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FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended March 31, 1997
[ ] 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 or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 East 58th Street, 19th Floor
New York, New York 10155
(Address of principal executive offices)
(212)-407-9191
(Registrant's telephone number)
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 the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of May 9, 1997, 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 8,333,865 and 1,047,037,
respectively.
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SFX BROADCASTING, INC. AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
MARCH 31, 1997
PART I FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 1997 (unaudited)
and December 31, 1996...........................................3
Consolidated Statements of Operations for Three Months Ended
March 31, 1997 and 1996 (unaudited).............................5
Consolidated Statements of Cash Flows for Three Months Ended
March 31, 1997 and 1996 (unaudited).............................6
Notes to Consolidated Financial Statements (unaudited)..........7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................9
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...............................17
SIGNATURES...................................................................20
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SFX BROADCASTING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---------- -------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................................................... $ 110,271 $ 10,601
Cash pledged for letters of credit and restricted cash ...................... 6,676 20,000
Accounts receivable less allowance for doubtful accounts of $1,722 in
1997 and $1,620 in 1996.................................................. 43,480 47,275
Asset under contract for sale................................................ 4,100 8,352
Other current assets......................................................... 5,525 2,461
--------------- ----------------
Total current assets.................................................. 170,052 88,689
--------------- ----------------
Property and Equipment:
--------------- ----------------
Land 6,491 6,791
Buildings and improvements................................................... 36,219 11,485
Equipment and furniture...................................................... 59,054 54,736
101,764 73,012
Less accumulated depreciation and amortization .............................. (12,366) (10,192)
--------------- ----------------
Net property and equipment............................................ 89,398 62,820
Intangible Assets:
Broadcast licenses........................................................... 627,315 558,640
Goodwill .................................................................... 135,095 98,165
Deferred financing costs..................................................... 20,615 19,504
Other .................................................................. 4,837 4,727
--------------- ----------------
787,862 681,036
Less accumulated amortization................................................ (22,265) (16,933)
--------------- ----------------
Net intangible assets................................................. 765,597 664,103
Deposits and other payments for pending acquisitions......................... 36,700 31,692
Notes receivable from officers .............................................. 2,836 --
Other assets................................................................. 15,539 12,023
--------------- ----------------
--------------- ----------------
TOTAL ASSETS................................................................. $ 1,080,122 $ 859,327
=============== ================
</TABLE>
Note: The balance sheet at December 31, 1996 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 BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
----------- -------------
(Unaudited) (Note)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.............................................................. $ 8,476 $ 10,921
Accrued expenses.............................................................. 23,097 21,913
Accrued interest and dividends................................................ 24,557 7,111
Current portion of long-term debt and capital lease obligations............... 1,096 381
---------------- ----------------
Total current liabilities.............................................. 57,226 40,326
Deferred income taxes payable ................................................ 102,254 91,352
Long-term debt and capital lease obligations, less current portion............ 465,634 481,079
Total liabilities...................................................... 625,114 612,757
Redeemable preferred stock ................................................... 367,359 152,053
Commitments and contingencies
Shareholders' Equity :
Class A voting common stock, $.01 par value; 100,000,000 shares authorized;
8,360,183 issued and 8,333,865 outstanding at March 31,
1997 and 8,063,348 outstanding at December 31, 1996 ....................... 83 81
Class B voting convertible common stock, $.01 par value; 10,000,000
shares authorized; 1,190,911 issued and 1,047,037 outstanding at March
31, 1997 and December 31, 1996............................................. 12 12
Additional paid-in capital.................................................... 183,484 183,866
Treasury Stock; 170,192 shares................................................ (6,393) (6,393)
Accumulated deficit........................................................... (89,537) (83,049)
---------------- ----------------
Total shareholders' equity............................................. 87,649 94,517
---------------- ----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................................... $ 1,080,122 $ 859,327
================ ================
</TABLE>
Note: The balance sheet at December 31, 1996 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 DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------------
` 1997 1996
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<S> <C> <C>
Radio broadcasting revenue...................................................... $ 50,994 $ 22,405
Less: agency commissions........................................................ 6,003 2,605
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Net radio broadcasting revenue........................................... 44,991 19,800
Concert promotion revenue....................................................... 7,789 --
--------------- -----------------
Total net revenue........................................................ 52,780 19,800
Radio station operating expenses................................................ 29,916 14,056
Concert promotion operating expenses............................................ 7,738 --
Depreciation, amortization, duopoly integration costs and acquisition
related costs................................................................ 8,145 2,299
Corporate expenses.............................................................. 1,893 1,210
Corporate expenses: non-cash stock compensation................................. 156 --
--------------- -----------------
Operating income......................................................... 4,932 2,235
Investment income............................................................... (1,680) (164)
Interest expense................................................................ 12,815 3,384
--------------- -----------------
Loss before income taxes................................................. (6,203) (985)
Income tax expense.............................................................. 285 --
--------------- -----------------
Net loss................................................................. (6,488) (985)
Redeemable preferred stock dividends and accretion.............................. 7,952 136
--------------- -----------------
Net loss applicable to common stock...................................... $ (14,440) $ (1,121)
=============== ==================
Net loss per common share................................................ $ (1.58) $ (0.15)
=============== ==================
Weighted average common shares outstanding...................................... 9,161,433 7,458,215
</TABLE>
See accompanying notes to consolidated financial statements
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SFX BROADCASTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------------
1997 1996
---------------- ----------------
<S> <C>
OPERATING ACTIVITIES:
Net loss........................................................................ $ (6,488) $ (985)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization................................................ 7,845 2,022
Interest on receivables from related parties and officers.................... (36) (79)
Changes in assets and liabilities, net of amounts acquired:
Decrease in accounts receivables............................................. 5,816 1,229
Increase in other assets..................................................... (1,859) (1,788)
Decrease in accounts payable, accrued expenses and other liabilities......... (8,656) --
Increase (decrease) in accrued interest ..................................... 12,002 (2,020)
Decrease in deferred income.................................................. 751 --
--------------- --------------
Net cash provided by (used in) operating activities........................ 9,375 (1,621)
INVESTING ACTIVITIES:
Deposits and other payments for pending acquisitions......................... (14,545) (300)
Purchases of radio stations and concert promotion businesses, net of cash
acquired.................................................................. (86,257) (22,487)
Proceeds from sale of radio station.......................................... 350 --
Purchases of property and equipment.......................................... (2,785) (351)
Proceeds from sale of property and equipment................................. 367 --
Loans to officers............................................................ (2,800) --
Increase in other intangibles................................................ -- (2,055)
--------------- --------------
Net cash used in investing activities...................................... (105,670) (25,193)
FINANCING ACTIVITIES:
Additions to debt issuance costs............................................. (52) --
Proceeds from senior and subordinated debt................................... 20,000 18,500
Payments on senior loans, capital lease obligations and subordinated debt.... (50,152) (165)
Net proceeds from sale of preferred stock.................................... 215,258 --
Proceeds from exercise of warrants........................................... 46 --
Dividends paid on preferred stock............................................ (2,459) (65)
--------------- ---------------
Net cash provided by financing activities.................................. 182,641 18,270
Net increase in cash and cash equivalents....................................... 86,346 (8,544)
Cash and cash equivalents at beginning of period................................ 30,601 11,893
--------------- ---------------
Cash and cash equivalents at end of period...................................... $ 116,947 $ 3,349
=============== ===============
Supplemental disclosure of cash flow information Cash paid during the period
for:
Interest..................................................................... $ 814 $ 5,404
Income taxes................................................................. $ 1,441 $ 40
Supplemental disclosure of noncash financing activities:
Issuance of 250,838 shares of Class A Common Stock and assumption of $15.4
million of debt in connection with the Meadows Acquisition.
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, 1997 and
1996 is unaudited. The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with Rule 10-01 of Regulation
S-X. Accordingly, they do not include all the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, the unaudited interim financial
statements contain all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation of the financial position, results of
operations and cash flows of SFX Broadcasting, Inc. (the "Company" or "SFX"),
for the periods presented.
The results of operations for the three 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, 1996.
In February 1997, the FASB issued Statement No. 128 (SFAS 128),
"Earnings Per Share," which establishes new standards for computing and
presenting earnings per share. SFAS 128 is effective for financial statements
issued for periods ending after December 15, 1997, including interim periods.
Management does not anticipate that the effect of adopting this new standard
will have a material impact on the calculation of the Company's net earnings
or loss per share.
NOTE 2 - RECENTLY COMPLETED ACQUISITIONS AND DISPOSITIONS
Radio Broadcasting. In January 1997, the Company purchased one radio
station operating in Albany, New York, (the "Albany Acquisition") for a
purchase price of $1.0 million.
In February 1997, the Company acquired radio stations KQUE-FM and
KNUZ-AM in Houston, Texas (the "Houston Acquisition"), for a purchase price of
$42.9 million, including fees and expenses plus certain contingent payments of
up to $750,000.
Also, in February 1997, the Company consummated the acquisition of
radio station WWYZ-FM in Hartford, Connecticut (the "Hartford Acquisition"),
for a purchase price of $25.9 million, including fees and expenses.
In March 1997, the Company exchanged one radio station operating in
Washington, D.C./Baltimore, Maryland, (the "Washington Station") for two radio
stations operating in Dallas, Texas (the "CBS Exchange") and completed the
sale of two radio stations operating in the Myrtle Beach, South Carolina
market for $5.1 million payable in installments over a five year period
(present value of approximately $4.3 million). The CBS Exchange was structured
as a substantially tax free exchange of like kind assets. The contract for the
sale of the Myrtle Beach stations was in place prior to the merger with
Multi-Market Radio, Inc. ("MMR"). No gain or loss was recognized on these
transactions.
Concert Promotion. In January 1997, the Company purchased
Delsener/Slater Enterprises, Ltd ( "Delsener/Slater"), a concert promotion
company based in New York City, for an aggregate consideration of
approximately $26.6 million, including $2.9 million for working capital and
the present value of deferred payments of $3.0 million to be paid, without
interest, over five years, and $1.0 million to be paid, without interest, over
ten years (the "Delsener/Slater Acquisition"). The deferred payments are
subject to acceleration in certain circumstances.
In March 1997, Delsener/Slater consummated the acquisition of certain
companies which collectively own and operate the Meadows Music Theater in
Hartford, Connecticut (the "Meadows Acquisition") for $0.9 million in cash,
shares of SFX Class A Common Stock with a value of approximately $7.5 million
and the assumption of approximately $15.4 million of debt.
For financial statement purposes, all of the acquisitions described
above were accounted for using the purchase method, with the aggregate
purchase price allocated to the tangible and identifiable intangible assets
based upon current estimated fair market values. The allocation resulted in an
excess of costs over estimated fair value of identifiable net assets acquired
of approximately $42,679,000, $36,415,000, $21,580,000 and $932,000 for the
Houston Acquisition, the Hartford
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Acquisition, the Delsener/Slater Acquisition and the Albany Acquisition,
respectively, in 1997. The assets and liabilities of these acquisitions and
the results of their operations for the period from the date of acquisition
have been included in the accompanying consolidated financial statements.
NOTE 3 - OTHER RECENT TRANSACTIONS
Preferred Stock Offering, Note Offering. On January 23, 1997, the
Company completed the sale of $225.0 million of Series E Cumulative
Exchangeable Preferred Stock ("Series E Preferred Stock"). Dividends on the
Series E Preferred Stock accrue at the rate of 12 5/8% per annum and are
payable on January 15 and July 15 of each year. Dividends may be paid, at the
Company's option, through January 15, 2002, in cash or additional shares of
Series E Preferred Stock. Subject to certain conditions, the shares of the
Series E Preferred Stock are exchangeable in whole or in part on a pro rata
basis, at the option of the Company, on any dividend payment date, for the
Company's 12 5/8% Senior Subordinated Exchangeable Debentures due 2006. The
Company is required, subject to certain conditions, to redeem all of the
Series E Preferred Stock outstanding on October 31, 2006.
Note Receivable From Officer. The Company entered into a new
employment agreement with Robert F.X. Sillerman, the Company's Executive
Chairman, effective January 1, 1997. Pursuant to the terms of the employment
agreement, the Company made a $2.5 million loan to Mr. Sillerman. The loan is
a full-recourse obligation of Mr. Sillerman and bears interest. Mr. Sillerman
has indicated his intention to use a portion of the proceeds from the loan to
acquire additional common equity in the Company.
NOTE 4 - PENDING ACQUISITIONS AND DISPOSITIONS
Pending Acquisitions and Dispositions. In October 1996, the Company
entered into an agreement, as amended, with Secret Communications Limited
Partnership ("Secret Communications"), pursuant to which the Company agreed to
acquire substantially all of the assets used in the operation by Secret
Communications of seven radio stations located in two markets (Indianapolis,
Indiana and Pittsburgh, Pennsylvania) (the "Secret Communications
Acquisition"). Two of the radio stations operating in Pittsburgh are not yet
owned by Secret Communications but must be acquired prior to the consummation
of the Secret Communications Acquisition, and Secret Communications currently
provides programming and sells advertising on these stations pursuant to an
local Marketing agreement ("LMA"). The purchase price of the acquisition is
$255.0 million, of which the Company paid a $10.0 million deposit and
segregated $5.0 million pursuant to a letter of credit to secure its
obligations under the purchase agreement. The agreement permitted the Company
to close on the acquisition of the Indianapolis stations, prior to the
acquisition of the Pittsburgh stations, for a payment of $127.5 million.
Pursuant to this agreement, the Company acquired the Indianapolis stations on
April 1, 1997.
In addition, pursuant to separate agreements, the Company has also
agreed to: (i) acquire substantially all of the assets of four radio stations
operating in Richmond, Virginia, where the Company currently owns one station,
for $40.4 million (the "Richmond Acquisition"); (ii) exchange four radio
stations owned by the Company and located on Long Island, New York, for two
radio stations operating in Jacksonville, Florida, where the Company currently
owns four stations, and a cash payment of $11.0 million (the "Chancellor
Exchange"); (iii) exchange one radio station in Pittsburgh, Pennsylvania,
which the Company is acquiring from Secret Communications and $20.0 million in
cash for one radio station in Charlotte, North Carolina and a
radio network where the Company currently owns two stations (the "Charlotte
Exchange"); (iv) pursuant to a letter of intent, acquire Sunshine Promotions,
Inc., a concert promotion company based in Indianapolis, Indiana, and certain
related companies, for approximately $59.0 million consisting of $50.0 million
in cash at closing, $2.0 million in cash payable over 5 years, shares of Class
A Common Stock issuable over a two year period with a maximum value of
approximately $4.0 million and the assumption of approximately $3.0 million of
debt (the "Sunshine Acquisition") ; (v) acquire two radio stations operating
in Pittsburgh, Pennsylvania and two in Milwaukee, Wisconsin for $35.0 million
(the "Hearst Acquisition"); (vi) pursuant to a letter of intent, sell six
stations in Jackson, Mississippi and two stations in Biloxi, Mississippi for a
minimum consideration of $60.0 million (the "Jackson and Biloxi Disposition");
and (vii) pursuant to a letter of intent, exchange two radio stations in
Wichita, Kansas and one radio station in Daytona Beach, Florida for three
radio stations in Greenville, South Carolina where the Company currently owns
four stations (the "Greenville Exchange"). The aggregate purchase price of
these acquisitions, net of dispositions, is approximately $77.4 million, of
which the Company has deposited $9.6 million in escrow to secure its
obligations under these agreements. The Company expects to record a material
gain on the Jackson and Biloxi Disposition.
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Also, in April 1997, the Company sold one radio station operating in
Little Rock, Arkansas (the "Little Rock Disposition") to Triathlon
Broadcasting Company, a related party. The station was sold for $4.1 million,
of which $3.5 million had been held as a deposit by the Company since 1996. No
gain or loss was recorded on the transaction.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Basis of Presentation
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the consolidated
financial statements and related notes thereto. The following discussion
contains certain forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, risks and uncertainties relating to leverage,
the need for additional funds, consummation of the pending acquisitions,
integration of the recently completed acquisitions, the ability of the Company
to achieve certain cost savings, the management of growth, the introduction of
new technology, changes in the regulatory environment, the popularity of radio
as a broadcasting and advertising medium and changing consumer tastes. The
Company undertakes no obligation to publicly release the results of any
revisions to these forward-looking statements that may be made to reflect any
future events or circumstances.
GENERAL
The Company currently owns and operates, provides programming to or
sells advertising on behalf of 73 radio stations located in 23 markets.
Following completion of the pending acquisitions and the pending dispositions,
the Company will own and operate, provide programming to or sell advertising
on behalf of 72 radio stations located in 20 markets.
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 less station operating expenses. Although
Broadcast Cash Flow is not a measure of performance calculated in accordance
with generally accepted accounting principles ("GAAP"), the Company believes
that Broadcast Cash Flow is accepted by the broadcasting industry as a
generally recognized measure of performance and is used by analysts who report
publicly on the performance of broadcasting companies. Nevertheless, this
measure should not be considered in isolation or as a substitute for operating
income, net income, net cash provided by operating activities or any other
measure for determining the Company's operating performance or liquidity which
is calculated in accordance with GAAP.
The primary source of the Company's revenue is the sale of
advertising time on its radio stations. The Company's most significant station
operating expenses are employee salaries and commissions, programming expenses
and advertising and promotional expenditures. The Company strives to control
these expenses by working closely with local station management.
The Company's revenues are primarily affected by the advertising
rates its radio stations can obtain in the face of competition from radio and
other media. 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 competitive 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 such 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, 1997, approximately 79% 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 radio broadcasting industry is highly competitive and the
Company's stations are located in highly competitive markets. The financial
results of each of the Company's stations are dependent to a significant
degree upon its audience ratings and its share of the overall advertising
revenue within the station's geographic market. Each of the Company's stations
competes for audience share and advertising revenue directly with other FM and
AM radio stations, as well as with other media, including
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newspapers and television, within their respective markets. The Company's
audience ratings and market share are subject to change, and any adverse
change in audience rating and market share in any particular market could have
a material and adverse effect on the Company's net revenues. Although the
Company competes with other radio stations with comparable programming formats
in most of its markets, if another station in the market were to convert its
programming format to a format similar to one of the Company's radio stations,
if a new radio station were to adopt a competitive format, or if an existing
competitor were to strengthen its operations, the Company's stations could
suffer a reduction in ratings or advertising revenue and could require
increased promotional and other expenses. In addition, certain of the
Company's stations compete, and in the future other stations may compete, with
groups of stations in a market operated by a single operator. As a result of
the Telecommunications Act of 1996 (the "Telecom Act"), the radio broadcasting
industry has become increasingly consolidated, resulting in the existence of
radio broadcasting companies which are significantly larger, with greater
financial resources, than the Company. Furthermore, the Telecom Act will
permit other radio broadcasting companies to enter the markets in which the
Company operates or may operate in the future. Although the Company believes
that each of its stations is able to compete effectively in its market, there
can be no assurance that any of the Company's stations will be able to
maintain or increase current audience ratings and advertising revenue market
share. The Company's stations also compete with other advertising media such
as newspapers, television, magazines, billboard advertising, transit
advertising and direct mail advertising. Radio broadcasting is also subject to
competition from new media technologies that are being developed or
introduced, such as the delivery of audio programming by cable television
systems or the introduction of digital audio broadcasting. The Company cannot
predict the effect, if any, which these new technologies may have on the radio
broadcasting industry.
In addition to its radio station operations, in the first quarter of
1997, the Company, through completed and pending acquisitions, became one of
the leading promoters of music concerts and other entertainment events. The
Company anticipates that the primary source of revenues from its concert
promotion activities will be from the sale of tickets at events which the
Company promotes. The Company anticipates that the most significant expenses
with respect to its concert promotion activities will be talent and other
expenses associated with producing an event. The booking of talent in the
concert promotion business generally involves contracts for limited
engagements often involving a small number of performances. The Company
believes that the concert promotion business is highly competitive, and will
compete with other live entertainment, including sports activities as well as
the electronic entertainment industry.
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 radio
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. The Company anticipates that the second and third
quarters will reflect the highest revenues from the Company's concert
promotion activities.
Results of Operations
The Company's consolidated financial statements tend not to be
directly comparable from period to period due to acquisition and disposition
activity. The major acquisitions in 1996 and 1997, all of which have been
accounted for using the purchase method of accounting, and major dispositions
were as follows:
1996 Acquisitions and Dispositions: In February 1996, the Company
acquired substantially all the assets of WTDR-FM and WLYT-FM in Charlotte,
North Carolina ( the " Charlotte Acquisition"). In June 1996, the Company
acquired substantially all of the assets of WROQ-FM, Greenville, South
Carolina (the "Greenville Acquisition"), and WTRG-FM and WRDU-FM, both
operating in Raleigh, North Carolina, and WMFR-AM, WMAG-FM and WTCK-AM
(formerly WWWB-AM), each operating in Greensboro, North Carolina (the
"Raleigh-Greensboro Acquisition").
The Company acquired from Prism Radio Partners, LP pursuant to the
Prism Acquisition (i) substantially all of the assets used in the operation
of eight FM and five AM radio stations located in four markets: Jacksonville,
Florida; Raleigh, North Carolina; Tucson, Arizona and Wichita, Kansas, in July
1996, and (ii) substantially all of the assets of three radio stations
operating in Louisville, Kentucky, in September 1996. In October 1996, the
Company sold the Louisville stations (the "Louisville Disposition")
(collectively, the "Prism Acquisition").
In July 1996, the Company acquired Liberty Broadcasting, Inc., a
privately-held radio broadcasting company which owned and operated or provided
programming to or sold advertising on behalf of 14 FM and six AM radio
stations located in six markets: Washington, DC/Baltimore, Maryland;
Nassau-Suffolk, New York; Providence, Rhode Island; Hartford,
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Connecticut; Albany, New York and Richmond, Virginia (the "Liberty
Acquisition"). In July 1996, the Company sold three of the Liberty Stations
operating in the Washington, DC/Baltimore, Maryland market ("the Washington
Dispositions".)
In July 1996, the Company acquired substantially all of the assets of
WJDX-FM, Jackson, Mississippi and in August 1996, the Company acquired
substantially all of the assets of WSTZ-FM and WZRX-AM, each operating in
Jackson and Mississippi ( collectively, the "Jackson Acquisitions").
In October 1996, the Company sold radio station KTCK-AM, Dallas,
Texas (the "Dallas Disposition").
In November 1996, the Company acquired Multi-Market Radio, Inc.
("MMR"), a radio broadcasting company which owned and operated, provided
programming to or sold advertising on behalf of sixteen FM stations and one AM
station located in eight markets: New Haven, Connecticut; Hartford,
Connecticut; Springfield/ Northampton, Massachusetts; Daytona Beach, Florida;
Augusta, Georgia; Biloxi, Mississippi; Myrtle Beach, South Carolina and Little
Rock, Arkansas ( the "MMR Merger"). Of the seventeen stations, MMR had entered
into agreements to sell two stations operating in Myrtle Beach, South Carolina
and one station operating in Little Rock, Arkansas (the "MMR Dispositions").
MMR also did not renew its joint sales agreement ("JSA") with one station
operating in Augusta, Georgia and its local marketing agreement ("LMA") with
one station operating in Myrtle Beach, South Carolina.
In December 1996, the Company acquired WHSL-FM operating in
Greensboro, North Carolina (the "Greensboro Acquisition").
Also, in December 1996, the Company exchanged the assets of KRLD-AM,
operating in Dallas, Texas, along with the Texas State Networks for the assets
of KKRW-FM operating in Houston, Texas (the "Houston Exchange").
The Charlotte Acquisition, the Greenville Acquisition, the
Raleigh-Greensboro Acquisition, the Prism Acquisition, the Liberty
Acquisition, the Washington Dispositions, the Jackson Acquisitions, the Dallas
Disposition, the MMR Merger, the Greensboro Acquisition and the Houston
Exchange are collectively herein referred to as the "1996 Acquisitions and
Dispositions".
1997 Acquisitions and Dispositions:
Radio Broadcasting. In January 1997, the Company purchased one radio
station operating in Albany, New York, (the "Albany Acquisition") for a
purchase price of $1.0 million.
In February 1997, the Company consummated the acquisition of radio
stations KQUE-FM and KNUZ-AM in Houston, Texas (the "Houston Acquisition"),
for a purchase price of $42.9 million, including fees and expenses.
Also, in February 1997, the Company consummated the acquisition of
radio station WWYZ-FM in Hartford, Connecticut (the "Hartford Acquisition"),
for a purchase price of $25.9 million, including fees and expenses.
In March 1997, the Company exchanged one radio station operating in
Washington, D.C./Baltimore, Maryland, (the "Washington Station") for two radio
stations operating in Dallas, Texas (the "CBS Exchange") and completed the
sale of two radio stations operating in the Myrtle Beach, South Carolina
market for $5.1 million payable in installments over a five year period
(present value of approximately $4.3 million). The CBS Exchange was structured
as a substantially tax free exchange of like kind assets. The contract for
sale of the Myrtle Beach stations was in place prior to the MMR Merger;
therefore, no gain or loss was recognized on these transactions.
Concert Promotions. In January 1997, the Company purchased
Delsener/Slater Enterprises, Ltd ("Delsener/Slater"), a concert promotion
company based in New York City, for an aggregate consideration of
approximately $26.6 million, including $2.9 million for working capital and
the present value of deferred payments of $3.0 million to be paid, without
interest, over five years, and $1.0 million to be paid, without interest, over
ten years (the "Delsener/Slater Acquisition"). The deferred payments are
subject to acceleration in certain circumstances.
In March 1997, the Company's wholly-owned subsidiary Delsener/Slater
Enterprises consummated the acquisition of certain companies which
collectively own and operate the Meadows Music Theater in Hartford,
Connecticut (the "Meadows Acquisition) for $0.9 million in cash, shares of the
Company's Class A Common Stock with a value of approximately $7.5 million and
the assumption of approximately $15.4 million of debt.
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<PAGE>
The Albany Acquisition, the Houston Acquisition, the Hartford
Acquisition, the CBS Exchange, the Myrtle Beach Disposition, the
Delsener/Slater Acquisition, and the Meadows Acquisition, are collectively
herein referred to as the "1997 Acquisitions and Dispositions".
Results for the 1996 quarter included WLYT-FM and WTDR-FM, Charlotte,
North Carolina, (the "Charlotte Stations") for which the Company had provided
programming and sold advertising time pursuant to an LMA prior to the
acquisition of such stations in March 1996; and WHSL-FM in Greensboro, North
Carolina for which the Company had sold advertising pursuant to a JSA
beginning in the first quarter of 1996 quarter.
Three Months Ended March 31, 1997 Compared to Three Months Ended March 31, 1996
The Company's total net revenue increased 167% to $52.8 million from
$19.8 million, for the three months ended March 31, 1997 ("1997 quarter") and
1996 ("1996 quarter"), respectively, primarily as a result of the 1996
Acquisitions and Dispositions and the 1997 Acquisitions and Dispositions
(collectively the "Recent Acquisitions") which increased net revenues $31.7
million, including $7.8 million of concert promotion revenue. In addition, the
net revenue at the Company's existing stations increased $1.3 million as a
result of strong radio advertising, combined with improved inventory
management, ratings and other factors generally affecting sales and rates. On
a same station basis, assuming all radio stations owned and operated as of
March 31, 1997 were owned for the periods reported, net radio broadcasting
revenue would have increased approximately 11% from the 1996 quarter.
Radio station operating expenses increased 113% to $29.9 million in
the 1997 quarter from $14.1 million in the 1996 quarter primarily due to the
inclusion of expenses of $14.9 million related to the Recent Acquisitions as
discussed above and $951,000 of increased expenses at the Company's existing
stations primarily related to increased advertising and promotion costs and
higher variable costs related to the increase in net revenues. In addition,
$7.7 million of concert promotion operating expenses were recorded in the 1997
quarter.
Depreciation, amortization, duopoly integration costs and acquisition
related costs increased 254% to $8.1 million from $2.3 million in the 1996
quarter due to the inclusion of $4.9 million of depreciation and amortization
related to the Recent Acquisitions and increased amortization related to debt
issuance costs.
Corporate, general and administrative expenses were $1.9 million and
$1.2 million for the 1997 quarter and 1996 quarter, respectively. The increase
reflects the growth in the Company's overall operations and its responsibility
to perform services for Triathlon Broadcasting Company ("Triathlon"). As a
percentage of total net revenue, corporate general and administrative expense
declined from 6.1% to 3.6% from the comparable prior year period. The 1997
quarter corporate, general and administrative expenses are net of $625,000 of
fees from Triathlon.
Operating income was $4.9 million for the 1997 quarter as compared to
operating income of $2.2 million for the 1996 quarter due to the results
discussed above.
Interest expense, net of investment income, increased 246% to $11.1
million from $3.2 million in the 1997 quarter, primarily due to interest on
the $450.0 million in aggregate principal of the Company's 10 3/4% Senior
Subordinated Notes due 2006 issued in May 1996 (the "Note Offering").
The Company recorded state income tax expense of $285,000 in the 1997
quarter and no federal or state income tax benefit or expense for the 1996
quarter. The Company did not recognize a federal tax benefit for losses in the
1997 and 1996 quarters based upon the expectation of recording a full
valuation allowance for the full year loss, prior to giving effect to the
pending acquisitions.
The Company's net loss was $6.5 million for the 1997 quarter compared
to a net loss of $985,000 for the 1996 quarter was due to the factors
discussed above.
Net loss applicable to common stock increased to $14.4 million in the
1997 quarter from $1.1 million in the 1996 quarter due to dividends on the
Company's 6 1/2% Series D Cumulative Convertible Exchangeable Preferred Stock
(the "Series
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<PAGE>
D Preferred Stock") and the 12 5/8% Series E Cumulative Exchangeable Preferred
Stock (the "Series E Preferred Stock") issued in May 1996 and January 1997,
respectively, and the increase in the net loss discussed above.
Broadcast Cash Flow increased 162% to $15.1 million for the 1997
quarter from $5.7 million for the 1996 quarter. The increase was a result of
the inclusion of cash flow from the Recent Acquisitions of $9.0 million as
well as $372,000 of improved results at the Company's existing stations. On a
same station basis, assuming all radio stations owned and operated as of March
31, 1997 were owned for the periods reported, Broadcast Cash Flow from radio
would have increased approximately 27% from the 1996 quarter.
Liquidity and Capital Resources. The Company's principal need for
funds has historically been to fund the acquisition of radio stations,
including related working capital needs, 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 offerings of equity and debt securities, borrowings under credit
agreements and, to a significantly lesser extent, cash flows from operations.
Statement of Cash Flows. Net cash provided by operations for the
quarter ended March 31, 1997 was $9.4 million as compared to cash used in
operations of $1.6 million in the quarter ended March 31, 1996. The increase
in 1997 as compared to 1996 was primarily attributable to improved Broadcast
Cash Flow and the increase in accrued interest on the 10 3/4% senior
subordinated notes which is paid semi-annually in May and November.
Net cash used in investing activities for the quarter ended March 31,
1997 was $105.7 million as compared to cash used in investing activities of
$25.2 million in the quarter ended March 31, 1996. Cash used in investing
activities in 1997 quarter related primarily to the, Albany, Houston, Hartford,
Delsener/Slater and Meadows Acquisitions. Cash used in investing activities
in the 1996 quarter related primarily to the Charlotte Acquisition.
Net cash provided by financing activities for the quarter ended March
31, 1997 was $182.6 million as compared to cash provided by financing
activities of $18.3 million in the quarter ended March 31, 1996. In the
quarter ended March 31, 1997, cash provided by financing activities related
primarily to $215.3 million of proceeds from the Company's public offering of
its Series E Preferred Stock in January 1997 (the "Series E Preferred Stock
Offering") partially offset by the repayment of outstanding balances under the
Company's $225.0 million senior credit facility (the "Credit Agreement").
1996 Acquisitions and Dispositions. During 1996 the Company paid $21.5
million, $14.3 million, $37.3 million, $6.7 million, $106.7 million, $240.7
million, $6.7 million and net cash of $55.4 million for the Charlotte
Acquisition, the Greenville Acquisition, the Raleigh-Greensboro Acquisition,
the Jackson Acquisitions, the Prism Acquisition, the Liberty Acquisition, the
Greensboro Acquisition and the MMR Merger, respectively. In addition, the
Company received $18.5 million, $25.0 million and $13.4 million for the
Louisville Dispositions, the Washington Dispositions and the Dallas
Disposition, respectively.
The primary sources of funds for the Charlotte Acquisition were
proceeds from the Company's 1995 Public Offering of Common Stock (the "1995
Stock Offering") and funds available under the Company's senior secured credit
facility for borrowings of up to $50.0 million (the "Old Credit Agreement").
The Greenville Acquisition, Raleigh-Greensboro Acquisition, Jackson
Acquisitions, Prism Acquisition, Liberty Acquisition and Greensboro
Acquisition were primarily funded with proceeds from the Note Offering and the
Series D Preferred Stock offering. The MMR Merger was funded primarily with
proceeds from the Note Offering, the Series D Preferred Stock offering and the
Credit Agreement.
In December 1996, the Company loaned to ABS Communications, LLC
("ABS") $14.5 million to finance the purchase by ABS of two radio stations
operating in Richmond, Virginia, in connection with the Richmond Acquisition.
The Company has also paid a $2.0 million deposit to ABS pursuant to its
agreement to purchase substantially all of ABS. The primary source of funds
for this loan was borrowings under the Credit Agreement.
1997 Acquisitions and Dispositions. In January 1997, the Company
consummated the Delsener/Slater Acquisition, pursuant to which it purchased
Delsener/Slater, a concert promotion company based in New York City, for an
aggregate consideration of approximately $23.6 million. In addition to this
amount, $3.0 million is to be paid, without interest, over five years, and
$1.0 million is to be paid, without interest, over ten years. The deferred
payments are subject to acceleration in certain circumstances. The primary
source of funds for this acquisition was borrowings under the Credit
Agreement.
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<PAGE>
Also in January 1997, the Company consummated the Albany Acquisition,
pursuant to which it purchased one radio station operating in Albany, New
York, for a purchase price of $1.0 million. The primary source of funds for
this acquisition was borrowings under the Credit Agreement.
In February 1997, the Company consummated the acquisition of radio
station WWYZ-FM in Hartford, Connecticut, for a purchase price of $25.9
million, including fees and expenses. The primary source of funds for this
acquisition was proceeds from the Series E Preferred Stock Offering.
Also, in February 1997, the Company consummated the acquisition of
radio stations KQUE-FM and KNUZ-AM in Houston, Texas, for a purchase price of
approximately $42.9 million, including fees and expense, plus certain
contingent payments of up to $750,000. The primary source of funds for this
acquisition was proceeds from the Series E Preferred Stock Offering.
In March 1997, the Company completed the sale of two radio stations
operating in the Myrtle Beach, South Carolina market for $5.1 million payable
in installments over a five year period (present value of approximately $4.3
million). As these stations were acquired in November 1996 pursuant to the MMR
Merger, no gain or loss was recognized on the transaction.
Also, in March 1997, the Company consummated the acquisition of
certain companies which collectively own and operate the Meadows Music Theater
in Hartford, Connecticut for $0.9 million in cash, shares of SFX Class A
Common Stock with a value of approximately $7.5 million and the assumption of
approximately $15.4 million of debt.
In April 1997, the Company sold one radio station operating in Little
Rock, Arkansas (the "Little Rock Disposition") to Triathlon, a related party.
The station was sold for $4.1 million, of which $3.5 million had been held as
a deposit.
Pending Acquisitions and Dispositions. In October 1996, the Company
entered into an agreement, as amended, with Secret Communications, pursuant to
which the Company agreed to acquire substantially all of the assets used in
the operation by Secret Communications of seven radio stations located in two
markets (Indianapolis, Indiana and Pittsburgh, Pennsylvania). Two of the radio
stations operating in Pittsburgh are not yet owned by Secret Communications
but are anticipated to be acquired prior to the consummation of the Secret
Communications Acquisition, and Secret Communications currently provides
programming and sells advertising on these stations pursuant to an LMA. The
purchase price of the acquisition is $255.0 million, of which the Company has
paid a $10.0 million deposit and segregated $5.0 million pursuant to a letter
of credit to secure its obligations under the purchase agreement. The
agreement permits the Company to close the acquisition of the Indianapolis
stations, prior to the acquisition of the Pittsburgh stations, for a payment
of $127.5 million. Pursuant to this agreement, the Company acquired the
Indianapolis stations on April 1, 1997.
In addition, pursuant to separate agreements, the Company has also
agreed to: (i) acquire substantially all of the assets of four radio stations
operating in Richmond, Virginia, where the Company currently owns one station
for approximately $40.4 million (the "Richmond Acquisition"); (ii) exchange
four radio stations owned by the Company and located on Long Island, New York,
for two radio stations operating in Jacksonville, Florida, where the Company
currently owns four stations, and a cash payment of $11.0 million (the
"Chancellor Exchange"); (iii) exchange one radio station in Pittsburgh,
Pennsylvania, which the Company is acquiring from Secret Communications and
$20.0 million in cash for one radio station in Charlotte, North Carolina where
the Company currently owns two stations (the "Charlotte Exchange"); (iv)
pursuant to a letter of intent, acquire Sunshine, a concert promotion company
based in Indianapolis, Indiana, and certain related companies, for
approximately $59.0 million consisting of $50.0 million in cash at closing
$2.0 million in cash payable over 5 years, shares of Class A Common Stock
issuable over a two year period with a maximum value of approximately $4.0
million and the assumption of approximately $3.0 million of debt (the
"Sunshine Acquisition"); (v) acquire two radio stations operating in
Pittsburgh, Pennsylvania and two in Milwaukee, Wisconsin for $35.0 million
(the "Hearst Acquisition"); (vi) pursuant to a letter of intent, sell six
stations in Jackson, Mississippi and two stations in Biloxi, Mississippi for a
minimum consideration of $60.0 million (the "Jackson and Biloxi Disposition");
and (vii) pursuant to a letter of intent, exchange two radio stations in
Wichita, Kansas and one radio station in Daytona Beach, Florida for three
radio stations in Greenville, South Carolina where the Company currently owns
four stations (the "Greenville Exchange"). The aggregate purchase price of
these acquisitions, net of dispositions, is approximately $77.4 million, of
which the Company has deposited $9.6 million in escrow to secure its
obligations under these agreements.
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<PAGE>
The Company anticipates that it will consummate all of the pending
acquisitions and dispositions as follows:
</TABLE>
<TABLE>
<CAPTION>
TRANSACTION CASH PURCHASE (SALE) ANTICIPATED DATE OF
PRICE (1) (IN MILLIONS) CONSUMMATION
<S> <C> <C>
Secret Pittsburgh Acquisition $ 127.5 2nd quarter 1997
Sunshine Promotions Acquisition 52.0 2nd quarter 1997
Chancellor Exchange (11.0) 2nd or 3rd quarter 1997
Richmond Acquisition 40.4 2nd or 3rd quarter 1997
Charlotte Exchange 20.0 2nd or 3rd quarter 1997
Hearst Acquisition 35.0 3rd or 4th quarter 1997
Greenville Exchange -- 4th quarter 1997
Jackson and Biloxi Disposition (60.0) 1st quarter 1998
</TABLE>
(1) Represents the gross cash sales or purchase price for the corresponding
transaction. Certain of these amounts do not reflect amounts advanced or
placed in escrow, payable over a period of time or payable in stock of
the Company.
The timing and completion of each of the above transactions are
subject to a number of closing conditions, certain of which are beyond the
Company's control. The pending acquisitions and the pending disposition are
subject to the approval of the Federal Communications Commission (other than
the Sunshine Acquisition) and the Company's lenders. Additionally, the
Department of Justice Antitrust Division has indicated its intention to review
matters related to the concentration of ownership within markets even when the
ownership in question is in compliance with the provisions of the Telecom Act.
While the Company believes that each of the pending acquisitions and the
pending disposition does not substantially lessen competition, there can be no
assurance that the Department of Justice Antitrust Division will not take a
contrary position, which could delay or prevent the consummation of any of the
pending acquisitions or require the Company to restructure its ownership in
the relevant market or markets. In addition, the Sunshine Acquisition, the
Jackson and Biloxi Disposition and the Greenville Exchange are subject to the
execution of definitive acquisition agreements.
The Company intends to finance the pending acquisitions from
borrowings under the Credit Agreement, cash on hand and proceeds from the
Chancellor Exchange, and the Jackson and Biloxi Disposition.
Capital expenditures totaled $2,785,000 in the quarter ended March
31, 1997 as compared to $351,000 in the quarter ended March 31, 1996. Capital
expenditures in 1997 included cash paid for broadcasting, computer and general
operating equipment. The Company expects that capital expenditures in 1997
will substantially exceed historical levels due to the overall growth of the
Company, one time costs associated with consolidating newly acquired radio
stations into common facilities with existing stations and capital
expenditures requirements of the Company's new concert promotion business.
The Company is also required to make a payment of $1.0 million in
1997 to redeem the outstanding shares of Series B Preferred Stock.
Sources of Liquidity. On November 22, 1996, the Company entered into
the Credit Agreement, a senior revolving credit facility providing for
borrowings of up to $225.0 million. Borrowings under the Credit Agreement may
be used to finance permitted acquisitions, for working capital and general
corporate purposes, and for letters of credit up to $20.0 million. The
facility converts into a five-year term loan on September 30, 1998, with
repayment due in quarterly installments commencing December 31, 1998, and with
the final payment due September 30, 2003. The principal will be amortized by
5% in 1998, 15% in 1999, 20% in 2000, 20% in 2001, 22% in 2002 and 18% in
2003. Interest on the funds borrowed under the Credit Agreement is based on a
floating rate selected by the Company of either (i) the higher of (a) the Bank
of New York's prime rate and (b) the federal funds rate plus 0.5%, plus a
margin which varies from 0.25% to 1.5%, based on the Company's then-current
leverage ratio, or (ii) the LIBOR rate plus a margin which varies from 1.5% to
2.75%, based on the Company's then-current leverage ratio. The Company must
prepay certain outstanding borrowings in advance of their scheduled due dates
in certain circumstances. The Company must also pay annual commitment fees of
0.5% of the unutilized total commitments under the Credit Agreement. The
Company's obligations under the Credit Agreement are secured by substantially
all of its assets, including property, stock of subsidiaries and accounts
receivable, and are guaranteed by the Company's subsidiaries. As of May 15,
1997, the Company had outstanding borrowings under the Credit Agreement of
$50.0 million. The Company has entered into a letter of intent to increase the
size of the Credit Agreement to $300 million and to make certain other changes
in the terms of the
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<PAGE>
agreement. The letter of intent provides that the Company, at its option, and
upon the approval of the lenders, may increase the size of the facility to
$400 million at any time prior to June 30, 1999. The Company anticipates
entering into a definitive credit agreement during the second quarter 1997
(the "Amended Credit Agreement").
On January 23, 1997, the Company completed the sale of $225.0 million
of Series E Preferred Stock. Dividends on the Series E Preferred Stock accrue
at the rate of 12.625% per annum and are payable on January 15 and July 15 of
each year. Dividends may be paid, at the Company's option, through January 15,
2000, in cash or additional shares of Series E Preferred Stock. The Company
used $50.0 million of the net proceeds to repay borrowings under the Credit
Agreement.
Subject to certain conditions, the shares of Series E Preferred Stock
are exchangeable in whole or in part on a pro rata basis, at the option of the
Company, on any dividend payment date, for the Company's 12 5/8% Senior
Subordinated Exchange Debentures due 2006. The Series E Preferred Stock is
redeemable at the Company's option, in whole or in part, at any time on or
after January 15, 2002, at the redemption prices set forth herein, plus
accumulated and unpaid dividends to the date of redemption. In addition, prior
to January 15, 2000, the Company may, at its option and subject to certain
conditions, redeem up to 50% of the aggregate of (i) the liquidation
preference of the Series E Preferred Stock issued (whether initially issued or
issued in lieu of cash dividends) less the liquidation preference of Series E
Preferred Stock exchanged for Exchange Debentures and (ii) the principal
amount of Exchange Debentures issued (whether issued in exchange for Series E
Preferred Stock or in lieu of cash interest), with the net proceeds of one or
more common equity offerings at a redemption price of 112.625% of the
liquidation preference or principal amount, as the case may be. The Company is
required, subject to certain conditions, to redeem all of the Series E
Preferred Stock outstanding on October 31, 2006, at a redemption price equal
to 100% of the liquidation preferences thereof, plus accumulated and unpaid
dividends to the date of redemption. Upon the occurrence of a Change of
Control (as defined therein), each holder of Series E Preferred Stock may
require the Company to offer to purchase all of that holder's shares of Series
E Preferred Stock at a price equal to 101% of the liquidation preference
thereof, plus accumulated and unpaid dividends to the date of purchase. The
Series E Preferred Stock will rank junior to the Series D Preferred Stock and
senior to all other outstanding classes or series of capital stock, with
respect to dividend rights and rights on liquidation of the Company.
The Company will require financing in addition to cash on hand in
order to consummate the pending acquisitions, which the Company anticipates
obtaining through borrowings under the Credit Agreement and proceeds from the
Chancellor Exchange and the Jackson and Biloxi Disposition. However, it is
anticipated that the Jackson and Biloxi Disposition will not be consummated
prior to the closing of the pending acquisitions, if at all, and therefore, the
Company will require financing in addition to the amounts available under the
Credit Agreement. The Company anticipates that amounts available under the
Amended Credit Agreement will be sufficient to fund the pending acquisitions.
The Company is required to meet certain specified financial tests,
such as total leverage and senior leverage ratios and pro forma interest
expense, in order to borrow under the Credit Agreement and it is anticipated
that the Amended Credit Agreement will contain similar requirements. The
ability of the Company to meet such tests is dependent on the cash flow of the
Company, giving effect to the consummation of the pending acquisitions and
pending dispositions. There can be no assurance that the Company will be able
to enter into the Amended Credit Agreement or that the Company will achieve
the cash flow levels required under the Amended Credit Agreement (or the
Credit Agreement) to obtain the financing necessary to fund the pending
acquisitions. If the Company does not enter into the Amended Credit Agreement
or is unable to borrow thereunder, there can be no assurance that it will be
able to obtain the financing on terms comparable to the terms of the Amended
Credit Agreement or on terms acceptable to the Company. If the Company is
unable to consummate the pending acquisitions because of its failure to obtain
financing, it may forfeit deposits, as of May 15, 1997, up to an aggregate
amount of approximately $19.6 million.
As a result of the foregoing, there can be no assurance as to when
the pending acquisitions or the pending dispositions will be consummated or
that they will be consummated on the terms described herein or at all.
The Company expects that any additional acquisitions will be financed
through funds generated from operations, cash on hand, funds which may be
available under the Amended 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 terms of the Amended Credit Agreement, the debt
incurrence test under the Note Indenture, the Series D Preferred Stock and/or
the Series E Preferred Stock.
The Company's ability to make scheduled payments of principal, to pay
interest on or to refinance its debt (including the Notes and the Company's
borrowings under the Credit Agreement or the Amended Credit Agreement), to
make dividend payments on the Series D Preferred Stock and the Series E
Preferred Stock and to redeem the Series B Preferred Stock, the
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<PAGE>
Series C Preferred Stock, the Series D Preferred Stock and the Series E
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 these
stations into the Company's operations. The Company's borrowings under the
Credit Agreement (or the Amended Credit Agreement) will be, and other future
borrowings may be, at variable rates of interest, which will result in higher
interest expense in the event of increases in interest rates. There can be no
assurance that the Chancellor Exchange or the pending dispositions will be
consummated, that the Company will be able to borrow under the Credit
Agreement (or the Amended Credit Agreement), 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 to enable the Company to service its
debt, to make dividend, and redemption payments and to make necessary capital
or other expenditures. The Company may be required to refinance a portion of
the principal amount of the Notes, or the aggregate liquidation preference of
the Series E Preferred Stock and the Series D Preferred Stock prior to their
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.
Charges to Operations. Pursuant to an agreement between the Company
and D. Geoffrey Armstrong, the Company's Chief Operating Officer (the
"Armstrong Agreement"), Mr. Armstrong's employment may be terminated by either
party during the one-month period commencing on November 22, 1997 upon 30
days' written notice. If his employment agreement is terminated, Mr. Armstrong
will receive a payment of $1.2 million pursuant to the provisions of his
employment agreement and the Company will purchase all of his outstanding
options under the Company's stock option plans for an amount equal to the
difference between (x) the number of such options multiplied by the respective
exercise price of such options and (y) the number of such options multiplied
by the greater of $40.00 and the average trading price of a share of Class A
Common Stock during the 20 days prior to five days before the effective date
of the termination of the employment agreement. In the event that the Company
is required to purchase Mr. Armstrong's options, based upon a repurchase price
of $40.00 per share, the Company will make a payment to Mr. Armstrong of
approximately $3.2 million. Should the employment contract be terminated and
the stock options be repurchased, the Company will record a charge to earnings
equal to the amount paid for the options.
The pending acquisitions will be accounted for using the purchase
method of accounting and the intangible assets created in the purchase
transactions will be amortized against future earnings of the combined
companies. The amount of such amortization will be substantial and 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.
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
3.1 Restated Certificate of Incorporation, as amended (incorporated by
reference to Exhibit 3.1 to Form 8-K (Commission File No. 0-22486)
filed with the Commission on November 27, 1996).
3.2 By-laws, as amended (incorporated by reference to Exhibit 3.1 to
Amendment No. 1 to Registration Statement on Form S-3 (Reg. No.
333-15469) filed with the Commission on November 21, 1996).
4.1 Form of Certificate of Designations for Series E Cumulative
Exchangeable Preferred Stock (incorporated by reference to the
Registration Statement on Form S-3 (Reg. No. 333-16995) filed with
the Commission on November 27, 1996).
4.2 Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights of Preferred Stock
and Qualifications, Limitations and Restrictions thereof of 6 1/2%
Series D Cumulative Convertible Exchangeable Preferred Stock due May
31, 2007 (incorporated by reference to Exhibit 3.5 to Registration
Statement on Form S-4 (Reg. No. 333-06553) filed with the Commission
on June 21, 1996).
4.3 Warrant Agreement, dated as of March 23, 1994, by and among MMR,
American Stock Transfer & Trust Company, as warrant agent and
certain underwriters (incorporated by reference to Exhibit 4.2 to
Amendment No. 2 to Registration Statement on Form SB-2 (Reg. No.
33-74526) filed with the Commission on March 18, 1994).
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<PAGE>
4.4 Supplemental Warrant Agreement, dated as of November 22, 1996
(incorporated by reference to Exhibit 4.2 to Form 8-K (Commission
File No. 0-22080) filed with the Commission on November 27, 1996).
4.5 Unit Purchase Options, dated March 23, 1994 (incorporated by
reference to Exhibit 4.1 to Amendment No. 2 to Registration
Statement on Form SB-2 (Reg. No. 33-74526) filed with the Commission
on March 18, 1994).
4.6 Common Stock Purchase Warrant, dated July 29, 1993 (incorporated by
reference to Exhibit 10.38 to Form 10-KSB (Commission File No.
0-22486) for the year ended December 31, 1994).
4.7 Common Stock Purchase Warrants dated November 22, 1996 (incorporated
by reference to Exhibit 4.2 to Form 8-K (Commission File No.
0-22080) filed with the Commission on November 27, 1996).
4.8 Assumption of Warrants dated November 22, 1996 (incorporated by
reference to Exhibit 4.2 to Form 8-K (Commission File No. 0-22080)
filed with the Commission on November 27, 1996).
10.1 Agreement of Merger, dated February 12, 1997, among the Company,
NOC-Acquisition Corp., CADCO Acquisition Corp., QN-Acquisition
Corp., Nederlander of Connecticut, Inc., Connecticut Amphitheater
Development Corporation, QN Corp., Connecticut Performing Arts
Partners and certain stockholders (incorporated by reference to
Exhibit 10.51 to Form 10-K (Commission File No. 0-22486) for the
year ended December 31, 1996).
10.2 Amendment No. 1 to Asset Purchase Agreement, dated January 21, 1997,
between Secret Communications Limited Partnership and the Company
(incorporated by reference to Exhibit 10.52 to Form 10-K (Commission
File No. 0- 22486) for the year ended December 31, 1996).
10.3 Letter of Intent, dated March 4, 1997, between the Company and
Sunshine Promotions, Inc. (incorporated by reference to Exhibit
10.53 to Form 10-K (Commission File No. 0-22486) for the year ended
December 31, 1996).
10.4 Employment Agreement between the Company and Michael G. Ferrel
(incorporated by reference to Exhibit 10.54 to Form 10-K (Commission
File No. 0-22486) for the year ended December 31, 1996).
10.5 Fourth Supplemental Indenture, dated January 29, 1997, among
Delsener/Slater Enterprises, Ltd., Delsener/Slater Enterprises,
Inc., In House Tickets, Inc., Connecticut Concerts Incorporated,
Ardee Festivals N.J., Inc., Ardee Productions, Ltd., Exit 116
Revisited, Inc., Dumb Deal, Inc., Broadway Concerts, Inc. and The
Chase Manhattan Bank (incorporated by reference to Exhibit 10.55 to
Form 10-K (Commission File No. 0-22486) for the year ended December
31, 1996).
10.6* Consent and Amendment to the Second Amendment and Restated Credit
Agreement, dated March 24, 1997, between the Company and the Lenders
10.7* Amendment No. 2 to Asset Purchase Agreement, dated April 1, 1997,
between Secret Communications, Inc. Limited Partnership and the
Company
10.8* Amended and Restated Employment Agreement between the Company and
Robert F.X. Sillerman, dated as of January 1, 1997.
10.9* First Amendment to the Second Amended and Restated Credit Agreement,
dated as of January 22, 1997, between the Company and its
Subsidiaries and the Lenders.
11.1* Statement regarding Calculation of Per Share Earnings.
27.1* Financial Data Schedule.
- ----------------
* filed herewith
(b) Reports on Form 8-K
18
<PAGE>
On January 17, 1997, the Company filed a Form 8-K under Item 5
(Other Events) thereof, disclosing (i) a Supplement, dated January 17, 1997,
to the Company's Prospectus dated December 10, 1996, (ii) an amendment to the
asset purchase agreement with Secret Communications Limited Partnership, (iii)
the agreement of the Company's compensation committee and independent
directors to enter into a new employment agreement with Mr. Sillerman and the
execution of an employment agreement with Mr. Ferrel, (iv) the termination of
a joint sales agreement with Triathlon Broadcasting Company (v) the execution
of three Supplemental Indentures with respect to the Company's 10 3/4% Senior
Subordinated Notes due 2006, (vi) the consummation of certain acquisitions and
dispositions, (vii) the execution of stock option agreement with Mr. Ferrel
and (viii) the assumption of certain Class B Warrants from Multi-Market Radio,
Inc.
On January 21, 1997, the Company filed a Form 8-K under Item 5
(Other Events) thereof, disclosing certain financial information with respect
to certain radio stations acquired from Secret Communications Limited
Partnership.
On January 22, 1997, the Company filed a Form 8-K under Item 5
(Other Events) thereof, disclosing a Supplement dated January 22, 1997, to the
Company's Prospectus Supplement dated January 17, 1997, and Prospectus dated
December 10, 1996.
On January 27, 1997, the Company filed a Form 8-K under Item 5
(Other Events) thereof, disclosing the Company's consummation of its public
offering of 2,225,000 shares of 12 5/8% Series E Cumulative Exchangeable
Preferred Stock, par value $.01 per share.
19
<PAGE>
SIGNATURES
Pursuant to the requirement 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, 1997
By:/s/Howard Tytel
-------------------------------------------------
Howard J. Tytel
Executive Vice President and
Secretary
Date: May 15, 1997
By:/s/Thomas P. Benson
-------------------------------------------------
Thomas P. Benson
Chief Financial Officer and
Treasurer
20
<PAGE>
CONSENT AND AMENDMENT
March 24, 1997
To the Banks Parties to the
Credit Agreement referred to below
Gentlemen:
We refer to the Second Amended and Restated Credit Agreement
dated as of November 22, 1996 (the "Credit Agreement") among SFX
Broadcasting, Inc. (the "Borrower"), the Subsidiaries of the Borrower from
time to time parties thereto, the Lenders from time to time parties thereto
and The Bank of New York, as Agent (the "Agent"), as amended by the First
Amendment to the Second Amended and Restated Credit Agreement dated as of
January 22, 1997. Unless otherwise defined herein, the terms defined in the
Credit Agreement shall be used herein as therein defined.
We have notified the Agent that we have entered into an
agreement to acquire four radio stations in Pittsburgh, Pennsylvania
(WDVE-FM, WXDX-FM, WDSY-FM and WJJJ- FM) and three radio stations in
Indianapolis, Indiana (WFBQ-FM, WRZX-FM and WNDE-AM) from Secret
Communications, L.P., a Delaware limited partnership (the "Stations").
Pursuant to Section 6.14(c) of the Credit Agreement relating
to Permitted Acquisitions, the Borrower may make a Permitted Acquisition so
long as no Default or Event of Default would exist before and after giving
effect to such Permitted Acquisition. Pursuant to the
<PAGE>
definition of "Permitted Acquisition" set forth in Section 1.1 of the Credit
Agreement, the Borrower is required to obtain the approval of the Required
Lenders for any acquisition not specifically referenced in such definition. In
that the acquisition of the Stations is not so referenced, we hereby request
your consent in order that the Borrower may acquire the Stations as described
above.
We have also notified the Agent that we, together with a
wholly-owned subsidiary, SFX Holdings, Inc., a Delaware corporation, have
entered into a separate agreement with EZ Communications, Inc., a Virginia
corporation, Professional Broadcasting, Incorporated, a Virginia corporation,
and EZ Philadelphia, Inc., a Virginia corporation, to exchange one of the
stations being acquired in Pittsburgh, Pennsylvania (WDSY-FM) and $20 million
cash for WRFX-FM located in Kannapolis, North Carolina and serving the
Charlotte, North Carolina market (the "Exchange"). Pursuant to Section 6.14(b)
of the Credit Agreement the Borrower is prohibited from directly or indirectly
exchanging any of its assets except as specifically referenced in Section
6.14(b) and so long as no Default or Event of Default would exist before or
after giving effect thereto. In that the Exchange is not so referenced, we
hereby request that you consent to the amendment of the Credit Agreement by
deleting Section 6.14(b) therein in its entirety and inserting in lieu thereof
the following:
"(b) Exchange of Assets. No Obligor shall, directly or
indirectly, exchange any of its assets except as permitted by Section 6.5, and
so long as no Default or Event of Default would exist before or after giving
effect thereto, other than:
2
<PAGE>
(i) KRLD-AM and the Texas State Networks in
Dallas, Texas for KKRW-FM in Houston, Texas;
(ii) WBAB-FM, WHFM-FM, WBLI-FM and WGBB-AM in
Long Island for stations WFYW-FM and WAPE-FM in Jacksonville, Florida;
(iii) KTXQ-FM and KRRW-FM in Dallas, Texas for
station WHFS-FM serving Washington DC/Baltimore, Maryland; and
(iv) WDSY-FM in Pittsburgh, Pennsylvania and
$20 million cash for WRFX-FM located in Kannapolis, North Carolina and serving
the Charlotte, North Carolina market; and
(v) other assets provided that:
(A)(1) the BCF attributable to all radio
broadcast stations sold and/or exchanged
during the one-year period ending on the
date of the proposed exchange shall not
exceed 15% of the BCF of the Borrower;
(2) the BCF attributable to all radio
broadcast stations sold and/or
exchanged since the date of this
Agreement, after giving effect to the
proposed exchange, shall not exceed
25% of the BCF of the Borrower;
(3) fair value is received by any of
the Obligors; and
(4) at least 75% of the consideration
to be received by any of the Obligors is
in the form of a radio broadcast station
or other assets used in the broadcast of
radio programming and/or cash or cash
equivalents.
(B) the assets received by any of the
Obligors pursuant to such exchanges
qualify as a Permitted Acquisition.
In that the Credit Agreement does not provide for
investments in Subsidiaries organized in connection with an Exchange of
Assets, we hereby request that you consent to the amendment of the Credit
Agreement by deleting in its entirety the definition of "Permitted
3
<PAGE>
Investments" set forth in Section 1.1 of the Credit Agreement and inserting in
lieu thereof the following:
"Permitted Investments" means (a) investments in obligations
of the United States of America maturing within one year from the
date of acquisition, (b) certificates of deposit issued by commercial
banks organized under the Laws of the United States of America or any
state thereof and having a combined capital, surplus and undivided
profits of not less than $100,000,000, (c) investments in commercial
paper, maturing not more than 90 days after the date of issue, issued
by a Person (other than an Affiliate) with a rating of "P-1" (or its
then equivalent) according to Moody's Investors Service, Inc., "A- 1"
(or its then equivalent) according to Standard & Poor's Corporation,
or a better rating, (d) investments in Wholly-Owned Subsidiaries
identified on Schedule 4.4(D), in Wholly- Owned Subsidiaries
organized in connection with Permitted Acquisitions and in Wholly-
Owned Subsidiaries organized in connection with an exchange of assets
as permitted by Section 6.14(b), and (e) the investment in ABS equal
to at least a 96% interest therein.
In addition, we hereby request that you consent to amendment
of the Credit Agreement by deleting in its entirety Section 5.13 thereof and
inserting in lieu thereof the following:
"Section 5.13 Further Documentation. In the event that
stations WBAB-FM, WHFM-FM, WBLI-FM and WGBB-AM in Long Island shall
not be exchanged as permitted by and in accordance with Section
6.14(b)(ii) within 270 days from the date hereof, Borrower shall
cause to be promptly delivered to the Agent, the documents described
in Section 3.1(c), and such other documentation as the Agent may from
time to time, in its discretion request, all in form and substance
satisfactory to the Agent."
We also request that you consent to the amendment of the
Credit Agreement by deleting in its entirety Section 4.29 thereof and
inserting in lieu thereof the following:
4
<PAGE>
"Section 4.29 License Subsidiaries. Except as set forth in
Schedule 4.29, all FCC licenses and other authorizations relating to
the Stations and all FCC licenses and other authorizations relating
to any other stations acquired in connection with a Permitted
Acquisition or asset exchange are held by their respective License
Subsidiaries. In the case of those stations set forth on Schedule
4.29 and those stations acquired in connection with a Permitted
Acquisition or asset exchange, Borrower shall cause by the later of
(i) April 30, 1997 or (ii) 60 days after such acquisition, all FCC
licenses and other authorizations relating to such stations to be
held by their respective License Subsidiaries. No License Subsidiary
(a) owns or holds any assets (including the ownership of stock or any
other interest in any Person) other than Operating Agreements and FCC
licenses and other authorizations relating to the Stations and
Operating Agreements and FCC licenses and other authorizations
relating to any other stations acquired in connection with Permitted
Acquisitions, (b) is engaged in any business other than the holding,
acquisition and maintenance of FCC licenses and other authorizations,
(c) has any investments in any other Person or (d) owes any Debt to
any Person other than Intercompany Debt."
We also request that you consent to the amendment of the
Credit Agreement by deleting in its entirety Section 6.25(e) thereof and
inserting in lieu thereof the following:
"(e) From and after April 30, 1997 (or if an Operating
Subsidiary is formed or acquired by the Borrower after the date
hereof, from and after the date which is 60 days after such formation
or acquisition), no Operating Subsidiary shall operate, manage or
direct the day-to-day operations of any Station or any station
acquired pursuant to a Permitted Acquisition or a permitted asset
exchange unless it has entered into an Operating Agreement with a
License Subsidiary and such Operating Agreement is in full force and
effect."
Moreover, we hereby request you consent to the substitution
of Schedule 1.1(D) of the Credit Agreement with Schedule 1.1(D) hereto.
Please evidence your consent to these requests by executing
and returning at least two counterparts of this Consent to the Agent's
counsel, Sullivan and Cromwell, 125 Broad Street, New York, New York 10004,
attention of James Fitzpatrick, facsimile no. (212) 558-
5
<PAGE>
3567. This consent shall become effective when and if (a) counterparts of this
Consent shall have been executed by the Required Lenders and (b) the Borrower
shall have complied with the provisions of Section 5.12 of the Credit
Agreement regarding New Subsidiaries. This consent is subject to the
provisions of Section 10.10(c) relating to waivers and consents in respect of
Credit Agreement.
Very truly yours,
SFX BROADCASTING, INC.
By: /s/ Howard J. Tytel
---------------------------
Howard J. Tytel
Executive Vice President
6
<PAGE>
Agreed as of the date
first written above:
THE BANK OF NEW YORK
By /s/
--------------------------
Title: Vice President
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By /s/
---------------------------
Title: Vice President
BANKERS TRUST COMPANY
By /s/ Gina S. Thompson
---------------------------
Gina S. Thompson
Title: Vice President
BANK OF MONTREAL
By /s/ Michael Andres
---------------------------
Michael Andres
Title: Managing Director
BANQUE NATIONALE DE PARIS
By /s/
---------------------------
Title: Vice President
BANQUE NATIONALE DE PARIS
By /s/
---------------------------
Title: Vice President
7
<PAGE>
CIBC, INC.
By /s/
-----------------------------------
Title: Director, CIBC Wood Gundy
Securities Corp., as Agent
CORESTATES BANK N.A.
By /s/
------------------------------------
Title: Vice President
THE FUJI BANK, LIMITED, NEW YORK
By /s/ Teiji Teramoto
-------------------------------------
Teiji Teramoto
Title: Vice President & Manager
LEHMAN COMMERCIAL PAPER INC.
By /s/ Dennis J. Dee
-------------------------------------
Dennis J. Dee
Title: Authorized Signatory
NATIONAL BANK OF CANADA
By /s/
-------------------------------------
Title: Vice President
NATIONAL BANK OF CANADA
By /s/
-------------------------------------
Title: Vice President
8
<PAGE>
NATIONAL CITY BANK
By /s/
---------------------------------------
Title: Account Officer
SOCIETE GENERALE
By /s/ Mark Virgil
----------------------------------------
Mark Virgil
Title: Vice President
SOUTHERN PACIFIC THRIFT & LOAN ASSOCIATION
By /s/
----------------------------------------
Title: Senior Vice President
THE SUMITOMO BANK, LIMITED
By /s/
----------------------------------------
Title: Vice President
THE SUMITOMO BANK, LIMITED
By /s/ Brian M. Smith
----------------------------------------
Brian M. Smith
Title: Senior Vice President &
Regional Manager (East)
9
<PAGE>
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By /s/
---------------------------------------
Title: First Vice President
10
<PAGE>
SCHEDULE 1.1(D)
PERMITTED DEBT
<TABLE>
<CAPTION>
<S> <C>
1. Note payable to John Noland from SFX Broadcasting, Inc. for the purchase of the assets
and broadcast license of WKTF in Jackson, MS entered into in December, 1993. Balance
of $597,717.
2. Note payable to Carolina First Bank from SFX Broadcasting, Inc. for satellite equipment
in Greenville, SC entered into in April, 1993. Balance of $20,050.
3. Capital lease between Metropolitan Broadcasting of Dallas, Inc. and IBM Credit Corp.
for a mini computer in Dallas, TX entered into in June, 1992. Balance of $28,656.
4. Capital lease between Metropolitan Broadcasting of Dallas, Inc. and Eaton Financial for
computer equipment and software in Dallas, TX entered into in February, 1993. Balance
of $37,066.
5. Capital lease between SFX Broadcasting, Inc. and Tokai Financial for modular furniture
in Dallas, TX entered into in May, 1995. Balance of $54,844.
6. Capital lease between SFX Broadcasting, Inc. and IBM Credit Corp. for mini computer in
Jackson, MS entered into in January, 1994. Balance of $18,608.
7. Note payable between Capstar Communications of South Carolina (WMYI), Inc. and
Carolina First Bank for a vehicle in Greenville, SC entered into in August, 1993. Balance
of $5,910.
8. Note payable between Capstar Communications of South Carolina (WMYI), Inc. and
Carolina First Bank for computer equipment in Greenville, SC entered into in April,
1993. Balance of $8,224.
9. Capital lease between SFX Broadcasting, Inc. and IBM Credit Corp. for mini computer in
Greenville, SC entered into in March, 1994. Balance of $19,438.
10. Capital lease between Capstar Communications Inc. and Devon Capital Corp. for
broadcasting equipment in Nashville, TN entered into in January, 1992. Balance of
$3,749.
11. Capital lease between SFX Broadcasting, Inc. and IBM Credit Corp. for mini computer in
Nashville, TN entered into in December, 1993. Balance of $21,746.
12. Letter of credit between SFX Broadcasting, Inc. and Chemical Bank payable to 150 E.
58th St. Partners with respect to leased space in New York, NY. Balance of $125,000.
11
<PAGE>
13. Notes payable to Texas Stadium Corporation for two stadium suites in Dallas, TX entered
into in August, 1989. Balance of $644,818.
14. Capital lease between SFX Broadcasting, Inc. and Priority Leasing for satellite equipment
in Dallas, TX entered into in July, 1995. Balance of $287,078.
15. Capital lease between BB&T Leasing Company and SFX Broadcasting, Inc. for furniture
in Charlotte, NC entered into in March, 1996. Balance of $100,738.
16. Capital leases between Creative Financial Service and WMXB for a 1993
- Plymouth Grand Voyager in Richmond, VA entered into in July, 1993.
Balance of $8,000.
17. Capital leases between AT&T and WGNA for a Merlin Phone System in Latham, NY
entered into in August, 1993. Balance of $7,011.
18. Capital leases between AT&T and WPYX for a Merlin Phone System in Latham, NY
entered into in June, 1996. Balance of $37,186.
19. Notes payable to Wachovia Bank of South Carolina, NA for a vehicle in Greenville, SC
entered into in April, 1996. Balance of $33,275.
20. Capital leases between NEC America, Inc. and SFX Broadcasting, Inc. for phone
equipment in San Diego, CA entered into in May, 1995. Balance of $25,155.52.
21. Capital leases between Ford Financial Services, Inc. and SFX Broadcasting, Inc. for
furniture in San Diego, CA entered into in July, 1995. Balance of $38,343.
22. Capital leases between Capelco Capital, Inc. and SFX Broadcasting, Inc. for office
equipment in San Diego, CA entered into in January, 1995. Balance of $46,648.
23. Notes payable to George Coleman Ford for a vehicle in Greenville, SC entered into in
April, 1995. Balance of $7,344.
24. Capital leases between CFC Funding Corporation and SFX Broadcasting, Inc. for
equipment in Dallas, TX entered into in July, 1995. Balance of $32,141.
25. All indebtedness of MMR or any Subsidiary thereof which will become
an Obligor upon consummation of the MMR Merger, provided that such
indebtedness was in existence as of September 30, 1996. From and
after the date which is five business days after the closing of the
MMR Merger, indebtedness owed by MMR to Finova Capital Corporation
and The Huff Alternative Fund L.P. shall be excluded from the
definition of Permitted Debt.
12
<PAGE>
26. All capital leases, purchase money debt and other ordinary course of business debt of any
company acquired by the Borrower pursuant to a Permitted Acquisition (which for the
avoidance of doubt shall include debt assumed in connection with the purchase of
Nederlander of Connecticut, Inc., a Connecticut corporation, Connecticut Amphitheater
Development Corporation, a Connecticut corporation, QN Corp., a Connecticut
corporation, Connecticut Performing Arts, Inc., a Connecticut corporation; and
Connecticut Performing Arts Partners) provided that such capital leases, purchase money
debt or other ordinary course of business debt was in existence on the closing of such
Permitted Acquisition.
27. The Existing Subordinated Notes.
28. The New Notes.
</TABLE>
13
<PAGE>
AMENDMENT NO. 2 TO ASSET PURCHASE AGREEMENT
This Amendment No. 2 dated as of April 1, 1997 ("Amendment
No. 2") to the Asset Purchase Agreement (the "Asset Purchase Agreement") dated
as of October 15, 1996 between Secret Communications Limited Partnership, a
Delaware limited partnership ("Seller"), and SFX Broadcasting, Inc., a
Delaware corporation ("Buyer").
W I T N E S S E T H :
WHEREAS, Seller and Buyer each desire to amend the Asset
Purchase Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, it is hereby agreed between Seller and Buyer
as follows:
1. The Asset Purchase Agreement is hereby amended by
adding a Section 1.8 thereto which shall read in its entirety as follows:
"1.8. CLOSING OF PURCHASE AND SALE OF WFBQ-FM, WRZX-FM AND
WNDE-AM. (a) At any time after the FCC Consents with respect to WFBQ-FM,
WRZX-FM and WNDE-AM (the "Indianapolis Stations") become Final Orders and the
other conditions to closing of each party contained in this Agreement (other
than those contained in Sections 6.8 and 7.6), as they relate only to the
Indianapolis Stations, have been satisfied or waived, upon the mutual
agreement of Buyer and Seller the closing (the "Indianapolis Closing") of the
purchase and sale of the Purchased Assets relating to the Indianapolis
Stations shall be consummated at 10:00 A.M., local time, at the offices of
Buyer, 150 East 58th Street, New York, New York 10155, on April 1, 1997, or at
such other place or on such other date as shall be agreed upon by Buyer and
Seller.
(b) At the Indianapolis Closing, Seller shall
deliver to Buyer (i) a bill of sale and assignment, in the form of
Exhibit C to this Agreement, of all of the Purchased Assets relating to the
Indianapolis Stations and (ii) all of the documents, instruments and opinions
required to be delivered by Seller pursuant to Article VI of this Agreement;
provided, however, that such documents, instruments and opinions shall relate
solely to the purchase and sale of the Purchased Assets relating to the
Indianapolis Stations. At the Indianapolis Closing, Buyer shall deliver to
Seller (i) by bank wire transfer of immediately available funds to an account
number to be designated by Seller in writing at least two business days prior
to the Indianapolis Closing the amount of $127,500,000 and (ii) all of the
documents, instruments and opinions required to be delivered by Buyer pursuant
to Section 1.4 and Article VII of this Agreement; provided, however, that such
documents, instruments and opinions shall relate solely to the purchase and
sale of the Purchased Assets relating to the Indianapolis Stations.
(c) For purposes of the Indianapolis Closing,
all references in this Agreement to "Closing" and "Closing Date" shall refer
to the consummation of the purchase and sale
<PAGE>
of the Purchased Assets relating to the Indianapolis Stations and the date of
the Indianapolis Closing, respectively. Upon and after consummation of the
Indianapolis Closing, all references to "Closing" and "Closing Date" in this
Agreement shall refer to the consummation of the purchase and sale of the
Stations other than the Indianapolis Stations and the date of such Closing,
respectively. Upon the consummation of the Indianapolis Closing, the "Purchase
Price" to be paid by Buyer at the Closing of the purchase and sale of the
Purchased Assets relating to the Stations other than the Indianapolis Stations
shall become $127,500,000."
2. Section 5.6(a) of the Asset Purchase Agreement is
hereby deleted in its entirety and shall be of no further force or effect.
3. Section 13 of Amendment No. 1 to the Asset Purchase
Agreement is hereby deleted in its entirety and shall be of no further force or
effect.
4. This Amendment No. 2 shall be governed by and
construed in accordance with the internal laws (as opposed to tho conflict of
laws provisions) of the State of Illinois.
5. This Amendment No. 2 may be executed in one or more
counterparts, each of which shall be considered an original instrument, but
all of which shall be considered one and the same agreement, and shall become
binding when one or more counterparts have been signed by each of the parties
and delivered to each of Seller and Buyer.
- 2 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 2 to be executed as of the day and year first above written.
SECRET COMMUNICATIONS LIMITED
PARTNERSHIP
By: Broadcast Alchemy, L.P.,
a General Partner
By: Lane Broadcasting, Inc.
Its: General Partner
By: /s/ Arthur J. Schiller
-------------------------
Arthur J. Schiller
Its: Vice President
SFX BROADCASTING, INC.
By: /s/ Richard Liese
-------------------------
Richard Liese
Its: Vice President
- 3 -
<PAGE>
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AGREEMENT made as of January 1, 1997 (the "Employment
Agreement"), between SFX BROADCASTING, INC., a Delaware corporation (the
"Employer") and ROBERT F.X.
SILLERMAN (the "Executive").
WHEREAS, Employer and Executive entered into a certain
employment agreement dated as of April 1, 1995 (the "Employment Agreement");
and
WHEREAS, Employer and Executive desire to amend and restate
the Employment Agreement to extend the term of employment and to reward the
Executive for his leadership of the Employer as demonstrated by the Employer's
recent growth and financial results;
WHEREAS, the Board of Directors of the Employer (the
"Board"), discussed the necessity of amending the Employment Agreement and
instructed the Compensation Committee of the Board (the "Compensation
Committee") to consider the matter and make a recommendation to the Board; and
WHEREAS, the Compensation Committee and the Board approved
(each with the Executive abstaining) the terms and conditions of this Amended
and Restated Employment Agreement.
NOW, THEREFORE, for good and valuable consideration the
sufficiency and receipt of which is hereby acknowledged, Employer and
Executive agree as follows:
1. Employment. Upon the terms and subject to the
conditions of this Agreement, Employer hereby employs the Executive and the
Executive hereby accepts employment by Employer on the terms hereinafter set
forth.
2. Term.
2.1 The term of the Executive's employment
hereunder shall commence on January 1, 1997 (the "Effective Date") and
continue until the fifth anniversary thereof (the "Term") and shall terminate
at the close of business on December 31, 2002 (the "Termination Date") unless
terminated earlier in accordance with the provisions of this Employment
Agreement.
3. Executive's Position, Duties, and Authority.
3.1 The Employer shall employ the Executive,
and the Executive shall serve, as Executive Chairman of the Board and as a
Chief Executive Officer of the Employer and
<PAGE>
of any successor by merger, acquisition of substantially all of the assets of
the Employer or otherwise.
3.2 The Executive shall have executive
duties, functions, authority and responsibilities commensurate with the office
or offices he from time to time holds with the Employer.
3.3 The Executive shall serve without
additional remuneration as (i) a member of the Compensation Committee and
Stock Option Committee of the Employer and as a member of any other committee
of the Employer, as determined by the Board; and (ii) a director and/or
officer of one or more of the Employer's subsidiaries if appointed to such
position by the Employer.
4. Full-time Services. The Executive shall devote
substantially all of his business time to the business and affairs of the
Company and to the fulfillment of his duties hereunder in a diligent and
competent fashion to the best of his abilities. Notwithstanding the foregoing,
(i) the Executive shall have the right to continue to fulfill his obligations
as a director and officer of companies in which he currently serves in such
capacity, including without limitation, Sillerman Communications Management
Corporation, Sillerman Management Company, Inc. and The Marquee Group, Inc.,
and (ii) shall have the right to devote a portion of his business time to
personal, non-broadcast investments and commitments or to broadcast
investments provided that such investments do not involve the ownership of
radio stations in the top fifty markets in the United States (as determined by
ratings published from time to time by The Arbitron Company). In addition,
except as provided in Section 16, the Executive may serve on boards of
directors of other organizations and companies; provided that the service on
such other boards of directors does not interfere with the performance of the
Executive's services hereunder.
5. Location of Employment. Unless the Executive consents
otherwise in writing, the headquarters for performance of his services
hereunder shall be the principal offices of the Employer in New York, New
York, or at such other location within 25 miles of residence of the Executive
as the Executive shall approve of.
6. Compensation.
6.1 Base Salary. During the Term, the
Employer shall pay or cause to be paid to the Executive an initial base salary
per annum (the "Base Salary") which shall initially be
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<PAGE>
$400,000, payable in monthly installments. Notwithstanding the foregoing, the
Board shall review the Executive's Base Salary at least annually and may by
action of the Board, after and pursuant to the affirmative recommendation of
the Compensation Committee, increase, but shall not decrease, such Base
Salary, as such salary may have been increased, at any time and from
time-to-time during the Term.
6.2 Loan. On the Effective Date, the
Employer shall make a loan (the "Loan") to the Executive in the amount of
$2,500,000. The Loan shall accrue simple interest from the date of advance at
the rate of 7% per annum and will be repaid, together with the accrued
interest, on the expiration or earlier termination of this Agreement;
provided, however, that should the Term of this Agreement be extended by the
parties beyond five (5) years, the maturity date of the Loan may be extended
by the Board for such additional period as shall be determined by the Board in
its sole discretion. The Employer shall have full recourse to the Executive
and his assets for the repayment of the loan.
7. The Executive shall be entitled to receive an annual
incentive bonus (the "Bonus"), in cash, stock, options or other compensation,
during the continuance of the Executive's employment hereunder in accordance
with a formula to be determined by the Board, after and pursuant to the
affirmative recommendation of the Compensation Committee. The Bonus shall be
payable within a reasonable period of time not to exceed ninety (90) days
following the end of each fiscal year of the Employer. To the extent that the
Executive is granted options to acquire shares of the Class A Common Stock of
the Employer (the "Class A Stock"), such options shall have an exercise price
equal to the average closing ask and bid price of the Class A Stock on the
date of the grant and shall be exercisable for 10 years and shall vest on a
schedule to be determined by the Board but in no event shall the vesting
schedule exceed the Term of this Agreement. Notwithstanding the foregoing, in
the event that the Executive ceases to be employed by the Employer for any
reason whatsoever, all options issued pursuant to this Section 7 shall vest
immediately and the Executive shall retain the right to exercise each such
option during the remaining term of each such grant.
8. Expenses. The Employer shall pay or reimburse the
Executive for all reasonable expenses actually incurred or paid by the
Executive during the Term of employment in the performance of the Executive's
services hereunder upon presentation of expense statements or
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vouchers or such other supporting information as the Employer may reasonably
require of the Executive. The Employer shall make an automobile available for
Executive's exclusive use while employed under this Agreement.
9. Benefits. During the Term, the Executive shall be
eligible to participate in any pension or profit-sharing plan or program of
the Employer now existing or established hereafter, in accordance with and to
the extent that he is eligible under the general provisions thereof. The
Executive shall also be eligible to participate in any group life insurance,
hospitalization, medical, health and accident, disability or similar plan or
program of the Employer, now existing or established hereafter, in accordance
with and to the extent that he is eligible under the general provisions
thereof.
10. Existing Life Insurance. The Employer shall have the
right to obtain up to $5,000,000 of life insurance on the life of Executive
and to be the beneficiary of such policy. The Executive shall cooperate in
assisting the Employer to obtain such insurance. The Employer shall continue
to pay all premiums on such policies and shall maintain such policies, subject
to the insurability of the Executive, if required to keep such policies in
effect during the Term.
11. Indemnification. The Executive shall be entitled in
connection with his employment hereunder to the benefit of the indemnification
provisions contained on the date hereof in the bylaws and certificate of
incorporation of the Employer, as the same may hereafter be amended (not
including any amendments or additions that limit or narrow, but including any
that add to or broaden, the protection afforded to the Executive), to the
fullest extent permitted by applicable law. The Employer shall in addition
cause the Executive to be indemnified in accordance with Section 145 of the
Delaware General Corporation Law to the fullest extent permitted by such
section, to the extent required to make the Executive whole in connection with
any loss, costs or expense indemnifiable thereunder.
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<PAGE>
12. Confidential Information.
The Executive acknowledges that his employment by
the Employer has brought and will bring him into close contact with
confidential proprietary information of the Employer, including information
regarding costs, profits, markets, sales, products, key personnel, pricing
policies, operational methods, technical processes, other business affairs and
methods, plans for future developments, and other information not readily
available to the public, the disclosure of which to third parties would in
each case have a material adverse effect on the Employer's business operations
(the "Confidential Information"). In recognition of the foregoing, the
Executive covenants and agrees that:
(a) he will keep secret all Confidential
Information and will not intentionally disclose Confidential Information
to anyone outside of the Employer and its representatives other than in the
course of performance of his duties hereunder, either during or for a one year
period after the Term except with the Employer's written consent, provided
that (i) the Executive shall have no such obligation to the extent
Confidential Information is or becomes publicly known other than as a result
of the Executive's breach of his obligations hereunder and (ii) the Executive
may, after giving prior notice to the Employer to the extent practicable under
the circumstances, disclose such matters to the extent required by applicable
laws or governmental regulations or judicial or regulatory process; and
(b) he will, at the Executive's option,
either (i) deliver promptly to the Employer on termination of his
employment by the Employer or at any other time the Employer may so request,
and at the Employer's request, all memoranda, notes, records, reports and
other documents (and all copies thereof) relating to the Employer's business,
which he obtained while employed by, or otherwise serving or acting on behalf
of, the Employer and which he may then possess or have under his control (the
"Records"); or (ii) in lieu of subclause (i) above, the Executive shall
destroy all of the Records and shall deliver to the Employer, a certificate to
that affect.
13. Termination.
13.1 For purposes of this Employment
Agreement the following definitions shall apply:
13.1.1 "Cause" shall mean:
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(i) the Executive is convicted of a
felony involving moral turpitude which would render the Executive unable to
perform his duties set forth in this Employment Agreement; or
(ii) the Executive engages in conduct
that constitutes willful gross neglect or willful gross misconduct in carrying
out his duties under this Employment Agreement, resulting, in either case, in
material economic harm to the Employer, unless the Executive believed in good
faith that such act or nonact was in the best interests of the Employer.
13.1.2 A "Change in Control" shall
mean the occurrence of any one of the following events:
(i) any "person," as such term is used
in Sections 3(a)(9) and 13(d) of the Securities Exchange Act of 1934
(other than the Executive or entities controlled by the Executive), becomes a
"beneficial owner," as such term is used in Rule 13d-3 promulgated under that
act, of 25% or more of the voting power of the Employer;
(ii) all or substantially all of the
assets or business of Employer is disposed of pursuant to a merger,
consolidation or other transaction (unless the shareholders of the Employer
immediately prior to such merger, consolidation or other transaction
beneficially own, directly or indirectly, in substantially the same proportion
as they owned the voting power of the Employer, all of the voting power or
other ownership interests of the entity or entities, if any, that succeed to
the business of the Employer);
(iii) the Employer combines with
another company and is the surviving corporation but, immediately after
the combination, the shareholders of the Employer immediately prior to the
combination hold, directly or indirectly, 50% or less of the voting power of
the combined company; or
(iv) the majority of the Board consists
of individuals other than incumbent directors which term means members of
the Board as of the date of the employment agreements, except that any person
who becomes a director subsequent to such date whose election or nomination
was supported by two-thirds of the directors who then comprise the incumbent
directors shall be considered an incumbent director.
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<PAGE>
13.1.3 "Constructive Termination
Without Cause" shall mean a termination of the Executive's employment at
his initiative as provided in this Section 13 following the occurrence,
without the Executive's written consent, of one or more of the following
events:
(i) a reduction in the Executive's then
current Base Salary or failure by the Employer to fulfill its obligations
under Sections 6, 7, 8 and 9 above;
(ii) the failure to elect or reelect the
Executive to any of the positions described in Section 3 hereof or
removal of him from any such position;
(iii) a material diminution in the Executive's
duties or the assignment to the Executive of duties which are materially
inconsistent with his duties or which materially impair the Executive's
ability to function as the Executive Chairman of the Board or a Chief
Executive Officer of the Employer; or
(iv) the failure of the Employer to obtain
the assumption in writing of its obligation to perform this Employment
Agreement by any successor to all or substantially all of the assets of the
Employer within 15 days after a merger, consolidation, sale or similar
transaction.
13.2 Termination by the Employer for Cause.
A termination for Cause shall not take
effect unless all of the provisions of this Section 13.2 are complied
with. The Executive shall be given written notice by the Board of the
intention to terminate him for Cause, such notice (A) to state in detail the
particular act or acts or failure of failures to act that constitute the
grounds on which the proposed termination for Cause is based and (B) to be
given within three months of the Board learning of such act or acts or failure
or failures to act. The Executive shall have 10 business days after the date
that such written notice has been given to the Executive in which to cure such
conduct, to the extent such cure is possible. If he fails to cure such
conduct, the Executive shall then be entitled to a hearing before the Board.
Such hearing shall be held within 15 business days of such notice to the
Executive, provided he requests such hearing within 10 business days of the
written notice from the Board of the intention to terminate him for Cause. If,
within five business days following such hearing, the Executive is furnished
written notice by the Board confirming that, in its judgment, grounds for
Cause on the basis of the original notice exist, he shall thereupon be
terminated for Cause.
13.2.1 In the event the Employer
terminates the Executive's employment for Cause, he shall be entitled to:
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(A) the Base Salary through the date
of the termination of his employment for Cause;
(B) a Bonus for the year in which he
was terminated equal to the Bonus for the year prior to such termination,
prorated over the time elapsed during the year in which he was terminated.
13.2.2 In the event Employer
terminates the Executive's employment for Cause, the Executive shall have
no further obligations or liability to the Employer (except his obligations
under Sections 6.2, 12 and 16, which shall survive)
13.3 Termination Without Cause or
Constructive Termination Without Cause. In the event the Executive's
employment is terminated without Cause, other than due to disability or death,
or in the event there is a Constructive Termination Without Cause, the
Executive shall be entitled to:
(A) the Base Salary through the date
of termination of the Executive's employment;
(B) the Base Salary, at the annualized
rate in effect on the date of termination of the Executive's employment
(or in the event a reduction in Base Salary is the basis for a Constructive
Termination Without Cause, then the Base Salary in effect immediately prior to
such reduction), for a period of 36 months following such termination or until
the end of the Term, whichever is longer provided that at the Executive's
option the Employer shall pay him the present value of such salary
continuation payments in a lump sum (using as the discount rate 75% of the
prime rate (as published by The Wall Street Journal) for the month in which
such termination occurs);
(C) immediately vested options to
purchase shares of Class A Common Stock in an amount equal to 375,000 shares
less the multiple of 75,000 shares times the number of years elapsed under the
Term of this Agreement at an exercise price per share equal to the exercise
price of the last stock option granted prior to termination; and
(D) a Bonus for the unexpired term,
based on the Bonus received for the year prior to termination (the "Base Bonus
Amount") multiplied by the then unexpired term; and further provided that at
the Executive's option, the Employer shall pay him the present value of
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such salary and bonuses in a lump sum (using as the discount rate 75% of the
prime rate (as published by The Wall Street Journal) for the month in which
such termination occurs. Notwithstanding the foregoing, in no event shall the
Base Bonus Amount be less than $1,250,000.
(E) all benefits provided in Section 9
hereof until the end of the Term.
(F) the full amount of the Loan,
including any interest earned thereon, shall be forgiven by the Employer and
the Executive shall thereafter have no obligation to repay any such amounts.
13.4 Termination of Employment Following a
Change in Control. If, following a Change in Control, the Executive's
employment is terminated for any reason other than for Cause, whether
voluntary or involuntary or there is a Constructive Termination Without Cause,
the Executive shall be entitled to the payments and benefits provided in
Section 13.3 above, provided that the payments shall be paid in a lump sum
without any discount. In addition, the Executive shall receive 10 year options
to purchase 350,000 shares of Class A Stock which shall be exercisable at the
lowest exercise price of any other options the Executive shall own as of the
date of the Change in Control and, the full amount of the Loan, including any
interest earned thereon, shall be forgiven by the Employer and the Executive
shall thereafter have no obligation to repay any such amounts. The Executive
shall forfeit any rights granted pursuant to this Section 13.4 if such
Executive accepts a written offer to remain with the surviving company in an
executive position with equivalent duties, authority and responsibility as the
Executive currently holds (other than as a non-employee director).
13.4.1 Payment Following a Change in
Control. In the event that the termination of the Executive's employment is
as a result of a Change in Control and the aggregate of all payments or
benefits made or provided to the Executive under the Employment Agreement and
under all other plans and programs of the Employer (the "Aggregate Payment")
is determined to constitute a Parachute Payment, as such term is defined in
Section 280G(b)(2) of the Internal Revenue Code, the Employer shall pay to the
Executive, prior to the time any excise tax imposed by Section 4999 of the
Internal Revenue Code ("Excise Tax") is payable with respect to such Aggregate
Payment, an additional amount which, after the imposition of all income and
excise taxes thereon, is equal to one-half of the Excise Tax on the Aggregate
Payment. The determination of whether the Aggregate Payment constitutes a
Parachute Payment and, if so, the amount to be paid
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to the Executive and the time of payment pursuant to this subsection shall be
made by an independent auditor (the "Auditor") jointly selected by the
Employer and the Executive and paid by the Employer. The Auditor shall be a
nationally recognized United States public accounting firm which has not,
during the two years preceding the date of its selection, acted in any way on
behalf of the Employer or any affiliate thereof. If the Executive and the
Employer cannot agree on the firm to serve as the Auditor, then the Executive
and the Employer shall each select one accounting firm and those two firms
shall jointly select the accounting firm to serve as the Auditor.
13.5 Voluntary Termination. In the event of
a termination of employment by the Executive on his own initiative other than
a termination due to death or disability or a Constructive Termination without
Cause, the Executive shall have the same entitlements as provided in
Section 13.2 above for a termination for Cause. A voluntary termination under
this Section 13.5 shall be effective upon 30 days prior written notice to the
Employer and shall not be deemed a breach of this Employment Agreement.
13.6 Stock Options. Notwithstanding anything
to the contrary, upon termination for any reason whatsoever, the
Executive shall have the immediate right to exercise any stock options in
full, whether or not such option is fully exercisable on the date of
termination, for the remainder of the original term of each such stock option.
13.7 No Mitigation: No Offset. In the event
of any termination of employment under this Employment Agreement, the
Executive shall be under no obligation to seek other employment and there
shall be no offset against amounts due the Executive under this Employment
Agreement on account of any remuneration attributable to any subsequent
employment that he may obtain.
14. Disability.
14.1 If during his active employment
hereunder the Executive shall become physically or mentally disabled,
whether totally or partially, so that he is prevented from performing his
usual duties for a period of six consecutive months, the Employer shall,
nevertheless, pay the Executive his full Base Salary and Bonus in respect of
the period ending on the last day of the sixth consecutive month of disability
(such last day being referred to herein as the "Disability Date") and the
following additional provisions shall apply:
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14.2 If the Executive has not resumed his
usual duties on or prior to the Disability Date, the Executive's employment
shall terminate and the Employer shall pay, unless prior to the date the
Executive became physically or mentally disabled a notice of termination
was delivered to the Executive, 75% of his Base Salary from the Disability
Date through the Termination Date and, except as provided in Section 14.4, the
Employer shall have no obligation to pay Bonus to the Executive in respect of
periods after the Disability Date. Any Base Salary payable pursuant to this
Section 14.2 shall be reduced by the amount of any benefits payable to the
Executive under any group or individual disability insurance plan or policy,
the premiums for which are paid primarily by the Employer;
14.3 Unless the Employer exercises its option
under Section 14.4 to restore the Executive to his full compensation,
duties, functions, authority and responsibilities hereunder, the Executive
shall have no obligations or liabilities hereunder from and after the
Disability Date (except for his obligations under Sections 12 and 16, which
shall survive); and
14.4 If during the Term and subsequent to a
Disability Date, the Executive shall recover fully from a disability, the
Employer, by action of the Board, shall have the right (exercisable within
sixty days after notice from the Executive of such recovery), but not the
obligation, to restore the Executive to employment and to full compensation
and his full level of duties, functions, authority and responsibilities
hereunder.
15. Death of Executive.
15.1 Upon the Executive's death, whether
prior to or subsequent to his Disability Date and prior to the delivery
of a notice of termination, this Agreement and all of the Employer's
obligations to pay salary and Bonus hereunder shall terminate, except as
provided in Sections 15.2 through 15.4.
15.2 The Executive's estate or designated
beneficiary shall be entitled to receive (a) any unpaid portions of the
Executive's Base Salary in respect of the period ending on the Executive's
date of death and, (b) unpaid Bonus in respect of years prior to the year of
death. The Employer shall pay to such estate or beneficiary an amount equal to
the present value of all the remaining Base Salary, calculated assuming annual
compound interest at 75% of the prime rate (as published in The Wall Street
Journal) for the first business day of the month in which the Executive's
death occurs.
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15.3 The Base Salary and Bonus payable
pursuant to this Section 15 shall be reduced by the value of any benefits
payable to the Executive's estate or designated beneficiary under any life
insurance plan or policy the premiums for which are paid primarily by the
Employer, other than such insurance identified in Section 10.
16. Non-competition.
16.1 During the Term, the Executive will not,
without the prior written approval of the Board, become employed by, or
become an officer, director, or general partner of, any partnership,
corporation or other entity which owns or operates radio stations in the top
fifty markets in the United States as determined by ratings published from
time to time by The Arbitron Company.
16.2 Subject to the following proviso, for a
period of one year following the termination of the Executive's
employment hereunder the Executive will not become employed by, or become an
officer, director or general partner of, any partnership, corporation or other
entity which is engaged in a business which is directly competitive in any
city with any business in which the Employer is engaged on the date of such
termination; provided however, that during such one year period the Employer
shall employ the Executive as a consultant with compensation at a rate equal
to fifty percent of the Employer's Base Salary immediately prior to such
termination. If the Employer elects not to employ the Executive as a
consultant for such one year period as provided herein, the provisions of this
Section 16.2 shall not apply and the Executive shall be free to engage in any
activity referred to herein.
17. Notices. All notices, requests, consents and other
communications, required or permitted to be given hereunder, shall be in
writing and shall be deemed to have been duly given if delivered personally or
sent by prepaid telegram, or mailed first class, postage prepaid, by
registered or certified mail, as follows (or to such other or additional
address as either party shall designate by notice in writing to the other in
accordance herewith):
17.1 If to the Employer:
SFX Broadcasting, Inc.
150 East 58th Street, l9th Floor
New York, New York 10155
Attention: Board of Directors
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17.2 If to the Executive:
Robert F.X. Sillerman
207 East 61st Street
New York, NY 10022
17.3 Copies of all communications given
hereunder shall also be delivered or sent, in like fashion, to Baker &
McKenzie (attention: Michael Burrows, Esq.) at 805 Third Avenue, New York, New
York 10022.
18. General.
18.1 Governing Law. This Agreement shall be
governed by and construed and enforced in accordance with the internal laws of
the State of New York.
18.2 Captions. The section headings
contained herein are for reference purposes only and shall not in any way
affect the meaning or interpretation of this Agreement.
18.3 Entire Agreement. This Agreement
including any Exhibits attached hereto sets forth the entire agreement and
understanding of the parties relating to the subject matter hereof, and
supersedes all prior agreements, arrangements and understandings, written or
oral, between the parties, except as specifically provided herein.
18.4 Successors and Assigns. This Agreement,
and the Executive's rights and obligations hereunder, may not be assigned by
the Executive, except that the Executive may designate pursuant to
section 18.6 one or more beneficiaries to receive any amounts that would
otherwise be payable hereunder to the Executive's estate. This Agreement shall
be binding on any successor to the Employer, whether by merger, acquisition of
substantially all of the Employer's assets or otherwise, as fully as if such
successor were a signatory hereto and the Employer shall cause such successor
to, and such successor shall, expressly assume the Employer's obligations
hereunder. The term "Employer" as used in this Agreement, shall include all
such successors.
18.5 Amendments; Waivers. This Agreement
cannot be changed, modified or amended, and no provision or requirement hereof
may be waived, without an affirmative vote of the Board after the affirmative
recommendation of the Compensation Committee of the Board, and the consent in
writing of the Executive and the Employer. The failure of a party at any time
or times to require performance of any provision hereof shall in no manner
affect the right of such party at a later time to enforce the same. No waiver
by a party of the breach of any term or
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<PAGE>
covenant contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be, or construed as, a further or
continuing waiver of any such breach, or a waiver of the breach of any other
term or covenant contained in this Agreement.
18.6 Beneficiaries. Whenever this Agreement provides for any payment
to the Executive's estate, such payment may be made instead to such
beneficiary or beneficiaries as the Executive may have designated in a writing
filed with the Employer. The Executive shall have the right to revoke any such
designation and to redesignate a beneficiary or beneficiaries by written
notice to the Employer (and to any applicable insurance company) to such
effect.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
SFX BROADCASTING, INC.
By: /s/ Michael G. Ferrel
---------------------------
Name: Michael G. Ferrel
Title: President
/s/ Robert F.X. Sillerman
---------------------------
ROBERT F.X. SILLERMAN
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==============================================================================
FIRST AMENDMENT
TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
AMONG
SFX BROADCASTING, INC.,
BORROWER
THE SUBSIDIARIES OF BORROWER
LISTED ON THE SIGNATURE PAGES HEREOF
THE BANK OF NEW YORK,
AS AGENT FOR THE LENDERS AND INDIVIDUALLY AS A LENDER
AND
THE LENDERS
LISTED ON THE SIGNATURE PAGES HEREOF
DATED AS OF JANUARY 22, 1997
==============================================================================
<PAGE>
FIRST AMENDMENT TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO THE SECOND AMENDED AND RESTATED
CREDIT AGREEMENT is entered into as of January 22, 1997 among SFX
Broadcasting, Inc., a Delaware corporation ("Borrower"), the Subsidiaries of
SFX Broadcasting, Inc. listed on the signature pages hereof, the Lenders
listed on the signature pages hereof and The Bank of New York, as Agent for
the Lenders, and amends the Second Amended and Restated Credit Agreement,
dated November 22, 1996, among the Borrower, the Subsidiaries from time to
time parties thereto, the Lenders from time to time parties thereto and the
Agent (the "Credit Agreement"). Capitalized terms used herein and not
otherwise defined have the meaning assigned to them in the Credit Agreement.
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders and
the Agent have made certain credit facilities available to Borrower on the
terms and subject to the conditions set forth therein; and
WHEREAS, Borrower desires to offer and issue $225,000,000 of
its 12-5/8% Series E Cumulative Exchangeable Preferred Stock (the "Series E
Preferred Stock") substantially on the terms set forth in the Prospectus
Supplement (to Prospectus dated December 10, 1996) filed by Borrower with the
Securities and Exchange Commission on January 17, 1997 (the "Prospectus
Supplement") and to pay dividends on the Series E Preferred Stock in
accordance with the terms described in such Prospectus Supplement;
WHEREAS, Borrower has requested that the Lenders and the
Agent amend the Credit Agreement to (i) permit such offering and issuance of
the Series E Preferred Stock substantially on the terms set forth in the
Prospectus Supplement, and (ii) to permit payment of dividends on the Series E
Preferred Stock on the terms described in the Prospectus Supplement; and
WHEREAS, the Lenders and the Agent have agreed to amend the
Credit Agreement as so requested.
NOW, THEREFORE, for and in consideration of the above
premises and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. The Credit Agreement is hereby amended by deleting
Section 6.12 therein in its entirety and inserting
in lieu thereof the following:
Section 6.12 Restricted Payments. No Obligor shall
make a Restricted Payment, except (i) any Obligor
may make a Restricted Payment to Borrower and (ii)
so long as no Default or Event of Default would
exist before or after
<PAGE>
giving effect thereto, Restricted Payments shall be
permitted with respect to: (i) cash dividends equal
to 6% per annum of the liquidation preference for
the Series C Preferred Stock in accordance with the
terms thereof on the date hereof, (ii) any cash
dividends payable on the Borrower's Series D
Preferred Stock in accordance with the terms
thereof as in effect on the date hereof, (iii) any
cash dividends payable on the Borrowers' Series E
Preferred Stock in accordance with the terms
thereof described in the Prospectus Supplement,
(iv) redemptions of the Series C Preferred Stock
pursuant to the exercise of the put rights
maintained by the holder of such shares in
accordance with the terms of the Dallas
Acquisition, (v) scheduled redemptions of the
Borrower's Series B Preferred Stock in accordance
with the terms thereof as in effect on the date
hereof, (vi) the redemption of the MMR Warrants in
an amount not to exceed $250,000, (vii) any
redemption of up to a 4% minority interest held in
ABS, (viii) the repurchase of up to $150,000 of MMR
stock options held by Bruce Morrow and (ix) up to
$25,000,000 in repurchases of the Borrower's stock
or warrants, other than any stock specified in
clauses (iv) and (v) above provided that the Total
Leverage Ratio is less than or equal to 4.5 to 1.0
before and after giving effect thereto.
2. The Credit Agreement is hereby amended by deleting
Section 6.13 therein in its entirety and inserting
in lieu thereof the following:
Section 6.13 Issuance of Securities. No Obligor
will, directly or indirectly, issue, sell or
otherwise dispose of (a) any of its shares of
capital stock or any other investment securities of
any class, (b) any securities convertible into or
exchangeable for any such shares or (c) any
warrants, options, rights to subscribe for or
purchase any such shares or other rights with
respect to such shares, except that, (i) Borrower
may issue from time to time securities to
employees, officers, or directors of Borrower, or
to consultants providing bona fide services to
Borrower or a Subsidiary of Borrower on
commercially reasonable terms, in either case
pursuant to any stock option, stock bonus or other
employee benefit plan approved by the board of
directors of Borrower, unless, at the time when
such plan is approved, or at the time when rights
under any such plan are exercised, in either case
on a fully diluted basis, a Default or Event of
Default would exist after giving effect thereto and
by reason thereof or after giving effect to and by
reason of the exercise by such employees, officers
or directors of their respective rights thereunder
(including, an Event of Default of the nature
described in Section 7.11), (ii) Borrower may issue
common equity provided no Default or Event of
Default would exist after giving effect thereto and
by reason thereof (including an Event of Default of
the nature described in Section 7.11) and (iii)
Borrower may issue its Series E Preferred Stock in
accordance with the terms of the Prospectus
Supplement provided no Default or Event of Default
would exist
-2-
<PAGE>
after giving effect thereto and by reason thereof
(including an Event of Default of the nature
described in Section 7.11), and thereafter pay
dividends thereon in the form of shares of the
Series E Preferred Stock in accordance with the
terms of the Prospectus Supplement.
3. The Credit Agreement is hereby amended by deleting
therefrom the definition of "Fixed Charges" in
Section 1.1 in its entirety and inserting in lieu
thereof the following:
"Fixed Charges" means for the most recently
completed four fiscal quarters for the Borrower and
its subsidiaries on a consolidated basis, the sum
of the following paid during such fiscal period:
(a) Debt Service, (b) cash income taxes, (c)
capital expenditures, (d) all dividends with
respect to the Series C Preferred Stock, (e) all
dividends with respect to the Series D Preferred
Stock and (f) all cash dividends with respect to
the Series E Preferred Stock.
4. Representations and Warranties. Each Obligor
represents and warrants to the Agent and the
Lenders that (a) this First Amendment and each
other Loan Document executed by it in connection
with this First Amendment has been duly authorized,
executed and delivered by such Obligor and the
Credit Agreement, as amended by this First
Amendment, and each such other Loan Document
constitutes a legal, valid, and binding obligation
of such Obligor, enforceable against such Obligor
in accordance with the terms thereof, (b) there
exists no Default or Event of Default under the
Credit Agreement, (c) the representations and
warranties set forth in the Credit Agreement and
the other Loan Documents to which it is a party are
true and correct as of the date hereof as though
made on and as of the date hereof, (d) it has
complied with all agreements and conditions to be
complied with by it on or before the date hereof
under the Credit Agreement and the other Loan
Documents to which it is a party, and (e) the
Credit Agreement, as amended hereby, the other Loan
Documents and the financing statements filed in
connection therewith, remain in full force and
effect, and subject only to Permitted Liens, are
sufficient to grant a first priority security
interest, in and on all Collateral described
therein, securing payment and performance of the
Obligations of Obligors under the Loan Documents,
as amended hereby.
5. Ratification. The Credit Agreement, as amended by
this First Amendment, and the other Loan Documents
remain in full force and effect and are hereby
ratified and confirmed.
6. Counterparts. This First Amendment may be executed
in any number of counterparts, all of which taken
together constitute one and the same agreement. In
making proof hereof, it shall not be necessary to
produce or
-3-
<PAGE>
account for any counterpart other than one signed
by the party against which enforcement is sought.
7. Governing Law. This First Amendment shall be
governed by, and construed in accordance with, the
law of the State of New York.
8. Entire Agreement: Ratification. The Credit
Agreement, as amended by this First Amendment, and
the other Loan Documents represent the final
agreement between the parties with respect to the
subject matter hereof and may not be contradicted
by evidence of prior, contemporaneous or subsequent
oral agreement of the parties. There are no oral
agreements or understandings among the parties.
-4-
<PAGE>
EXECUTED as of the day and year first mentioned.
SFX BROADCASTING, INC., BORROWER
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
SFX Broadcasting of the Southwest, Inc.
SFX Broadcasting of Texas, Inc.
SFX Broadcasting of Texas (KRLD), Inc.
SFX Broadcasting of Texas (KRLD) Licensee, Inc.
SFX Broadcasting of Texas (TSN), Inc.
SFX Broadcasting of Texas (TSN) Licensee, Inc.
KODA-FM Licensee, Inc.
KJQY-FM Licensee, Inc.
SFX Broadcasting of Texas (KTCK), Inc.
SFX Broadcasting of Texas (KTCK) Licensee, Inc.
SFX Broadcasting of the Southeast, Inc.
SFX Broadcasting of Central North Carolina, Inc.
SFX Broadcasting of South Carolina (WMYI), Inc.
SFX Broadcasting of South Carolina (WMYI)
Licensee, Inc.
SFX Broadcasting of Mississippi, Inc.
SFX Broadcasting of Mississippi Licensee, Inc.
-5-
<PAGE>
SFX Broadcasting of South Carolina (WSSL), Inc.
SFX Broadcasting of South Carolina (WSSL)
Licensee, Inc.
SFX Broadcasting of Tennessee, Inc.
SFX Broadcasting of Tennessee Licensee, Inc.
SFX Broadcasting of Jackson, Inc.
SFX Broadcasting of Jackson Licensee, Inc.
SFX Broadcasting of North Carolina, Inc.
SFX Broadcasting of North Carolina Licensee,
Inc.
SFX Broadcasting of San Diego, Inc.
Parker Broadcasting Company
SFX Broadcasting of San Diego Licensee, Inc.
SFX Acquisition Corporation
Liberty Acquisition Subsidiary Corporation
Liberty Broadcasting, Inc.
Liberty Broadcasting Group Incorporated
Beck-Ross Communications, Inc.
W.B.L.I., Inc.
WBLI-FM, Inc.
WHCN, Inc.
WHCN-FM, Inc.
WSNE, Inc.
-6-
<PAGE>
WSNE-FM, Inc.
WPYX, Inc.
WTRY, Inc.
WYSR, Inc.
WPOP, Inc.
WHJY, Inc.
WBJJ, Inc.
Liberty Broadcasting of New York Incorporated
WHFM, Inc.
WBAB, Inc.
WGBB, Inc.
Liberty Broadcasting of Albany Incorporated
WGNA, Inc.
WGNA-FM, Inc.
Liberty Broadcasting of Maryland Incorporated
WHFS, Inc.
Liberty Broadcasting of Maryland II Incorporated
WMXB, Inc.
WXTR, Inc.
Musical Heights, Inc.
SFX Broadcasting of Hartford, Inc.
WQSI, Inc.
-7-
<PAGE>
WZYQ, Inc.
SFX Merger Company
Multi-Market Radio, Inc.
Southern Starr of Mississippi, Inc.
Southern Starr Broadcasting Group, Inc.
General Communicorp, Inc.
General Broadcasting of Connecticut, Inc.
Southern Starr Limited Partnership
Multi-Market Radio of Augusta, Inc.
Multi-Market Radio of Myrtle Beach, Inc.
Multi-Market Radio of Northampton, Inc.
Multi-Market Radio of Hartford, Inc.
Southern Starr of Arkansas, Inc.
Multi-Market Radio of Springfield, Inc.
Southern Starr Communications, Inc.
Southern Starr Management, Inc.
General Broadcasting of Florida, Inc.
General Broadcasting Corp.
By: /s/ Howard J. Tytel
-------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
-8-
<PAGE>
THE BANK OF NEW YORK,
as the Agent, the Letter of Credit
Issuing Bank and as a Lender
By: /s/ Joseph P. Matteo
-------------------------------------
Name: Joseph P. Matteo
Title: Vice President
BANK OF TOKYO - MITSUBISHI TRUST
COMPANY
By: /s/ Augustine Okwu Jr.
-------------------------------------
Name: Augustine Okwu Jr.
Title: Vice President and Co-Head
BANKERS TRUST COMPANY
By: /s/ Gina S. Thompson
-------------------------------------
Name: Gina S. Thompson
Title: Vice President
BANK OF MONTREAL
By: /s/ Rene Encarnacion
-------------------------------------
Name: Rene Encarnacion
Title: Director
BANQUE NATIONALE DE PARIS
By: /s/
-------------------------------------
Name:
Title: Vice President
BANQUE NATIONALE DE PARIS
By: /s/ Pamela Lucash
-------------------------------------
Name: Pamela Lucash
Title: Assistant Treasurer
-9-
<PAGE>
CIBC, INC.
By: /s/ Matthew B. Jones
-------------------------------------
Name: Matthew B. Jones
Title: Authorized Signatory
CORESTATES BANK N.A.
By: /s/ Chris Kalmbach
-------------------------------------
Name: Chris Kalmbach
Title: Vice President
THE FUJI BANK, LIMITED, NEW YORK BRANCH
By: /s/
-------------------------------------
Name:
Title: Vice President & Manager
LEHMAN COMMERCIAL PAPER INC.
By: /s/ Dennis J. Dee
-------------------------------------
Name: Dennis J. Dee
Title: Authorized Signatory
NATIONAL BANK OF CANADA
By: /s/
-------------------------------------
Name:
Title: Vice President
NATIONAL BANK OF CANADA
By: /s/
-------------------------------------
Name:
Title: Vice President
-10-
<PAGE>
NATIONAL CITY BANK
By: /s/ Andrew J. Walshaw
-------------------------------------
Name: Andrew J. Walshaw
Title: Account Officer
SOCIETE GENERALE
By: /s/ Mark Virgil
-------------------------------------
Name: Mark Virgil
Title: Vice President
SOUTHERN PACIFIC THRIFT & LOAN
ASSOCIATION
By: /s/
-------------------------------------
Name:
Title:
THE SUMITOMO BANK, LIMITED
By: /s/ J.H. Broadley
-------------------------------------
Name: J.H. Broadley
Title: Vice President
THE SUMITOMO BANK, LIMITED
By: /s/ B.W. Henry
-------------------------------------
Name: B.W. Henry
Title: Vice President, NY Office
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By: /s/ Christopher J. Aguilar
-------------------------------------
Name: Christopher J. Aguilar
Title: First Vice President
-11-
<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
EXHIBIT 11.1
STATEMENT REGARDING CALCULATION OF PER SHARE EARNINGS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
---------------- --------------
<S> <C> <C>
Primary and Fully Diluted:
Average shares outstanding.................................... 9,161,433 7,458,215
---------------- --------------
Total................................................ 9,161,433 7,458,215
================ ==============
Net loss ..................................................... $ (6,488) $ (985)
Less: preferred stock dividends and accretion................. 7,952 136
---------------- --------------
Net loss attributable to common shareholders.................. (14,440) (1,121)
=============== ===============
Net loss per common shares.................................... $ (1.58) $ (0.15)
================ ===============
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
<CASH> 116,947,000
<SECURITIES> 0
<RECEIVABLES> 45,202,000
<ALLOWANCES> 1,722,000
<INVENTORY> 0
<CURRENT-ASSETS> 170,052,000
<PP&E> 101,764,000
<DEPRECIATION> 12,366,000
<TOTAL-ASSETS> 1,080,000
<CURRENT-LIABILITIES> 57,226,000
<BONDS> 465,634,000
367,359,000
0
<COMMON> 95,000
<OTHER-SE> 87,554,000
<TOTAL-LIABILITY-AND-EQUITY> 1,080,000
<SALES> 0
<TOTAL-REVENUES> 52,780,000
<CGS> 0
<TOTAL-COSTS> 47,848,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,815,000
<INCOME-PRETAX> (6,203,000)
<INCOME-TAX> 285,000
<INCOME-CONTINUING> (6,488,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,488,000)
<EPS-PRIMARY> (1.58)
<EPS-DILUTED> 0
</TABLE>
