capstar's
sole cost and expense, and at reasonable times and upon reasonable notice,
reasonable access to the offices, buildings, real properties, machinery and
equipment, records, files, books of account, agreements and commitments
related to the operation of the Station. Capstar covenants and agrees that,
prior to the Closing, neither Capstar nor any of Capstar's representatives,
advisers, employees, consultants, auditors and other experts will interfere
with the operation of the Station or any of the Business Arrangements. All
information obtained by Capstar through any investigation of or access to the
properties, operations and financial condition of the Station shall at all
times prior to the Closing remain confidential, and neither Capstar nor any of
its representatives, advisers, employees, consultants, auditors or other
experts shall disclose any such information to any other person or entity
without the prior written consent of Spur.
4.2. Satisfaction of Conditions; Cooperation. From and after the
date on which Spur shall receive the Option Exercise Notice and continuing
thereafter until the Closing, each of Spur and Capstar will use its reasonable
efforts to (a) obtain, as soon as possible, all governmental approvals
required to be obtained by it and make, as soon as possible, all filings with
any governmental authority required on its part to consummate the sale and
purchase of the Assets contemplated hereby, and (b) obtain, as soon as
possible, other consents to and approvals required to be obtained by it to
-5-
<PAGE>
consummate the sale and purchase of the Assets contemplated
hereby.
4.3. Representations and Warranties. At the Closing, Spur shall
convey to Capstar full legal and beneficial title to the Assets, free and clear
of all liens, pledges, mortgages, security interests, conditional sales
contracts and encumbrances. At the Closing, the Fixtures and Equipment will be
in satisfactory operating condition (except for ordinary wear and tear which in
the aggregate would not have a material adverse effect on the operation of the
Station) and will be capable of being used in connection with the operation of
the Station without need for material repair or replacement except in the
ordinary course of business. At the Closing, the Assets sold and transferred
to Capstar shall constitute all of the assets, properties and rights of Spur,
other than the Excluded Assets, which are necessary to the operation of the
Station as a going concern on a basis consistent with past practice. EXCEPT
AS SET FORTH IN THIS SECTION 4.3, NEITHER SPUR NOR ANY OF ITS AGENTS,
ATTORNEYS OR REPRESENTATIVES MAKES ANY REPRESENTATION OR WARRANTY WHATSOEVER,
EXPRESSED OR IMPLIED, RESPECTING THE ASSETS OR THE STATION, OR MAKES ANY
WARRANTY THAT THE ASSETS SHALL BE MERCHANTABLE OR FIT POR A PARTICULAR
PURPOSE. ANY APPLICABLE IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PATICULAR PURPOSE IS HEREBY DISCLAIMED.
5. Conditions to Closing.
5.1. Conditions Precedent to Obligation of Capstar. Te obligation
of Capstar to consummate the sale and purchase of the Assets contemplated by
this Agreement shall be subject to satisfaction (or the waiver in writing of
Capstar) at or prior to the Closing of all of the following conditions:
5.1.1. No Casualty, Loss or Damage. No material casualty, loss
or damage shall have occurred prior to the Closing Date to any Assets
unless Spur shall have either repaired or replaced such lost or damaged
property; provided, however, that Capstar reserves the right, in its sole
discretion, to waive the condition set forth in this Section 5.1.1, and
either receive any insurance proceeds or benefits payable to Spur with
respect to any such casualty, loss or damage or reduce the Purchase Price
by an amount equal to any such casualty, loss or damage.
5.1.2. Documents. All documents, instruments
and agreements required to be executed and delivered by
-6-
<PAGE>
Spur or third parties at the Closing as contemplated hereby, and such
other documents and instruments as Capstar shall reasonably request,
shall have been duly executed and delivered by Spur and any other parties
required and shall have been received by Capstar.
5.1.3. Consents. All consents and approvals of third parties
or any regulatory body or authority, whether required contractually or by
applicable federal, state or local law, or otherwise necessary for the
execution, delivery and performance of this Agreement by Spur, and the
transfer of the Assets to Capstar, shall have been delivered to Capstar
in form and substance satisfactory to Capstar at least two days prior to
the Closing Date and shall not have been withdrawn or revoked.
5.1.4. Ad Valorem and Other Taxes. Except as otherwise
apportioned pursuant to Section 7.2, below, all ad valorem and other
taxes (excluding income) assessed against the Assets for the year in
which the Closing shall occur and all prior years shall have been paid.
5.1.5. Corporate Authority. Spur shall have delivered to
Capstar, in such form as Capstar's legal counsel may reasonably request,
evidence of Spur's authority for the execution, delivery and performance
of this Agreement and the other agreements and instruments to be executed
and delivered by Spur pursuant hereto and the transactions contemplated
hereby and thereby.
5.2. Conditions Precedent to Obligation of Spur. The obligation of
Spur to consummate the sale and purchase of the Assets contemplated by this
Agreement shall be subject to satisfaction (or the waiver in writing by Spur)
at or prior to the Closing of all of the following conditions:
5.2.1. Closing Deliveries. Capstar shall have delivered to
Spur immediately available funds in an amount equal to the Purchase Price
determined pursuant to Section 2 hereof.
5.2.2. Documents. All documents, instruments and agreements
required to be executed and delivered by Capstar or third parties at the
Closing as contemplated hereby, and such other documents and instruments
as Spur shall reasonably request, shall have been duly executed and
delivered by Capstar and any other parties required and shall have been
received by Spur.
-7-
<PAGE>
5.2.3. Consents. All consents and approvals of third parties
or any regulatory body or authority, whether required contractually or by
applicable federal, state or local law, or otherwise necessary for the
execution, delivery and performance of this Agreement by Capstar, shall
have been delivered to Spur in form and substance satisfactory to Spur at
least two days prior to the Closing Date and shall not have been
withdrawn or revoked.
5.2.4. Corporate Authority. Capstar shall have delivered to
Spur, in such form as legal counsel for Spur may reasonably request,
evidence of Capstar's corporate authority for the execution, delivery and
performance of this Agreement and the other agreements and instruments to
be delivered by Capstar pursuant hereto and the transactions contemplated
hereby and thereby.
6. Termination.
6.1. Grounds for Termination. This Agreeent may be terminated at
any time prior to the Closing Date:
(a) by the written agreement of Spur and Capstar;
or
(b) by Capstar, by written notice to Spur, in the event Spur fails
to perform, keep or observe any term, provision, condition or covenant
contained herein, which failure is not cured to Capstar's reasonable
satisfaction within ten business days after Capstar gives Spur written
notice identifying such failure; or
(c) by Spur, by written notice to Capstar, in the event Capstar
fails to perform, keep or observe any term, provision, condition or
covenant contained herein, which failure is not cured to Spur's
reasonable satisfaction within ten business days after Spur gives Capstar
written notice identifying such failure; or
(d) by Spur or by Capstar, by written notice to the other, if the
Closing shall not have occurred by 5:00 p.m., Austin, Texas time on the
90th day following the date on which Spur shall receive the Option
Exercise Notice, unless such date is extended by mutual agreement in
writing; or
(e) by Spur or by capstar, by written notice to the
other, if on the date scheduled for Closing any proceed-
-8-
<PAGE>
ing or action shall have bean filed seeking to restrain, enjoin or
otherwise prevent the consummation of this Agreement or the transactions
contemplated hereby or any order shall have been entered restraining or
prohibiting consummation of the transactions contemplated hereby.
6.2. Effect of Termination. If this Agreement is terminated as
permitted under Section 6.1, above, such termination shall be without
liability of either party, except that such termination shall be without
prejudice to any and all other remedies the parties may have against each
other for any breach of this Agreement.
7. Receivables; Apportionment; Other Taxes.
7.1. Receivables. If any monies or other assets are received by
Capstar subsequent to the Closing to which Spur is entitled and that are not
included in the Assets, Capstar shall hold such monies and assets received in
trust for Spur and shall account for and pay same to Spur within fifteen days
of receipt. If any monies or other assets are received by Spur subsequent to
the Closing to which Capstar is entitled, and that are included in the Assets,
Spur shall hold such monies and assets received in trust for Capstar and shall
account for and pay same to Capstar within fifteen days of receipt.
7.2. Apportionment. Ad valorem and similar taxes imposed by any
taxing authority on the Assets and applicable to periods both prior to and
after the Closing Date shall be prorated as of the Closing Date. spur and
Capstar shall agree on the amounts owing to Spur by Capstar or to Capstar by
Spur resulting from such proration within sixty days after the Closing Date,
and such amounts shall be paid within thirty days thereafter.
7.3. Other Taxes. To the extent there are any sales, use, or
similar taxes payable to any taxing authority in any state arising from this
transaction, they shall be borne by Capstar and Capstar agrees to indemnify
Spur therefor. Capstar shall have the right to approve all sales tax
information and returns submitted to tax authorities and to designate the
amount of sales tax shown due thereon arising from the sale and purchase of
the Assets contemplated hereby.
-9-
<PAGE>
8. Miscellaneous.
8.1. Notice. Any notice required or permitted to be given under
this Agreement shall be in writing, and shall be mailed by certified mail,
return receipt requested, or delivered to the addresses, or sent by telecopy
to the telecopy numbers, as follows:
SPUR: Spur Jackson, L.P.
c/o Spur Capital, Inc.
301 Congress Avenue
Suite 410
Austin, Texas 78701
Attention: President
Telecopy No.: (512) 495-6496
CAPSTAR: Capstar Communications of Mississippi, Inc.
l375 Beasley Road
Jackson, Mississippi 39206
Attention: President
Telecopy No.: (______) ________
or such other address as shall be furnished in writing by such parties, and
such notice shall be effective and be deemed to have been given as of the date
actually received.
To the extent any notice provision in any other agreement,
instrument or document required to be executed or executed by the parties in
connection with the transactions contemplated herein contains a notice
provision which is different from the notice provision contained in this
Section 8.1 with respect to matters arising under such other agreement,
instrument or document, the notice provision in such other agreement,
instrument or document shall control.
8.2. Amendments and Waivers. This Agreement may
not be amended or waived except by an instrument in writing
signed on behalf of each of the parties hereto.
8.3. Further Documents. Spur shall, at any time
and from time to time after the Closing, upon request by
Capstar and without further consideration, execute and deliver
such instruments of transfer or other documents and take such
further action as may be reasonably required in order to con-
vey, transfer, assign and deliver to Capstar the Assets in
accordance with this Agreement or to perfect any other under-
taking made by Spur hereunder. Capstar shall, at any time and
-10-
<PAGE>
from time to time after the Closing, upon request by Spur and without further
consideration, execute and deliver such documents and take such further action
as may be reasonably required in order to perfect any undertaking made by
Capstar hereunder.
8.4. Assignability; Enforceability. Neither party shall assign this
Agreement or its rights or obligations hereunder in whole or in part without
the prior written consent of the other party; provided, however, that Spur may
assign this Agreement and its rights and obligations hereunder to its lenders.
Any assignment made or attempted in violation of this Section 8.4 shall be
void and of no effect.
This Agreement shall be binding on and enforceable by Spur and
Capstar, and their respective legal representatives, successors and permitted
assigns.
Except as set forth in this Section 8.4, no person or entity not a
party to this Agreement shall have rights under this Agreement as a third
party beneficiary or otherwise.
8.5. Entire Agreement. This Agreement constitutes the full
understanding of the parties, a complete allocation of risks between them and a
complete and exclusive statement of the terms and conditions of their agreement
relating to the subject matter hereof and supersedes any and all prior
agreements, whether written or oral, that may exist between the parties with
respect thereto. Except as otherwise specifically provided in this Agreement, no
conditions, usage of trade, course of dealing or performance, understanding or
agreement purporting to modify, vary, explain or supplement the terms or
conditions of this Agreement shall be binding unless hereafter made in writing
and signed by the party to be bound, and no modification shall be effected by
the acknowledgement or acceptance of documents containing terms or conditions at
variance with or in addition to those set forth in this Agreement. No waiver
by either party with respect to any breach or default or of any right or
remedy and no course of dealing, shall be deemed to constitute a continuing
waiver of any other breach of default or of any other right or remedy, unless
such waiver be expressed in writing signed by the party to be bound. Failure
of a party to exercise any right shall not be deemed a waiver of such right or
rights in the future.
8.6. Controlling Law and Jurisdiction. THE VALIDITY,
INTERPRETATION AND PERFORMANCE OF THIS AGREEMENT AND
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<PAGE>
ANY DISPUTE CONNECTED HEREWITH SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS WITHOUT REARD TO PRINCIPLES OF CONFLICTS OF LAW.
8.7. Public Announcement. Until the Closing, no press release,
public announcement, confirmation or other information regarding this
Agreement or the contents hereof shall be made by either party without the
prior written consent of the other party, except as may be necessary in the
opinion of counsel of either party to meet the requirements or regulations of
any applicable law, governmental unit or agency.
8.8. Finder's Fees and Commissions. SPUR and Capstar agree to
indemnify each other and hold each other harmless from any liability, cost or
expense (including, but not limited to, fees and disbursements of legal
counsel) resulting from any agreement, arrangement or understanding made by
the indemnifying party with any third party for brokerage or finder's fee or
other commissions in connection with this Agreement, the documents and
instruments referred to herein, or the transactions contemplated hereby or
thereby.
8.9. Attorneys' Fees and Expenses. Capstar agrees to bear and pay
when due all legal fees and expenses incurred by it and SPUR in connection with
the negotiation and execution of this Agreement and the consummation of the
purchase and sale of Assets contemplated hereby.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto on the date
first herein- above written.
SPURCAPITAL, INC. CAPSTAR COMMUNICATIONS OF
MISSISSIPP, INC.
By: /s/ Don R. Kuykendall By: /s/ R. Steven Hicks
------------------------- ---------------------------
Don R. Kuykendall, Name: R. Steven Jicks
President Title: President
<PAGE>
EXHIBIT "A"
BILL OF SALE
GENERAL ASSIGNMENT AND CONVEYANCE
BILL OF SALE, GENERAL ASSIGNMENT AND CONVEYANCE, dated as of
____________, 199__, by Spur Jackson, L.P., a Delaware limited partnership
("Seller"), in favor of Capstar Communications of Mississippi, Inc. a Delaware
corporation ("Purchaser").
WHEREAS, Seller has agreed to sell to Purchaser and Purchaser has agreed
to purchase from Seller substantially all the assets, properties and rights of
Seller used by Seller in the operation of Radio Broadcast Station WJDX-FM,
Jackson, Mississippi ("Station") on the terms and subject to the conditions
set forth in that certain Option Agreement, dated December __, l993
("Agreement"), by and between Seller and Purchaser; and
WHEREAS, Seller has agreed to execute and deliver certain documents
evidencing the sale, conveyance, transfer, assignment and delivery of such
assets, properties and rights to Purchaser;
NOW, THEREFORE, for and in consideration of the sum of Ten and No/l00
Dollars ($1O.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller hereby grants, sells,
conveys, transfers, assigns and delivers to Purchaser all of the assets,
properties and rights of Seller, whether tangible, intangible, real, personal
or mixed, and wherever located (other than the Excluded Assets), used by
Seller in the operation of the Station, including without limitation, the
following:
(a) all fixtures, equipment, furniture and other
tangible property used by Seller in the operation of the
Station;
(b) all of Seller's rights under the lease agreements, marketing
agreements, supply agreements, utility agreements, service agreements,
employment agreements and other agreements, whether written or oral, to
which Seller is a party and which relate to the operation of the Station;
<PAGE>
(c) all licenses, permits, authorizations or other rights granted
by the Federal Communications Commission and other governmental
authorities and all certificates of convenience or necessity, immunities,
privileges, easements, consents, grants, ordinances and other rights of
every character whatsoever that are used by Seller in or associated with
the operation of the Station;
(d) all supplier lists and supplier data relating
to the operation of the Station;
(e) all customer records and files relating to the
operation of the Station;
(f) all rights under express or implied warranties from the sellers
of goods and services used in or associated with the operation of the
Station; and
(g) all books, records and other documents used in or associated
with the operation of the Station or the employees and former employees
engaged in work in connection with the Station.
TO HAVE AND TO HOLD, unto Purchaser, its legal representatives,
successors and assigns, FOREVER.
All capitalized terms used but not defined herein shall have the meanings
ascribed to such terms in the Agreement.
This Bill of Sale, General Assignment and Conveyance shall be binding on
and enforceable against Seller and its legal representatives, successors and
permitted assigns.
IN WITNESS WHEREOF, this Bill of Sale, General Assignment and Conveyance
has been duly executed and delivered on behalf of Seller by a duly authorized
officer of Capstar, Inc., a Delaware corporation, acting in its capacity as
the General Partner of Seller, on this ____ day of ____________, 199 .
SPUR JACKSON, L.P.
By: Spur Capital, Inc.,
General Partner
By:___________________
Don R. Kuykendall,
President
-2-
<PAGE>
THE STATE OF TEXAS
COUNTY OF TRAVIS
BEFORE ME, the undersigned authority, on this day personally appeared Don
R. Kuykendall, President of Spur Capital Inc., a Delaware corporation, which
corporation is the general partner of Seller, known to me to be the person
whose name is subscribed to the foregoing instrument, and acknowledged to me
that he executed the same for the purposes and consideration therein
expressed, in the capacity therein stated, and as the act and deed of said
corporation, acting in its capacity as general partner of the Seller.
GIVEN under my hand and seal of office, this the _____
day of _________________, 199 .
Notary Public in and for
the State of T E X A S
Name:_______________________
My Commission Expires:________
-3-
S F X Broadcasting, Inc.
150 East 58th Street
New York, New York 10155
212 407 9191
212 753 3188 FAX
April 23, 1996
Mr. Randall Mays
Vice President
Clear Channel Radio, Inc.
P.0. Box 659512
San Antonio, TX 78265-9512
Dear Randall:
This letter sets forth certain of the principal terms for a Purchase
Agreement between Clear Channel Radio, Inc. ("Clear Channel") and SFX
Broadcasting, Inc. ("Seller",) for Clear Channel's purchase of all of the
assets, including real property, tangible and intangible personal or mixed
property (the "Assets") used or useful in the operation of radio stations
WWKY-AM, WVEZ-FM and WTFX-FM (the "Stations"), free and clear of all debts,
claims, liens, encumbrances, financing lease or other liabilities of any
nature whatsoever. This offer will expire on April 30, 1996, at 5:00 p.m.
E.S.T.
1. Basic Terms.
The parties will be bound only upon execution of a definitive Purchase
Agreement (the "Purchase Ageeement"), but they acknowledge that they have
agreed in principle on the following terms:
(a) The Purchase Price for the Assets (the "Purchase Price") shall be
$19,500,000, which shall include a covenant not to compete.
(b) Until the Closing and except as otherwise agreed to by the parties,
Seller will continue to operate the Stations in the ordinary course of
business and none of the Assets will be sold, distributed or transferred
except in the ordinary course of business.
(c) The Assets shall include, but not be limited to, all studio and
transmitter equipment, building, land, furniture, fixtures, vehicles, land
improvements, leases, programming contracts, and accounts receivable. The
Assets will be transferred free and clear of all debts, liens, claims,
encumbrances, financing leases and other liabilities of any nature whatsoever,
except as agreed by Clear Channel.
<PAGE>
Mr. Randall Mays
Vice President
Clear Channel Radio, Inc.
April 23, 1996
Page 2
2. Definitive Agreement: Due Diligence.
(a) Upon the acceptance of this letter by Clear Channel, the parties agree
to proceed in good faith to negotiate and execute the Purchase Agreement. The
parties expressly agree that the Purchase Agreement shall not differ
materially in term's from this Agreement, and shall include customary
representations, warranties, term's and conditions, and due diligence
requirements as are standard in agreements of this type, and which are
satisfactory to all parties.
(b) In addition, concurrently herewith, Clear Channel's staff and counsel
will proceed forthwith to conduct a due diligence investigation of the
business, financial position and affairs of Seller as relating to the Stations
and to all legal and engineering issues relating to the Stations and the
transactions contemplated herein.
3. Conditions.
The parties' obligation to proceed with the transaction as discussed
herein is contingent upon the following: (I) the completion of all items and
issues referred to in Section 2; (ii) the approval of Clear Channel's Board of
Directors; (iii) the approval of the Federal Communications Commission, the
Federal Trade Commission and any other governmental regulatory bodies
necessary to the transfer of the licenses for the Stations; and (iv) the
acquisition of the Stations by Seller.
4. Expenses.
Each party shall be solely responsible for all costs and expenses
incurred by it in connection with the negotiation, preparation and execution
of the Purchase Agreement, or the consummation of the transactions
contemplated herein, except that all parties shall divide the costs of any
governmental filing fees in connection with this transaction evenly among
them. Each party acknowledges that there are no brokers involved in the
transactions.
5. Filing of License Transfer.
Both parties agree that within thee business days of the execution of a
definitive purchase agreement both parties shall file with the Federal
Communications Commission for the transfer of all necessary and associated FCC
licenses for Stations.
<PAGE>
Mr. Randall Mays
Vice President
Clear Channel Radio, Inc.
April 23, 1996
Page 3
6. Closing.
Seller agrees to close, at Buyer's option, on an initial order from the
FCC for the license transfer.
7. Assignment.
Clear Channel may fully assign all of its rights and obligations under
this letter to any entity in which Clear Channel has a majority ownership
interest.
Very truly yours,
SFX BROADCASTING, INC.
/s/ Robert F.X. Sillerman
------------------------
Robert F.X. Sillerman
Executive Chairman
Agreed to and accepted:
By: /s/ Randall Mays
-------------------
Name: Randall Mays
Title: VP
[Letterhead]
Mr. R. Steven Hicks
President/CEO
SFX Broadcasting, Inc.
c/o Star Media Group, Inc.
5080 Spectrum Drive, #609B
Dallas, TX 75248
Dear Mr. Hicks:
Susquehanna Radio Corp., or its assignee (Buyer) hereby offers to purchase
from SFX Broadcasting Inc. (Seller) the assets associated with the operation
of Radio Station KTCK-AM (Station) licensed to Dallas, TX on the terms and
subject to the conditions set forth herein.
Assets to be Purchased
Buyer will purchase all of the assets, tangible and intangible, real,
personal or mixed (the Assets), used and/or useful in the operation of the
Station. The Assets are to be free and clear of any debts, liens, or
encumbrances of any kind or nature except as to any obligation or liability
of Seller that Buyer may expressly agree in writing to assume.
Purchase Price
The purchase price will be $14,000,000 in cash for assets.
Earned Money/Liquidated Damages
Buyer and Seller will proceed diligently and in good faith to the
execution of an agreement, embodying the terms of this offer and containing
such other provisions mutually acceptable to both parties as are usual and
customary in such agreements. Upon the signing of the formal agreement, a
deposit in the amount of $700,000 will be established with a mutually
acceptable escrow agent. Should Buyer fail or decline to perform its
obligations in the definitive agreement, this sum will be paid to Seller as
liquidated damages in full compensation for any damages that Seller may
sustain thereby.
<PAGE>
Mr. R. Steven Hicks
April 11, 1996
Page 2
Fees/Expenses
Each party shall bear its own legal and accounting fees. Buyer and Seller
warrant that other than Star Media Group no broker has been used in the
transaction contemplated herein. Any payment due to Star Media shall be the
responsibility of Seller.
Prorations
All revenues and expenses excluding employee benefits shall be prorated to
the date of closing.
Financial Statements/Due Diligence/Warranties
Seller will provide reasonable access to Buyer to perform due diligence
including but not limited to inspection of all financial statements, books
and records; review of contracts; and inspection of physical assets.
Seller will warrant that the broadcasting equipment of the Station is, and
will be on the date of closing, in good working order and operating in
conformance with the requirements of the Station's license and applicable
rules of the Federal Communications Commission (FCC).
LMA
Subject to satisfactory completion of the due diligence review mentioned
above, Buyer and Seller agree to enter into a Local Marketing Agreement which
will permit the Buyer to program and market the station prior to closing.
Seller will be compensated at a rate of $80,000 per month for the initial 3
months, $90,000 per month for the second 3 months and $100,000 per month
thereafter in connection with this Local Marketing Agreement.
Contingencies/Timing/Confidentiality
This offer is contingent upon execution of a formal Purchase and Sale
Agreement reasonably acceptable to Buyer and Seller within forty-five days of
acceptance of this letter and upon the consent of the FCC to the assignment
of Station's license to Buyer. Within five days after execution of a formal
Purchase and Sale Agreement, Buyer and Seller will join in an application to
the FCC seeking consent to the assignment. Closing will take place on a
mutually acceptable date after consent to the assignment has been granted by
the FCC staff under delegated authority, but in no event later than ten days
after such consent shall have become a Final Order.
Notwithstanding the foregoing Buyer agrees that any obligation to sell the
Station created by the execution of this letter is contingent upon the sale
of Seller's other radio station assets in the Dallas market.
<PAGE>
Mr. R. Steven Hicks
April 11, 1996
Page 3
Seller agrees that for a period of forty-five days from the date of the
acceptance by Seller of the terms hereof, Seller will refrain from
negotiating or entering into any agreement with respect to the disposition of
the Station or any of its assets with any party. In the event that a
satisfactory Agreement has not been executed by the parties hereto for any
reason within forty-five days from the acceptance of the terms hereof by
Seller, no party shall have any legal obligation hereunder.
If closing of the purchase and sale contemplated herein has not been
completed within 12 months after acceptance by the FCC of the applications
for assignment of license to Buyer, either party hereto shall have the right
to rescind its obligations hereunder.
Buyer shall have the right to demand specific performance of Seller's
obligations hereunder.
Neither of the parties hereto shall make any public announcement or press
release regarding this letter or transaction or the subject matter hereof
without the prior written consent of the other party.
If you are in agreement with the terms and conditions contained herein,
please so indicate by signing the enclosed copy of this letter and returning
it to my attention. This offer will expire at 5:00 p.m., Eastern Daylight
Time, Friday, April 19, 1996.
SUSQUEHANNA RADIO CORP.
By: /s/ Peter P. Brubaker
------------------------------
Peter P. Brubaker
Vice Chairman
AGREED AND ACCEPTED
SFX BROADCASTING, INC.
By: /s/ Howard J. Tyler
------------------------
Date: 4/18/96
cc: Paul Leonard
Star Media Group, Inc.
<PAGE>
Date: September 5, 1995
Memo To: D. Geoff Armstrong
From: R. Steven Hicks
Re: Contractual Deferred Compensation
This letter shall serve as an addendum to your employment agreement dated
April 1, 1995 as approved by the Compensation Committee.
For your past efforts and as an incentive to enter into a new employment
agreement SFX Broadcasting Inc. will pay you immediately, pursuant to Section
3 paragraph B of the Employment Agreement a lump sum of $150,000 which will
be deemed earned per the following schedule:
<TABLE>
<CAPTION>
<S> <C>
25.00% .... December 31, 1995
25.00% .... April 1, 1996
25.00% .... April 1, 1997
25.00% .... April 1, 1998
</TABLE>
It is understood that if you are terminated for cause under your
Employment Agreement any unearned amounts will be deducted from any monies
owed to you by the Company.
/s/ Robert F.X. Sillerman
- ------------------------
Robert F.X. Sillerman
Chairman
/s/ R. Steven Hicks
--------------------------
R. Steven Hicks
President
/s/ D. Geoff Armstrong
--------------------------
D. Geoff Armstrong
Employee
EXHIBIT 11.1
Statement Regarding Calculation of Per Share Earnings
(Dollars in thousands, Except for per share amounts)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1996 1995
--------------- ----------------
<S> <C> <C>
Primarily and Fully Diluted:
Average shares outstanding...................................................... 7,458,215 5,916,445
Net effect of dilutive stock options - based on the treasury stock method using
average market price............................................................ -- --
--------------- ----------------
Total...................................................................... 7,458,215 5,916,445
--------------- ----------------
Net loss........................................................................ $ (985) $ (521)
Less: Preferred Stock dividends and accretion................................... 136 71
--------------- ----------------
Net loss attributable to common shareholders.................................... $ (1,121) $ (592)
--------------- ----------------
Net (loss) income per common share.............................................. $ (0.15) $ (0.10)
--------------- ----------------
</TABLE>
See accompanying notes to consolidated financial statements
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