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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to ____________________
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Commission file number: 0-22486
SFX BROADCASTING, INC.
(Exact name of Registrant as Specified in Its Charter)
Delaware 13-3649750
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation) Identification No.)
150 East 58th Street, 19th Floor 10155
New York, New York (Zip Code)
(Address of Principal Executive Offices)
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Registrant's telephone number, including area code: ( 212) 407-9191
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
CLASS A COMMON STOCK, $.01 PAR VALUE
CLASS B WARRANTS
(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No __.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Aggregate market value as of the close of business on March 24, 1997
of the voting stock held by non-affiliates of the registrant was $242,943,180.
The number of shares of the registrant's Class A Common Stock, $.01
par value, and Class B Common Stock, $.01 par value, outstanding as of March
24, 1997 was 8,314,186 and 1,064,936, respectively.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Registrant's 1997 Annual
Meeting of Stockholders are incorporated by reference in Part III of this Form
10-K Annual Report.
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PART I
ITEM 1. BUSINESS.
GENERAL
SFX Broadcasting, Inc., a Delaware corporation (the "Company"), was
incorporated in Delaware in 1992 principally to acquire and operate radio
stations. Upon consummation of the Company's initial public offering in the
fall of 1993, the Company owned and operated or provided programming to nine
radio stations in six markets. During the past three years, the Company has
significantly expanded its radio station operations. The Company is currently
one of the largest radio station groups in the United States and owns or
operates, provides programming to or sells advertising on behalf of 67 radio
stations in 20 markets. The Company's radio stations are diverse in terms of
format and geographic markets and are organized into five contiguous regional
clusters designed to maximize market penetration. Upon consummation of the
Pending Acquisitions and the Pending Disposition (as defined herein), the
Company will own or operate, provide programming to or sell advertising on
behalf of 80 radio stations (61 FM and 19 AM stations) in 23 markets. In
addition, the Company will rank number one or two in 1996 combined market
revenues in 18 of its 23 markets and will own or operate two or more stations
in 22 of these markets.
The following chart sets forth certain information with respect to the
Company's stations after giving effect to the Pending Acquisitions and the
Pending Disposition:
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NUMBER OF
STATIONS
OPERATED
FOLLOWING 1996 1996
NUMBER OF NUMBER OF PENDING COMBINED COMBINED COMBINED
STATIONS STATIONS ACQUISITIONS MARKET MARKET MARKET
MARKET CURRENTLY TO BE AND PENDING AUDIENCE REVENUE REVENUE
MARKET RANK (1) OPERATED(2) ACQUIRED DISPOSITION SHARE SHARE SHARE
- --------------------------- ---------- -------------- ------------- --------------- ----------- ------------ ----------
AM FM
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NORTHEAST REGION
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Providence, RI 31 3 -- 1 2 22.3% 28.0% 2
Hartford, CT 42 5 -- 1 4 33.1% 33.8% 2
Albany, NY 57 5 -- 2 3 26.1% 30.2% 1
Springfield/Northampton, MA 77 3 -- 1 2 20.3% 29.9% 1
New Haven, CT 97 2[4] -- -- 2 31.9% 50.3% 1
MID-SOUTH ATLANTIC REGION
Charlotte, NC 37 2 1 -- 3 24.9% 27.7% 2
Greensboro, NC 41 4 -- 2 2 15.6% 18.0% 4
Nashville, TN 44 2 -- -- 2 25.0% 28.0% 1
Greenville-Spartanburg, SC 59 4 -- 1 3 35.4% 46.3% 1
MID-ATLANTIC REGION
Pittsburgh, PA 20 -- 5 1 4 27.0% 33.5% 1
Milwaukee, WI 29 -- 2 1 1 8.7% 8.2% 4
Indianapolis, IN 36 -- 3 1 2 20.5% 26.8% 2
Raleigh-Durham, NC 48 4 -- -- 4 32.0% 40.6% 1
Richmond, VA 56 1 4 -- 5 29.6% 34.8% 2
SOUTHERN REGION
Jacksonville, FL 53 4 2(5) 2 4 36.8% 45.3% 1
Daytona Beach, FL 93 1 -- -- 1 12.4% 33.3% 1
Jackson, MS 118 6 -- 2 4 36.2% 56.6% 1
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NUMBER OF
STATIONS
OPERATED
FOLLOWING 1996 1996
NUMBER OF NUMBER OF PENDING COMBINED COMBINED COMBINED
STATIONS STATIONS ACQUISITIONS MARKET MARKET MARKET
MARKET CURRENTLY TO BE AND PENDING AUDIENCE REVENUE REVENUE
MARKET RANK (1) OPERATED(2) ACQUIRED DISPOSITION SHARE SHARE SHARE
- --------------------------- ---------- -------------- ------------- --------------- ----------- ------------ ----------
AM FM
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Biloxi, MS 133 2 -- -- 2 31.8% 47.6% 1
SOUTHWEST REGION
Dallas, TX 7 -- 2 -- 2 6.4% 5.7% 5
Houston, TX 9 4 -- 1 3 16.9% 15.6% 2
San Diego, CA 14 2 -- -- 2 10.3% 11.0% 3
Tucson, AZ 60 4 -- 2 2 26.1% 26.2% 1
Wichita, KS 90 3 -- 1 2 18.6% 21.0% 3
--- ---- --- -------- ----- ----- ---
Total 61 19 19 61
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(1) Based upon BIA Publications, Inc.'s ("BIA") 1996 Market, Stations
Revenues and Ranking.
(2) Does not include seven radio stations which are currently owned by the
Company or which the Company has agreed to acquire and are to be
transferred in the Pending Disposition, the Chancellor Exchange, the CBS
Exchange and the Charlotte Exchange (each as defined herein).
(3) Ranks radio stations currently operated and radio stations anticipated to
be operated by the Company upon the consummation of the Pending
Acquisitions and the Pending Disposition against radio stations actually
owned and operated in 1996 by other market participants.
(4) Includes one station which the Company does not own or operate but sells
advertising on behalf of pursuant to a Joint Sales Agreement
("JSA").
(5) The Company currently provides programming and sells advertising on these
stations pursuant to a Local Marketing Agreement ("LMA").
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OPERATING STRATEGY
Operate Highly Ranked Stations. The Company believes that operating
highly ranked stations, measured in terms of combined market audience share,
provides important advantages because such stations are regarded as an
efficient means of targeting advertising dollars at well-defined audiences.
Such stations can better capitalize on the operating leverage inherent in
the radio industry because a significant portion of the total costs of
operating a radio station are fixed and, therefore, increased revenues
generally result in disproportionately larger increases in Broadcast Cash Flow
(as defined herein).
Assemble Market Clusters with Regional Concentrations. The Company has
capitalized and intends to continue to capitalize on the recently enacted
Telecommunications Act of 1996 (the "Telecom Act") by assembling and operating
a cluster of stations in each of its principal markets. The Company believes
that, by having a larger share of the total advertising inventory in a
particular market, it can offer advertisers attractive packages of advertising
options. The Company also believes that its cluster approach will allow it to
operate its stations with more highly skilled local management teams and
eliminate duplicative operating and overhead expenses. By assembling market
clusters with a regional concentration, the Company believes that it will be
able to increase revenues by targeting regionally-based advertisers and
capturing a larger share of their advertising budgets. The Company believes
that its cluster approach will allow it to compete more effectively against
other advertising mediums including newspaper and television. The Pending
Acquisitions will strengthen the Company's existing clusters of stations and
create additional clusters within regions in which it already operates.
Enhance Revenues and Control Costs. The Company seeks to maximize
Broadcast Cash Flow by employing management techniques to enhance revenues
while maintaining strict cost controls. Key elements of the Company's strategy
include:
Aggressive Sales and Inventory Management. In each of its market
clusters, the Company utilizes sophisticated sales reporting systems
to monitor its sales activity and to formulate and implement pricing
strategies and inventory controls. The Company believes that having a
larger share of the total advertising inventory in a particular market
enhances its ability to identify market trends, as well as to compete
on a more equal basis with non-radio competitors which now control in
excess of 90% of the advertising revenue in the Company's markets.
Targeted Programming. The Company utilizes extensive market research
to refine the programming at each of its stations and to position each
of the stations within a particular cluster to maximize the total
audience share and market revenue of the cluster as a whole. The
Company's cluster approach is designed to afford it the flexibility
either to develop strong programming formats for its market leading
stations or to develop independently successful program formats to
meet the needs of particular market conditions.
Strict Cost Controls. The Company's management imposes strict
financial reporting requirements and expense budget limitations on
each of its stations. In addition, management maintains a centralized
accounting system which allows it to monitor the performance and
operations of each of its stations. Such centralization allows the
Company to achieve expense savings in certain areas, including
purchasing and administrative expenses. The Company also achieves
expense savings through the elimination of certain duplicative costs
within its markets and market clusters.
Leverage Regional Management Structure. The Company emphasizes both
regional and local management of its radio stations. In July 1996, in
connection with its rapid growth, the Company implemented a new regional
management structure. The regional operations are currently managed under the
direction of five regional vice presidents, each of whom reports directly to
the Company's Chief Executive Officer and Chief Operating Officer. Each of
these regional vice presidents is an experienced executive with over 15 years
of radio broadcasting experience. Through this regional management structure,
the Company believes that it will be able to more readily transfer the
programming and sales successes of individual stations and clusters to other
stations and clusters within the same region. The Company believes that
regional management and coordination will enable it to maximize the benefits of
operating a large number of radio stations in numerous markets while
maintaining controls over local operations. Local management is primarily
responsible for building and developing a sales team capable of converting the
station's audience rankings into revenues. The Company's general managers and
sales managers are motivated through incentive
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compensation based primarily upon their station's cash flow performance. The
stations to be acquired in the Pending Acquisitions are in regions where the
Company has already established a regional management structure.
Invest in Complementary Businesses. The Company intends to selectively
pursue acquisitions of, and other business arrangements with, complementary
businesses that provide opportunities to capitalize on the Company's core
capabilities as one of the largest radio station groups in the United States.
Concert Promotion Business. Following the Company's strategy to invest
in businesses which complement its radio station operations, the
Company has become a leading promoter of music concerts and
other entertainment events through a series of completed and
contracted for acquisitions of significant concert promoters.
The Company intends to concentrate its concert promotion activities
in markets where a single concert promoter owns or has long-term
leases to operate the principal venues within such market,
particularly in markets where the Company currently owns and/or
operates radio stations.
Management believes that the concert promotion industry presently
bears many characteristics similar to the radio station industry prior
to the recent significant consolidations. In particular, the concert
promotion business is highly fragmented consisting principally of
regional and local companies. Management believes that significant
opportunities exist for profitable growth in the concert promotion
industry. Moreover, management believes that concert promotion
businesses are generally available for acquisition at significantly
lower multiples of cash flow than radio broadcasting businesses.
The following chart sets forth certain information with respect to
certain major venues which the Company will own, operate through long-term
leases or exclusively produce events for, following the consummation of the
Pending Acquisitions (as defined herein):
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LOCATION VENUE SEATING CAPACITY
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Long Island, New York Jones Beach Marine Amphitheater 11,100
Holmdel, New Jersey PNC Bank Arts Center (formerly the
Garden State Arts Center) 10,800[1]
Hartford, Connecticut Meadows Music Theater 25,000
Rochester, New York Finger Lakes Performing Arts (2) 12,700
Indianapolis, Indiana Deer Creek Music Center (3) 21,000
Columbus, Ohio Polaris Amphitheater (3) 20,000
Indianapolis, Indiana Murat Centre (3) 2,700 seat theater and
2,200 seat ballroom
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(1) The Company, in connection with Pavilion Partners, has entered into a new
22 year lease agreement which grants Pavilion Partners the right to
expand the capacity to 17,500 prior to the start of the 1998 concert
season.
(2) The Company has entered into a letter of intent to be the exclusive
promoter of this venue.
(3) The Company will own or operate these venues upon the consummation of
the Sunshine Acquisition (as defined herein).
Investment in Music Technologies LLC. In August 1996, the Company made
an equity investment in a newly formed company, Music Technologies LLC
("Music Technologies"). Music Technologies was formed to provide music
research services to radio broadcasting companies including the
Company. In exchange for the Company's investment, Music Technologies
agreed to provide certain music testing services to the Company at
cost. Music Technologies began performing music tests for the Company
during the first quarter of 1997. As of March 1997, Music Technologies
has not provided significant services for other broadcasting
companies.
RADIO BROADCASTING
Recently Completed Acquisitions and Dispositions
From January 1, 1996 through the date hereof, the Company acquired or
entered into agreements to acquire 67 stations in 19 markets, net of certain
dispositions. The major acquisitions and dispositions during this period were
as follows:
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The Liberty Acquisition
In July 1996, the Company acquired Liberty Broadcasting Inc.
("Liberty") for a purchase price of approximately $239.7 million, including
$10.4 million for working capital (the "Liberty Acquisition"). Liberty was a
privately-held radio broadcasting company which owned and operated or provided
programming to or sold advertising on behalf of 14 FM and six AM radio stations
(the "Liberty Stations") operating in six markets. The Liberty Acquisition
significantly expanded the Company's presence in Providence, Rhode Island;
Hartford, Connecticut; and in Albany, New York in the Northeast Region, as well
as in Richmond, Virginia. Also in July 1996, the Company sold three of the
Liberty Stations operating in the Washington D.C./Baltimore, Maryland market
for $25.0 million (the "Washington Dispositions").
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The Prism Acquisition
In July 1996, the Company acquired from Prism Radio Partners L.P.
("Prism"), a privately-held radio broadcasting company, substantially all of
the assets of eight FM and five AM radio stations located in four markets:
Jacksonville, Florida; Raleigh, North Carolina; Tucson, Arizona; and Wichita,
Kansas. In September 1996, the Company also acquired from Prism substantially
all of the assets of three radio stations operating in Louisville, Kentucky
(the "Louisville Acquisition" and collectively, the "Prism Acquisition"). The
total purchase price for the Prism Acquisition was approximately $105.3
million. In October 1996, the Company sold the Louisville stations (the
"Louisville Dispositions") for $18.5 million. The Prism Acquisition
significantly expanded the Company's presence in the Southern, Mid-Atlantic and
Southwest Regions.
The MMR Merger
In November 1996, the Company consummated the merger of Multi-Market
Radio, Inc. ("MMR") (the "MMR Merger"), pursuant to which it acquired MMR in
exchange for approximately 1,800,000 shares of capital stock of the Company and
other equity securities having a total value of approximately $71.5 million.
Concurrently with the consummation of the MMR Merger, the Company paid
approximately $43.0 million to satisfy outstanding indebtedness of MMR. MMR was
a publicly held radio broadcasting company which owned and operated or provided
programming to or sold advertising on behalf of 13 FM and one AM radio station
operating in seven markets. As a result of the MMR Merger, the Company
significantly expanded its presence in the following markets: Hartford and New
Haven, Connecticut and Springfield/Northampton, Massachusetts in the Northeast
Region; Daytona Beach, Florida and Biloxi, Mississippi in the Southern Region;
and Myrtle Beach, South Carolina.
Additional Acquisitions
The Company also expanded its presence in certain key markets in North
Carolina. In February 1996, the Company acquired radio stations WTDR-FM and
WLYT-FM (formerly WEZC-FM), both operating in Charlotte, North Carolina, for an
aggregate purchase price of $24.3 million (the "Charlotte Acquisition"). In
June 1996, the Company acquired substantially all of the assets of WROQ-FM,
operating in Greenville, South Carolina, for approximately $14.0 million (the
"Greenville Acquisition"). The Greenville Acquisition increased the number of
radio stations the Company owns in the Greenville-Spartanburg market to four.
Also in June 1996, the Company acquired substantially all of the assets of
WTRG-FM and WRDU-FM, both operating in Raleigh, North Carolina, and WMFR-AM,
WMAG-FM and WTCK-AM (formerly WWWB-AM), each operating in Greensboro, North
Carolina, for approximately $36.8 million (the "Raleigh-Greensboro
Acquisition"). As a result of the Raleigh-Greensboro Acquisition, the Company
owns four radio stations in each of the Raleigh-Durham market and the
Greensboro market.
In November 1996, the Company consummated the sale of KTCK-AM,
operating in Dallas, Texas, for a net consideration of $13.4 million (the
"Dallas Disposition").
In February 1997, the Company purchased WWYZ-FM, operating in Hartford
Connecticut, for a purchase price of $25.5 million (the "Hartford
Acquisition"). The Hartford Acquisition increased the number of stations the
Company owns in the Hartford market to five.
In March 1997, the Company acquired two radio stations operating in
Houston, Texas, for a purchase price of approximately $43.0 million, exclusive
of certain additional contingent liabilities which may become payable
(the "Texas Coast Acquisition"). The Texas Coast Acquisition increased the
number of stations the Company owns in the Houston market to four.
In addition, the Company augmented its existing radio station markets
by acquiring three stations in Jackson, Mississippi (the "Jackson
Acquisition"), one station in Greensboro, North Carolina (the "Greensboro
Acquisition") and one station in Albany, New York (the "Albany Acquisition")
and exchanging the assets of a Dallas, Texas station for a station operating in
Houston, Texas (the "Houston Exchange").
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Pending Acquisitions and Pending Disposition
In October 1996, the Company entered into an agreement, which was
subsequently amended, with Secret Communications Limited Partnership, a
privately-held entity ("Secret Communications"), which, as amended, provides
for the acquisition by the Company of substantially all of the assets used in
the operation of three radio stations located in Indianapolis, Indiana and
four radio stations located in Pittsburgh, Pennsylvania for $255.0 million
(the "Secret Acquisition"). Two of the radio stations in Pittsburgh are not
yet owned by Secret Communications but must be acquired prior to the
consummation of the acquisition, and Secret Communications currently provides
services to these stations pursuant to an LMA. The agreement provides the
Company the right to acquire the Indianapolis stations, prior to the
acquisition of the Pittsburgh stations, for $127.5 million. Management
believes that the acquisition offers significant opportunity to improve
revenues at the acquired stations. In the Pittsburgh market, management
anticipates that the Company will benefit from several recent actions taken
by Secret Communications, including the adoption of a new format at one
station, completion of a facilities swap which resulted in one of the stations
moving to a stronger signal with improved coverage of the market area and
consolidation of certain selling and administrative functions.
In addition, pursuant to separate agreements, the Company has also
agreed to: (i) acquire substantially all the assets of four radio stations
operating in Richmond, Virginia, where the Company currently owns one station,
for a purchase price of $40.4 million and certain contingent payments (the
"Richmond Acquisition"); (ii) exchange one radio station operating in
Washington, D.C./Baltimore, Maryland, for two radio stations operating in
Dallas, Texas (the "CBS Exchange"); (iii) exchange four radio stations owned by
the Company and located in 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"); (iv)
exchange one radio station operating in Pittsburgh, Pennsylvania which the
Company is acquiring from Secret Communications and $20.0 million in cash for
one radio station operating in Charlotte, North Carolina, (the "Charlotte
Exchange"); (v) sell one radio station operating in Little Rock, Arkansas,
for a sale price of $4.1 million (the "Little Rock Disposition"); and
(vi) pursuant to a letter of intent, to acquire two radio stations (operating
in Pittsburgh, Pennsylvania, and two radio stations operating in Milwaukee,
Wisconsin from the Hearst Corporation for $35.0 million (the "Hearst
Acquisition"). The parties intend to complete the Hearst Acquisition using a
structure which will facilitate a like kind exchange under Section 1031 of
the Internal Revenue Code for the benefit of the Hearst Corporation.
CONCERT PROMOTION
Recently Completed Acquisitions
In January 1997, the Company acquired Delsener/Slater Enterprises, Ltd
("Delsener/Slater"), a concert promotion company which has long-term leases, or
is the exclusive promoter, for many of the major concert venues in the New York
City metropolitan area including the Jones Beach Marine Amphitheater and the
PNC Bank Arts Center (formerly the Garden State Arts Center), for an aggregate
consideration of approximately $24.0 million.
In March 1997, the Company consummated the acquisition of certain
companies which hold a thirty-seven year lease to operate the Meadows Music
Theater, a 25,000 seat outdoor complex, located in Hartford, Connecticut, for a
purchase price of $1.0 million in cash, shares of Class A Common Stock with a
value of approximately $9.0 million, which are callable by the Company under
certain circumstances, and the assumption of approximately $14.0 million in
debt.
Also in March, 1997, the Company, in partnership with Pavilion
Partners, entered into an a twenty-two year lease to operate the PNC Bank Arts
Center, a 10,800 seat complex located in Holmdel, New Jersey. The lease also
granted Pavilion Partners the right to expand the capacity to 17,500 prior to
the 1998 season.
Pending Acquisitions
In March, 1997, the Company entered into a letter of intent with
Sunshine Promotions, Inc. ("Sunshine"), one of the largest concert promoters in
the Midwest, to acquire substantially all of the assets of Sunshine and certain
other related companies for an aggregate purchase price of approximately
$59.0 million consisting of $50.0 million in cash at closing, $2.0 million in
cash payable over five years, shares of the Company's Class A Common Stock
par value $.01 per share (the "Class A Common Stock") with a maximum value of
approximately $4.0 million and the assumption of approximately $3.0 million
in debt. The assets to be acquired include Deer Creek Music Center, a
21,000 seat complex located in Indianapolis, Indiana, the Polaris
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Amphitheater, a 20,000 seat complex located in Columbus, Ohio and a 99 year
lease to operate Murat Centre, a 2,700 seat theater and 2,200 seat ballroom,
located in Indianapolis, Indiana.
Also in March, 1997, the Company entered into a letter of intent with
Finger Lakes Performing Arts Center, a 12,700 seat complex located in
Rochester, New York, to be the exclusive promoter of concerts at the facility
(the "Finger Lakes Transaction").
The Secret Communications Acquisition, the Richmond Acquisition, the
CBS Exchange, the Chancellor Exchange, the Charlotte Exchange, the Sunshine
Acquisition, the Finger Lakes Transaction and the Hearst Acquisition are
referred to herein collectively as the "Pending Acquisitions." The Little Rock
Disposition is referred to herein as the "Pending Disposition."
The Company anticipates that it will consummate all of the Pending
Acquisitions and the Pending Disposition in the second and third quarters of
1997.
The timing and completion of the Pending Acquisitions and the Pending
Disposition are subject to a number of conditions, certain of which are beyond
the Company's control. Each of the Pending Acquisitions and the Pending
Disposition is subject to the approval of the Federal Communications
Commission (the "FCC") (other than the Sunshine Acquisition) and the Company's
lenders. Additionally, the Department of Justice, Antitrust Division (the
"Antitrust Division") has indicated its intention to review matters related to
the concentration of ownership within markets even when the ownership in
question is permitted under the provisions of the Telecom Act. Certain of the
Pending Acquisitions have been subject to inquiries from the Antitrust
Division. 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 Antitrust Division will not take a contrary
position, which could delay or prevent the consummation of any or all of the
Pending Acquisitions or require the Company to restructure its ownership in
the relevant market or markets. The Company's ability to consummate the
Pending Acquisitions is also subject to the availability of funds under
the Company's $225.0 million senior credit facility (the "Credit Agreement")
and other sources of financing which the Company is currently evaluating.
In addition, the Sunshine Acquisition, the Finger Lakes Transaction, and
the Hearst Acquisition are subject to the execution of definitive acquisition
agreements. Based upon discussions with its commercial and investment bankers,
management believes that financing to complete the Pending Acquisitions will
be available on acceptable terms.
THE STATIONS
The following table summarizes certain information with respect to the
radio stations the Company will own and operate, provide programming to or sell
advertising on behalf of, after giving effect to the Pending Acquisitions and
the Pending Disposition.
<TABLE>
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1996 TOTAL
STATION RANK STATION NUMBER OF EXPIRATION
MARKET TARGET AMONG TARGET AUDIENCE REVENUE STATIONS DATE OF FCC
STATION(1) RANK(2) STATION FORMAT(2) DEMOGRAPHICS(3) DEMOGRAPHICS(2) SHARE(2) RANK(2) MARKET(2) AUTHORIZATION
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NORTHEAST REGION
Providence, RI 31
WSNE-FM ......... Adult Contemporary("AC") Adults 25-54 3 6.6% 6 30 4/1/98
WHJY-FM ......... Album Oriented Rock Adults 18-34 1 9.9% 1 30 4/1/98
WHJJ-AM ......... News/Talk Adults 35-64 7 5.8% 9 30 4/1/98
Hartford, CT 42
WHCN-FM ......... Album Oriented Rock Adults 25-54 3 5.9% 8 20 4/1/98
WMRQ-FM ......... Modern Rock Adults 18-34 1 7.0% 9 20 4/1/98
WPOP-AM ......... News/Talk Adults 35-64 16 1.6% 12 20 4/1/98
WWYZ-FM ......... Country Adults 25-54 3 10.3% 4 20 4/1/98
WKSS-FM.......... Top 40 Adults 18-34 4 8.3% 5 20 4/1/98
Albany, NY 57
WGNA-FM ......... Country Adults 25-54 1 14.1% 1 40 6/1/98
WGNA-AM.......... Country Adults 25-54 23 0.3% 25 40 6/1/98
WPYX-FM (4)...... Album Oriented Rock Adults 18-34 1 8.3% 2 40 6/1/98
WTRY-AM ......... Oldies Adults 35-64 9 1.7% 21 40 6/1/98
WTRY-FM (5)...... Oldies Adults 25-54 13 1.7% 22 40 6/1/98
Springfield/
Northampton, MA (6) 77
WHMP-FM ......... Alternative Adults 18-34 7 2.6% 6 16 4/1/98
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1996 TOTAL
STATION RANK STATION NUMBER OF EXPIRATION
MARKET TARGET AMONG TARGET AUDIENCE REVENUE STATIONS DATE OF FCC
STATION(1) RANK(2) STATION FORMAT(2) DEMOGRAPHICS(3) DEMOGRAPHICS(2) SHARE(2) RANK(2) MARKET(2) AUTHORIZATION
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WHMP-AM ......... Talk Adults 35-64 15 2.1% 7 16 4/1/98
WPKX-FM ......... Country Adults 25-54 1 15.6% 2 16 4/1/98
New Haven, CT 97
WPLR-FM ......... Album Oriented Rock Adults 18-34 1 20.1% 1 8 4/1/98
WYBC-FM (7)...... Urban AC Adults 18-34 4 11.8% 4 8 4/1/98
MID-SOUTH ATLANTIC
REGION
Charlotte, NC 37
WLYT-FM ......... AC Adults 25-54 3 7.5% 6 40 12/1/03
WRFX-FM (8)...... Album Oriented Rock Adults 25-54 1 9.7% 2 40 12/1/03
WTDR-FM.......... Country Adults 25-54 4 7.7% 7 40 12/1/03
Greensboro, NC 41
WMAG-FM.......... AC Adults 25-54 4 8.8% 3 34 12/1/03
WTCK-AM (9)...... Sports Adults 25-54 NR 0.1% 19 34 12/1/03
WMFR-AM.......... News/Talk Adults 25-54 20 1.5% 12 34 12/1/03
WHSL-FM ......... Country Adults 25-54 7 5.2% 10 34 12/1/03
Nashville, TN 44
WSIX-FM.......... Country Adults 25-54 1 17.5% 1 45 8/1/04
WRVW-FM ......... AC Adults 18-34 2 7.5% 7 45 8/1/04
Greenville-
Spartanburg, SC 59
WSSL-FM.......... Country Adults 25-54 1 14.8% 1 36 12/1/03
WMYI-FM.......... AC Adults 25-54 5 9.2% 3 36 12/1/03
WGVL-AM.......... Talk Adults 25-54 18 0.3% NR 36 12/1/03
WROQ-FM.......... Classic Rock Adults 25-54 3 11.1% 2 36 12/1/03
MID-ATLANTIC REGION
Pittsburgh, PA (10) 20
WDVE-FM (11)..... Rock Adults 25-54 1 10.2% 2 47 8/1/98
WXDX-FM (11)..... Alternative Adults 18-34 2 3.5% 13 47 8/1/98
WJJJ-FM (11)..... Smooth Jazz Adults 25-54 9 4.2% 14 47 8/1/98
WVTY-FM (12)..... AC Adults 25-54 5 4.7% 5 47 8/1/98
WTAE-AM (12)..... Talk Adults 25-54 13 4.4% 6 47 8/1/98
Milwaukee, WI 29
WLTQ-FM (12)..... AC Adults 25-54 10 3.4% 8 31 12/1/04
WISN-AM (12)..... Talk Adults 25-54 8 5.3% 6 31 12/1/04
Indianapolis, IN 36
WFBQ-FM (11)..... Album Oriented Rock Adults 25-54 1 13.2% 1 30 8/1/04
WRZX-FM (11)..... Alternative Adults 18-34 2 5.6% 7 30 8/1/04
WNDE-AM (11)..... News/Talk Adults 25-54 14 1.7% 14 30 8/1/04
Raleigh-Durham, NC 48
WRSN-FM (13) .... AC Adults 25-54 10 5.5% 9 33 12/1/03
WDCG-FM.......... Contemporary Hit Radio Adults 18-34 1 10.8% 2 33 12/1/03
WRDU-FM.......... Album Oriented Rock Adults 25-54 4 7.1% 3 33 12/1/03
WTRG-FM.......... Classic Hits Adults 35-64 3 8.6% 4 33 12/1/03
Richmond, VA 56
WMXB-FM.......... AC Adults 25-34 6 6.1% 5 26 10/1/03
WVGO-FM (14)..... Oldies Adults 18-49 12 0.5% 11 26 10/1/03
WKLR-FM (14) (15) 70s Oldies Adults 25-54 21 3.5% 9 26 10/1/03
WKHK-FM (14)..... Country Adults 18-54 12 14.9% 1 26 10/1/03
WBZU-FM (16)..... Alternative Adults 18-34 3 4.6% 10 26 10/1/03
SOUTHERN REGION (17)
Jacksonville, FL 53
WKQL-FM.......... Oldies/Adult Adults 25-54 2 5.8% 7 34 2/1/04
WIVY-FM.......... Soft Rock Adults 25-54 6 5.0% 8 34 2/1/04
WOKV-AM.......... News/Talk Adults 18-49 11 6.0% 5 34 2/1/04
WBWL-AM (18)..... Nostalgia Adults 50 & over 34 2/1/04
WFYV-FM (19)..... Classic Rock Adults 18-49 9.8% 2 34 2/1/04
WAPE-FM (19)..... AC Adults 18-49 2 8.6% 3 34 2/1/04
Daytona Beach, FL 93
WGNE-FM ......... Country Adults 25-54 2 12.4% 1 14 2/1/04
Jackson, MS 118
WMSI-FM.......... Country Adults 25-54 1 14.5% 1 28 6/1/04
WKTF-FM.......... Country Adults 25-54 12 3.6% 8 28 6/1/04
-9-
<PAGE>
1996 TOTAL
STATION RANK STATION NUMBER OF EXPIRATION
MARKET TARGET AMONG TARGET AUDIENCE REVENUE STATIONS DATE OF FCC
STATION(1) RANK(2) STATION FORMAT(2) DEMOGRAPHICS(3) DEMOGRAPHICS(2) SHARE(2) RANK(2) MARKET(2) AUTHORIZATION
------------------- ------- ----------------- --------------- --------------- -------- ------- --------- -------------
WJDS-AM.......... AC Adults 25-54 14 0.9% 14 28 6/1/04
WSTZ-FM.......... Album Oriented Rock Adults 25-54 6 7.4% 4 28 6/1/04
WJDX-FM.......... AC Adults 25-54 3 7.1% 3 28 6/1/04
WZRX-AM ......... Gospel Adults 25-54 10 2.1% 13 28 6/1/04
Biloxi, MS 133
WKNN-FM ......... Country Adults 25-54 1 21.7% 1 20 6/1/03
WMJY-FM ......... AC Adults 25-54 2 10.1% 2 20 6/1/03
SOUTHWEST REGION
Dallas, TX 7
KTXQ-FM (20)..... Album Oriented Rock Adults 25-49 18 3.5% 12 49 8/1/97
KRRW-FM (20)..... 70s Oldies Adults 25-54 17 2.9% 18 49 8/1/97
Houston, TX 9
KODA-FM.......... AC Adults 25-54 2 7.3% 3 53 8/1/97
KKRW-FM ......... 70s Oldies Adults 18-34 10 3.8% 11 53 8/1/97
KQUE-FM (21)..... AC Adults 18-34 4 5.8% 16 53 8/1/97
KNUZ-AM (21)..... Nostalgia Adults 35-64 NR NR NR 53 8/1/97
San Diego, CA 14
KYXY-FM.......... AC Adults 25-54 1 8.0% 2 37 12/1/97
KPLN-FM ......... Classic Rock Adults 25-54 7 2.3% 17 37 12/1/97
Tucson, AZ 60
KRQQ-FM.......... Contemporary Hit Radio Adults 18-34 3 9.4% 3 27 10/1/97
KWFM-FM.......... Oldies Adults 25-54 NR 5.9% 6 27 10/1/97
KCEE-AM.......... Nostalgia Adults 61 & over 10 4.1% 13 27 10/1/97
KNST-AM.......... News/Talk Adults 25-54 4 6.7% 5 27 10/1/97
Wichita, KS 90
KRZZ-FM ......... Classic Rock Adults 18-34 3 7.1% 6 23 6/1/97
KKRD-FM ......... Contemporary Hit Radio Adults 18-34 3 7.4% 3 23 6/1/97
KNSS-AM ......... News/Talk Adults 25-54 11 4.1% 9 23 6/1/97
</TABLE>
- -----------
NR Not rated.
(1) Some stations are licensed to a different community located within the
market they serve.
(2) Based upon BIA's 1996 Station Share, Target Demo and Target Demo Ranking.
(3) Due to variations that may exist within the same-station programming
format, the demographic target may be different even though the station
program format is the same.
(4) FCC records indicate that a complaint is pending at the FCC against
WPYX-FM regarding the broadcast of allegedly indecent material.
(5) WTRY-FM changed its call letters from WYSR-FM.
(6) Northampton is not separately rated by Arbitron and, accordingly, the
number of stations in the market represents the number of stations in
the combined Springfield/Northampton, Massachusetts market.
(7) The Company sells advertising on WYBC-FM pursuant to a JSA.
(8) The Company has agreed to acquire WRFX-FM, operating in Charlotte, North
Carolina, from EZ Communications in exchange for WDSY-FM, operating in
Pittsburgh, Pennsylvania, and $20.0 million in cash.
(9) WTCK-AM changed its call letters from WWWB-AM.
(10) Does not include WDSY, operating in Pittsburgh, Pennsylvania, which is
to be disposed of in the Charlotte Exchange.
(11) On October 15, 1996, the Company agreed to acquire these stations from
Secret Communications, which owns or has agreed to acquire each of the
indicated stations.
(12) In March 1997, the Company entered into a letter of intent with the
Hearst Corporation to acquire these stations.
(13) WRSN-FM changed its call letters from WZZU-FM.
(14) In August 1996, the Company agreed to acquire substantially all of ABS
Communications L.L.C. ("ABS") which owns or has agreed to acquire each
of the four indicated stations.
(15) WKLR-FM changed its call letters from WLEE-FM.
(16) On October 15, 1996, the FCC issued the licensee of WBZU-FM a notice of
apparent liability for a forfeiture in the amount of $10,000 for apparent
violation of federal
regulations by airing indecent programming.
(17) Does not include KOLL-FM, Little Rock, Arkansas, which the Company has
agreed to sell.
(18) WBWL-AM changed its call letters from WPDQ-AM.
(19) Pursuant to the Chancellor Exchange, the Company has agreed to acquire
WFYV-FM and WAPE-FM in exchange for four radio stations currently owned
by the Company (but not listed in the table) operating in Long Island,
New York. Chancellor currently provides programming to and sells
advertising on the four Long Island stations pursuant to an LMA with the
Company. The Company has been providing programming to and selling
advertising on WFYV-FM and WAPE-FM since August 1, 1996.
(20) To be acquired by the Company in the CBS Exchange.
(21) On February 6, 1996 the FCC fined the then-owner of KNUZ-AM and KQUE-FM
$18,500 for failure to engage in sufficient recruitment efforts, and
placed the two stations under two-year equal employment opportunity
reporting conditions. The first report was timely filed by the station
owner on April 1, 1996. The second and final report is due on April 1,
1997.
<PAGE>
BROADCASTING REVENUES
The primary source of the Company's revenues is the sale of
broadcasting time for local, regional and national advertising. A station's
sales staff generates most of the station's local and regional advertising
sales. To generate national advertising sales, the Company engages an
advertising representative for each of its stations who specializes in national
advertising sales and who is compensated on a commission-only basis. Most
advertising contracts are short-term and generally run only for a few weeks.
- 10 -
<PAGE>
The Company believes that radio is an efficient and cost-effective
means for advertisers to reach specific demographic groups. Radio is a
precisely-targeted medium and is highly flexible due to the short lead
time between production and broadcast and due to the relative ease of
production of commercials. To ensure that an advertising message will be heard
mainly by its targeted customer base, an advertiser can choose to advertise on
a station with a format that appeals to a specific demographic group. In
addition, radio can more readily reach people in the workplace and in their
cars than television and other media.
Advertising rates charged by a radio station are based primarily on
the station's ability to attract audiences in the demographic groups targeted
by advertisers (as measured by ratings service surveys quantifying the number
of listeners tuned to the station at various times of the day and week) and on
the supply of and demand for radio advertising time, as well as competing
forms of advertising. Rates are generally highest during morning and afternoon
drive-time hours.
Depending on the format of a particular station, there are
predetermined numbers of advertisements that are broadcast each hour. The
Company endeavors to determine the number of advertisements broadcast per hour
that can maximize available revenue dollars without jeopardizing listening
levels. Although the number of advertisements broadcast during a given time
period may vary, the total number of slots available for broadcast advertising
on a particular station generally does not vary significantly from year to
year.
CONCERT PROMOTION REVENUES
Revenues from the Company's concert promotion activities are derived
primarily from the sale of tickets at events which the Company promotes. In
addition, the Company derives revenue from the operation of certain activities
which are ancillary to the concert promotion business, including the production
and marketing of concert tours, the sale of advertising signage and the
operation or rental to third parties of food, beverage, merchandising and
parking concessions. The Company's revenues in the concert promotion business
are dependent, to a large extent, on the caliber of talent which it can attract
and "book" at events which it promotes as well as the Company's ability to
predict the popularity of events prior to ticket sales.
COMPETITION
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, within their respective markets. Radio
stations compete for listeners primarily on the basis of program content and by
hiring high-profile talent with appeal to a particular demographic group. The
Company competes for advertising revenues principally through effective
promotion of its stations' listener demographics and audience shares, and
through the number of listeners in a target group that can be reached for the
price charged for the air-time.
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 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 its current audience ratings and advertising revenue market share.
- 11 -
<PAGE>
The Company's stations also compete for advertising revenues with
other media, including newspapers, broadcast television, cable television,
magazines, billboard advertising, transit advertising and direct mail
advertising. By building in each of its markets a strong base of listeners
comprised of specific demographic groups, the Company is able to attract
advertisers seeking to reach those listeners. Other factors that affect a
station's competitive position include its authorized power, terrain, assigned
frequency, audience characteristics, local program acceptance and the number
and characteristics of other stations in the market area. The radio
broadcasting industry 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. See "--Federal Regulation of Radio Broadcasting--Proposed
Changes." The radio broadcasting industry historically has grown despite the
introduction of new technologies for the delivery of entertainment and
information, such as television broadcasting, cable television, audio tapes and
compact disks. There can be no assurance, however, that the development or
introduction in the future of any new media technology will not have an adverse
effect on the radio broadcasting industry.
As a result of the Company's recent expansion into the concert
promotion industry, the Company will also face competition from other
businesses in this field. The concert promotion industry is highly competitive.
The Company's venues and other entertainment services will compete with other
live entertainment, including sports activities, as well as the electronic
entertainment industry. In the live entertainment industry, the Company will be
competing with a number of large and small entertainment promoters and venue
owners for bookings of concerts and other events. The Company's entertainment
services will compete with advertising and other sales marketing agencies.
SEASONALITY
The Company's revenues vary throughout the year. With respect to the
radio broadcasting industry, the company's first quarter generally reflects the
lowest revenues and its fourth quarter generally reflects the highest revenues
each year. The concert promotion business is generally most active in the late
spring and summer. Accordingly, the second and third fiscal quarters should
reflect a substantial portion of the revenues from the Company's concert
promotion activities.
EMPLOYEES
As of March 17, 1997, the Company had approximately 1,110 full-time
and 510 part-time employees, none of whom were represented by unions.
Management believes that relations with employees are good. Following
consummation of the Pending Acquisitions and the Pending Disposition, the
Company anticipates that it will have approximately 1,380 full-time and 660
part-time employees. The Company will be required to hire a significant number
of seasonal workers to operate its outdoor amphitheaters during the summer
concert season.
The Company employs several high-profile on-air personalities with
large, loyal audiences in their respective markets. The Company endeavors to
enter into employment agreements with those on-air personalities and station
general managers whose services are deemed by the Company to be important for
its continued success. In addition, the Company has entered into long-term
employment agreements with certain of its executive officers and managers in
the concert promotion business.
FEDERAL REGULATION OF RADIO BROADCASTING
Adoption of the Telecom Act in February 1996 eliminated the national
limits and liberalized the local limits on radio station ownership by a single
company. However, the Antitrust Division has indicated that, in certain cases,
ownership of the number of radio stations permitted by the Telecom Act may
result in the undue concentration of ownership within a market or otherwise
have an anti-competitive effect. The Antitrust Division is increasingly
scrutinizing acquisitions of radio stations and the entering into of JSAs and
LMAs. In particular, the Department of Justice (the "DOJ") has indicated that a
prospective buyer of a radio station may not enter into an LMA in connection
with the acquisition of such station before expiration of the applicable
waiting period under the Hart-Scott Radio Act (the "HSR Act"). In a recent
case, the DOJ has also, for the first time, required the termination of a radio
station JSA that, in the opinion of the DOJ, would have given a radio station
owner, together with its proposed acquisition of other radio stations in the
market, control over more than 60% of the sales of radio advertising time in
the market. Certain of the Pending Acquisitions and the JSAs entered into by
the Company have been the subject of inquiries from the Antitrust Division.
There can be no assurance that future inquiries or policy and rule-making
activities of the FCC or
- 12 -
<PAGE>
the Antitrust Division will not impact the Company's operations (including
existing stations or markets), expansion strategy or its ability to realize the
benefits which management had anticipated obtaining following the adoption of
the Telecom Act.
The ownership, operation and sale of radio stations are subject to the
jurisdiction of the FCC, which acts under authority granted by the
Communications Act of 1934, as amended (the "Communications Act"). Among other
things, the FCC assigns frequency bands for broadcasting; determines the
particular frequencies, locations and operating power of stations; issues,
renews, revokes and modifies station licenses; determines whether to approve
changes in ownership or control of station licenses; regulates equipment used
by stations; adopts and implements regulations and policies that directly or
indirectly affect the ownership, operation and employment practices of
stations; and has the power to impose penalties for violations of its rules or
the Communications Act.
The following is a brief summary of certain provisions of the
Communications Act and of specific FCC regulations and policies. Reference
should be made to the Communications Act, FCC rules and the public notices and
rulings of the FCC for further information concerning the nature and extent of
federal regulation of broadcast stations.
FCC Licenses. Radio stations operate pursuant to broadcasting licenses
that are granted by the FCC for maximum terms of eight years and are subject to
renewal upon application to the FCC. During certain periods when renewal
applications are pending, petitions to deny license renewals can be filed by
interested parties, including members of the public. The FCC will grant a
renewal application if it finds that the station has served the public
interest, convenience and necessity, that there have been no serious violations
by the licensee of the Communications Act or the rules and regulations of the
FCC, and that there have been no other violations by the licensee of the
Communications Act or the rules and regulations of the FCC that, when taken
together, would constitute a pattern of abuse.
Ownership Matters. The Communications Act prohibits the assignment of
a broadcast license or the transfer of control of a broadcast licensee without
the prior approval of the FCC. In determining whether to grant or renew a
broadcast license, the FCC considers a number of factors pertaining to the
licensee, including compliance with various rules limiting common ownership of
media properties, the "character" of the licensee and those persons holding
"attributable" interests therein and compliance with the Communications Act's
limitations on alien ownership.
To obtain the FCC's prior consent to transfer control of or assign a
broadcast license, appropriate applications must be filed with the FCC. If the
transfer or assignment application involves a "substantial change" in ownership
or control, the application is placed on public notice for a period of
approximately 30 days during which petitions to deny the application may be
filed by interested parties, including members of the public. If the transfer
or assignment application does not involve a "substantial change" in ownership
or control, it is a "pro forma" application. The "pro forma" application is
nevertheless subject to having informal objections filed against it. If the FCC
grants a transfer or assignment application, interested parties have
approximately 30 days from public notice of the grant to seek reconsideration
or review of that grant. The FCC normally has approximately an additional ten
days to set aside such grant on its own motion.
Pursuant to the Telecom Act, the limit on the number of radio stations
one entity may own nationally has been eliminated and the limits on the number
of radio stations one entity may own locally have been increased as follows:
(i) in a market with 45 or more commercial radio stations, an entity may own up
to eight commercial radio stations, not more than five of which are in the same
service (FM or AM), (ii) in a market with between 30 and 44 (inclusive)
commercial radio stations, an entity may own up to seven commercial radio
stations, not more than four of which are in the same service, (iii) in a
market with between 15 and 29 (inclusive) commercial radio stations, an entity
may own up to six commercial radio stations, not more than four of which are in
the same service and (iv) in a market with 14 or fewer commercial radio
stations, an entity may own up to five commercial radio stations, not more than
three of which are in the same service, except that an entity may not own more
than 50% of the stations in such market. FCC ownership rules continue to permit
an entity to own one FM and one AM station locally regardless of market size.
For the purposes of these rules, in general, a radio station being programmed
pursuant to an LMA by an entity is not counted as an owned station for purposes
of determining the programming entity's local ownership limits unless the
entity already owns a radio station in the market of the station with which the
entity has the LMA; a radio station whose advertising time is being sold
pursuant to a JSA is currently not counted as an owned station of the entity
selling the advertising time even if that entity owns a radio station in the
market of the station with which the entity has the JSA. As a result of the
elimination of the national ownership limits and the liberalization of the
local ownership limits effected by the Telecom Act, radio station acquisitions
are subject to antitrust review by the Antitrust Division even if approved
- 13 -
<PAGE>
by the FCC. The Antitrust Division has articulated what it believes to be the
relevant market for competitive analysis in the radio broadcasting industry,
but no court has determined its validity. The Antitrust Division has also
indicated an intention to review such acquisitions carefully.
The Communications Act and FCC rules also prohibit the common
ownership, operation or control (i) of a radio broadcast station and a
television broadcast station serving the same geographic market, subject to a
presumptive waiver of such prohibition for stations located in the largest
television markets if certain conditions are satisfied (the Telecom Act directs
the FCC to extend such waiver policy to the top 50 television markets), and
(ii) of a radio broadcast station and a daily newspaper serving the same
geographic market. Under these rules, absent waivers, the Company would not be
permitted to acquire any daily newspaper or television broadcast station (other
than low-power television) in any geographic market in which it owns broadcast
properties. The FCC has pending an inquiry to determine whether it should
liberalize its invoice policy with respect to common funding of a daily
newspaper and one or more radio stations in the same market.
The FCC generally applies its ownership limits to "attributable"
interests held by an individual, corporation, partnership or other association.
In the case of corporations holding (or through subsidiaries controlling)
broadcast licenses, the interests of officers, directors and those who,
directly or indirectly, have the right to vote 5% or more of the corporation's
stock (or 10% or more of such stock in the case of insurance companies,
investment companies and bank trust departments that are passive investors) are
generally attributable except that, in general, no minority voting stock
interest will be attributable if there is a single holder of more than 50% of
the outstanding voting power of the corporation. The FCC has outstanding a
notice of proposed rulemaking that, among other things, seeks comment on
whether the FCC should modify its attribution rules by (i) restricting the
availability of the single majority stockholder exemption, (ii) attributing
under certain circumstances certain interests such as non-voting stock or debt,
and (iii) attributing JSAs under certain circumstances. The Company cannot
predict the outcome of this proceeding or how it will affect the Company's
business. Furthermore, the single majority stockholder exemption would no
longer apply to the Company if conversion of the Company's 6 1/2% Series D
Cumulative Convertible Exchangeable Preferred Stock due 2007 (the "Series D
Preferred Stock") or of the 6 1/2 % Series D Exchange Notes due May 31, 1997
(the "Series D Exchange Notes") into Class A Common Stock caused Robert F.X.
Sillerman's voting power in the Company to drop to 50% or less (an event that
would require prior FCC consent). In such event, all stockholders holding 5% or
more of the total voting power in the Company would have an attributable
interest in the Company, and their other media interests, if any, could
therefore adversely affect the Company's ability to acquire or to hold
interests in radio stations in particular markets. Also, under certain
circumstances, the FCC's "cross-interest" policy may prohibit one party from
acquiring an attributable interest in one media outlet (newspaper, radio and
television station) and a substantial non-attributable economic interest in
another media outlet in the same market.
Mr. Sillerman, the Executive Chairman of the Company, has non-voting
common and preferred stock interests in Triathlon Broadcasting Company, a
publicly traded radio broadcasting company ("Triathlon"), which has
attributable interests in radio stations in small and medium markets
primarily located in the Midwest and Western United States. Heretofore, the FCC
has not considered Mr. Sillerman's interest in Triathlon to be an attributable
one. However, Mr. Sillerman's non-voting stock interests in Triathlon are
convertible into voting stock interests under certain circumstances, including
the receipt of necessary FCC approval. The FCC is examining, through
outstanding rulemaking and adjudicatory proceedings, whether to change the
criteria for considering an interest to be attributable. Some commentators in
the rulemaking proceedings have urged that the test of attribution should not
be voting power but rather influence over the licensee. Fisher Wayland Cooper
Leader & Zaragoza LLP, FCC counsel to the Company, has advised the Company
that, to the extent that the FCC adopts this standard, certain contractual
arrangements between Sillerman Communications Management Company ("SCMC"), a
corporation controlled by Mr. Sillerman, and Triathlon may cause Mr.
Sillerman's interest in Triathlon to be attributable. If the FCC were to
determine that Mr. Sillerman's interest in Triathlon were attributable, then
Mr. Sillerman may be required to reduce the number of his attributable
interests to the then-applicable permissible limits contained in the FCC's
ownership rules.
The Communications Act prohibits the issuance of a broadcast license
to, or the holding of a broadcast license by, any corporation of which more
than 20% of the capital stock is owned of record or voted by non-U.S. citizens
or their representatives or a foreign government or a representative thereof or
a corporation organized under the laws of a foreign country ("Aliens"). The
Communications Act also authorizes the FCC if the FCC determines that it would
be in the public interest, to prohibit the issuance of a broadcast license to,
or the holding of a broadcast license by, any corporation directly or
indirectly controlled by any other corporation of which more than 25% of the
capital stock is owned of record or voted by Aliens. The Company has been
advised that the FCC staff has interpreted this provision
- 14 -
<PAGE>
to require a finding that such a grant or holding would be in the public
interest before a broadcast license may be granted to or held by any such
corporation. The Company has also been advised that the FCC staff has made such
a finding only in limited circumstances. The FCC has issued interpretations of
existing law under which these restrictions in modified form apply to other
forms of business organizations, including partnerships. As a result of these
provisions, the licenses granted to the radio station subsidiaries of the
Company by the FCC could be revoked if, among other restrictions imposed by the
FCC, more than 25% of the Company's stock were directly or indirectly owned or
voted by Aliens. The Certificate of Incorporation contains limitations on Alien
ownership and control of the Company that are substantially similar to those
contained in the Communications Act.
Local Marketing Agreements. Over the past few years, a number of radio
stations, including certain of the Company's stations, have entered into what
have commonly been referred to as LMAs. While these agreements may take varying
forms, pursuant to a typical LMA, separately owned and licensed radio stations
agree to enter into cooperative arrangements of varying sorts, subject to
compliance with the requirements of antitrust laws and with the FCC's rules and
policies. Under these types of arrangements, separately-owned stations could
agree to function cooperatively in terms of programming, advertising sales,
etc., subject to the requirement that the licensee of each station shall
maintain independent control over the programming and operations of its own
station. One typical type of LMA is a programming agreement between two
separately-owned radio stations serving a common service area, whereby the
licensee of one station programs substantial portions of the broadcast day on
the other licensee's station, subject to ultimate editorial and other controls
being exercised by the latter licensee, and sells advertising time during such
program segments. Such arrangements are an extension of the concept of "time
brokerage" agreements, under which a licensee of a station sells blocks of time
on its station to an entity or entities which program the blocks of time and
which sell their own commercial advertising announcements during the time
periods in question.
The FCC has specifically revised its cross-interest policy to make that
policy inapplicable to time brokerage arrangements. Furthermore, over the past
few years, the staff of the FCC's Mass Media Bureau has held that LMAs are not
contrary to the Communications Act, provided that the licensee of the station
which is being substantially programmed by another entity maintains complete
responsibility for and control over programming and operations of its broadcast
station and assures compliance with applicable FCC rules and policies.
The FCC's multiple ownership rules specifically permit radio station
LMAs to continue to be entered into and implemented, but provide that a station
brokering more than 15% of the time on another station serving the same market
will be considered to have an attributable ownership interest in the brokered
station for purposes of the FCC's multiple ownership rules. As a result, in a
market in which the Company owns a radio station, the Company would not be
permitted to enter into an LMA with another local radio station which it could
not own under the local ownership rules, unless the Company's programming
constitutes 15% or less of the other local station's programming time on a
weekly basis. The FCC's rules also prohibit a broadcast licensee from
simulcasting more than 25% of its programming on another station in the same
broadcast service (i.e., AM-AM or FM-FM) through a time brokerage or LMA
arrangement where the brokered and brokering stations which it owns or programs
serve substantially the same area.
Joint Sales Agreements. Under a typical JSA, the licensee of one radio
station sells the advertising time of another licensee's radio station.
Currently, JSAs are not deemed by the FCC to be attributable. However, the FCC
has outstanding a notice of proposed rule making concerning, among other
things, whether JSAs should be considered attributable interests under certain
circumstances. The attribution of radio station JSA has become less of a
concern from the standpoint of compliance with the FCC multiple ownership rules
as a result of the general liberalization of the ownership limits on radio
stations authorized by the Telecom Act. If JSAs become attributable interests
as a result of such rule making, the Company would be required to terminate any
JSA it might have with a radio station with which the Company could not have an
LMA.
Programming and Operation. The Communications Act requires
broadcasters to serve the "public interest." The FCC gradually has relaxed or
eliminated many of the more formalized procedures it had developed in the past
to promote the broadcast of certain type of programming responsive to the needs
of a station's community of license. A licensee continues to be required,
however, to present programming that is responsive to issues of the station's
community, and to maintain certain records demonstrating such responsiveness.
Complaints from listeners concerning a station's programming often will be
considered by the FCC when it evaluates renewal applications of a licensee,
although such complaints may be filed at any time and generally may be
considered by the FCC at any time. Stations also must follow various rules
promulgated under the Communications Act that regulate, among other things,
political advertising, sponsorship identifications, the advertisement of
contests and lotteries, obscene and indecent broadcasts,
- 15 -
<PAGE>
and technical operations, including limits on radio frequency radiation. In
addition, licensees must develop and implement affirmative action programs
designed to promote equal employment opportunities, and must submit reports to
the FCC with respect to these matters on an annual basis and in connection wit
a renewal application.
Failure to observe these or other rules and policies can result in the
imposition of various sanctions, including monetary forfeitures, the grant of
"short" (less than the maximum) renewal terms or, for particularly egregious
violations, the denial of a license renewal application or the revocation of a
license.
Proposed Changes. The Congress and/or the FCC have under
consideration, and in the future may consider and adopt, new laws, regulations
and policies regarding a wide variety of matters that could affect, directly or
indirectly, the operation, ownership and profitability of the Company's radio
broadcast stations, result in the loss of audience share and advertising
revenues for the Company's radio broadcast stations, and affect the ability of
the Company to acquire additional radio broadcast stations or finance such
acquisitions. Such matters may include: changes to the license renewal process;
spectrum use or other fees on FCC licensees; revisions to the FCC's equal
employment opportunity rules and other matters relating to minority and female
involvement in the broadcasting industry; proposals to change rules relating to
political broadcasting; technical and frequency allocation matters; proposals
to permit expanded use of FM translator stations; proposals to restrict or
prohibit the advertising of beer, wine and other alcoholic beverages on radio;
changes in the FCC's cross-interest, multiple ownership and attribution
policies; changes to broadcast technical requirements; delivery by telephone
companies of audio and video programming to the home through existing phone
lines; proposals to limit the tax deductibility of advertising expenses by
advertisers; and proposals to auction the right to use the radio broadcast
spectrum to the highest bidder.
The FCC has authorized the use of a new technology, digital audio
broadcasting("DAB"), to deliver audio programming by satellite and is
considering terrestrial DAB. DAB will provide a medium for the delivery by
satellite or terrestrial means of multiple new audio programming formats to
local and national audiences. It is not presently known precisely how in the
future this technology may be used by existing radio broadcast stations either
on existing or alternate broadcasting frequencies.
The Company cannot predict what other matters might be considered in
the future by the FCC and/or Congress. The implementation of the Telecom Act or
any of these proposals or changes may have a material adverse impact on the
Company's business, competitive position or results of operations.
FORWARD-LOOKING INFORMATION
Except for the historical information contained in this Form 10-K,
certain items herein, including without limitation certain matters discussed
under Part I, Item 3, "Legal Proceedings" and under Part II, Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" (the "MD&A"), are forward-looking statements. The matters referred
to in such statements could be affected by the risks and uncertainties involved
in the Company's business, including without limitation the effect of economic
and market conditions, the level and volatility of interest rates, the impact
of current or pending legislation and regulation and the other risks and
uncertainties detailed in Part I, Item 1, "Competition" and "Federal Regulation
of Radio Broadcasting" and in Part II, Item 7, the MD&A.
ITEM 2. PROPERTIES.
The Company's corporate headquarters are located in New York, New
York. The types of properties required to support each of the Company's radio
stations include offices, studios and transmitter sites. The transmitter site
for each station is generally located so as to provide maximum market coverage
consistent with the station's license. The types of properties used in
connection with the Company's concert promotion business include indoor and
outdoor concert facilities and offices. All of the property owned by the
Company secures the Company's borrowings under the Credit Agreement.
No one property is material to the Company's overall operations. The
majority of the Company's offices and studios used in connection with the
operations of the Company's radio stations are leased, with lease terms that
expire in one to eight years. The Company owns or leases all of its transmitter
antenna sites with lease terms that expire in one to fifty years. The Company
does not anticipate any difficulties in renewing those leases that expire
within the next five years or in leasing other space if required. The Company
owns substantially all of the equipment used in its radio broadcasting
business.
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<PAGE>
In addition, the Company leases certain concert facilities including
Jones Beach Marine Amphitheater, Meadows Music Theartre and PNC Bank Arts
Center, with lease terms that expire in 1999, 2034 and 2017, respecively.
Management believes that its properties are in good condition and are
suitable for its operations, however, the Company continually looks for
opportunities to upgrade its properties.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in a lawsuit filed October 21, 1996 by
Cardinal Communications Partners, L.P. in the District Court of Dallas County,
Texas (No. 9611157). Also named as a defendant is Robert F.X. Sillerman,
Executive Chairman of the Company. The complaint alleges that Cardinal is
entitled to contingent payments related to its sale of radio station KTCK-AM
operating in Dallas, Texas, to the Company in April 1995 and the Company's
subsequent sale of KTCK-AM, in October 1996 in the Dallas Disposition. The
complaint seeks a declaratory judgment and actual and punitive damages in an
unspecified amount, as well as attorneys' fees, based on claims of breach of
contract, fraud, negligent misrepresentation, quantum meruit and unjust
enrichment. The Company intends to defend the case vigorously. However, recent
discussions between counsel for both sides have resulted in an agreement to
submit the matter to non-binding mediation in April 1997.
In addition, the Company has received a subpoena from the Antitrust
Division, seeking information related to the Company's LMAs and JSAs. The
subpoena focuses primarily on a JSA between the Company and Triathlon with
respect to certain stations operating in Wichita, Kansas, which has since
been terminated. The Company responded to the subpoena in February 1997.
The Company, together with, in some instances, certain of its
directors and officers, is a defendant or co- defendant in various legal
actions involving employment related matters and various other claims
incidental to the conduct of its business. However, in the opinion of
management, there are no other material threatened or pending legal proceedings
against the Company, which if adversely decided, would have a material effect
on the financial condition or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's annual meeting of stockholders (the "Annual Meeting")
was held on November 22, 1996. On October 1, 1996, the record date for the
Annual Meeting, there were 6,431,897 outstanding shares of Class A Common
Stock (the "Class A Shares") and 856,126 shares of Class B Common Stock
(the "Class B Shares" and, collectively with the Class A Shares, the "Shares").
The Shares present at the Annual Meeting represented 96.1% of the combined
voting power of the outstanding Shares as of the record date.
The first matter voted upon at the Annual Meeting was a proposal to
approve the Amended and Restated Agreement and Plan of Merger, dated as of
April 15, 1996, as amended on May 6, 1996, July 30, 1996 and September 30,
1996, among the Company, SFX Merger Company and MMR and the MMR Merger. MMR was
organized in 1992 by Robert F.X. Sillerman, Executive Chairman of the Board of
Directors and controlling stockholder of the Company, Michael G. Ferrel, Chief
Executive Officer and a Director of the Company, and Howard J. Tytel, a
Director and Executive Vice President of the Company. Mr. Sillerman owned a
substantial equity interest in MMR which was exchanged for common stock of the
Company upon the consummation of the MMR Merger. The proposal received the
affirmative vote of 5,384,738 Class A Shares and 856,126 Class B Shares and the
negative vote of 3,884 Class A Shares and 0 Class B Shares, with 2,783 Class A
Shares abstaining and 729,817 broker non-votes. The votes in favor of the
proposal represented 93.1% of the combined voting power of the outstanding
Shares represented in person or by proxy at the Annual Meeting and voting on
the proposal, and therefore the proposal was approved.
The second matter voted upon was a proposal to approve an amendment to
the Company's Restated Certificate of Incorporation (the "Certificate of
Incorporation") to increase the number of authorized Class A Shares from
10,000,000 to 100,000,000. The proposal received the affirmative vote of
5,405,421 Class A Shares and 856,126 Class B Shares and the negative vote of
22,109 Class A Shares and 0 Class B Shares, with 4,913 Class A Shares
abstaining and 729,817 broker non-votes. The votes in favor of the proposal
represented 93.1% of the combined voting power of the outstanding Shares as of
the record date and 84% of the vote of the outstanding Class A Shares as of the
record date, and therefore the proposal was approved.
Class A Shares and Class B Shares vote together on most matters, with
each Class A Share entitled to one vote and each Class B Share entitled to
ten votes, except that the holders of Class A Shares are entitled to elect by
a separate class vote a number of directors, which is currently three. In
addition, the Class A Shares were entitled to a separate class vote with
respect to the second matter considered at the Annual Meeting and the Class B
Shares were entitled to a separate class vote with respect to the third matter
considered at the Annual Meeting.
- 17 -
<PAGE>
The third matter voted upon was a proposal to approve an amendment to
the Certificate of Incorporation to increase the number of authorized Class B
Shares from 1,000,000 to 10,000,000. The proposal received the affirmative vote
of 5,376,794 Class A Shares and 856,126 Class B Shares and the negative vote of
50,736 Class A Shares and 0 Class B Shares, with 4,240 Class A Shares
abstaining and 729,817 broker non-votes. The votes in favor of the proposal
represented 93% of the combined voting power of the outstanding Shares as of
the record date and 100% of the vote of the outstanding Class B Shares as of
the record date, and therefore the proposal was approved.
The fourth matter voted upon was a proposal to approve the issuance to
SCMC of warrants to purchase 300,000 Class A Shares, which were immediately
exercisable upon approval of such proposal, at an initial exercise price of
$33.75 per share, as partial consideration for SCMC terminating its financial
consulting arrangement with the Company and assigning to the Company its rights
to receive fees for consulting and marketing services payable by MMR and
another publicly-held radio broadcasting company over the next eight years. The
proposal received the affirmative vote of 5,215,762 Class A Shares and 856,126
Class B Shares and the negative vote of 174,671 Class A Shares and 0 Class B
Shares, with 7,830 Class A Shares abstaining and 729,817 broker non-votes. The
votes in favor of the proposal represented 98.7% of the combined voting power
of the Shares represented in person or by proxy at the Annual Meeting and
voting on the proposal, and therefore the proposal was approved.
In the election of directors, the fifth proposal voted upon, the
following persons received the number of votes set opposite their respective
names:
Nominees elected by holders of Class A Shares and Class B Shares
NAME VOTES RECEIVED VOTES WITHHELD
---- -------------- --------------
Robert F.X. Sillerman 14,679,191 30,990
Geoffrey Armstrong 14,678,991 31,190
Howard J. Tytel 14,679,191 30,990
Richard A. Liese 14,677,891 32,290
Thomas P. Benson 14,679,191 30,990
Such nominees received the highest number of the votes cast at the
Annual Meeting for the directors to be elected by the holders of the Class A
Shares and Class B Shares, voting together, and therefore such persons were
duly elected as directors of the Company.
Nominees elected by holders of Class A Shares
NAME VOTES RECEIVED VOTES WITHHELD
---- -------------- --------------
James F. O'Grady, Jr. 6,116,781 32,140
Paul Kramer 6,117,931 30,990
Edward F. Dugan 6,117,931 30,990
Such nominees received the highest number of the votes cast at the
Annual Meeting for the directors to be elected by the holders of Class A Shares
and therefore such persons were duly elected as directors of the Company.
The sixth matter voted upon was a proposal to approve the Company's
1996 Stock Option Plan and the performance goal included therein. The proposal
received the affirmative vote of 5,037,318 Class A Shares and 856,126 Class B
Shares and the negative vote of 381,766 Class A Shares and 0 Class B Shares,
with 104,740 Class A Shares abstaining and 729,817 broker non-votes. The votes
in favor of the proposal represented 92.4% of the combined voting power of the
Shares represented in person or by proxy at the Annual Meeting and voting on
the proposal, and therefore the proposal was approved.
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<PAGE>
The seventh matter voted upon was a proposal to ratify the appointment
of Ernst & Young LLP as independent auditors of the Company for the fiscal year
ending December 31, 1996. The proposal received the affirmative vote of
6,146,088 Class A Shares and 856,126 Class B Shares and the negative vote of
2,813 Class A Shares and 0 Class B Shares voting by proxy, with 2,413 Class A
Shares abstaining. The votes in favor of the proposal represented 99.9% of the
combined voting power of the Shares represented in person or by proxy at the
Annual Meeting, and therefore the proposal was approved.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND STOCKHOLDER MATTERS.
MARKET INFORMATION FOR SECURITIES
The Company's Class A Common Stock and Class B Warrants trade on the
Nasdaq Stock Market under the symbols SFXBA and SFXBW, respectively. The high
and low sales for the Company's Class A Common Stock and Class B Warrants for
the years ended December 31, 1996 and 1995 were:
<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS B WARRANTS (1)
-------------------------------------------- ------------------------------------------
1996 1995 1996 1995
-------------------- -------------------- ------------------ ------------------
QUARTER ENDED HIGH LOW HIGH LOW HIGH LOW HIGH LOW
- ------------- ---- --- ---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
March 31 $35.00 $25.50 $26.00 $17.00 $2 3/4 $1 7/16 $1 1/2 $3/4
June 30 $39.25 $31.50 $26.25 $20.50 $2 9/16 $1 1/2 $2 3/8 $15/16
September 30 $48.00 $37.50 $29.75 $24.75 $2 11/16 $1 15/16 $2 3/8 $1 1/2
December 31 $48.25 $24.75 $30.25 $24.00 $6 $1 7/8 $2 1/8 $1 1/16
</TABLE>
(1) The Company assumed the Class B Warrants from MMR pursuant to the
MMR Merger. Each Class B Warrant is exercisable for .2983 shares of
Class A Common Stock. Prior to the MMR Merger the Class B Warrants
traded under the symbol "RDIOAZ."
As of March 27, 1997, there were approximately 98 holders of record of
the Company's outstanding Class A Common Stock, and three holders of record of
the Company's outstanding Class B Common Stock.
The Company has not paid any dividends on its common stock. The
Company intends to retain future earnings for use in its business and does not
anticipate paying any cash or stock dividends on shares of its common stock in
the foreseeable future. In addition, the certificates of designations with
respect to the Series D Preferred Stock and the Company's 125/8% Series E
Cumulative Exchangeable Preferred Stock (the "Series E Preferred Stock")
prevents the payment of dividends on the common stock unless all dividends on
the outstanding shares of Series D Preferred Stock and Series D Preferred Stock
have been paid. The Credit Agreement and the indenture governing the Company's
Senior Subordinated Notes due 2006 (the "Notes") also restrict the Company's
ability to pay cash dividends unless certain financial tests (including a ratio
of debt to cash flow) and an additional restricted payments test are met.
Recent Sales of Unregistered Securities
In May 1996, the Company sold $450.0 million in aggregate principal
amount of Notes and $149.5 million in aggregate liquidation preference of its
Series D Preferred Stock to qualified institutional buyers (as defined in Rule
144A) and to a limited amount of accredited purchasers in reliance on the
exemption from registration provided by Rule 144A promulgated under the
Securities Act of 1933, as amended. Goldman, Sachs & Co., Lehman Brothers Inc.
and BT Securities Corporation, the underwriters for the private placements,
received an aggregate of $17,877,500 in underwriting discounts and commissions.
Each share of Series D Preferred Stock is convertible at the option of
the holder thereof into 1.0987 Class A Shares (subject to adjustments in
certain events) at any time prior to the close of business on May 31, 2007. In
the event that either (i) an insufficient number of Class A Shares are
available for issuance upon such conversion or (ii) the Company is restricted
by FCC rules from issuing Class A Shares upon such conversion, then the Company
will be
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<PAGE>
required to pay each holder of Series D Preferred Stock seeking to convert an
amount per share equal to 110% of the current market price of the Class A
Common Stock as of the date of such conversion.
Pursuant to its contractual obligations with the original purchasers
of the Notes and Series D Preferred Stock, the Company filed registration
statements with the Securities and Exchange Commission (the "Commission")
relating to an exchange offer for the Notes and a "shelf@ offering of the
Series D Preferred Stock by the holders thereof. Such registration statements
were declared effective in July 1996 and the exchange offer was subsequently
completed with full participation by the holders of the Notes.
In March 1997, the Company issued 250,838 shares of Class A Common
Stock in connection with the acquisition of certain companies which
collectively own and operate the Meadows Music Theater. The shares where issued
in reliance on the exemption from registration provided by Section 4(2) of the
Securities Act of 1933, as amended.
- 20 -
<PAGE>
ITEM 6. SELECTED COMBINED FINANCIAL DATA OF SFX BROADCASTING (1)
<TABLE>
<CAPTION>
Year Ended December 31,
(dollars in thousands)
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues................................................$ 15,003 $ 34,233 $ 55,556 $ 76,830 $ 143,061
Station operating expenses.................................. 9,624 21,555 33,956 51,039 92,816
Depreciation, amortization, duopoly integration costs
and acquisition related costs (2)........................ 3,208 4,475 5,873 9,137 17,311
Corporate, general & administrative expenses................ 769 1,808 2,964 3,797 6,313
Non-recurring and unusual charges, including
adjustments to broadcast rights agreements (3).......... -- 13,980 -- 5,000 28,994
----------- ---------- ----------- ----------- -----------
Operating income (loss)..................................... 1,402 (7,585) 12,763 7,857 (2,373)
Interest income............................................. -- (17) 121 (650) (4,017)
Interest expense............................................ 3,610 7,351 9,332 12,903 34,897
Loss on sale of radio station............................... -- -- -- -- 1,900
----------- ---------- ----------- ----------- -----------
Net loss before income taxes extraordinary loss and
cumulative effect of a change in accounting principle ...... (2,208) (14,919) 3,310 (4,396) (35,153)
Income tax expense.......................................... -- 1,015 1,474 -- 480
Extraordinary loss on debt retirement....................... -- 1,665 -- -- 15,219
Cumulative effect of a change in accounting principle....... -- 182 -- -- --
----------- ---------- ----------- ----------- -----------
Net loss.................................................... (2,208) (17,781) 1,836 (4,396) (50,852)
Redeemable preferred stock dividends and accretion (4)...... 385 557 348 291 6,061
Net income (loss) applicable to common stockholders......... $ (2,593) $(18,338) $ 1,488 $ (4,687) $ (56,913)
=========== ========== =========== =========== ===========
Net income (loss) per share................................ $ (2.20) $ (7.08) $ 0.26 $ (0.71) $ (7.52)
=========== ========== =========== =========== ===========
Weighted average common shares outstanding.................. 1,178,570 2,589,285 5,792,385 6,595,728 7,563,600
=========== ========== =========== =========== ===========
OTHER OPERATING DATA:
Broadcast Cash Flow (5)..................................... $ 5,379 $ 12,678 $ 21,600 $ 25,791 $ 50,245
EBITDA (5).................................................. 4,610 10,870 18,636 21,994 43,932
Cash capital expenditures .................................. 115 569 1,951 3,261 3,224
Net cash provided by (used in) operating activities......... 1,171 76 1,174 499 (13,447)
Net cash (used in) provided by investing activities......... (115) (56,568) (6,184) (25,697) (470,513)
Net cash (used in) provided by financing activities......... (495) 66,122 (2,083) 33,897 502,668
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<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
(dollars in thousands)
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents...................... $ 657 $ 10,287 $ 3,194 $ 11,893 $ 10,601
Working capital (deficit)...................... (37,470) 22,088 18,698 19,334 48,363
Intangible assets, net......................... 27,856 107,290 102,152 129,543 664,103
Total assets................................... 36,127 152,871 145,808 187,337 859,327
Total debt and capital lease obligations....... 39,011 81,627 81,516 81,850 481,460
Redeemable preferred stock..................... 3,892 3,701 2,466 3,285 152,053
Shareholders' equity (deficit)................. (9,411) 48,598 48,856 83,061 94,517
</TABLE>
(1) The Company's consolidated financial statements tend not to be directly
comparable from period to period due to acquisition activity. The selected
financial data of the Company and its predecessors include (i) the
historical financial statements of Capstar Communications, Inc.
("Capstar") (ii) the historical financial statements of the Company since
its formation on February 26, 1992 , (iii) the results of operations of
Command, WMYI-FM, WKTF-FM, WRVW-FM, KYXY-FM and KTCK-AM from the date of
their acquisition in July 1993, April 1993, December 1993, December 1994,
April 1995 and September 1995, respectively, and (iv) the results of
operations of radio stations acquired, sold or exchanged pursuant to the
Charlotte Acquisition in February 1996, the Raleigh-Greensboro Acquisition
in June 1996, the Prism Acquisition, Liberty Acquisition and Washington
Dispositions each occurring in July 1996, the Jackson Acquisitions in July
and August 1996, the Dallas Disposition in October 1996, the MMR Merger in
November 1996, and the Greensboro Acquisition and the Houston Exchange in
December 1996. The acquisitions were accounted for using the purchase
method of accounting.
(2) In 1995, costs of $1,380,000 relating to the integration of KYXY-FM
operating in San Diego and the reformatting of its duopoly partner and in
1996 costs of $785,000 related to the integration and reformatting of the
Charlotte stations and $352,000 related to the relocation of certain
corporate office functions were included in depreciation, amortization,
duopoly integration costs and acquisition related costs.
(3) In 1993, a non cash non-recurring and unusual charge was incurred relating
to the valuation of founders shares at the offering date and certain
pooling costs related to the Capstar merger. In 1995, a $5.0 million
charge was incurred with respect to the diminished value of the Texas
Rangers contract. In 1996, non-recurring and unusual charges of
$28,994,000 in 1996 which consisted primarily of (i) payments in excess
of the fair market value of stock repurchased from the Company's
former president totaling $12,510,000 (ii) a write-off of $2,330,000
a loan made to the Company's former president and accrued interest
thereon, (iii) $5,586,000 relating to a write-off of a $2.0 million
loan to SCMC and accrued interest thereon and the issuance of 600,000
warrants to SCMC, (iv) $4,575,000 for the repurchase of Mr. Armstrong's
options, and (v) a charge of $1,600,000 related to the termination of
Texas Rangers.
(4) Includes preferred stock dividends and accretion on Series A, B, C and D
Redeemable Preferred Stock.
(5) EBITDA is defined as net revenues less station operating expenses and
corporate general and administrative expenses. Broadcast Cash Flow is
defined as EBITDA before corporate, general and administrative expenses.
Although EBITDA and Broadcast Cash Flow are not measures of performance
calculated in accordance with generally accepted accounting principles
("GAAP"), the Company believes that EBITDA and Broadcast Cash Flow are
accepted by the broadcasting industry as generally recognized measures of
performance and are used by analysts who report publicly on the
performance of broadcasting companies. In addition, EBITDA is the basis
for determining compliance with several covenants in the Indentures and
the Credit Agreement.
- 22 -
<PAGE>
ITEM 7. 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 67 radio stations located in 20 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 80 radio stations located in 23 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 (including, where applicable, fees earned
by the Company pursuant to the SCMC Termination Agreement as defined herein)
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. Pursuant to an agreement with SCMC (the
"SCMC Termination Agreement"), the Company receives fees for certain financial
consulting and administrative services provided to Triathlon. Fee revenue from
the SCMC Termination Agreement will fluctuate principally based upon the level
of acquisition and financing activity of Triathlon, above the minimum annual
fees of $1,000,000. 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. In 1996, approximately 78% 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.
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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, 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 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 of
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 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 activity. The
major acquisitions during the three years ended December 31, 1996, all of which
have been accounted for using the purchase method of accounting, were as
follows:
1994 Acquisitions: In December 1994, the Company acquired WRVW-FM in
Nashville, Tennessee.
1995 Acquisitions: In April 1995, the Company acquired KYXY-FM in San
Diego, California, and in September 1995, the Company purchased KTCK-AM in
Dallas, Texas. The Company had been providing programming and selling
advertising pursuant to an LMA with KYXY-FM since January 1995 and KTCK-AM
since March 1995. In addition, the Company provided programming and sold
advertising pursuant to an LMA with WTDR-FM and WLYT-FM in Charlotte, North
Carolina beginning April 1995.
1996 Acquisitions: In February 1996, the Company acquired
substantially all the assets of WTDR-FM and WLYT-FM in Charlotte, North
Carolina pursuant to the Charlotte Acquisition. In June 1996, the Company
acquired substantially all of the assets of WROQ-FM, Greenville, South
Carolina, pursuant to 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 pursuant to
the Raleigh-Greensboro Acquisition.
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<PAGE>
The Company acquired from Prism 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 pursuant to the Louisville Dispositions.
In July 1996, the Company acquired Liberty, 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, Connecticut; Albany, New York and
Richmond, Virginia. In July 1996, the Company sold three of the Liberty
Stations operating in the Washington, DC/Baltimore, Maryland market pursuant
to 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, pursuant to collectively, the Jackson Acquisitions.
In October 1996, the Company sold radio station KTCK-AM, Dallas,
Texas pursuant to the Dallas Disposition.
In November 1996, the Company acquired 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 pursuant to 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 had also decided not to
renew its JSA with one station operating in Augusta, Georgia and its LMA with
one station operating in Myrtle Beach, South Carolina.
In December 1996, the Company acquired WHSL-FM operating in
Greensboro, North Carolina pursuant to the Greensboro Acquisition.
Also, in December 1996, the company exchanged the assets of KRLD-FM
operating in Dallas, Texas, along with the Texas State Networks for the assets
of KKRW-FM operating in Houston, Texas pursuant to 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".
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
For the year ended December 31, 1996, net revenues increased 86% to
$143,061,000 from $76,830,000 primarily as a result of the 1996 Acquisitions
(excluding the Charlotte Acquisition which the Company operated pursuant to an
LMA prior to the acquisition) which increased net revenues by $58,880,000. Net
revenue from the Company's existing stations (excluding the 1996 Acquisitions
and the Charlotte Acquisition which the Company did not operate for the entire
1995 period) increased $4,743,000 as a result of strong radio advertising
growth in all of the Company's markets combined with improved inventory
management, ratings and other factors generally affecting sales and rates. On a
same station basis, assuming all stations owned and operated as of December 31,
1996 were owned for all periods reported, net revenues would have increased 10%
from 1995.
Station operating expenses increased 82% to $92,816,000 from
$51,039,000 primarily due to the inclusion of expenses related to the 1996
Acquisitions (excluding the Charlotte Acquisition) of $38,525,000 and to
increases in variable expenses related to the increases in net revenue at the
existing stations.
Depreciation, amortization, duopoly integration costs and acquisition
related costs increased 89% to $17,311,000 from $9,137,000 due to the inclusion
of depreciation and amortization related to the 1996 Acquisitions. Duopoly
integration costs and acquisition related costs decreased from $1,380,000 in
1995 to $1,137,000 in 1996.
Corporate expenses were $6,313,000 and $3,797,000 for the years ended
December 31, 1996 and 1995, respectively. The increase reflects the growth in
the Company's overall operations. Corporate expenses declined as a
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percentage of net revenues. Included in corporate expenses in 1996 were fees
received from MMR and Triathlon of $802,000.
The Company recorded a loss on sale of KTCK-AM Dallas of $1,900,000
in 1996.
The Company recorded non-recurring and unusual charges of $28,994,000
in 1996 which consisted primarily of (i) $12,510,000 relating to payments in
excess of the fair market value of stock repurchased from the Company's former
president (ii) a write-off of a $2,330,000 loan made to the Company's former
president and accrued interest thereon, (iii) $5,586,000 relating to a
write-off of a $2.0 million loan to SCMC and accrued interest thereon and the
issuance of 600,000 warrants to SCMC, (iv) $4,575,000 for the repurchase of
Mr. Armstrong's options, and (v) a charge of $1,600,000 related to the
termination of Texas Rangers. In 1995, the Company recorded a $5.0 million
charge related to the write down in value of the Company's broadcast rights
of Texas Rangers baseball.
Operating loss was $2,373,000 for the year ended December 31, 1996
compared to operating income of $7,857,000 for the same period in 1995 due to
the results discussed above.
Interest expense, net of interest income, increased 152% to
$30,880,000 from $12,253,000 in the year ended December 31, 1996, primarily due
to interest on the $450.0 million aggregate principal amount of 11.375% Senior
Subordinated Notes issued in May 1996 (the "Note Offering"). Additionally,
interest on borrowings related to the Charlotte Acquisition and the MMR Merger
contributed to the increase.
The Company incurred an extraordinary loss totaling $15,219,000 for
the year ended December 31, 1996 which consisted primarily of payments of $9.0
million for the repurchase premium and consent payments related to the early
redemption of $79.4 million of the Company's 11 3/8% Senior Subordinated Notes
due 2000 (the "Old Notes") in the tender offer and the related consent
solicitations and the write-off of $5.6 million of debt issue costs.
The Company recorded income tax expense of $480,000 for the year
ended December 31, 1996 related to state and local taxes. The Company did not
record income tax expense in 1995.
The Company's net loss was $50,852,000 in 1996 compared to a net loss
of $4,396,000 in 1995 due to the factors discussed above.
Net loss applicable to common stock increased to $56,913,000 in 1996
from $4,687,000 in 1995 due to dividends on the Series D Preferred Stock issued
in May 1996 (the "Series D Preferred Stock Offering") and the increase in the
net loss discussed above.
Broadcast Cash Flow increased 95% to $50,245,000 for the year ended
December 31, 1996 from $25,791,000 for 1995. The increase was primarily a
result of the inclusion of the results of the 1996 Acquisitions (excluding the
Charlotte Acquisitions) of $20,356,000 and as well as improved results of
$3,073,000 at the Company's existing stations in all markets, except Jackson,
Mississippi. On a same station basis, assuming all stations owned and operated
as of December 31, 1996 were owned for all periods reported, Broadcast Cash
Flow would have increased approximately 26% from 1995.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
For the year ended December 31, 1995, net revenues increased 38.3% to
$76,830,000 from $55,556,000 due to revenue increases at the Houston,
Nashville, Greenville, and Jackson properties and the inclusion of net revenues
of $16,729,000 for KYXY-FM, KTCK-AM, and the Charlotte Acquisitions for the
portion of the year the Company owned and/or operated the stations. The revenue
increase was partially offset by a slight decline in revenue in the Dallas
market due to the lack of advertiser interest in baseball broadcasts and a
decline in revenue in San Diego due to the January 1995 reformatting of KPLN-FM
(formerly KMKX-FM). The increase in net revenue from existing operations was
related to strong radio advertising growth averaging approximately 8% in the
Company's markets, combined with improved inventory management, ratings and
other factors generally affecting sales and rates. On a same station basis,
assuming all stations owned and/or operated by the Company in 1995 had been
owned for all periods reported, and the Company's San Diego stations attained
the same market revenue share for the entire year as they did in the fourth
quarter of 1995, net revenues would have increased 15.4% from 1994 reaching
$79,871,000.
Station operating expenses increased 50.3% to $51,039,000 from
$33,956,000 primarily due to the inclusion of expenses related to the
operations of KYXY-FM for $4,715,000, KTCK-AM for $3,713,000, and WTDR-FM and
WLYT-FM (formerly WEZC-FM) for $3,454,000 during the portion of the year the
Company owned and/or operated the stations and higher marketing costs in
Charlotte, San Diego and Greenville. Management believes that the increased
investment in marketing during the year has resulted in improved station
selling position. On a same station basis,
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<PAGE>
assuming all stations owned and/or operated by the Company in 1995 had been
owned for all periods reported, including certain cost savings implemented
during 1995, station operating expenses would have increased 15.5% as compared
to 1995 and station operating expenses as a percent of net revenue would have
remained constant from 1995.
Depreciation, amortization and duopoly integration costs increased
55.6% to $9,137,000 in 1995 from $5,873,000 in 1994, primarily due to the
acquisitions described above and to costs of $1,380,000 incurred related to the
integration of the San Diego stations and the reformatting of its duopoly
partner KPLN-FM.
Corporate expenses were $3,797,000 and $2,964,000 for the twelve
months ended December 31, 1995 and 1994, respectively. Corporate, general and
administrative expense as a percentage of net revenue was 5% for both 1995 and
1994.
Operating income was $7,857,000 as compared to income of $12,763,000
in 1994. The decrease from the prior year was due primarily to a $5,000,000
pre-tax charge related to the estimated losses on Texas Rangers baseball
broadcast rights.
Interest expense, net of investment income (loss), increased 29.6%
to $12,253,000 primarily due to the inclusion of $2,847,000 in LMA payments in
Charlotte and Dallas representing financing payments to the current owners.
Additionally, borrowings related to the Acquisition of the assets of KYXY-FM
in San Diego contributed to the increase. These borrowings were repaid in
July 1995 with the proceeds of the Company's 1995 public offering of common
stock (the "1995 Stock Offering"). During 1995, the Company recorded
investment income of $650,000 compared to $121,000 of net investment losses
in 1994. The investment income in 1995 is related to the interest earned on
the excess proceeds of the 1995 Stock Offering.
The Company recorded no income tax expense for the twelve months
ended December 31, 1995 due to a net loss for the year, compared to income tax
expense of $1,474,000 for the twelve months ended December 31, 1994. The
Company has considered prudent and feasible tax planning strategies in
assessing the need for a valuation allowance and has assumed $650,000 of
benefit attributable to such strategies. In event the Company were to determine
in the future that such strategies would not be implemented, an adjustment to
the deferred tax liability would be charged to income in the period such
determination was made.
Net loss was $4,396,000 for the year ended December 31, 1995 compared
to a net income of $1,836,000 for the same period in 1994 due to the factors
discussed above.
Broadcast Cash Flow increased 19.4% to $25,791,000 for the twelve
months ended December 31, 1995 from $21,600,000 marketing at the Dallas,
Greenville and San Diego properties has resulted in improved selling position
at these properties even though it has adversely affected Broadcast Cash Flow.
On a same station basis, assuming all stations owned and/or operated by the
Company in 1995 had been owned for all periods reported, including certain cost
savings implemented during 1995, Broadcast Cash Flow would have increased 15.1%
to $27,900,000 from $24,231,000 in 1994.
Liquidity and Capital Resources
Cash used in operations for the year ended December 31, 1996 was
$13,447,000 as compared to cash provided by operations of $499,000 in 1995 and
$1,174,000 in 1994. The cash used in operations in 1996 was primarily
attributable to the cash portion of the non-recurring and unusual charges and
to the required investment in working capital of radio stations acquired
without the related working capital. The decrease in 1995 as compared to 1994
was primarily attributable to higher investments in working capital of stations
acquired in 1995.
The Company used cash in investing activities for the years ended
December 31, 1996, 1995 and 1994 of $470,5513,000, $25,697,000 and $6,184,000,
respectively. Cash used in investing activities in 1996 related primarily to
the Charlotte, Greenville, Raleigh-Greensboro, Liberty, Prism, Jackson,
Greensboro Acquisitions, and the MMR Merger. In addition, proceeds from sale of
radio stations in 1996 of $56.9 million was offset by deposits and other
payments for Pending Acquisitions of $30.8 million and capital expenditures of
$3.2 million. Cash used in 1995 was primarily attributable to the purchases of
KYXY-FM in San Diego and KTCK-AM in Dallas and the purchase of property and
equipment, and was partially offset by the sale of short term investments.
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<PAGE>
Cash provided by financing activities for the years ended December
31, 1996 and 1995 was $502,668,000 and $33,897,000, respectively. The Company
used cash in financing activities for the year ended December 31, 1994 of
$2,083,000. In 1996, cash provided by financing activities related primarily to
$644,945,000 of proceeds from the Note Offering and the Series D Preferred
Stock Offering and borrowings under a credit agreements partially offset by
payments on subordinated debt, senior loans and capital lease obligations of
$110,396,000 during 1996. In 1995, cash provided by financing activities
related primarily to proceeds of the 1995 Stock Offering. In 1994, cash used in
financing activities primarily related to the redemption of 2,000 shares of the
Company's Series A and B Redeemable Preferred Stock for $1,750,000.
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.
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 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 $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 Acquisition 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 $24.0 million. Of 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.
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 $25.5
million. The primary source of funds for this acquisition was proceeds from the
Company's Public Offering of $225.0 million aggregate liquidation preference 12
5/8%, Series E Cumulative Exchangeable Preferred Stock (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 $43.0 million 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 will be 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 $1.0 million in cash, shares of SFX Class
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A Common Stock with a value of approximately $9.0 million and the assumption of
approximately $14.0 million of debt.
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
provides the Company the right to acquire the Indianapolis stations, prior to
the acquisition of the Pittsburgh stations, for $127.5 million.
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
(the "Richmond Acquisition"); (ii) exchange one radio station operating in
Washington, D.C./Baltimore, Maryland, for two radio stations operating in
Dallas, Texas (the "CBS Exchange"); (iii) 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 (the "Chancellor Exchange"); (iv) 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"); (v) 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; (vi)
acquire two radio stations operating in Pittsburgh, Pennsylvania and two in
Milwaukee, Wisconsin for $35.0 million (the "Hearst Acquisition"); and
(vii) sell one radio station operating in Little Rock, Arkansas (the "Little
Rock Disposition").
The aggregate cash sale price of the Chancellor Exchange and the
Little Rock Disposition transactions is $15.1 million, of which the purchasers
have deposited in escrow or paid $3.5 million.
The Company anticipates that it will consummate all of the Pending
Acquisitions and the Pending Dispositions as follows:
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CASH PURCHASE (SALE)
PRICE(1) ANTICIPATED DATE OF
TRANSACTION (IN MILLIONS) CONSUMMATION
- ----------- --------------------- ---------------------
Little Rock Disposition $ (4.1) 2nd quarter 1997
CBS Exchange -- 2nd quarter 1997
Richmond Acquisition 40.4 2nd quarter 1997
Chancellor Exchange (11.0) 2nd quarter 1997
Secret Communications
Acquisition 255.0 2nd quarter 1997
Charlotte Exchange 20.0 2nd quarter 1997
Sunshine Promotions
Acquisition 52.0 2nd quarter 1997
Hearst Acquisition 35.0 3rd quarter 1997
(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 FCC (other than the Sunshine Acquisition) and the
Company's lenders. Additionally, the 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 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 and the Hearst Acquisition are subject to the
execution of definitive acquisition agreements.
The Company intends to finance the Pending Acquisitions from cash on hand
(approximately $105.0 million as of March 28, 1997), the Chancellor Exchange,
and the Little Rock Disposition, borrowings under the Credit Agreement and
other financing sources which the Company is currently evaluating. Based on
discussions with its commercial and investment bankers, management believes
that financing to complete the Pending Acquisitions will be available on
acceptable terms.
Capital expenditures totaled $3,224,000 in 1996, $3,261,000 in 1995 and
$1,951,000 in 1994. 1996 capital expenditures consisted of upgrades to the
Company's broadcasting, office and computer equipment in various markets.
Capital expenditures in 1995 included (i) the consolidation of the operations
of WSIX-FM and WRVW-FM, including a real estate acquisition, building
improvements and the replacement of certain broadcast equipment, and (ii)
leasehold improvements and the replacement of certain broadcast equipment
related to the relocation of KRLD-AM and TSN to the Ballpark in Arlington.
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. In May 1996, the Company issued New Notes due 2006
in an aggregate principal amount of $450.0 million. Interest on the New Notes
accrues at the rate of 10.75% per year and is payable on May 15 and
November 15 of each year. The New Notes are general senior subordinated
unsecured obligations of the Company. The New Notes are guaranteed on a
senior subordinated basis by each of the Company's subsidiaries. The New
Note Indenture contains certain covenants which limit the ability of the
Company and certain of its subsidiaries to, among other things, incur
additional indebtedness, pay dividends or make certain other restricted
payments, consummate certain asset sales, enter into certain transactions with
affiliates, incur indebtedness that is senior in right of payment to the New
Notes, incur liens, impose restrictions on the ability of a subsidiary to pay
dividends or make certain payments to the Company and its subsidiaries, merge
or consolidate with any other person or dispose of all or substantially all of
the assets of the Company.
Concurrently with the Note Offering, the Company sold in a private
placement 2,990,000 shares of Series D Preferred Stock aggregating $149.5
million in liquidation preference (the "Series D Preferred Stock Offering").
Dividends of $0.8125 per share of Series D Preferred Stock are payable
quarterly in cash. Accumulated unpaid
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<PAGE>
dividends bear interest at the annual rate of 6.5%. The shares of Series D
Preferred Stock are convertible into shares of Class A Common Stock at any time
prior to May 31, 2007, unless previously redeemed or repurchased, at a
conversion price of $45.51 per share (equivalent to a conversion rate of 1.0987
shares of Class A Common Stock per share of Series D Preferred Stock), subject
to adjustment in certain events. The shares of Series D Preferred Stock are
exchangeable in full (but not in part), at the Company's option, subject to
compliance with covenants contained in the Company's debt agreements, for
Series D Exchange Notes. The Certificate of Designations of the Series D
Preferred Stock contains certain covenants which, among other things, limit the
ability of the Company and its subsidiaries to engage in transactions with
affiliates.
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 March 28, 1997, the Company had no outstanding
borrowings under the Credit Agreement.
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 12.625% 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, proceeds from the Chancellor
Exchange and the Pending Dispositions and other financing sources which the
Company is currently evaluating. There can be no assurance that the Chancellor
Exchange or the Pending Dispositions will be successfully consummated or that
the Company will be able to successfully arrange for additional financing. The
Company expects to make borrowings under the Credit Agreement of $225.0 million
in order to consummate the Pending Acquisitions which it expects to occur in
the second quarter of 1997. The Credit Agreement prohibits the Company from
utilizing funds available thereunder unless the Company meets certain specified
financial tests, such as total leverage and senior leverage ratios and pro
forma interest expense. 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 acquisitions and dispositions of the Company. There can be no assurance
that the Company will have adequate borrowing capacity under the Credit
Agreement or will be
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<PAGE>
able to obtain additional financing on terms acceptable to the Company or at
all. If the Company is unable to consummate the Pending Acquisitions because of
its failure to obtain financing or for any other reason, it may forfeit
deposits up to an aggregate amount of approximately $22.0 million.
As a result of the foregoing, there can be no assurance as to when the
Pending Acquisitions or the Pending Disposition 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 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 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), 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 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 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, 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 which are
currently deferred, 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 $3.25 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 Company's Compensation Committee, Independent Directors and Mr.
Sillerman have agreed that the Company will enter into a new employment
agreement with Mr. Sillerman, pursuant to which Mr. Sillerman will continue in
his position with the Company for a five-year term, subject to renewal for an
additional five-year term. Mr. Sillerman's annual base pay under the agreement
will be $400,000, initially, subject to periodic adjustments. The Board of
Directors and the Compensation Committee also approved a $2.5 million loan to
Mr. Sillerman, which loan will be a full-recourse obligation of Mr. Sillerman
and bear 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.
The employment agreement, which has not yet been finalized, will include
the issuance of stock options or their equivalent both during the term of the
employment agreement and in the event of a Change of Control of the Company in
amounts to be determined by the Board of Directors and the Compensation
Committee. It is anticipated that, except as described above, the provisions of
Mr. Sillerman's employment agreement, including those with respect to changes
of control of the Company, will be similar to those in his existing employment
agreement.
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<PAGE>
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.
At December 31, 1996, the aggregate contractual maturities of long-term
debt for the years ended December 31, 1997, 1998, 1999, 2000 and thereafter
(excluding borrowings under the Credit Agreement, which was repaid in 1997) are
$231,000, $309,000, $0, $566,000 and $450,000,000 respectively. (The Company
had capital lease obligations of $354,000 as of December 31, 1996.) Future
minimum payments for all noncancellable capital leases with initial terms of
one or more years for the years ended December 31, 1997, 1998, 1999, 2000 and
thereafter are $179,000, $141,000, $63,000, $17,000 and $4,000 respectively.
The Company is also required to make a payment of $1.0 million in 1997 to
redeem its Series B Redeemable Preferred Stock. The Company believes it will
require additional financing to be able to make these payments, together with
capital expenditures and principal amortization payments under the New Credit
Agreement, and through funds generated from its operations.
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<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
See Index to Financial Statements on page F1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with the Company's
accountants on accounting matters or financial disclosures.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information called for by this item is incorporated by reference to
the Company's definitive Proxy Statement for the 1997 Annual Meeting of
Stockholders to be filed pursuant to Regulation 14A.
ITEM 11. EXECUTIVE COMPENSATION
The information called for by this item is incorporated by reference to
the Company's definitive Proxy Statement for the 1997 Annual Meeting of
Stockholders to be filed pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for by this item is incorporated by reference to
the Company's definitive Proxy Statement for the 1997 Annual Meeting of
Stockholders to be filed pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
The information called for by this item is incorporated by reference to
the Company's definitive Proxy Statement for the 1997 Annual Meeting of
Stockholders to be filed pursuant to Regulation 14A.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
(a) (1) The following consolidated financial statements of SFX
Broadcasting, Inc. and subsidiaries are filed As a part of this
report or are incorporated herein by reference:
Report of Independent Auditors
Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 1996 and 1995
Consolidated Statements of Operations for each of the three
years in the period ended December 31, 1996
Consolidated Statements of Shareholders' Equity for each of the
three years in the period ended December 31, 1996
Consolidated Statements of Cash Flows for each of the three
years in the period ended December 31, 1996
Notes to Consolidated Financial Statements
(2) The following financial statement schedule of SFX Broadcasting,
Inc. and Subsidiaries is filed as a part of this report or
incorporated herein by reference:
Schedule II - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable and therefore have been omitted.
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<PAGE>
(3) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
<S> <C>
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 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 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 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).
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 Amended and Restated Employment Agreement between the Company and Mr. Sillerman (incorporated by
reference to Exhibit 10.26 to Amendment No. 2 to Registration Statement Form S-1 (Reg.
No. 33-92086) filed with the Commission on June 26, 1995).
10.2 Amended and Restated Employment Agreement between the Company and Mr. Hicks (incorporated
by reference to Exhibit 10.27 to amendment No. 2 to Registration Statement Form S-1 (Reg. No.
33-92086) filed with the Commission on June 26, 1995).
10.3 Amended and Restated Employment Agreement between the Company and Mr. Armstrong (incorporated by
reference to Exhibit 10.28 to Amendment No. 2 to Registration Statement Form S-1 (Reg. No.
33-92086) filed with the Commission on June 26, 1995).
10.4 Asset Purchase Agreement between Trumper Communications of North Carolina Limited Partnership
and SFX Broadcasting of North Carolina, Inc. dated as of April 1, 1995 (incorporated by reference
to Exhibit 10.29 to Amendment No. 2 to Registration Statement Form S-1 (Reg. No. 33-92086) filed
with the Commission on June 26, 1995).
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<PAGE>
10.5 Asset Purchase Agreement between Cardinal Communications Partners, L.P., SFX Broadcasting of
Texas (KTCK), Inc. and the Company, dated as of April 24, 1995 (incorporated by reference to
Exhibit 10.30 to Amendment No. 2 to Registration Statement Form S-1 (Reg. No. 33-92086) filed
with the Commission on June 26, 1995).
10.6 Senior Promissory Note of Sillerman Communications Management Corporation to the Company in
the amount of $2,000,000, dated as of January 23, 1995 (incorporated by reference to Exhibit 10.31
to Amendment No. 2 to Registration Statement Form S-1 (Reg. No. 33-92086) filed with the
Commission on June 26, 1995).
10.7 First Amendment to Amended and Restated Credit Agreement between the Company and The Bank
of New York as Agents thereunder, dated as of April 21, 1995 (incorporated by reference to Exhibit
10.32 to Amendment No. 2 to Registration Statement Form S-1 (Reg. No. 33-92086) filed with the
Commission on June 26, 1995).
10.8 Stock Exchange Agreement between Equitable Deal Flow Fund, L.P., the Equitable Life Assurance
Society of the United States, Equitable Variable Life Insurance Company and the Company, dated
as of December 2, 1994 (incorporated by reference to Exhibit 10.33 to Amendment No. 2 to
Registration Statement Form S-1 (Reg. No. 33-92086) filed with the Commission on June 26, 1995).
10.9 Stock Purchase Agreement among the Company, Liberty Broadcasting, Incorporated, Josephthall,
Littlejohn and Levy Fund, L.P., Michael Craven and James Thompson dated as of November 15, 1995
(incorporated by reference to Exhibit 10.34 to Form 10-K (Commission File No. 0-22486) for the
year ended December 31, 1995).
10.10 Letter Agreement between SFX Broadcasting, Inc. and Multi-Market Radio, Inc. regarding exchange
of assets dated November 17, 1995 (incorporated by reference to Exhibit 10.35 to Form 10-K
(Commission File No. 0-22486) for the year ended December 31, 1995).
10.11 Joint Sales Agreement between SFX Broadcasting of Jackson, Inc. and Multi-Market Radio
Acquisition Corporation (incorporated by reference to Exhibit 10.36 to Form 10-K (Commission File
No. 0-22486) for the year ended December 31, 1995).
10.12 Joint Sales Agreement between SFX Broadcasting of South Carolina (WMYI), Inc. and Multi-Market
Radio Acquisition Corporation (incorporated by reference to Exhibit 10.37 to Form 10-K
(Commission File No. 0-22486) for the year ended December 31, 1995).
10.13 Joint Sales Agreement between Multi-Market Radio Acquisition Corporation and the Company
(incorporated by reference to Exhibit 10.38 to Form 10-K (Commission File No. 0-22486) for the
year ended December 31, 1995).
10.14 Programming Agreement between the Company and Trumper Communications of North Carolina Limited Partnership
(incorporated by reference to Exhibit 10.39 to Form 10-K (Commission File No. 0-22486) for the year ended
December 31, 1995).
10.15 Asset Purchase Agreement between Prism Radio Partners, L.P. and the Company (incorporated by
reference to Exhibit 10.40 to Form 10-K (Commission File No. 0-22486) for the year ended
December 31, 1995).
10.16 Joint Sales Agreement between the Company and HMW Communications, Inc. (incorporated by
reference to Exhibit 10.42 to Form 10-K (Commission File No. 0-22486) for the year ended
December 31, 1995).
10.17 Asset Purchase Agreement between the Company and HMW Communications, Inc. (incorporated
by reference to Exhibit 10.42 to Form 10-K (Commission File No. 0-22486) for the year ended
December 31, 1995).
10.18 Asset Purchase Agreement between Texas Coast Broadcasters, Inc. and Multi-Market Radio, Inc.
(incorporated by reference to Exhibit 99.1 to Form 10-K (Commission File No. 0-22486) for the year
ended December 31, 1995).
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<PAGE>
10.19 Asset Purchase Agreement between Lewis Broadcasting Corporation and Multi-Market Radio
Acquisition Corporation (incorporated by reference to Exhibit 99.2 to Form 10-K (Commission File
No. 0-22486) for the year ended December 31, 1995).
10.20 Asset Purchase Agreement between ABS Greenville Partners, L.P. and Multi-Market Radio
Acquisition Corporation (incorporated by reference to Exhibit 99.3 to Form 10-K (Commission File
No. 0-22486) for the year ended December 31, 1995).
10.21 Asset Purchase Agreement between Multi-Market Radio, Inc. and Puritan Radiocasting Company
(incorporated by reference to Exhibit 10.1 to MMR's 10-Q (Commission File No. 0-22080) for the
quarter ended March 31, 1996).
10.22 Asset Purchase Agreement between MMR and Wilks Broadcast Acquisitions, Inc. (incorporated by
reference to Exhibit 10.3 to MMR's 10-Q ( Commission File No. 0-22080) for the quarter ended
March 31, 1996).
10.23 Letter of Intent between MMR and Jones Eastern Radio of Augusta, Inc. (incorporated by reference
to Exhibit 10.5 to MMR's 10-Q ( Commission File No. 0-22080) for the quarter ended March 31,
1996).
10.24 Amended and Restated Agreement and Plan of Merger, dated April 15, 1996, among the Company,
SFX Merger Company and MMR (composite version incorporated by reference to Annex B to the
Joint Proxy Statement/Prospectus to Form S-4 (Commission File No. 333-13337) filed with the
Commission on October 3, 1996).
10.25 Asset Purchase Agreement between HMW Communications, Inc. and Multi-Market Radio
Acquisition Corporation (incorporated by reference to Exhibit 99.4 to Form 10-K (Commission File
No. 0-22486) for the year ended December 31, 1995).
10.26 Joint Sales Agreement between HMW Communications, Inc. and Multi-Market Radio Acquisition
Corporation (incorporated by reference to Exhibit 99.6 to Form 10-K (Commission File No. 0-22486)
for the year ended December 31, 1995).
10.27 Termination and Assignment Agreement, dated as of April 15, 1996, between Sillerman
Communications Management Corporation and the Company (incorporated by reference to Exhibit
10.1 to Form 8-K (Commission File No. 0-22486) filed with the Commission on April 18, 1996).
10.28 Warrant to purchase 300,000 shares of Class A Common Stock of the Company issued to SCMC
(incorporated by reference to Exhibit 10.3 to Form 8-K (Commission File No. 0-22486) filed with the
Commission on October 3, 1996).
10.29 Warrant to purchase 300,000 shares of Class A Common Stock of the Company issued to SCMC
(incorporated by reference to Exhibit 10.4 to Form 8-K (Commission File No. 0-22486) filed with the
Commission on October 3, 1996).
10.30 Agreement, dated as of April 16, 1996, between the Company and R. Steven Hicks (incorporated by
reference to Exhibit 10.2 to Form 8-K (Commission File No. 0-22486) filed with the Commission on
April 18, 1996).
10.31 Asset Purchase Agreement, dated May 1, 1996, among the Company, KIRO, Inc, and Bonneville
Holding Company (incorporated by reference to Exhibit 10.2 to Form 8-K (Commission File No.
0-22486) filed with the Commission on May 9, 1996).
10.32 Letter Agreement, dated May 16, 1996, between the Company and the Bank of New York
(incorporated by reference to Exhibit 10.1 to Form 8-K (Commission File No. 0-22486) filed with the
Commission on May 24, 1996).
10.33 Consent Agreement, dated May 17, 1996, among The Huff Alternative Income Fund, L.P., Multi-
Market Radio, Inc. and the Company (incorporated by reference to Exhibit 10.2 to MMR's Form 8-K
(Commission File No. 0-22080) filed with the Commission on September 10, 1996).
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<PAGE>
10.34 Asset Purchase Agreement, dated May 13, 1996, between SFX Acquisition Corporation and Clear
Channel Radio, Inc. (incorporated by reference to Exhibit 10.2 to Form 8-K (Commission File No.
0-22486) filed with the Commission on May 24, 1996).
10.34 Asset Purchase Agreement, dated May 13, 1996, between SFX Acquisition Corporation and Regent
Broadcasting of Louisville, Inc. (incorporated by reference to Exhibit 10.3 to Form 8-K (Commission
File No. 0-22486) filed with the Commission on May 24, 1996).
10.35 Amended and Restated Agreement, dated June 19, 1996, between the Company and R. Steven Hicks
(incorporated by reference to Exhibit 10.1 to Form 8-K (Commission File No. 0-22486) filed with the
Commission on June 21, 1996).
10.36 Amended and Restated Employment Agreement, dated June 19, 1996, between the Company and
Tom Benson (incorporated by reference to Exhibit 10.1 to Form 8-K (Commission File No. 0-22486)
filed with the Commission on June 21, 1996).
10.37 Time Brokerage Agreement between ABS Greenville Partners, L.P. and Multi-Market Radio
Acquisition Corporation (incorporated by reference to Exhibit 99.7 to Form 10-K (Commission File
No. 0-22486) for the year ended December 31, 1995).
10.38 Exchange Agreement, dated July 1, 1996, between Chancellor Radio Broadcasting Company and SFX
Broadcasting, Inc. (incorporated by reference to Exhibit 10.59 to Amendment No. 1 to the Form S-4
of SFX Broadcasting, Inc. (Commission File No. 333-06553) filed with the Commission on July 16,
1996).
10.39 Asset Purchase Agreement between SFX Broadcasting of Texas (KTCK) Licensee, Inc., SFX
Broadcasting of Texas (KTCK), Inc. and KRBE Co. (incorporated by reference to Exhibit 10.58 to
Amendment No. 1 to Form (Reg. No. 333-06553) filed with the Commission on July 16, 1996).
10.40 Asset Purchase Agreement between Jared Broadcasting Company of Albany, Incorporated
(incorporated by reference to Exhibit 2.13 to Form 10-Q (Commission File No. 0-22486) for the
quarter ended September 30, 1996).
10.42 Letter of Intent, dated August 9, 1996, between the Company., Kenneth A. Brown, ABS
Communications, Inc., ABS Communications, L.L.C., ABS Richmond Partners, L.P., ABS Richmond
Partners II, L.P., EBF, Inc. and EBF Partners (incorporated by reference to Exhibit 2.11 to Form 10-Q
(Commission File No. 0-22486) for the quarter ended September 30, 1996).
10.43 Letter of Intent, dated August 28, 1996, between SFX Broadcasting, Inc. and EZ Communications,
Inc. (incorporated by reference to Exhibit 2.3 to Form 8-K (Commission File No. 0-22486) filed with
the Commission on October 3, 1996).
10.44 Loan Agreement, dated September 4, 1996, between the Company and MMR (incorporated by
reference to Exhibit 2.4 to Form 8-K (Commission File No. 0-22486) filed with the Commission on
October 3, 1996).
10.45 Asset Exchange Agreement, dated as of September 24, 1996, among WHFS, Inc. Liberty
Broadcasting of Maryland Incorporated (incorporated by reference to Exhibit 2.5 to Form 8-K
(Commission File No. 0-22486) filed with the Commission on October 3, 1996).
10.46 Asset Purchase Agreement between Secret Communications Limited Partnership and the Company
(incorporated by reference to Exhibit 10.2 to Form 8-K (Commission File No. 0-22486) filed with the
Commission on October 30, 1996).
10.47 Purchase and Sale Agreement among WWYZ, Inc., Great American Music Fest & Production Co.
(collectively the "Companies"), each of the shareholders of the Companies and SFX Broadcasting,
Inc. (incorporated by reference to Exhibit 10.4 to Form 8-K (Commission File No. 0-22486) filed with
the Commission on October 30, 1996).
10.48 Amendment to Asset Purchase Agreement between Texas Coast Broadcasters, Inc. and Multi-Market
Radio, Inc. (incorporated by reference to Exhibit 10.5 to Form 8-K (Commission File No. 0-22486)
filed with the Commission on October 30, 1996).
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<PAGE>
10.49 Stock Purchase Agreement between Delsener/Slater Enterprises, Ltd., Beach Concerts, Inc.,
Connecticut Concerts, Incorporated, Broadway Concerts, Inc., Ardee Productions, Ltd., Ardee
Festivals NJ, Inc., In-House Tickets, Inc., Exit 116 Revisited, Inc., Dumb Deal, Inc., Ron Delsener,
Mitch Slater and SFX Broadcasting, Inc. (incorporated by reference to Exhibit 10.3 to Form 8-K
(Commission File No. 0-22486) filed with the Commission on October 30, 1996).
10.50 Second Amended and Restated Credit Agreement among the Company, its subsidiaries and the Bank
of New York, as agent for the lenders (incorporated by reference to Exhibit 10.1 to Form 8-K
(Commission File No. 0-22486) filed with the Commission on November 27, 1996).
10.51* 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.
10.52* Amendment No. 1 to Asset Purchase Agreement, dated January 21, 1997, between Secret
Communications Limited Partnership and the Company.
10.53* Letter of Intent, dated March 4, 1997, between the Company and Sunshine Promotions, Inc.
10.54* Employment Agreement between the Company and Michael G. Ferrel.
10.55* 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.
10.56* Form of Consent and Amendment to the Second Amendment and Restated Credit Agreement, dated
March 24, 1997, between the Company and the Lenders.
10.57* Form of Amendment No. 2 to Asset Purchase Agreement, dated between Secret Communications,
Inc. Limited Partnership and the Company.
10.58* Master Richmond Station Group Agreement, dated as of December 17, 1996, among the Company,
ABS Communications Incorporated, Kenneth Brown, EBF Partners, ABS Communications, L.L.C.,
ABS Richmond Partners, L.P, ABS Richmond Partners II, L.P., ABS Richmond Towers, L.P. and J.
Edwin Conrad.
10.59* Convertible Note Agreement, dated as of December 17, 1996, between ABS Communications, L.L.C.,
as borrower and the Company, as lender.
10.60* SFX Contribution Agreement, dated as of December 17, 1996, among Liberty Acquisition
Subsidiary Corporation, Liberty Broadcasting of Maryland II, the Company and ABS Communications, L.L.C.
11.1* Statement regarding computation of per share earnings.
21.1* Subsidiaries of the Company
23.1* Consent of Ernst & Young LLP.
23.2* Consent of Fisher Wayland Cooper Leader & Zaragoza LLP.
23.3* Consent of BIA Publications, Inc.
27.1* Financial Data Schedule
</TABLE>
- -------------
- 39 -
<PAGE>
* filed herewith
(b) The following reports on Form 8-K were filed during the fiscal quarter
ended December 31, 1996.
On October 3, 1996, the Company filed a report on Form 8-K in
connection with (i) the amendment of its merger agreement with MMR, (ii) the
entering into of a memorandum of understanding with respect to certain
litigation, (iii) the entering into of a loan agreement with MMR, (iv) the
entering into of agreements with respect to: the Jackson Acquisitions, the
Louisville Dispositions, the Albany Acquisition, the exchange of certain
stations operating in Charlotte, North Carolina, the Richmond Acquisition and
the Dallas Acquisition.
On October 30, 1996, the Company filed a report on Form 8-K in
connection with Supplement No. 1 to the Company's Joint Proxy
Statement/Prospectus.
On November 1, 1996, the Company filed a report on Form 8-K
containing certain financial statements of radio stations WRFX-FM, WEDJ-FM and
WKSS-FM.
On November 27, 1996 the Company filed a report on Form 8-K in
connection with (i) the consummation of the MMR Merger, (ii) the termination of
a letter of intent with respect to the exchange of certain radio stations,
(iii) the approval of an amendment to the Company's Certificate of
Incorporation to increase the authorized shares of Class A Common Stock and
(iv) certain pro forma financial information.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SFX BROADCASTING, INC.
By:
Name: Robert F.X. Sillerman
Title: Executive Chairman
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE Title Date
<S> <C> <C>
/s/ Robert F.X. Sillerman
------------------------------ Executive Chairman and Director March 31, 1997
Robert F.X. Sillerman (principal executive officer)
/s/ Michael G. Ferrel
------------------------------ Chief Executive Officer and Director March 31, 1997
Michael G. Ferrel
/s/ D. Geoffrey Armstrong
------------------------------ Chief Operating Officer, Executive March 31, 1997
D. Geoffrey Armstrong Vice President and Director
/s/ Thomas P. Benson
------------------------------ Chief Financial Officer, Treasurer March 31, 1997
Thomas P. Benson and Director (principal financial and
accounting officer)
/s/ Howard J. Tytel
------------------------------ Executive Vice President, Secretary March 31, 1997
Howard J. Tytel and Director
/s/ James F. O'Grady
------------------------------ Director March 28, 1997
James F. O'Grady
- 40 -
<PAGE>
/s/ Paul Kramer
------------------------------ Director March 31, 1997
Paul Kramer
/s/ Richard A. Liese
------------------------------ Director March 31, 1997
Richard A. Liese
/s/ Edward F. Dugan
------------------------------ Director March 28, 1997
Edward F. Dugan
- 41 -
<PAGE>
SFX BROADCASTING, INC. AND SUBSDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
PAGE
The following consolidated financial statements are included in
Item 8:
Report of Independent Auditors F-2
Consolidated Balance Sheets as of December 31, 1996 and 1995 F-3
Consolidated Statements of Operations for each
of the Three Years in the Period Ended December 31, 1996 F-5
Consolidated Statements of Shareholders' Equity for each
of the Three Years in the Period Ended December 31, 1996 F-6
Consolidated Statements of Cash Flows for each of the
Three Years in the Period Ended December 31, 1996 F-7
Notes to Consolidated Financial Statements F-8
The following consolidated financial statement schedule is included
in Item 14(a):
Schedule II - Valuation and Qualifying Accounts F-23
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
SFX Broadcasting, Inc.
We have audited the accompanying consolidated balance sheets of SFX
Broadcasting, Inc. and Subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1996. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of SFX Broadcasting, Inc. and Subsidiaries at December 31, 1996 and
1995, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
ERNST & YOUNG LLP
New York, New York
February 20, 1997,
except for Note 13, as to which the date
is March 27, 1997
F-2
<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(dollars in thousands)
</TABLE>
<TABLE>
<CAPTION>
December 31,
------------
1996 1995
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .................................................... $10,601 $11,893
Cash pledged for letters of credit (Note 13).................................. 20,000 --
Accounts receivable less allowance for doubtful accounts of $1,620 in
1996 and $922 in 1995 including related party receivable of $250 in 1996
(Note 9) .................................................................. 47,275 18,034
Assets under contract for sale (Note 2)....................................... 8,352 --
Prepaid broadcast rights and other current assets ............................ 2,461 1,022
--------------- --------------
Total current assets ................................................... 88,689 30,949
--------------- --------------
Property and equipment:
Land ......................................................................... 6,791 3,179
Buildings and improvements ................................................... 11,485 6,265
Equipment and furniture ...................................................... 54,736 14,093
--------------- --------------
73,012 23,537
Less accumulated depreciation and amortization ............................... (10,192) (6,770)
--------------- --------------
Net property and equipment ............................................. 62,820 16,767
Intangible assets:
Broadcast licenses ........................................................... 558,640 118,724
Goodwill .................................................................... 98,165 11,209
Deferred financing costs ..................................................... 19,504 8,391
Other ........................................................................ 4,727 4,719
------------ --------------
681,036 143,043
Less accumulated amortization ................................................ (16,933) (13,500)
------------ --------------
Net intangible assets .................................................. 664,103 129,543
Deposits and other payments for pending acquisitions.......................... 31,692 4,556
Notes receivable from related parties (Note 9)................................ -- 4,439
Other assets ................................................................. 12,023 1,083
------------ --------------
TOTAL ASSETS ........................................................... $859,327 $187,337
============ ==============
</TABLE>
See accompanying notes
F-3
<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(dollars in thousands)
<TABLE>
<CAPTION>
December 31,
------------
1996 1995
---- ----
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................................................. $10,921 $4,005
Accrued expenses.............................................................. 21,913 4,736
Accrued interest and dividends................................................ 7,111 2,303
Current portion of long-term debt (Note 5).................................... 231 260
Current portion of capital lease obligations (Note 11)........................ 150 311
------------ -----------
Total current liabilities............................................... 40,326 11,615
Long-term debt, less current portion (Note 5)................................. 480,875 80,609
Capital lease obligations, less current portion (Note 11)..................... 204 670
Other liabilities............................................................. -- 682
Deferred income taxes (Note 8)................................................ 91,352 7,415
------------ -----------
Total liabilities....................................................... 612,757 100,991
Redeemable preferred stock (Note 6)........................................... 152,053 3,285
Commitments and contingencies (Note 11)
Shareholders' Equity (Note 7):
Class A Voting common stock, $.01 par value; 100,000,000 shares authorized;
8,089,367 issued and 8,063,348 outstanding at December 31,
1996 and 6,458,215 outstanding at December 31, 1995 ..................... 81 64
Class B Voting convertible common stock, $.01 par value; 10,000,000
shares authorized; 1,208,810 issued and 1,064,936 outstanding at
December 31, 1996 and 1,000,000 outstanding at December 31, 1995 12 10
Additional paid-in capital.................................................... 183,866 115,184
Treasury Stock; 170,192 shares at December 31, 1996........................... (6,393) --
Accumulated deficit........................................................... (83,049) (32,197)
------------ -----------
Total shareholders' equity.................................................... 94,517 83,061
------------ -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................................... $859,327 $187,337
============ ===========
</TABLE>
See accompanying notes
F-4
<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
------------ ------------ -------------
<S> <C> <C> <C>
Gross revenues............................................................... $ 162,011 $ 87,140 $ 63,116
Less agency commissions...................................................... (18,950) (10,310) (7,560)
------------- ------------ --------------
Net revenues......................................................... 143,061 76,830 55,556
Station operating expenses.................................................. 92,816 51,039 33,956
Depreciation, amortization, duopoly integration costs and acquisition related
costs (Notes 2 and 3).................................................... 17,311 9,137 5,873
Corporate expenses, including related party expenses of $151 in 1996, $330
in 1995 and $178 in 1994, net of related party advisory fees of $802
in 1996 (Note 9)........................................................ 6,313 3,797 2,964
Non-recurring and unusual charges, including adjustments to broadcast rights
agreement (Note 10)...................................................... 28,994 5,000 --
------------- ------------ --------------
Total operating expenses............................................. 145,434 68,973 42,793
------------- ------------ --------------
Operating (loss) income...................................................... (2,373) 7,857 12,763
Investment income (loss), net of equity in loss of uncosolidated subsidiary.. 4,017 650 (121)
Interest expense ............................................................ (34,897) (12,903) (9,332)
Loss on sale of radio station ............................................... (1,900) -- --
------------- ------------ --------------
(Loss) income before income taxes and extraordinary item .................... (35,153) (4,396) 3,310
Income tax expense (Note 8) ................................................. 480 -- 1,474
------------- ------------ --------------
(Loss) income before extraordinary item ..................................... (35,633) (4,396) 1,836
Extraordinary loss on debt retirement (Note 5)............................... 15,219 -- --
------------- ------------ --------------
Net (loss) income.................................................... (50,852) (4,396) 1,836
Redeemable preferred stock dividends and accretion........................... 6,061 291 348
------------- ------------ --------------
Net (loss) income applicable to common stock........................ $ (56,913) $ (4,687) $ 1,488
============= ============= ==============
(Loss) income applicable to common stock per share before
extraordinary item....................................................... $ (5.51) $ (0.71) $ 0.26
Extraordinary loss on debt retirement per common share....................... (2.01) -- --
------------- ------------ --------------
Net (loss) income per common share...........................................$ (7.52) $ (0.71) $ 0.26
============= ============ ==============
Weighted average common shares outstanding................................... 7,563,600 6,595,728 5,792,385
============= ============ ==============
</TABLE>
See accompanying notes
F-5
<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
Years Ended December 31, 1994, 1995, and 1996
(dollars in thousands)
<TABLE>
<CAPTION>
Unrealized
Holding Loss
Class A Class B Class C Paid-in Treasury on Short Term Accumulated
Common Common Common Capital Stock Investments Deficit Total
------ ------ ------ ------- --------- ----------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 ................ $ 37 $ 9 $ 11 $ 78,178 $ -- $ -- $ (29,637) $ 48,598
Accretion and dividends on
redeemable preferred stock .............. (348) (348)
Conversion of Class C Common
including fees and expenses (Note 7)..... 11 (11) (1,150) (1,150)
Reduction of equity issuance costs ........ 105 105
Unrealized holding losses on short
term investments ........................ (185) (185)
Net income ................................ 1,836 1,836
------- --------- -------- --------- ---------- ------------- --------- ---------
Balance, December 31, 1994 ................ $ 48 $ 9 $ -- $ 76,785 $(185) $(27,801) $ 48,856
======= ========= ======== ========= ========== ============= ========== =========
Public offering, net of expenses .......... 17 39,149 39,166
Redemption of Class C Common (Note 7)...... (459) (459)
Accretion and dividends on redeemabl
preferred stock ........................ (291) (291)
Conversion of Class A Common to Class B --
Common (Note 7)......................... (1) 1
Decrease in unrealized holding losses ..... 185 185
Net loss .................................. (4,396) (4,396)
------- --------- -------- --------- ---------- ------------- --------- ---------
Balance, December 31, 1995 ................ $ 64 $ 10 $ -- $115,184 $ -- $ -- (32,197) $ 83,061
======= ========= ======== ========= ========== ============= ========== =========
Issuance costs of Class D Redeemable
Preferred Stock ........................ (6,054) (6,054)
Accretion and dividends on redeemable
preferred stock ........................ (6,061) (6,061)
Issuance of stock options ................. 370 370
Issuance of warrants to SCMC
(Notes 9 and 10) ........................ 8,905 8,905
Issuance of equity securities for
MMR Merger (Note 7) ..................... 17 2 71,522 71,541
Repurchase of common stock (Note 10)....... (6,393) (6,393)
Net loss .................................. (50,852) (50,852)
------- --------- -------- --------- ---------- ------------- --------- ---------
Balance, December 31, 1996 ................ $ 81 $ 12 $ -- $183,866 $ (6,393) $ -- $(83,049) $ 94,517
======= ========= ======== ========= ========== ============= ========== =========
</TABLE>
See accompanying notes
F-6
<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Operating activities:
Net (loss) income ........................................................ $ (50,852) $ (4,396) $ 1,836
Adjustments to reconcile net (loss) income to net cash (used in)
provided by operating activities:
Depreciation and amortization ...................................... 16,174 7,757 5,873
Extraordinary loss on debt repayment ............................... 15,219 -- --
Noncash portion of non-recurring and unusual charge ................ 9,878 -- --
Loss on sale of radio station and other non cash items ............. 1,900 (207) 826
Deferred taxes ..................................................... (710) -- 1,309
Changes in assets and liabilities, net of amounts acquired:
Accounts receivable ............................................. (13,839) (5,164) (1,362)
Prepaid broadcasting rights and other assets .................... (1,704) 2,052 (4,476)
Accrued interest and dividends .................................. 3,841 6 (47)
Accounts payable, accrued expenses and other liabilities ........ 6,646 451 (2,785)
----------- ------------ -----------
Net cash (used in) provided by operating activities ............ (13,447) 499 1,174
Investing activities:
Purchase of stations and related business, net of cash acquired ... (493,433) (26,057) (4,604)
Proceeds from sales of stations and other assets.................... 56,943 703 --
Deposits and other payments for pending acquisitions ............... (30,799) (3,000) --
Purchase of property and equipment ................................. (3,224) (3,261) (1,951)
Purchase of short-term investments ................................. -- -- (3,019)
Sale of short-term investments ..................................... -- 7,918 3,390
Loans and advances to related parties .............................. -- (2,000) --
----------- ------------ -----------
Net cash used in investing activities .......................... (470,513) (25,697) (6,184)
Financing activities:
Payments on long-term debt, including prepayment premiums .......... (110,396) (22,521) (333)
Additions to debt issuance costs ................................... (19,505) (2,139) --
Proceeds from issuance of senior and subordinated debt ............. 501,500 22,000 --
Net proceeds from sale of preferred stock .......................... 143,445 -- --
Dividends paid on preferred stock .................................. (4,983) -- --
Proceeds from issuance of common stock ............................. -- 39,166 --
Purchase of treasury stock ......................................... (6,393) -- --
Redemption of preferred stock ...................................... (1,000) (1,000) (1,750)
Retirement of Class C Common Stock ................................. -- (459) --
Decrease in accrued stock acquisition costs ........................ -- (1,150) --
----------- ------------ -----------
Net cash provided by (used in) financing activities ............. 502,668 33,897 (2,083)
Net increase in cash and cash equivalents ................................. 18,708 8,699 7,093
Cash and cash equivalents at beginning of period .......................... 11,893 3,194 10,287
----------- ------------ -----------
Cash and cash equivalents at end of period ................................ $ 30,601 $ 11,893 $ 3,194
=========== ============ ===========
Supplemental disclosure of cash flow information
Cash paid during the year for:
Interest ............................................................... $ 30,898 $ 12,903 $ 9,464
Income taxes ........................................................... $ 81 -- $ 300
Supplemental schedule of noncash financing activities: Issuance of equity
securities for MMR Merger (Note 2)
Issuance of warrants in connection with SCMC termination agreement (Note 10)
</TABLE>
See accompanying notes
F-7
<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
SFX Broadcasting, Inc. (the "Company"), a Delaware corporation, is one
of the largest radio station groups in the United States. At December 31, 1996,
the Company owned and operated, provided programming to or sold advertising on
behalf of fifty-one FM stations and seventeen AM stations serving the following
twenty-three markets: Washington, D.C./Baltimore, Maryland; Houston, Texas;
Nassau-Suffolk, New York; San Diego, California; Providence, Rhode Island;
Charlotte, North Carolina; Hartford, Connecticut; Greensboro, North Carolina.;
Nashville, Tennessee; Raleigh-Durham, North Carolina; Jacksonville, Florida;
Richmond, Virginia; Albany, New York; Greenville-Spartanburg, South Carolina;
Tucson, Arizona; Springfield/Northampton, Massachusetts; Little Rock, Arkansas;
Wichita, Kansas; Daytona Beach, Florida; New Haven, Connecticut; Jackson,
Mississippi; Biloxi, Mississippi and Myrtle Beach, South Carolina.
NOTE 2 - ACQUISITIONS AND DISPOSITIONS
In December 1996, the Company acquired substantially all of the assets
of WHSL-FM, operating in Greensboro, North Carolina, for a purchase price of
$6.0 million (the"Greensboro Acquisition") and exchanged radio station KRLD-AM,
Dallas, Texas, and the Texas State Networks for radio station KKRW-FM, Houston,
Texas (the "Houston Exchange"). The Houston Exchange was structured as a
substantially tax free exchange of like kind assets. No gain or loss was
recorded on the Houston Exchange as the book values of KRLD-AM and the Texas
State Networks approximated the fair value of the assets of KKRW-FM.
In November 1996, the Company consummated its merger with MMR (the
"MMR Merger"), pursuant to which it acquired Multi-Market Radio, Inc. ("MMR")
in exchange for 1,631,450 shares of Class A Common Stock, 208,810 shares of
Class B Common Stock and other equity securities with a total market value for
all securities issued of approximately $71.5 million (Note 7). Concurrently
with the consummation of the MMR Merger, the Company paid approximately $43.0
million to satisfy outstanding indebtedness of MMR. MMR was organized in 1992
by the Company's executive chairman and another officer and director of the
Company. The Company's executive chairman owned a substantial equity interest
in MMR which was exchanged for Class B Common Stock of the Company upon the
consummation of the MMR Merger. MMR owned and operated, provided programming to
or sold advertising on behalf of 13 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. MMR had entered into agreements to sell two stations operating in
Myrtle Beach, South Carolina (Note 13) and one station operating in Little
Rock, Arkansas (the "MMR Dispositions"). The Little Rock station will be sold
to Triathlon Broadcasting, Inc. ("Triathlon"), a related party. The MMR
Dispositions are classified as assets under contract for sale in the
accompanying balance sheet. The Company also terminated a 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.
In October 1996, the Company sold radio station KTCK-AM, Dallas, Texas
for approximately $13.4 million, net of certain sale expenses (the "Dallas
Disposition"). The Company acquired the assets of KTCK-AM in Dallas, Texas (the
"Dallas Acquisition") in September 1995 from a third party for $8,633,000 in
cash (including $133,000 in transaction costs) and $2,000,000 of 6% current
coupon Series C Redeemable Preferred Stock (Note 6). The purchase agreement
contains a provision for a contingent payment not to exceed $7,500,000 payable
in 1998 if the Company's Dallas properties achieve certain ratings and
financial goals. The prior owner has commenced litigation against the Company
as a result of the parties' inability to agree on the amount of the contingent
payment due to the prior owner in connection with the Dallas Disposition and
the Houston Exchange. The Company recorded a loss of $1.9 million on the Dallas
Disposition, based on its estimate of the ultimate resolution of the
contingency. The Company had provided programming to KTCK-AM pursuant to an LMA
since March 1, 1995.
In July 1996, the Company acquired Liberty Broadcasting Inc. ("Liberty
Broadcasting") for a purchase price of approximately $239.7 million, including
$10.4 million for working capital (the "Liberty Acquisition"). Liberty
Broadcasting was a privately-held radio broadcasting company which owned and
operated, provided programming to or sold advertising on behalf of 14 FM and
six AM radio stations (the "Liberty Stations") located in six markets:
Washington, DC/Baltimore, Maryland; Nassau-Suffolk, New York; Providence, Rhode
Island; Hartford, Connecticut; Albany, New York and Richmond, Virginia.
F-8
<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996
In July 1996, the Company sold three of the Liberty Stations operating
in the Washington, DC/Baltimore, Maryland market (the "Washington
Dispositions") for $25.0 million. No gain or loss was recognized on the
Washington Dispositions.
In July 1996, the Company acquired from Prism Radio Partners L.P.
("Prism"), 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 September
1996, the Company also acquired from Prism substantially all of the assets of
three radio stations operating in Louisville, Kentucky (the "Louisville
Stations"), upon renewal of the Federal Communications Commission ("FCC")
licenses of such stations (the "Louisville Acquisition") (collectively the
"Prism Acquisition"). The total purchase price for the Prism Acquisition was
approximately $105.3 million. In October 1996, the Company sold the Louisville
Stations (the "Louisville Disposition") for $18.5 million.
The Company recognized no gain or loss on the Louisville Disposition.
In July 1996, the Company acquired substantially all of the assets of
WJDX-FM, Jackson, Mississippi for a purchase price of approximately $3.2
million. In addition, in August 1996, the Company acquired substantially all of
the assets of WSTZ-FM and WZRX-AM, each operating in Jackson, Mississippi, for
approximately $3.5 million (collectively, the " Jackson Acquisitions").
In June 1996, the Company acquired substantially all of the assets of
WROQ-FM, Greenville, South Carolina, for approximately $14.0 million (the
"Greenville Acquisition") and WTRG-FM and WRDU-FM, both operating in Raleigh,
North Carolina, and WMFR-AM, WMAG-FM and WTCK-AM (formerly WWWB-AM), each
operating in Greensboro, North Carolina for approximately $36.8 million (the
"Raleigh-Greensboro Acquisition").
In February 1996, the Company acquired radio stations WTDR-FM and
WLYT-FM (formerly WEZC-FM), both operating in Charlotte, North Carolina (the
"Charlotte Acquisition"), for an aggregate purchase price of $24.3 million.
Costs of $785,000 related to the integration and reformatting of the Charlotte
stations were included in depreciation, amortization, duopoly integration costs
and acquisition related costs in 1996.
In April 1995, the Company acquired all of the outstanding stock of
Parker Broadcasting Company ("Parker"), the owner and licensee of radio station
KYXY-FM in San Diego, California (the "San Diego Acquisition"), for
approximately $17,424,000 (including transaction costs of $831,000 of which
$175,000 was paid to SCMC for providing or paying for legal services necessary
in negotiating and documenting the transaction), including a $650,000 three
year covenant not to compete with the former owners. In addition, costs of
$1,380,000 related to the integration of KYXY-FM and reformatting of its
duopoly partner, KPLN-FM, were included in depreciation, amortization, duopoly
integration costs and acquisition related costs in 1995. The Company had
provided programming to and sold advertising on behalf of KYXY-FM pursuant to
an LMA since January 18, 1995.
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 $23,437,000, $27,747,000, $13,299,000, $4,669,000, $74,579,000,
$185,420,000, $114,674,000 and $6,710,000 for the Charlotte Acquisition,
Raleigh-Greensboro Acquisition, Greenville Acquisition, Jackson Acquisition,
Prism Acquisition, Liberty Acquisition, MMR Merger and the Greensboro
Acquisition, respectively, in 1996 and $21,136,000, and $9,250,000 for KYXY-FM,
and KTCK-AM, respectively, in 1995. 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.
The following unaudited pro forma summary presents the consolidated
results of operations for the years ended December 31, 1996, 1995 and 1994
as if the acquisitions for any given year and the subsequent year had occurred
at the beginning of such year after giving effect to certain adjustments,
including amortization of goodwill and interest expense on the acquisition
debt. These pro forma results have been prepared for comparative purposes
only and do not purport to be indicative of what would have occurred had
the acquisition been made as of that date or of results which may occur in
the future.
F-9
<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996
<TABLE>
<CAPTION>
Pro Forma
Year Ended December 31
In thousands except per share data
(Unaudited)
------------------------------------------------------
1996 1995 1994
------------------- --------------------- -----------
<S> <C> <C> <C>
Net revenues $ 199,650 $ 189,595 $ 62,323
=============== =============== =============
Income (loss) before
extraordinary item
and cumulative
effect of change in
accounting principal $ (37,027) $ (16,978) $ 2,332
================ ================ =============
Net income (loss) $ (52,246) $ (32,197) $ 1,283
================ ================ =============
Net income (loss)
applicable to
common stock $ (61,964) $ (42,153) $ 707
================ ================ ==============
Net income (loss)
per common share $ (6.79) $ (4.62) $ 0.12
================ ================= =============
Weighted average
common shares outstanding 9,128,284 9,128,284 5,792,385
================ ================= =============
</TABLE>
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation. The Company
accounts for investments in which it has a 50% or less ownership interest under
the equity method.
Cash and Cash Equivalents
All highly liquid investments with an original maturity of less than
three months are classified as cash equivalents. The carrying amounts of cash
and cash equivalents reported in the balance sheet approximate their fair
values.
Short-term investments
Available - for - sale securities were investments in mutual funds and
were carried at fair value, with the unrealized gains and losses reported in a
separate component of shareholders' equity. Realized gains and losses and
declines in value judged to be other than temporary on available - for - sale
securities are included in investment income or loss. The cost of securities
sold is based on the specific identification method. Interest and dividends on
securities classified as available - for - sale are included in investment
income.
Property and Equipment
Property and equipment are stated at cost. Depreciation and
amortization is provided on the straight-line method over the estimated useful
lives of the assets as follows:
Buildings and improvements 7-20 years
Equipment and furniture 5-7 years
Leasehold improvements are amortized over the shorter of the lease
term or estimated useful lives of the assets. Amortization of assets recorded
under capital leases is included in depreciation expense.
Amortization of Intangible Assets
Broadcast licenses and goodwill are amortized using the straight-line
method over 40 years. Other intangible assets are being amortized using the
straight-line method over their estimated remaining useful lives from 3 to 36
years. Debt issuance costs and discounts are being amortized by the
straight-line method, which closely approximates the interest method, over the
life of the respective debt.
In 1996 the Company adopted FAS No. 121 "Accounting for the Impairment
of Long-Lived Assets". Under FAS No. 121, the carrying values of intangible
assets are reviewed if the facts and circumstances suggest that they may be
impaired. If this review indicates the intangible assets will not be
recoverable as determined based on the undiscounted cash flows of the Company
over the remaining amortization period, the Company's carrying value of the
F-10
<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996
intangible assets will be reduced to their estimated fair values, if lower than
the carrying value. The impact of this adoption had no effect on the
consolidated financial statements.
Barter Transactions
The Company barters unsold advertising time for products and services.
Such transactions are recorded at the estimated fair value of the products or
services received. Barter revenue is recorded when commercials are broadcast
and related expenses are recorded when the bartered product or service is used.
For the years ended December 31, 1996, 1995 and 1994, the Company recorded
barter revenue of $8,029,000, $4,961,000 and $2,905,000 respectively, and
expenses of $7,476,000, $4,811,000 and $2,738,000 respectively.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Local Marketing Agreements / Joint Sales Agreements
From time to time, the Company enters into LMAs and JSAs, with respect
to radio stations owned by third parties including radio stations which it
intends to acquire. Terms of the agreements generally require the Company to
pay a monthly fee in exchange for the right to provide station programming and
sell related advertising time in the case of an LMA or sell advertising in the
case of a JSA. The agreements terminate upon the acquisition of the property.
The fees are expensed as incurred. The Company classifies the LMA fees as
interest expense to the extent interest is imputed based on the purchase price
of the broadcast property. The Company accounts for payments received pursuant
to LMAs of owned stations as net revenue to the extent that the payment
received represents a reimbursement of the Company's ownership costs.
Advertising Costs
Advertising costs are expensed as incurred and approximated
$5,068,000, $3,336,000, and $1,828,000 in 1996, 1995 and 1994, respectively.
Per Share Data
Income (loss) per common share is based on income (loss) applicable to
common shareholders for the period divided by the weighted average number of
shares of common stock outstanding plus common share equivalents (in periods in
which they have a dilutive effect) determined using the treasury stock method.
Federal Income Taxes
The Company and its subsidiaries report Federal income taxes using the
liability method in accordance with Statement of Financial Accounting Standards
No. 109.
Concentration of Credit Risk
The Company's revenue and accounts receivable primarily relates to the
sale of advertising within the radio stations' broadcast areas. Credit is
extended based on an evaluation of the customers financial condition, and
generally collateral is not required. Credit losses are provided for in the
financial statements and consistently have been within management's
expectations.
Reclassification
Certain amounts in 1994 and 1995 have been reclassified to conform to
the 1996 presentation.
NOTE 4 - CASH AND CASH EQUIVALENTS
F-11
<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996
The Company invests excess funds in highly liquid short-term interest
bearing obligations. The Company considers short-term investments held for
ninety days or less as cash equivalents. Due to the short maturity of these
instruments, the carrying amounts approximate the fair values.
The Company recognized investment income (loss) of $4,017,000,
$650,000 and ($121,000) for the years ended 1996, 1995 and 1994, respectively.
The investment loss for 1994 includes a charge of $491,000 in the fourth
quarter related to the permanent decline of certain short-term investments
available - for - sale at December 31, 1994.
NOTE 5 - DEBT AND SUBORDINATED NOTES
Debt consists of the following at December 31, 1996 and 1995 (in thousands):
1996 1995
---- ----
Promissory notes; interest at 10%
payable in monthly installments,
maturing in 1998, collateralized
by certain assets with a book value of
$1,157 at December 31, 1996 $ 540 $ 869
Senior subordinated notes 450,566 80,000
Senior credit facility 30,000 --
-------------- --------------
481,106 80,869
Less current portion (231) (260)
-------------- --------------
$ 480,875 $ 80,609
============== ==============
The aggregate contractual maturities of long-term debt for the years
ending December 31, excluding the senior credit facility which was repaid in
1997, are as follows: 1997 - $231,000; 1998 - $309,000; 1999 - $0; 2000 -
$566,000; 2001 - $0; thereafter -$450,000,000.
Included in 1996 interest expense is $385,000, $333,600 and $538,000
related to the LMA fees associated with the Greenville, Charlotte and Jackson
Acquisitions, respectively. Interest expense in 1995 included $2,542,000 and
$323,000 related to the LMA fees associated with the Charlotte and Dallas
Acquisitions, respectively.
In May 1996, the Company completed a private placement of $450.0
million in aggregate principal amount of its 10.75% Senior Subordinated Notes
due 2006 (the "Note Offering"). Interest is payable semi-annually on May 15 and
November 15. The notes are unsecured obligations of the Company and are
subordinate to all senior debt of the Company. The Company incurred issuance
costs totaling $15.3 million related to the Note Offering which were recorded
as deferred financing costs. Pursuant to its contractual obligations with the
original purchasers of these securities, the Company subsequently registered
these securities with the Securities and Exchange Commission.
Concurrently with the closings of the Note Offering and the Preferred
Stock Offering (Note 6), the Company completed a tender offer (the "Tender
Offer") and related consent solicitation with respect to its 11.375% Senior
Subordinated Notes due 2000 (the "Old Notes"). SFX repurchased approximately
$79.4 million in principal amount of the $80.0 million in principal amount of
the Old Notes outstanding in the Tender Offer. The Company also entered into a
supplemental indenture amending the terms of the indenture pursuant to which
the remaining Old Notes were issued.
In March 1995, the Company entered into a $50.0 million senior credit
facility (the "Old Credit Facility") pursuant to which the Company made
borrowings to finance the Charlotte Acquisition (Note 2) and certain working
capital needs. On May 31, 1996 all amounts outstanding under the Old Credit
Facility were repaid with a portion of the proceeds of the Note Offering and
the Preferred Stock Offering.
In connection with the repurchase of the Old Notes and the repayment
of the Old Credit Facility, the Company recorded an extraordinary loss on debt
retirement of approximately $15.2 million to reflect the cost of prepayment
premiums and the write-off debt of issuance costs.
On November 22, 1996, the Company entered into a new credit facility
(the "New Credit Agreement"), a senior revolving credit facility providing for
borrowings of up to $225.0 million. Borrowings under the New 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
F-12
<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996
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 New 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, including but not limited to achieving certain cash flow levels
or receiving certain proceeds from asset disposition as defined. The Company
must also pay annual commitment fees of 0.5% of the unutilized total
commitments under the New Credit Agreement. The Company's obligations under the
New 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. At December 31, 1996, the weighted average interest
rate was 8.36%. The outstanding balance at December 31, 1996 was repaid with
the proceeds of the Series E Preferred Stock Offering (Note 13).
The New Credit Agreement and the indentures related to the Company's
subordinated notes contain covenants that impose certain restrictions on the
Company.
The fair value of the Company's senior subordinated notes was
$475,350,000 at December 31, 1996 based upon the quoted market price. The book
value of the Company's promissory notes and senior credit facility approximates
fair value, which was estimated using discounted cash flow analysis based on
the Company's incremental borrowing rate for similar types of borrowing
arangements.
NOTE 6 - REDEEMABLE PREFERRED STOCK
Preferred stock consists of the following at December 31, 1996 and 1995
(dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Preferred Stock of the Company, $.01 par value, 10,012,000 shares authorized:
Series B Redeemable, 1,000 and 2,000 shares issued and outstanding in 1996 and
1995, respectively, includes accreted dividends of $182 in 1996 and
$269 in 1995 $ 917 $ 1,735
Series C Redeemable, 2,000 shares issued and outstanding in 1996 and 1995,
includes accreted dividends of $108 in 1996 and $22 in 1995 1,636 1,550
Series D Cumulative Convertible Exchangeable Preferred Stock, 2,990,000
shares issued and outstanding 149,500 --
-------------- ---------------
$ 152,053 $ 3,285
============== ===============
</TABLE>
The Series B Redeemable Preferred Stock is non-voting, not entitled to
receive dividends and is required to be redeemed in October 1997 at the
liquidation value of $1,000 per share. In January 1994, the Company repurchased
1,000 shares of Series B Redeemable Preferred Stock due October 1998 for
$750,000. The Series B Redeemable Preferred Stock ranks senior to the Company's
common stock as to dividends and liquidation rights.
The shares of Series C Redeemable Preferred Stock receive cumulative
dividends equal to 6% per annum paid by the Company in arrears on a quarterly
basis. The shares are non-voting and are redeemable by the Company after
September 15, 1998 or by the holder after September 15, 2000, at the
liquidation value of $1,000 per share. The Series C Redeemable Preferred Stock
ranks senior to other preferred stock and to the Company's common stock as to
dividends and liquidation rights.
The shares of Series D Cumulative Convertible Exchangeable Preferred
Stock (the "Series D Preferred Stock") receive cumulative dividends equal to 6
1/2% per annum ($0.8125 per share) which are paid by the Company on a quarterly
basis. The shares of Series D Preferred Stock are redeemable at the option of
the Company on or after June 1, 1999, in whole or in part, at the redemption
prices ranging from 104.5% in 1999 to 100.0% in 2006, plus accrued and unpaid
dividends to the redemption date. The Series D Preferred Stock is not subject
to any scheduled mandatory redemption prior to its maturity. The Series D
Preferred Stock will mature on May 31, 2007.
F-13
<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996
The Series D Preferred Stock is convertible at the option of the
holder into shares of Class A Common Stock of the Company at any time prior to
maturity at a conversion price of $45.51 per share (equivalent to a conversion
rate of 1.0987 shares per $50 in Liquidation Preference of Series D Preferred
Stock), subject to adjustment in certain events. The Series D Preferred Stock
is exchangeable in full but not in part, at the Company's option on any
dividend payment date, for the Company's 6 1/2% Convertible Subordinated
Exchange Notes due 2007.
In the event of a change of control, each holder of Series D Preferred
Stock may require the Company to repurchase its Series D Preferred Stock, in
whole or in part, at a repurchase price of 101% of the Liquidation Preference
of the Series D Preferred Stock to be repurchased, plus accrued dividends to
the repurchase date in cash. The Company may satisfy its repurchase obligation
upon a change of control through the issuance of shares of Class A Common Stock
(valued at 95% of the current market price.)
The Series D Preferred Stock ranks senior to the Company's common
stock as to dividends and liquidation rights.
NOTE 7 - SHAREHOLDERS' EQUITY
COMMON STOCK
The holders of Class A Common Stock are entitled to one vote per share
and the holders of Class B Common Stock are entitled to ten votes per share on
all matters to be voted on by stockholders, except (i) for the election of
directors, (ii) with respect to any "going private" transaction between the
Company and its Chairman, or any of his affiliates, and (iii) as otherwise
provided by law. In November 1994, the Board of Directors approved the
conversion of 73,266 shares of Class A Common Stock held by the Chairman and
the President of the Company to Class B Common Stock. The conversion occurred
on May 5, 1995. The holders of Class A and Class B Common Stock share ratably
in all dividends and other distributions. At December 31, 1996, 1,064,936
shares of Class A Common Stock, authorized but unissued, are reserved for
conversion of the Class B Common Stock. Shares of the Company's Class B Common
Stock convert on a share per share basis into the same number of Class A Common
Stock under certain circumstances.
In December 1994, pursuant to a transfer, 1,071,429 shares of Class C
Common Stock held by an affiliate of the Company were converted into Class A
Common Stock. In connection with this conversion, the Company agreed to pay
Sillerman Communications Management Corporation ("SCMC"), a corporation
controlled by the Company's Chairman, a $1,000,000 fee based upon: (i) SCMC's
negotiation of the transfer on behalf of the Company; (ii) SCMC's surrender of
certain contractual rights and economic interests with respect to the
transferred stock, which would otherwise block the stock transfer; (iii) the
restatement, including significant favorable adjustments, of the registration
rights agreement pursuant to which the transferred stock were originally
issued; (iv) the obtaining the rights of first refusal with respect to
subsequent transfers of the stock; (v) the Company's belief that the transfer
will have a favorable effect on the market of the Company's Class A Common
Stock and (vi) SCMC's assumption of certain legal costs of the transaction. The
Company's Board of Directors may consider additional fees in the event that
actual benefits to the Company from this transaction warrant additional
compensation. This transaction was the subject of a Fairness Opinion from an
independent investment banking firm. The Company charged paid-in capital for
the $1,000,000 fee and for legal, accounting, and valuation services of
$150,000 related to this transaction.
In December 1995, 16,784 shares of non-voting Class C Common Stock
were repurchased and retired by the Company for $459,000. In May 1996, 26,318
shares of Class A Common Stock and 143,874 shares of Class B Common Stock were
repurchased from the Company's former President (Note 10).
In July 1995, the Company completed an offering of 1,725,000 shares of
its Class A Common Stock for $24.50 per share. The net proceeds of the offering
were $39,166,000 after underwriting discounts, commissions and other costs of
the offering. The net proceeds were utilized to repay senior indebtedness of
$21,500,000 and to fund the Dallas Acquisition and a portion of the Charlotte
Acquisition (Note 2).
F-14
<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996
SECURITIES ISSUED IN MMR MERGER
The following MMR warrants and options issued and outstanding at the
date of the merger were assumed by the Company and are now convertible into SFX
shares:
<TABLE>
<CAPTION>
Securities # MMR SFX
of MMR Exercise # of SFX Excercise
Securities Shares Price Securities Price
- ------------------------------------------------------- ---------------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Underwriters warrants exercisable through July 22, 1998 125,000 $9.10 37,288 $30.51
Class B warrants exercisable through March 22, 1999 749,460 11.50 217,162 $38.55
Unit Purchase Options exercisable through March 22, 1999
(entitle the holder to purchase one share of MMR
Common Stock, one MMR Class A Warrant and one 160,000 $7.75-$11.50 47,728 $25.98-$38.55
MMR Class B Warrant)
Stock options exercisable at various dates through 305,000 $5.00-$10.50 90,982 $16.76-$35.20
November 22, 2006
Warrants issued to Huff Alternative Income Fund, L.P.
exercisable through March 31, 2005 728,000 $7.75 223,564 $25.98
</TABLE>
Each MMR warrant and option is exercisable for that number of shares of
the Company's Class A Common Stock equal to the product of the number of MMR
shares covered by the security times 0.2983 and the per share exercise price
for the share of the Company's Class A Common Stock issuable upon the exercise
of each warrant and option is equal the quotient determined by dividing the
exercise price per share of the MMR shares specified for such security by
0.2983.
STOCK OPTIONS
The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its employee stock options, as opposed to
the fair value accounting provided for under FAS Statement No. 123,
"Accounting for Stock-Based Compensation" ("Statement 123".)
Under stock option plans adopted annually since 1993, stock options to
acquire Class A Common Stock have been granted to certain officers, key
employees and other key individuals who perform services for the Company.
Options granted under these plans are generally granted at option prices equal
to the fair market value of the Class A Common Stock on the date of grant.
Terms of the options, determined by the Company, provided that the maximum
term of each option shall not exceed ten years and the options become fully
exercisable within five years of continued employment with the exception of
certain options granted to executives which were fully vested upon issuance.
At December 31, 1996, options outstanding had an average exercise price
of $20.95 and expiration dates ranging from December 1, 2003 to December 17,
2006.
F-15
<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Options outstanding at beginning of year 748,000 500,000 350,000
Option price $13.00-$21.25 $13.00-$13.50 $13.50
Options granted 349,000 248,000 150,000
Option price $27.25-$33.75 $21.25 $13.00
Options repurchased 187,000 - -
Option price $13.00-$21.25 - -
Options expired or canceled - - -
Options outstanding at end of year 910,000 748,000 500,000
Option price $13.00-$33.75 $13.00-$21.25 $13.00-$13.50
Options exercisable at end of year 461,200 153,000 110,000
</TABLE>
Pro forma information regarding net loss and loss per share is required
by Statement 123, and has been determined as if the Company had accounted for
its employee stock options under the fair value method of that statement. The
fair value for options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for 1996
and 1995: risk-free interest rate of 6.43% and 5.58%, respectively; no dividend
yield; volatility factor of the expected market price of the Company's common
stock of 0.372; and a weighted-average expected life of the option of 7 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value estimate,
in management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. Therefore, the impact
on the pro forma results of operations in 1996 and 1995 may not be
representative of the impact in future periods should additional options be
granted. The Company's pro forma information follows (in thousands except for
loss per share information):
1996 1995
------------ --------
Pro forma net loss applicable
to common stockholders $ (59,792) $ (4,899)
Pro forma loss per common share: $ (7.91) $ (0.74)
F-16
<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996
NOTE 8 - INCOME TAXES
The provision for income taxes for the years ended December 31, 1996, 1995 and
1994 is summarized in thousands as follows:
1996 1995 1994
------------------- ---------------- -----------------
Current
Federal............ $ -- $ -- $ 65
State.............. 1,190 -- 100
--------------- ---------------- -----------------
1,190 -- 165
--------------- ---------------- -----------------
Deferred
Federal............ -- -- 1,170
State.............. (710) -- 139
--------------- ---------------- -----------------
(710) -- 1,309
--------------- ---------------- -----------------
$ 480 $ -- $ 1,474
============= =============== ===============
The Company files a consolidated tax return for federal income tax
purposes. As a result of current losses, no federal tax provision was recorded
for the year ended December 31, 1996. The current income tax expense recorded
during 1996 is a result of current state and local income taxes in certain
states where subsidiaries file separate tax returns. Deferred state tax benefit
was recognized in 1996 attributable to the disposition of stations acquired in
transactions in which associated deferred tax liabilities were recorded in
purchase accounting. As a result of current losses and the deferred benefit
associated with the losses, no current or deferred expense or benefit was
recorded for the year ended December 31, 1995. The income tax expense recorded
during 1994 reflects increases in the excess of the financial statement basis
over tax basis in assets resulting from differences in amortization periods
offset, in part, by the projected reversal of temporary differences within the
carryforward period of available net operating losses.
At December 31, 1996, the company had total net operating loss
carryforwards of approximately $34,432,000 that will expire from 2003 through
2011, including net operating losses of acquired subsidiaries. Due to ownership
changes related to the acquisition of subsidiaries, the utilization of
approximately $10,603,000 of these losses is subject to various limitations.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The
significant components of the Company's deferred tax assets and liabilities as
of December 31, 1996 and 1995 are as follows (in thousands):
1996 1995
---------- ----------
Deferred Tax Assets:
Accounts receivable $ 563 $ 350
Net operating loss carryforwards 12,044 4,292
Management Service Contract 2,128 --
Writedown of broadcast rights agreement -- 484
Other reserves 646 --
Capital loss/AMT carryforwards 85 435
Accrued bonuses and other compensation 912 57
-------------- --------
Total deferred tax assets 16,378 5,618
Valuation allowance (5,623) (2,883)
-------------- -------
Net deferred tax assets 10,755 2,735
Deferred Tax Liabilities:
Property, plant and equipment (372) (354)
Intangible assets (101,658) (9,719)
Other (77) (77)
-------------- --------
Total deferred tax liabilities (102,107) (10,150)
-------------- --------
Net deferred tax liabilities $ (91,352) $ (7,415)
============== ========
The acquisition of Liberty Broadcasting and MMR resulted in the
recognition of deferred tax liabilities of approximately $47,503,000 and
$34,895,000, respectively, under the purchase method of accounting. These
amounts
F-17
<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996
were based upon the excess of the financial statement basis over the tax
basis in assets, principally intangible assets. Liberty Broadcasting and MMR
had pre-acquisition net operating losses of approximately $3,591,000 and
$5,062,000, respectively. Due to the Washington Disposition, the full amount
of Liberty Broadcasting, Inc.'s net operating losses were utilized in 1996.
Of the $5,062,000, Multi-Market Radio, Inc's losses, a valuation allowance of
approximately $643,000 has been recorded, as the ultimate utilization may be
limited.
The 1996, 1995 and 1994 effective tax rate varied from the statutory
Federal income tax rate as follows (in thousands):
1996 1995 1994
------------ ------- --------
Income taxes at the
statutory rate................... $ (16,924) $ (1,495) $ 1,125
Effect of non-recurring
and unusual charges ............. 6,875 -- --
Capital loss limitation............ -- -- 332
Valuation allowance................ 9,859 1,434 (207)
Effect of nondeductible
amortization of intangibles ..... 264 198 179
Reversal of 1993 provision......... -- -- (412)
State and local income taxes
(net of Federal benefit) ........ 317 (145) 273
Other.............................. 89 8 184
---------- --------- ------------
Total.............................. $ 480 $ -- $ 1,474
========== ========= ==========
NOTE 9 - RELATED PARTY TRANSACTIONS
Prior to April 1996, SCMC had been engaged by the Company from time to
time for advisory services with respect to specific transactions. In April
1996, the Company and SCMC entered into the SCMC Termination Agreement,
pursuant to which SCMC assigned to the Company its rights to receive fees
payable by each of MMR and Triathlon to SCMC in respect of consulting and
marketing services to be performed on behalf of such companies by SCMC,
except for fees related to certain transactions pending at the date of such
agreement, and the Company and SCMC terminated the arrangement pursuant to
which SCMC performed financial consulting services for the Company. Upon
consummation of the MMR Merger, SCMC's agreement with MMR was terminated.
Prior to consummation of the MMR Merger, MMR paid an annual fee of $500,000
to SCMC and Triathlon paid SCMC an annual fee of $300,000 (which increased to
$500,000 effective January 1, 1997). In addition, Triathlon has agreed to
advance to SCMC an amount of $500,000 per year in connection with
transaction-related services to be rendered by SCMC. However, if the
agreement between SCMC and Triathlon is terminated or if an unaffiliated
person acquires a majority of the capital stock of Triathlon the unearned
fees must be repaid. Pursuant to the SCMC Termination Agreement, the Company
has agreed to continue to provide consulting and marketing services to
Triathlon until the expiration of their agreement on June 1, 2005, and not to
perform any consulting or investment banking services for any person or
entity other than Triathlon in the radio broadcasting industry or in any
business which uses technology for the audio transmission of information or
entertainment. In consideration of the foregoing agreements, the Company
issued to SCMC warrants to purchase up to 600,000 shares of Class A Common
Stock at an exercise price, subject to adjustment, of $33.75 (the market
price at the time the financial consulting arrangement was terminated). The
Company also forgave a $2.0 million loan made by the Company to SCMC, plus
accrued and unpaid interest thereon. Pursuant to such agreement, the Chairman
has agreed with the Company that he will supervise, subject to the direction
of the Board of Directors, the performance of the financial consulting and
other services previously performed by SCMC for the Company. During 1996, the
Company received fees of $292,000 from MMR and $511,000 from Triathlon. In
connection with this agreement, the Company had a $250,000 receivable from
Triathlon at December 31, 1996.
In 1996, the Company paid to SCMC advisory fees of $4.0 million in
connection with the Liberty Acquisition, the Prism Acquisition, the
Greenville Acquisition, the Jackson Acquisitions, the Greensboro Acquisition
and the Raleigh-Greensboro Acquisition. In addition, the Company paid SCMC,
on behalf of MMR, a non-refundable fee of $2.0 million for investment banking
services provided to MMR in connection with the MMR Merger.
None of the Pending Acquisitions or Pending Dispositions predate the
SCMC Termination Agreement, and therefore no fees are payable to SCMC in
respect of any Pending Acquisitions or Pending Dispositions.
Prior to June 1996, the Company held a non-recourse note receivable
from the Company's former President in the amount of $2,000,000 which was
secured by 133,333 shares of Class B Common Stock. The note bore interest at
6% per annum. Interest income of $60,000 and $120,000 was accrued in 1996 and
1995 on the loan, respectively.
F-18
<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996
The loan and interest accrued were forgiven in June 1996 pursuant to an
agreement with the former President and are included in non-recurring and
unusual charges (Note 10).
Through June 1996, the Company sublet office space in Austin, Texas
on a month to month basis for certain management and accounting operations
from Capstar, Inc, a related party, prior to the termination of the former
president of the Company. The Company recorded rent expense related to this
sublease of $40,000, $67,000 and $94,000 for the years ended December 31,
1996, 1995 and 1994, respectively.
In January 1995, the Company paid a $1,000,000 fee to SCMC in
connection with the transfer of shares of the Company's Class C Common Stock.
During the last quarter of 1996, the Company consolidated all of its
corporate office functions in New York. Prior to such time, the Company had
an agreement with the Chairman related to the maintenance of the Company's
New York Office whereby the Company reimbursed SCMC for certain office
expenses and salaries for certain employees of SCMC who provided services on
behalf of the Company. In addition certain of the Company's employees
performed certain services for other entities affiliated with SCMC. In
connection with SCMC Termination Agreement and the consolidation of the
Company's Corporate Office in New York, SCMC employees who provided services
on behalf of the Company became employees of the Company. Total
reimbursements paid to SCMC for office expenses and salaries totaled
approximately $1,082,000, $530,000 and $480,000 for the years ended December
31, 1996, 1995 and 1994. The reimbursements paid to SCMC in 1996 included
$292,000 and $261,000 of fees paid by MMR and Triathlon, respectively,
directly to SCMC following the effective date of the SCMC Termination
Agreement. The timing of these payments during the year were such that the
Company had advanced amounts to SCMC of up to $230,000 during the period. As
of December 31, 1996, there are no amounts due to or from SCMC.
The transactions above were not negotiated on an arms-length basis.
Accordingly, each transaction was approved by the Company's Board of
Directors, including the Company's independent directors, in accordance with
the provisions relating to affiliate transactions in the Company's by-laws,
bank agreements and Indenture, which provisions require a determination as to
the fairness of the transactions to the Company.
The Company's Executive Vice President, General Counsel and Director
is Of Counsel to the law firm of Baker & McKenzie. Baker & McKenzie serves
as counsel to the Company in certain matters. Baker & McKenzie compensates
the executive based, in part, on the fees it receives from providing legal
services to the Company and other clients originated by the executive. The
Company paid Baker & McKenzie $4,886,000, $793,000 and $95,000 for legal
services during 1996, 1995 and 1994, respectively.
Also, see Notes 2, 7, and 10.
NOTE 10 - NON-RECURRING AND UNUSUAL CHARGES, INCLUDING ADJUSTMENTS
TO BROADCAST RIGHTS AGREEMENT
The Company recorded non-recurring and unusual charges of $28,994,000
in 1996 which consisted primarily of payments in excess of the fair value of
stock repurchased totaling $12,461,000 to the company's former President and
the reserve by the Company of $2,330,000 relating to the loan and accrued
interest to the Company's former President, $5,586,000 related to the SCMC
Termination Agreement (Note 9), $4,575,000 for the repurchase of options and
rights to receive options held by the Chief Operating Officer, and a charge
of $1,600,000 related to the termination of the Company's contractual
four-year broadcast rights of Texas Rangers baseball and an adjustment in
the value of the contract for the 1996 season. In 1995, the Company recorded
a $5 million charge related to the write down in value of the Company'sTexas
Rangers Rangers broadcast rights.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
The Company has entered into various operating leases, broadcast
rights agreements and employment agreements. Total rent expense was
$1,160,000, $1,506,000 and $2,903,000 for the years ending December 31, 1994,
1995 and 1996, respectively. The Company has entered into employment
agreements with certain officers and other key employees. Expenses under the
contracts approximated $9,523,000 for the year ended December 31, 1996.
Future minimum payments in the aggregate for all noncancelable operating
leases including broadcast rights agreements and employment agreements with
initial terms of one year or more consist of the following at December 31,
1996 (in thousands):
F-19
<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996
Operating Employment
Leases Agreements
----------- -------------
1997 $ 6,567 $ 12,777
1998 4,908 9,448
1999 4,341 6,854
2000 2,300 2,926
2001 1,769 967
2002 and thereafter 4,153 --
-------------- ----------
$ 24,038 $ 32,972
=========== ==========
Future minimum payments in the aggregate for all noncancelable capital
leases with initial terms of one year or more consist of the following at
December 31, 1996 (in thousands):
Capital
Leases
----------
1997 $ 179
1998 141
1999 63
2000 17
2001 4
2002 and thereafter --
---------
Total minimum lease payments 404
Less: amount representing interest (50)
---------
Present value of future minimum lease payments 354
Less: current portion (150)
---------
Long-term capital lease obligations $ 204
========
Pursuant to an agreement between the Company and the Company's Chief
Operating Officer, the Executive'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, the
Executive will receive a payment of $1,250,000 pursuant to the provisions of
his employment agreement which are currently deferred, of which $800,000 has
been accrued at December 31, 1996, 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 the Executive's options, based
upon a repurchase price of $40.00 per share, the Company would make a payment
to the Executive of approximately $3,250,000. If the employment contract is
terminated and the stock options repurchased, the Company would record a
charge to earnings equal to the amount paid for the options.
The Company is the subject of various claims and litigation principally
in the normal course of business. In the opinion of management, the ultimate
resolution of such matters will not have a material adverse impact on the
consolidated financial statements (Note 2).
NOTE 12 - DEFINED CONTRIBUTION PLAN
The Company sponsors a 401(k) defined contribution plan in which most
of its employees were eligible to participate. The Plan presently provides
for discretionary employer contributions. The Company contributed $17,000 in
1994 but made no contributions in 1995 or 1996.
F-20
<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996
NOTE 13 - SUBSEQUENT EVENTS
1997 Preferred Stock Offering. In February 1997, the Company sold
2,250,000 shares of 12 5/8% Series E Cumulative Exchangeable Preferred Stock.
The Company raised approximately $215.0 million, net of expenses. The Company
used a portion of the proceeds to repay the outstanding balance under the New
Credit Agreement and will use the remaining balance to finance current and
future acquisitions.
1997 Acquisitions and Dispositions. In January 1997, the Company
purchased Delsener/Slater Enterprises, a concert promotion company based in
New York City, for aggregate consideration of approximately $24.0 million. Of
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 New
Credit Agreement.
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 New Credit Agreement.
In February 1997, the Company consummated the acquisition of radio
station WWYZ-FM in Hartford, Connecticut, for a purchase price of $25.5
million. The primary source of funds for this acquisition was proceeds from
the Series E Preferred Stock Offering.
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 $43 million. 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
receivable in installments over a five year period (present value
approximately $4.3 million). As these stations were acquired in November 1996
pursuant to the MMR Merger, no gain or loss will be 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 $1 million in cash, shares of SFX Class A Common
Stock with a value of approximately $9 million, which is callable by the
Company under certain circumstances, and the assumption of approximately $14
million of debt.
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 Indianapolis, Indiana
and Pittsburgh, Pennsylvania (the "Secret Acquisition"). 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 provides the Company the right to acquire the Indianapolis
stations, prior to the acquisition of the Pittsburgh stations, for
$127.5 million
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
(the "Richmond Acquisition"); (ii) exchange one radio station operating in
Washington, D.C./Baltimore, Maryland, for two radio stations operating in
Dallas, Texas (the "CBS Exchange"); (iii) 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 (the "Chancellor Exchange"); (iv) exchange one
radio station in Pittsburgh, Pennsylvania, which the Company is acquiring
from Secret Communications, and $20 million in cash for one radio station in
Charlotte, North Carolina where the Company currently owns two stations (the
"Charlotte Exchange"); (v) pursuant to a letter of consent, acquire Sunshine
Promotions, Inc ("Sunshine"), a concert promotion company based in
Indianapolis, Indiana, and certain related companies, for approximately
$59 million, consisting of $50 million in cash at closing, $2 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 million and the
assumption of approximately $3 million of debt (the "Sunshine Acquisition");
and (vi) acquire two radio stations operating in Pittsburgh, Pennsylvania
and two in Milwaukee, Wisconsin for $35.0 million
F-21
<PAGE>
SFX BROADCASTING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996
(the "Hearst Acquisition"); and (vii) sell one radio station operating in
Little Rock, Arkansas (the "Little Rock Disposition"). The Company intends to
finance the Secret Acquisition, the Richmond Acquisition; the Charlotte
Exchange, the Sunshine Acquisition and the Hearst Acquisition from cash on
hand (approximately $105.0 million as of March 28, 1997), proceeds from the
Chancellor Exchange, and the Little Rock Disposition, borrowings under the
Credit Agreement and other financing sources which the Company is currently
evaluating. Based on discussions with its commercial and investment bankers,
the Company believes that the financing to complete such acquisitions will be
available on acceptable terms. If the Company is unable to consummate such
acquisitions because of its failure to obtain financing or for any other
reason, it may forfeit deposits up to an aggregate amount of approximately
$22 million.
F-22
<PAGE>
SFX Broadcasting, Inc. and Subsidiaries
Schedule II - Valuation and Qualifying Accounts
(in thousands)
<TABLE>
<CAPTION>
ADDITIONS
CHARGED
BALANCE AT TO COSTS BALANCE AT
BEGINNING AND END OF
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS ACQUISITIONS YEAR
----------- ------- -------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts:
1994....................... $631 $405 $375 $-- 661
1995....................... 661 658 519 122 922
1996....................... 922 922 528 304 1,620
</TABLE>
F-23
<PAGE>
AGREEMENT OF MERGER
BY AND AMONG
SFX BROADCASTING, INC., NOC-ACQUISITION CORP.,
CADCO ACQUISITION CORP., QN-ACQUISITION CORP.,
NEDERLANDER OF CONNECTICUT, INC.,
CONNECTICUT AMPHITHEATER DEVELOPMENT CORPORATION,
QN CORP., CONNECTICUT PERFORMING ARTS, INC., AND
CONNECTICUT PERFORMING ARTS PARTNERS
AND THE
STOCKHOLDERS OF NEDERLANDER OF CONNECTICUT, INC.,
CONNECTICUT AMPHITHEATER DEVELOPMENT CORPORATION
AND
QN CORP.
LISTED ON THE SIGNATURE PAGE HERETO
FEBRUARY 12, 1997
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. THE MERGERS......................................................1
1.1 The Mergers..........................................................1
1.2 Effective Date of the Mergers........................................2
1.3 Substitute Letter of Credit .........................................3
1.4 Certificates of Incorporation........................................3
1.5 By-Laws..............................................................3
1.6 Directors and Officers...............................................3
1.7 Conversion of Shares.................................................4
1.8 Payment for Shares of Stock..........................................5
1.9 Taking of Necessary Action; Further Action...........................5
1.10 Closing of the Company's Transfer Books..............................6
1.11 Apportionments ......................................................6
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES..................12
2.1 Corporate Organization..............................................12
2.2 Capitalization......................................................12
2.3 Subsidiaries of the Company.........................................13
2.4 Authorization.......................................................14
2.5 No Violation........................................................14
2.6 Permits; Compliance.................................................15
2.7 Reports and Financial Statements....................................15
2.8 Absence of Certain Changes or Events................................16
2.9 Undisclosed Liabilities.............................................17
2.10 Title to Properties.................................................17
2.11 Real Property.......................................................17
2.12 Personal Property...................................................23
2.13 Reserved............................................................23
2.14 Insurance...........................................................23
2.15 Employee Benefits...................................................23
2.16 Employees...........................................................24
2.17 Environment, Health and Safety......................................24
2.18 Intellectual Property...............................................26
2.19 Contracts...........................................................27
2.20 Taxes...............................................................28
2.21 Litigation..........................................................32
2.22 Consents............................................................32
2.23 Affiliate Transaction...............................................32
2.24 Broker's and Finder's Fees .........................................33
2.25 Absence of Certain Business Practices...............................33
i
<PAGE>
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SFX............................33
3.1 Corporate Organization..............................................33
3.2 Authorization.......................................................33
3.3 No Violation........................................................34
3.4 Litigation..........................................................34
3.5 Consents............................................................34
SECTION 4. REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER .............35
4.1 Authorization of Transaction........................................35
4.2 Noncontravention....................................................35
4.3 Brokers' Fees.......................................................36
4.4 Company Shares......................................................36
4.5 Accredited Investor.................................................36
4.6 Investment Intention................................................37
4.7 Receipt of Information..............................................37
SECTION 5. REPRESENTATIONS AND WARRANTIES REGARDING SFX SUBS................37
5.1 Organization........................................................37
5.2 Authority Relative to This Agreement................................37
SECTION 6. COVENANTS AND AGREEMENTS.........................................38
6.1 Conduct of Business.................................................38
6.2 Access..............................................................41
6.3 Filings and Governmental Consents...................................41
6.4 Stockholders' Approval..............................................41
6.5 Confidentiality.....................................................42
6.6 Restrictions on Transfer............................................43
6.7 Registration Statement for Registering of Stock.....................43
6.8 Use of Financial Statements ........................................44
6.9 "As Is, Where Is" Acquisition.......................................44
6.10 Stock Legend........................................................45
6.11 Further Actions.....................................................46
6.12 Casualty and Condemnation...........................................46
6.13 Environmental and Structural Unwind Provision.......................47
SECTION 7. CONDITIONS.......................................................51
7.1 Conditions to Each Party's Obligation to Effect the Merger..........51
7.2 Conditions to Obligation of the Companies to Effect the Mergers.....52
7.3 Conditions to Obligations of SFX and SFX Subs to Effect the Mergers.52
SECTION 8. TERMINATION PRIOR TO EFFECTIVE DATE..............................54
8.1 Termination Prior to Effective Date.................................54
8.2 Effect of Termination...............................................54
ii
<PAGE>
SECTION 9. DUE DILIGENCE REVIEW; PURCHASER'S TERMINATION OPTION.............55
SECTION 10. PUT AND CALL PROVISIONS AFTER MERGER.............................57
10.1 Put Option..........................................................57
10.2 Put Closing.........................................................57
10.3 Call Option.........................................................58
10.4 Call Closing........................................................58
10.5 Acceleration of Put.................................................58
SECTION 11. RIGHT OF FIRST REFUSAL...........................................59
SECTION 12. INDEMNIFICATION..................................................59
12.1 The Stockholders' Indemnitees.......................................59
12.2 SFX's Indemnitees...................................................60
12.3 Procedures..........................................................61
SECTION 13. MISCELLANEOUS PROVISIONS.........................................62
13.1 Specific Performance................................................62
13.2 Amendment and Modification..........................................62
13.3 Waiver..............................................................63
13.4 Survival of Representations and Warranties..........................63
13.5 Expenses............................................................64
13.6 Materiality.........................................................64
13.7 Notices.............................................................64
13.8 Assignment..........................................................65
13.9 Publicity...........................................................66
13.10 Books and Records; Tax Closing Package..............................66
13.11 Closing.............................................................66
13.12 Counterparts........................................................66
13.13 Headings............................................................66
13.14 Entire Agreement....................................................67
13.15 Obligations of SFX Subs.............................................67
13.16 Governing Law.......................................................67
13.17 Jurisdiction........................................................67
13.18 Several Obligations ................................................68
- iii -
<PAGE>
AGREEMENT OF MERGER
AGREEMENT OF MERGER dated February 12, 1997, among SFX BROADCASTING,
INC. ("SFX"), a Delaware corporation, NOC-Acquisition Corp., a Connecticut
corporation and a wholly-owned subsidiary of SFX ("NOC-Acquisition"),
CADCO-
- iv -
<PAGE>
Acquisition Corp., a Connecticut corporation and a wholly-owned subsidiary of
SFX ("CADCO-Acquisition"), QN-Acquisition Corp., a Connecticut corporation and
a wholly-owned subsidiary of SFX ("QN-Acquisition", and together with
NOC-Acquisition and CADCO-Acquisition, the "SFX Subs"), Nederlander of
Connecticut, Inc., a Connecticut corporation ("NOC"), Connecticut Amphitheater
Development Corporation, a Connecticut corporation ("CADCO"), QN Corp., a
Connecticut corporation, ("QN Corp.") Connecticut Performing Arts, Inc.
("CPA"), a Connecticut corporation, Connecticut Performing Arts Partners
("CPAP"), a joint venture by and between NOC and CADCO ("QN", and together with
NOC and CADCO, the "Companies") ( collectively, the SFX Subs and the Companies
are hereinafter referred to collectively as the "Constituent Corporations") and
all of the Stockholders of the Companies listed on the signature page hereto
(individually, a "Stockholder" and collectively, the "Stockholders").
WHEREAS, the Boards of Directors of (i) SFX, (ii) each of the SFX
Subs, and (iii) each of the Companies, deeming it advisable for their
respective benefits and the benefits of their respective shareholders, have
approved the merger of each of NOC-Acquisition, CADCO-Acquisition and
QN-Acquisition with and into NOC, CADCO, and QN respectively (collectively the
"Mergers"), upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1 THE MERGERS
1.1 The Mergers. On the Effective Date (as defined in Section 1.2),
NOC-Acquisition shall be merged with and into NOC, CADCO-Acquisition shall be
merged with and into CADCO and QN-Acquisition shall be merged with and into QN,
all in accordance with the applicable provisions of the law of the State of
Connecticut. Upon the Mergers, the separate existences of each of
NOC-Acquisition, CADCO-Acquisition and QN-Acquisition shall thereupon cease,
and NOC, CADCO and QN, as the surviving corporations in each of the Mergers
(each a "Surviving Corporation" and collectively, the "Surviving
Corporations"), shall continue their corporate existences under the law of the
State of Connecticut except that the name
- 1 -
<PAGE>
of NOC shall be changed so as to exclude the name "Nederlander" and any changes
to the names of the entities shall otherwise comply with applicable law. In
addition, upon the effectiveness of all of the Mergers, NOC, CADCO and QN each
shall possess all the rights, privileges, powers and franchises, of a public as
well as of a private nature, of (i) NOC-Acquisition and NOC, (ii)
CADCO-Acquisition and CADCO, and (iii) QN-Acquisition and QN, respectively; and
shall be subject to all the restrictions, disabilities and duties of (i)
NOC-Acquisition and NOC, (ii) CADCO-Acquisition and CADCO, and (iii)
QN-Acquisition and QN, respectively; and all the rights, privileges, powers and
franchises of (i) NOC-Acquisition and NOC, (ii) CADCO-Acquisition and CADCO,
and (iii) QN-Acquisition and QN, respectively; and all property, real, personal
and mixed, and all debts due to them on whatever account, for stock
subscriptions as well as all other things in action or belonging to each of
them shall be vested in NOC, CADCO and QN respectively; and all property,
rights, privileges, powers and franchises, and all and every other interest
shall be thereafter as effectually the property of the Surviving Corporations
as they were of the applicable Constituent Corporations, and the title to any
real estate vested by deed or otherwise in the Constituent Corporations shall
not revert or be in any way impaired by reason of the Mergers; but all rights
of creditors and all liens upon any property of the Constituent Corporations
shall be preserved unimpaired, and all debts, liabilities and duties of each of
the Constituent Corporations shall thenceforth attach to the applicable
Surviving Corporations, and may be enforced against them to the same extent as
if said debts, liabilities and duties had been incurred or contracted by said
Surviving Corporations.
1.2 Effective Date of the Mergers. Subject to the terms and conditions
hereof, including, without limitation, the satisfaction or waiver of the
conditions set forth in Section 7 hereof, the parties hereto will cause each of
the Mergers to be consummated on or about February 21, 1997 by the filing with
the Secretary of State of Connecticut, in accordance with the Stock Corporation
Act of the State of Connecticut ("CN Stock Act"), of a Certificate of Merger
(the "Certificate of Merger") in such form as required by and executed in
accordance with the relevant provisions of applicable law. Each of the Mergers
shall become effective on the date and time when the applicable Certificate of
Merger is so filed (the "Effective Date").
- 2 -
<PAGE>
1.3 Substitute Letter of Credit and Bond. Upon the consummation of the
Mergers, SFX shall cause the Surviving Corporations to replace: (i) that
certain letter of credit (as amended) No.42148, in the face amount of $785,000
drawn under Nations Bank which is currently being held by Fleet National Bank
of Connecticut ("Fleet") as security for that certain General Obligation
Indenture of Trust dated as of November 1, 1993, by and between Connecticut
Development Authority and Fleet (as amended); and (ii) the bond (the "Bond") to
the extent required to be posted pursuant to that certain preliminary report
issued by the State of Connecticut State Traffic Commission (No. 063-9702-1) in
an amount not to exceed $90,000, to the extent that the Bond is posted prior to
the Effective Date. SFX acknowledges that the Stockholders shall not be
required to post the Bond after the Effective Date.
1.4 Certificates of Incorporation. The Certificates of Incorporation
of each of NOC-Acquisition, CADCO-Acquisition, and QN-Acquisition, as in effect
immediately prior to the Effective Date shall be the Certificates of
Incorporation of the relevant Surviving Corporation, until thereafter amended
as provided by law provided that Article First of the Certificate of
Incorporation of NOC shall be amended in its entirety to provide that the name
of NOC is "NOC Corp".
1.5 By-Laws. The By-Laws of each of NOC-Acquisition, CADCO-
Acquisition and QN-Acquisition as in effect immediately prior to the Effective
Date shall be the By-Laws of the respective surviving corporations, until
amended as therein provided.
1.6 Directors and Officers. The directors of each of NOC, CADCO and QN
in office immediately prior to the Effective Date will resign effective as of
the Effective Date. The directors of the Surviving Corporations on the
Effective Date shall be the directors of NOC-Acquisition, CADCO-Acquisition and
QN-Acquisition in office immediately prior to the Effective Date, to serve in
accordance with the By-Laws of the Surviving Corporations. The officers of each
of the Surviving Corporations on the Effective Date shall be the officers of
NOC-Acquisition, CADCO-Acquisition, and QN-Acquisition immediately prior to the
Effective Date, to serve in accordance with the By-Laws of the relevant
Surviving Corporation.
- 3 -
<PAGE>
1.7 Conversion of Shares. As of the Effective Date, by virtue of the
Mergers and without any action on the part of the holders thereof:
(a) Each share of stock of each of NOC, CADCO, and QN outstanding
immediately prior to the Effective Date (the "Stock") shall be canceled and
extinguished and converted into the right to receive, in the aggregate, (i)
$1,000,000 in cash, without any interest, and (ii) shares of the Class A Common
Stock of SFX (the "SFX Shares"), with a market value as of the close of
business on the date prior to the Effective Date of $9 million, such market
value to be determined by the average official closing price per share of said
stock for the twenty (20) consecutive trading days ending on the fifth day
prior to the Effective Date in the market on which it is publicly traded (the
"Closing Value") which Closing Value shall be reduced by 10% (the "Adjusted
Closing Value") for the purposes of computing the number of shares to be
delivered on the Effective Date (the "Merger Consideration"); provided,
however, if the market value of the SFX shares is less than $9 million based
upon the closing price of such shares on the day immediately preceding the
Effective Date, SFX shall deliver an additional amount of shares so that the
aggregate value of the SFX shares so delivered is not less than $9 million,
based on the closing price of such shares on the day immediately preceding the
Effective Date. For example, assuming that the Closing Value as of the
Effective Date is equal to $30 per share, then the number of SFX Shares to be
delivered to the shareholders of NOC and CADCO would be 333,333 shares ($30 per
share reduced by 10% = $27 per share and $9,000,000/$27 per share = 333,333
shares). The Merger Consideration shall be allocated and distributed among the
shareholders of NOC, CADCO and QN in accordance with Section 1.8 below;
(b) Each share of Stock of NOC-Acquisition, CADCO-Acquisition and
QN-Acquisition outstanding immediately prior to the Effective Date shall be
converted without any action on the part of the holders thereof into one
validly issued, fully paid and nonassessable share of Stock of NOC, CADCO, and
QN, respectively;
(c) Each share of Stock of NOC, CADCO, and QN held in the treasury
of said Companies or the treasury of any subsidiary of said Companies, and each
such share owned by SFX, NOC-Acquisition, CADCO Acquisition or QN Acquisition
or any other
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subsidiary of SFX shall be canceled and cease to exist, and no payment or other
consideration shall be made in respect thereof: and
(d) All notes and other debt instruments of each of the Companies
outstanding on the Effective Date shall continue to be outstanding subsequent
to the Effective Date as notes and other debt instruments of the applicable
Surviving Corporation subject to the terms and covenants thereof, and shall not
be affected by the Mergers; provided, however, that any liabilities of any
nature whatsoever to any Stockholder shall, except to the extent disclosed
herein or in the Schedules attached hereto, be extinguished.
1.8 Payment for Shares of Stock. By no later than 9 a.m. on the
Effective Date, SFX and the SFX Subs shall cause the Merger Consideration to be
deposited with Robert E. Nederlander (the "Paying Agent") to be held pending
the consummation of Mergers. Upon the consummation of Mergers, the Paying Agent
shall distribute such Merger Consideration in accordance with a joint written
direction from the Stockholders to be provided to the Paying Agent on the
Effective Date.
1.9 Taking of Necessary Action; Further Action. SFX, each of the SFX
Subs, the Companies and the Stockholders, respectively, shall take all such
action as may be necessary or appropriate in order to effectuate the Mergers as
promptly as possible. If, at any time after the Effective Date any further
action is necessary or desirable to carry out the purposes of this Agreement
and to vest the Surviving Corporations with full right, title and possession to
all assets, property, rights, privileges, powers and franchises of the
applicable Constituent Corporations, the officers and directors of such
corporations are fully authorized in the name of their corporation or otherwise
to take, and shall use reasonable efforts to take, all such action.
1.10 Closing of the Company's Transfer Books. On the date hereof, the
stock transfer books of the Companies and the Companies Subsidiaries (as
defined below) shall be closed and no transfer of shares (other than shares
into which the capital stock of NOC
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Acquisition, CADCO Acquisition and QN Acquisition may be converted pursuant to
the Mergers), shall thereafter be made.
1.11 Apportionments. SFX and the Stockholders shall apportion the
following items of revenue and expense (which items of revenue and expense are
more particularly set forth by example in the Combined Balance Sheet of
Connecticut Performing Arts, Inc. and Connecticut Performing Arts Partners,
dated as of November 30, 1996), as of midnight of the date immediately
preceding the Effective Date in accordance with the following terms and
conditions:
A. (i) SFX shall, except as otherwise expressly set forth herein,
receive a credit in an amount equal to the sum of (a) all accounts payable and
accrued expenses of the Companies to the extent the same are attributable to
periods preceding the Effective Date; (b) to the extent not satisfied prior to
the Effective Date, any amounts of principal and accrued and unpaid interest
outstanding under the Nations Bank Loan (as defined on the Balance Sheet (as
defined below); and (c) $250,000.
(ii) Stockholders shall receive a credit in an amount equal to the
sum of (w) $110,000 on deposit with the City of Hartford together with any
interest accrued thereon, (x) an amount equal to any other deposits made on
behalf of the Companies and as set forth on Schedule 1.11(A)(ii), together with
any accrued interest thereon, (y) all cash on deposit in accounts of the
Companies as of the date immediately preceding the Effective Date less an
amount equal to any outstanding checks as of such date, and (z) all prepaid
expenses and subscriptions, if any, to the extent the same are attributable to
periods preceding the Effective Date;
(iii) the accounts receivable set forth below shall be apportioned
in the following manner:
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(a) Anheuser Busch: To the extent not paid prior to the Effective
Date, the Stockholders shall be entitled to an amount equal to any sponsorship
fees due on account of shows or events occurring prior to the Effective Date;
the Companies shall remit such amount to the Stockholders within five (5) days
following receipt thereof.
(b) To the extent not paid prior to the Effective Date, ATI The
Car Phone Store ("ATI"): the Stockholders shall be entitled to receive the sum
of $2,000 representing sponsorship fees due from ATI and attributable to
periods preceding the Effective Date; the Companies shall remit such amount to
the Stockholders within five (5) days following receipt thereof.
(c) WMRQ, WHCN and WKSS: Stockholders shall receive a credit on
the Effective Date in the following amounts to the extent not previously
received by the Companies: (i) such portion of the $5,833.31 with respect to
sponsorship fees due from WMRQ which are attributable to periods prior the
Effective Date, (ii) such portion of the $8,333.31 with respect to sponsorship
fees due from WHCN which are attributable to periods prior to the Effective
Date, and (iii) $18,750 with respect to sponsorship fees due from WKSS which
are attributable to periods prior to the Effective Date.
(d) WTIC: In the event that the $5,000 receivable on account of
sponsorship fees due from WTIC for the period January 1, 1997 through March 31,
1997 is received prior to the Effective Date, then SFX shall, on the Effective
Date, receive a credit of the allocable amount thereof (prorated on a per diem
basis) for the period from the Effective Date through March 31, 1997 and the
balance shall be retained by the Stockholders. In the event that such amount is
received subsequent to the Effective Date, the Companies shall remit the
allocable amount due to the Stockholders within five (5) days following receipt
thereof.
(e) Tweeter: In the event that the $6,250 receivable on account
of sponsorship fees due from Tweeter for the period from February 15, 1997
through May 15, 1997 is received prior to the Effective Date, SFX shall, on the
Effective Date, receive a credit for the
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allocable amount (prorated on a per diem basis) for the period from the
Effective Date through May 15, 1997 and the balance shall be retained by the
Stockholders. In the event that such amount is received subsequent to the
Effective Date, the Companies shall remit the allocable amount due to the
Stockholders within five (5) days following receipt thereof.
(f) St. Francis: In the event that the $40,000 receivable on
account of sponsorship fees due from St. Francis for the period from October 1,
1996 through September 30, 1997 is received prior to the Effective Date, SFX
shall, on the Effective Date, receive a credit for the allocable amount
(prorated on a per diem basis) for the period from the Effective Date through
September 30, 1997 and the balance shall be retained by the Stockholders. In
the event that such amount is received subsequent to the Effective Date, the
Companies shall remit the allocable amount due to the Stockholders within five
(5) days following receipt thereof.
(g) EMI, Inc.: Stockholders shall be entitled to receive (i) the
sum of $4,276.48 representing amounts due with respect to periods prior to the
Effective Date to the extent not received prior to the Effective Date, and (ii)
any additional amounts due with respect to events held subsequent to November
30, 1996 and prior to the Effective Date to the extent not received prior to
the Effective Date. In the event that such amounts are received subsequent to
the Effective Date, SFX shall remit the amount due to the Stockholders within
five (5) days following receipt thereof.
(h) Protix: There shall be no adjustment with regard to Protix.
(i) Ogden: There shall be no adjustment with regard to Ogden.
(iv) deferred income (excluding the amounts to be apportioned
in respect of items set forth in Section 1.11(A)(iii) above) shall be
apportioned between SFX and the Stockholders based upon the Companies prior
amortization schedule, which is attached hereto as Schedule 1.11(A)(iv),
therefor based upon the period to which such deferred income relates such that
SFX shall receive a credit for all such deferred income allocable to periods
from
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and after the Effective Date and the Stockholders shall receive a credit for
all such deferred income through the date immediately preceding the Effective
Date;
(v) if the Effective Date is other than the first day of a
calendar month, all fixed rent payable under leases (other than the Lease and
Sublease Agreement between CPA and CPAP) shall be apportioned for the month in
the which the Effective Date occurs provided that SFX shall receive a credit
for any unpaid amounts for any other periods prior to the Effective Date;
(vi) if the Effective Date is other than the first day of a
calendar month, interest payable under all loan agreements, mortgages and
financing agreements with the Connecticut Development Authority (expressly
excluding, however, interest payments payable to Protix and Ogden), shall be
apportioned for the month in which the Effective Date occurs provided that SFX
shall receive a credit for any unpaid amounts for any other periods prior to
the Effective Date; and
Anything contained herein to the contrary notwithstanding, no
apportionment shall be made with respect to: (i) all related party loans or
payables which shall be canceled or satisfied by the Stockholders as of the
Effective Date, and (ii) any long term debt or other obligations of the
Companies to Ogden, Protix, Shawmut Bank or the Connecticut Development
Authority.
B. To the extent that the following items are not subject to
adjustment pursuant to the provisions of 1.11(A) hereof, SFX and the
Stockholders shall also apportion the following items of revenue and expense as
of midnight on the date immediately preceding the Effective Date:
(i) all wages and salaries of employees for current periods,
including accruals up to the Effective Date, for bonuses, commissions,
vacations and sick pay and related payroll taxes;
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(ii) utility expenses, including without limitation,
telephone, electricity and gas, on the basis of the most recently issued bills
therefor, with a subsequent reapportionment of such utilities promptly after
issuance of bills for the same for the period which includes in the Effective
Date; and
(iii) payments in lieu of taxes and additional rents payable
under leases (other than the Lease and Sublease Agreement between CPA and CPAP)
and any prepaid charges or advance payments under service contracts.
C. The apportionments contemplated by this Section, to the extent
practicable, shall be made on the Effective Date. At least five (5) business
days prior to the estimated Effective Date, the Stockholders shall furnish to
SFX a proposed apportionment schedule with respect to the items set forth in
Sections 1.11(A) and (B). Thereafter, the Stockholders and SFX shall negotiate
in good faith in order to resolve any disputed amounts contained therein. In
the event that the Stockholders and SFX are unable to resolve any such disputed
items (the "Disputed Apportionments"), such dispute shall be resolved as
provided in Section 1.11(D) below. On the Effective Date, to the extent that
the aggregate apportionments which are not the subject of dispute shall result
(x) in an amount due to the Stockholders, SFX shall increase the amount of the
cash Merger Consideration in an amount equal to the amount due, or (y) in an
amount due to SFX, SFX shall be entitled to reduce the amount of the cash
Merger Consideration to the extent of such amount due SFX (but in no event to
exceed $100,000 exclusive of amounts required to repay the Nations Bank Loan
which shall be credited entirely in cash) and the balance of such amount due to
SFX shall be satisfied by reducing the amount of SFX Shares to be delivered to
the Stockholders by the dividing the balance of the amount due by the Closing
Value.
D. Within thirty (30) days following the Effective Date, the
Stockholders shall deliver to SFX a schedule of all final apportionments which
were not made on the Effective Date together with a schedule of all Disputed
Apportionments including the Stockholder's position with respect thereto (the
"Final Schedule"). Within ten (10) days following receipt of such Final
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Schedule, SFX shall either give the Stockholders written notice of acceptance
of such Final Schedule or the give the Stockholders written notice of any
remaining disputed amounts (a "Notice of Dispute"). If SFX fails to either
accept such Final Schedule or deliver a Notice of Dispute within said ten day
period, SFX shall be deemed to have accepted the Final Schedule. The Notice of
Dispute shall state the amount that SFX believes it is entitled to receive or
obligated to pay in respect of the final apportionments and any Disputed
Apportionments (the "SFX Amount") and the Stockholders shall have a period of
ten (10) days following receipt of the Notice of Dispute to either accept the
SFX Amount or to reject the SFX Amount. If the Stockholders reject the SFX
Amount and the amount in dispute is $10,000 or less in the aggregate, then the
disputed amount shall be shared equally between SFX and the Stockholders. If
the Stockholders reject the SFX Amount and the SFX Amount exceeds $10,000, and
the Stockholders and SFX unable to resolve any remaining differences within ten
(10) days following the rejection of the SFX Amount by the Stockholders, then
the such dispute shall be submitted to an independent arbitrator (the
"Apportionment Arbitrator") designated by the American Arbitration Association
under the expedited procedures then in effect for the resolution of commercial
disputes for resolution. The Arbitrator shall be a certified public accountant
designated by the American Arbitration Association. SFX and the Stockholders
shall share equally the costs and expenses of the Apportionment Arbitrator, but
each party shall bear its own legal and other expenses, if any. Upon final
resolution of the amount due in respect of the Final Schedule including any
Disputed Apportionments, the amounts due to either SFX or the Stockholders, as
the case may be, shall be paid in accordance with Section 1.11(C) hereof.
SECTION 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANIES
Each of the Companies (in each case, the "Company") hereby represents
and warrants (with respect to itself and its own subsidiaries only) to SFX as
follows:
2.1 Corporate Organization.
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(a) Schedule 2.1 of the Disclosure Schedule sets forth the name
and jurisdiction of the Company and its direct and indirect Subsidiaries, (the
"Subsidiaries"). Each of the Company and its Subsidiaries other than CPAP, is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization, has all
requisite corporate or other power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted, and is
duly qualified and in good standing to do business in each jurisdiction in
which the nature of the business conducted by it or the ownership or leasing of
its properties makes such qualification necessary except where the failure to
so qualify would not have a material affect on the Company or its Subsidiaries
(a "Material Adverse Affect").
(b) The copies of the Certificate of Incorporation and By-Laws of
the Company and of each of its subsidiaries heretofore delivered to SFX are
complete and correct copies of such instruments as presently in effect.
2.2 Capitalization. As of the date of this Agreement, the authorized
capital stock of the Company and the capital accounts of CPAP are as set forth
on Schedule 2.2. All issued and outstanding shares of Stock are duly
authorized, validly issued and outstanding, fully paid and nonassessable and
not subject to any unwaived, preemptive or appraisal rights. There is
outstanding no security, option, warrant, right, call, subscription, agreement,
commitment or understanding of any nature whatsoever, fixed or contingent, that
directly or indirectly (i) calls for the issuance, sale, pledge or other
disposition of any capital stock of the Company or its Subsidiaries or any
securities convertible into, or other rights to acquire, any of the capital
stock of the Company or its Subsidiaries; or (ii) obligates the Company or its
Subsidiaries to grant, offer or enter into any of the foregoing; or (iii)
relates to the voting or control of such capital stock, securities or rights.
No person has any right to require the Company or its Subsidiaries to register
any of its securities under the Securities Act of 1933, as amended (the
"Securities Act"). Schedule 2.2 sets forth the name and address of each holder
of Company Stock and the number of such securities held by such holder. Each
holder of Company Stock is an "accredited investor" as that term is defined in
Regulation D promulgated under the Securities Act.
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2.3 Subsidiaries of the Company.
(a) Schedule 2.3 of the Disclosure Schedule sets forth the name,
jurisdiction of incorporation and capitalization of each Subsidiary. Except as
set forth in Schedule 2.3 of the Disclosure Schedule, the Company does not own,
directly or indirectly, any capital stock of any corporation or have any direct
or indirect equity or ownership interest in any corporation, business trust,
firm, association, partnership, joint venture, entity or organization.
(b) Except as set forth in Schedule 2.3 of the Disclosure
Schedule, all of the issued and outstanding capital stock of each Subsidiary of
the Company is owned, directly or indirectly, by the Company free and clear of
any liens, claims, charges, options, rights of first refusal, pledges, security
interests, mortgages, indentures, or other encumbrances or third party rights
of any kind, written or oral (collectively, "Liens") and is validly issued,
fully paid and nonassessable.
(c) Except as set forth in Schedule 2.3 of the Disclosure
Schedule, each Subsidiary of the Company: (i) is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation; and (ii) has full power and authority to own, operate and lease
its properties and assets and to carry on its business as it is now being
conducted in the manner of and in the places in which such business is now
being conducted.
2.4 Authorization. The Company has full power and authority to enter
into this Agreement and (subject to obtaining the consents set forth in
Schedule 2.22 hereof and the approval of transactions contemplated hereby by
the stockholders of the Company in accordance with applicable law) to carry out
the transactions contemplated hereby. The Board of Directors of the Company has
approved this Agreement and the transactions contemplated hereby, has
authorized the execution and delivery of this Agreement and has directed that
the transactions
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contemplated hereby be submitted to its stockholders for approval within seven
(7) days of the date hereof, and (except for the approval of the transactions
contemplated hereby by the stockholders of the Company) no other corporate
proceedings on the part of the Company are necessary to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Company and (assuming this Agreement is a legal,
valid and binding obligation of SFX and its applicable subsidiary) constitutes
a legal, valid and binding obligation of the Company enforceable in accordance
with its terms.
2.5 No Violation. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will (with or
without notice or the passage of time, or both): (a) violate any provision of
the Certificate of Incorporation or ByLaws of the Company or of any Subsidiary
or the partnership agreement of CPAP; (b) except as set forth in Schedule 2.5
of the Disclosure Schedule, violate, conflict with, constitute a default under,
permit the termination of, cause the acceleration of the maturity of, or result
in the creation or imposition of any lien upon the properties or assets of the
Company or any of its Subsidiaries pursuant to the provisions of, any
agreement, lease, document, instrument, debt or obligation to which the Company
or any of its Subsidiaries is bound; or (c) violate any statute or law or any
judgment, decree, order, regulation or rule of any court or governmental agency
or body by which the Company or any of its Subsidiaries is bound or to which
the Company or any of its Subsidiaries is subject. Neither the Company nor any
of its Subsidiaries has received notice that it is in material violation of any
statute, law, judgment, decree, order, regulation or rule relating to or
affecting the operation, conduct or ownership of the properties or business of
the Company or any of its Subsidiaries.
2.6 Permits; Compliance. Except as set forth on Schedule 2.6 hereto,
to the actual knowledge of each Company, (i) each Company and its Subsidiaries
is in possession of all material franchises, grants, authorizations, licenses,
permits, easements, variances, exemptions, consents, certificates, approvals
and orders necessary to own, lease and operate its properties and to carry on
its business as it is now being conducted (collectively, the "Company
Permits"), and (ii) there is no material action, proceeding or investigation
pending or threatened regarding
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suspension or cancellation of any of the Company Permits. Schedule 2.6 sets
forth a list of all of the Company Permits. Neither the Company nor any of its
Subsidiaries is in material violation, which violation would have a Material
Adverse Effect, of (a) any law applicable to the Company or any of its
Subsidiaries or which any of their respective properties is bound by or subject
to or (b) any of the Company Permits and neither the Companies nor any of their
Subsidiaries has received notice with respect to any such violation. The
Company has provided SFX with copies of any written notifications which any of
its Subsidiaries has received from any governmental entity with respect to
material violations of applicable laws.
2.7 Reports and Financial Statements. Schedule 2.7 of the Disclosure
Schedule contains true and complete copies of the Company's (i) Unaudited
Balance Sheet and Income Statement for the years ended December 31, 1994 and
December 31, 1995, (ii) interim balance sheets and income statements for 1996
(other than for CPA and CPAP), (iii) certified audited combined financial
statements for CPAP and CPA for each of the years ended December 31, 1994 and
December 31, 1995 and (iv) internally prepared unaudited quarterly combined
financial statements for CPA and CPAP for 1996 (collectively, the "Financial
Statements"). The Financial Statements were prepared in accordance with
generally accepted accounting principles applied on a consistent basis (except
as may be indicated therein or in the notes thereto) and fairly present the
financial position of the Company and/or its Subsidiaries, as the case may be,
as at the dates thereof and the results of their operations and changes in
financial position for the periods then ended subject, in the case of the
unaudited interim financial statements, to normal year-end audit adjustments
and any other adjustments described therein which would not have a Material
Adverse Effect.
2.8 Absence of Certain Changes or Events. Except as disclosed in
Schedule 2.8 of the Disclosure Schedule, since November 1996, the Company and
its Subsidiaries have conducted their respective businesses only in a manner
consistent with usual and customary industry practice and there has not been:
(i) any material change in the business, operations or financial conditions of
the Company or any of its Subsidiaries; (ii) any entry into any commitment or
transaction material to the business and financial condition of the Company or
its
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Subsidiaries (including, without limitation, any borrowing or capital
expenditures other than the transactions contemplated by that certain loan
commitment, dated December 20, 1996 from the Connecticut Development Authority
to CPA (the "CDA Loan"); (iii) any material damage, destruction or loss (not
covered by insurance) with respect to any assets of the Company or any of its
Subsidiaries involving cost or loss (not covered by insurance) in excess of
$50,000 the aggregate; (iv) any change by the Company or its Subsidiaries in
their accounting methods, principles or practices; (v) any declaration, setting
aside or payment of any dividends or distributions in respect of shares of
Stock or the shares of Stock of, or other equity interests in, any subsidiary
of the Company or any redemption, purchase or other acquisition of any of the
Company's securities or any of the securities of any Subsidiary; (vi) any
increase in the benefits under, or the establishment or amendment of, any
bonus, insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards, or restricted stock
awards), stock purchase or other employee benefit plan, or any increase in the
compensation payable or to become payable to directors, officers or employees
of the Company or its Subsidiaries; (vii) any disposition of any material
property of the Company or its Subsidiary; (viii) any waiver or compromise by
the Company or any of its Subsidiaries of a valuable right or a material debt
owed to it; or (ix) any agreement or commitment by the Company or any of its
Subsidiaries to do all of the foregoing.
2.9 Undisclosed Liabilities. Except as set forth in Schedule 2.9 of
the Disclosure Schedule, the Company and its Subsidiaries have no indebtedness,
liabilities or obligations which would be required to be reflected on a balance
sheet or the footnotes thereto in accordance with generally accepted accounting
principles including those to any Stockholder or any affiliate of any
Stockholder (as such term is defined in Rule 144 under the Securities Act)
except indebtedness, liabilities and obligations: (a) reflected or reserved
against on the balance sheet of the Company and its Subsidiaries for the period
ended November 30, 1996 (the "Balance Sheet"), including the notes thereto; or
(b) incurred since the date of the Balance Sheet consistent with usual and
customary industry practice.
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2.10 Title to Properties. Except as set forth in Schedule 2.10 of the
Disclosure Schedule, the Company or one or more of its Subsidiaries has good
and marketable title to, or a valid leasehold interest in, all of their
properties and assets (real, personal or mixed), including without limitation,
all of their properties and assets, reflected on the Balance Sheet or acquired
since the date of the Balance Sheet, except for properties and assets sold or
disposed of since the date of the Balance Sheet consistent with usual and
customary industry past practice. There are no outstanding rights or options
relating to the Real Property leased by the Company and its Subsidiaries. To
the actual knowledge of the Company, there are no unrecorded or undisclosed
documents or other matters which affect title to the Real Property leased by
the Company and its Subsidiaries. The properties and assets to be held by the
Companies and their respective Subsidiaries are all such properties and assets
used and necessary to conduct in all material respects the business and
operations of the Companies as now conducted.
2.11 Real Property.
(i) Schedule 2.11 (i) of the Disclosure Schedule contains a list
and brief description of all real property owned or leased by the Company and
its Subsidiaries and the improvements (including buildings and other
structures) located on such real property (including a brief description of the
use to which such property is being employed and, in the case of any such
property which is leased, the termination date or notice requirement with
respect to termination, annual rental and renewal or purchase options) (the
"Real Property"). Schedule 2.11(i) of the Disclosure Schedule also lists all
title insurance policies with respect to the Real Property owned by the Company
and its Subsidiaries and all guarantees of such leases, given by the Company
and its Subsidiaries or any other person or entity. Complete and correct copies
of all such leases, title insurance policies and guarantees have been delivered
by the Company to SFX as of the date hereof;
(ii) Except as provided in Schedule 2.11(ii) of the Disclosure
Schedule, neither the Company nor any Subsidiary has received any notice of a
pending or contemplated annexation or condemnation or similar proceedings
affecting, or which may affect, all or any portion of the Real Property;
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(iii) The tenancies described on Schedule 2.11(iii) of the
Disclosure Schedule constitute all of the written and oral agreements which
grant rights of use or possession with respect to the Real Property; except as
otherwise noted on Schedule 2.11(iii), (a) the leases described on Schedule
2.11(iii) are valid and subsisting and in full force and effect, have not been
amended, modified or supplemented and the tenants, licensees or occupants
thereunder are in actual possession, (b) no landlord has asserted any claim
which would in any way affect the relevant tenant's right of use, possession or
occupancy, (c) there are no pending summary proceedings or other legal actions
for eviction of any such tenant, (d) no notice of default or breach on the part
of the tenant under any of the leases has been received by the Company or its
Subsidiaries or their respective agents from the landlord thereunder, (e) all
decorating, repairs, alterations and other work required to be performed by the
tenant under each of the leases has been performed in all material respects,
and (f) except as set forth in Schedule 2.22 of the Disclosure Schedule, no
consent is necessary from any of the landlords with regard to the Mergers. No
landlord under any of the leases has any right or option to terminate the lease
for any reason other than a default thereunder by the applicable tenant of the
Real Property and no landlord has a "put" option with regard to any such Real
Property. The copies of the leases delivered to SFX together with all other
agreements disclosed herein or in the Disclosure Schedule attached hereto
constitute the sole agreements binding upon the Company with respect to the
Real Property. The rents set forth in Schedule 2.11(iii) of the Disclosure
Schedule are the actual rents, income and charges presently being paid by the
Company and its Subsidiaries under the leases. No security deposits have been
paid by any tenants of the Real Property, except as set forth on Schedule
2.11(iii) hereto;
(iv) Those management agreements and operating agreements listed
on Schedule 2.11(iv) of the Disclosure Schedule, constitute all of the written
and oral agreements for the provision of management and/or operating services
to the Real Property and all such agreements unless otherwise disclosed on such
schedule are terminable upon thirty (30) days notice by the party to whom
services are being provided thereunder;
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(v) The Real Property constitutes separate tax lots which are not
owned in common with any other party, and payments in lieu of taxes ("PILOT'S")
have been assessed against each such lot as a separate tax lot without regard
to property owned by any other party;
(vi) The Real Property is serviced by a public sanitary sewer,
not a septic system;
(vii) To the actual knowledge of the Companies, the existing
parking areas and the existing number of parking spaces located at the Real
Property together with the parking agreements described on Schedule 2.11 are
all of the parking spaces required by law and the site fully complies with all
applicable laws, rules, regulations, codes and ordinances and approved site
plans;
(viii) Except as set forth on Schedule 2.11(viii) of the
Disclosure Schedule, there are no commissions or other compensation now or
hereafter payable to any broker or other agent under any written or oral
agreement or understanding with such broker or agent in relation to any of the
leases to which either the Company or its Subsidiaries are a party or any
extension thereof. With respect to any and all such brokerage commissions, the
Company covenants and agrees to pay any such brokerage commissions or
compensation at or prior to the Effective Date and shall hold SFX and the SFX
Subs harmless and defend each of SFX and the SFX Subs in regard to any and all
claims for brokerage commissions or other compensation relating to any leasing
activity prior to the Effective Date, including without limitation, reasonable
attorney's fees and expenses (notwithstanding anything to the contrary
contained in this Agreement, such indemnity obligation shall survive the
Effective Date);
(ix) There is no condemnation proceeding pending with regard to
all or part of the Real Property and, the Company has received no notice that
any such proceeding is contemplated by any governmental authority;
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(x) Except as otherwise disclosed on Schedule 2.11(x) hereto, to
the actual knowledge of the Companies, all certificates, permits and licenses
from any governmental authority having jurisdiction over the Real Property
which are necessary to permit the lawful use and operation of the buildings and
improvements on or constituting the Real Property as they presently exist, have
been obtained, and are now, and will continue to be at all times before the
Effective Date, in full force and effect, and, the Companies have received no
notice of any pending threat of modification, cancellation, termination or
expiration of any such certificate, permit, approval or license; no buildings
or improvements located on or constituting the Real Property depend on any
dedication, variance, subdivision, special exception or other special
governmental approval for their continuing legality under all current
applicable governmental laws, regulations and ordinances;
(xi) To the actual knowledge of the Companies, all utilities
required for the operation of the Real Property either enter the Real Property
through adjoining public streets or if they pass through adjoining private
land, do so in accordance with valid public easements or private easements; all
of said public utilities are installed and operating and all installation and
connection charges have been or will be paid in full prior to the Effective
Date;
(xii) The Companies have received no notice of any violation of
any covenant, restriction, condition or agreement contained in any instrument
affecting the Real Property and the Companies have received no notices of
default from any third party who shall be benefited by any such restriction,
condition or agreements;
(xiii) Except as set forth on Schedule 2.11 (xiii) of the
Disclosure Schedule, there are no charges, complaints, actions, proceedings or
investigations pending or (to the actual knowledge of the Companies) threatened
against or involving the Company or any of its Subsidiaries or the Real
Property;
(xiv) The Companies and their respective Subsidiaries have not
received any notice from any insurance company which has issued a policy with
respect to the Real
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Property or from any landlord of the Real Property requesting performance of
any structural or other repairs or alterations to the Real Property;
(xv) There are no, and on the Effective Date there will be no,
mechanics', materialmen's or similar liens against the Real Property or any
portion thereof, except for work performed with the prior written consent of
SFX;
(xvi) To the actual knowledge of the Companies, no current
zoning, building or similar law, ordinance, order or regulation is or will be
violated by the continued maintenance, operation or use of any buildings or
other improvements on or constituting the Real Property or by the continued
maintenance, operation or use of the parking areas as long as said maintenance,
operation or use does not materially change from the current maintenance,
operation or use and the Company and its Subsidiaries. The Companies have no
actual knowledge of any pending, threatened or contemplated changes to any
zoning, building or similar law, ordinance, order or regulation which may
affect the maintenance, operation or use of the Real Property;
(xvii) The Companies have received no notice of any violations of
any federal, state or municipal laws, ordinances with regard to any portion of
the Real Property;
(xviii) No assessments or impact fees for public improvements
have been made or charged or to the actual knowledge of the Companies and its
Subsidiaries are proposed against the Real Property, including without
limitation, those for street widenings, intersection restructurings,
construction of traffic signals, sewer, water, gas and electric lines and
mains, streets, roads, sidewalks and curbs;
(xix) Each of the Companies and their respective Subsidiaries is
not a foreign person within the meaning of Section 1445 of the Internal Revenue
Code of 1986, as amended. At the Closing, each of the Company and its
Subsidiaries shall deliver an executed certificate in the applicable form set
forth in Treasury Regulation Section 1.1445-2(b)(2);
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(xx) Each of the Company and its Subsidiaries has no actual
knowledge of any assessment (for real estate taxes, sewer, water, or other
municipal improvements, or not-for-profit associations) payable in annual
installments, or any part thereof, which has, or may become a lien on the Real
Property or any part thereof, nor of any pending special assessments affecting
the Real Property, or any part thereof; and
(xxi) All buildings and improvements located on the Real Property
are structurally sound and all material systems used therein are in good
working order.
(xxii) To the actual knowledge of the Companies, there are no old
highways, abandoned roads, lanes, cemetery or family burial grounds, springs,
streams, rivers, ponds, or lakes bordering or running through the Real
Property; the Companies have permitted no easements, rights of way, continuous
driveway usage, drain, sewer, water, gas or oil pipeline or other rights of
passage to others over the Real Property except as disclosed on the Schedules
attached hereto and the Companies have no knowledge of such adverse rights; no
encroachments upon the Real Property by others have been permitted by the
Companies nor have the Companies encroached upon any property of adjoining land
owners; and the Companies have conveyed no portion of the Real Property nor
committed any act or permitted any act to be committed which has changed or
could change the boundaries of the Real Property.
2.12 Personal Property. All of the personal property located at the
Real Property and available for inspection by SFX on January 16, 1997 and
available for inspection by SFX or its representatives on January 16, 1997,
constitutes all of the material tangible personal property and assets owned or
held by the Company and its Subsidiaries (the "Personal Property"). Except as
disclosed in Schedule 2.12 the Disclosure Schedule, and except as may be
subject to lease agreements or purchase money liens of the Company and the
Subsidiaries, the Companies own and have, and will have on the Effective Date,
good and marketable title to all such property (and to all other tangible and
intangible personal property and assets to be acquired by SFX hereunder), and
none of such property is, or at the Effective Date will be, subject to any
encumbrance other than as set forth in the Disclosure Schedule or the Financial
Statements. The Personal Property include all such properties used and
necessary to conduct in all material
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respects the business and operations of the Company and its Subsidiaries as it
is presently conducted.
2.13 [RESERVED]
2.14 Insurance. Schedule 2.14 of the Disclosure Schedule sets forth
the following information with respect to each current insurance policy
(including policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) to which the Company or
its Subsidiaries is a party, a named insured, or otherwise the beneficiary of
coverage:
(a) the name, address, and telephone number of the agent;
(b) the name of the insurer, the name of the policyholder, and
the name of each covered insured;
(c) the policy number and the period of coverage;
With respect to each such insurance policy, the Companies have not received
notice of any default (including with respect to the payment of premiums or the
giving of notices), under the policy, and no party to the policy has repudiated
any provision thereof. To the actual knowledge of the Company and its
Subsidiaries have been covered during the past three (3) years by insurance in
scope and amount customary and reasonable for the businesses in which it has
engaged during the aforementioned period.
2.15 Employee Benefits. The Company and its Subsidiaries have all
complied in all material respects with all laws relating to the employment of
labor, including, without limitation, the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), and those laws relating to wages, hours,
collective bargaining, unemployment insurance, workers' compensation, equal
employment opportunity, sexual harassment and payment and withholding
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of taxes. More specifically, the Company and its Subsidiaries have
substantially complied with and are not knowingly in default in any material
respect under any laws, rules and regulations relating to employment of labor,
including those relating to wages, hours, equal employment opportunities,
sexual harassment, employment of protected minorities (including women and
persons over 40 years of age), collective bargaining and the withholding and
payment of taxes and contributions and have withheld all amounts required or
agreed to be withheld from wages and salaries of its employees, and are not
liable (other than for the current payroll period) for any arrearage of wages
or for any tax or penalty or failure to comply with the foregoing. There are no
claims or complaints pending or, to the knowledge of the Company or its
Subsidiaries, threatened against the Company or its Subsidiaries before any
court or governmental agency and involving any alleged unlawful employment
practices, whether or not relating to the laws described above except as set
forth on Schedule 2.11 (viii). The Company and its Subsidiaries have not
consented to any decree involving any claim of unfair labor practice and have
not been held in any judicial proceeding to have committed any unfair labor
practice and there are no material controversies pending or threatened between
the Company or its Subsidiaries and any of its employees.
2.16 Employees. Schedule 2.16 of the Disclosure Schedule sets forth a
true and complete list of all employees of the Company and its Subsidiaries,
their positions, locations, salaries or hourly wages and severance
arrangements. Except as set forth on the Balance Sheet or on Schedule 2.16 of
the Disclosure Schedule, there is no liability for unpaid salary or wages,
bonuses, vacation time or other employee benefits, including, without
limitation, Retirement Benefits, due or accrued, nor liability for withheld or
deducted amounts from Employees earnings for the period ending on the Effective
Date. Neither the Company or its Subsidiaries is a party to or not bound by any
collective bargaining agreement, nor, except as otherwise set forth on Schedule
2.11 (xiii) has it experienced any strikes, grievances, claims of unfair labor
practices, or other collective bargaining disputes. Neither the Company or its
Subsidiaries has committed any unfair labor practice. There is no
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of the Company or its Subsidiaries.
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2.17 Environment, Health and Safety. Except as otherwise disclosed in
the reports and other documentation described in Schedule 2.17 hereof: (i) no
Hazardous Substances (as hereinafter defined) have been released, treated,
stored or disposed of, or otherwise deposited in, on, or under, or migrated to,
the Real Property, including without limitation of the generality of the
foregoing, the surface waters and subsurface waters of the Real Property which
have not been remediated in accordance with all applicable Environmental Laws
(as hereinafter defined); (ii) there are no substances or conditions
(including, without limitation, asbestos or asbestos-containing materials or
lead based paints) in or on the Real Property which may support a claim or
cause of action under any existing federal, state or local environmental
statute, regulation, ordinance or other environmental regulatory requirement,
whether relating to air, water, land or otherwise (hereinafter collectively
referred to as "Applicable Environmental Laws"), including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), as amended 42 U.S.C. ss. 6901 et seq. and the Resource Conservation
and Recovery Act ("RCRA"), as amended, 42 U.S.C. ss. 6901 et seq., which terms
shall also include, whether or not included in the definitions contained in
Applicable Environmental Laws, petroleum, petroleum by-products, solvents, or
polychlorinated biphenyls ("PCBs"); (iii) there are no underground tanks at the
Real Property and no part of the Real Property constitutes "wetlands" under any
federal, state or local statute, rule or regulation; (iv) there are no liens
under Applicable Environmental Laws affecting the Real Property and no
government actions have been taken or, are in process, which could subject any
portion of the Real Property to such liens; (v) there have been delivered to
SFX true copies of the results of any tests, investigations or reports made by
on behalf of or in the possession or control of the Company or any of its
Subsidiaries with respect to the environmental or other condition of the Real
Property and the Company is not aware of any material inaccuracies in such
tests, investigations or reports; (vi) the Company and its Subsidiaries and the
Real Property are in full compliance with all Applicable Environmental Laws and
with all permits and the Company shall and shall cause its Subsidiaries to
comply with all Applicable Environmental Laws up to the Effective Date; (vii)
the Companies have received no notice of the occurrence of any event which,
with the passage of time or the giving of notice or both, would constitute
non-compliance
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with such Applicable Environmental Laws and the Company and its Subsidiaries
has not received any notices of non-compliance with, or otherwise relating to,
such Applicable Environmental Laws; and (viii) there are no actions, suits,
claims, or proceedings relating to a violation or non-compliance with any
Applicable Environmental Laws pending which may affect the Real Property, or
with respect to the disposal, discharge or release of Hazardous Substances,
hazardous wastes or contaminants at or from or onto the Real Property. As used
herein, "Hazardous Substances" shall mean any hazardous materials, hazardous
waste, hazardous and toxic substances, pollutants and contaminants, as those
terms are defined by any Applicable Environmental Laws.
2.18 Intellectual Property.
(a) To the actual knowledge of the Companies, the Company or its
Subsidiaries own or have the right to use pursuant to license, sublicense,
agreement, or permission all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, ("Intellectual Property"), necessary for the operation of the
businesses of the Company and its Subsidiaries as presently conducted. Each
item of Intellectual Property owned or used by the Company and its Subsidiaries
is owned or available for use by the Company and its Subsidiaries on identical
terms and conditions immediately subsequent to the Effective Date. The Company
and its Subsidiaries have taken all reasonably necessary and desirable action
to maintain and protect each item of Intellectual Property that it owns or
uses.
(b) To the actual knowledge of the Companies, the Company and its
Subsidiaries have not interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of third
parties, and none of the Stockholders and the directors and officers (and
employees with responsibility for Intellectual Property matters) of the Company
has ever received any charge, complaint, claim, demand, or notice alleging any
such interference, infringement, misappropriation, or violation (including any
claim that the
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Company or the Subsidiaries must license or refrain from using any Intellectual
Property rights of any third party). To the best of the Company's knowledge, no
third party has interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Intellectual Property rights of the Company or the
Subsidiaries or its Subsidiaries.
2.19 Contracts. Schedule 2.19 of the Disclosure Schedule, together
with all other Schedules annexed hereto, lists the following contracts and
other agreements to which either the Company or its Subsidiaries are a party as
of the date hereof:
(a) any agreement (or group of related agreements) for the lease
of personal property to or from any person providing for lease payments in
excess of $50,000 per annum or a term of more than one (1) year;
(b) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the
performance of which has a term more than 12 months left on its term, or
involves unpaid consideration in excess of $50,000;
(c) any partnership or joint venture agreement;
(d) any agreement (or group of related agreements) under which it
has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, in excess of $25,000, or under
which it has imposed a security interest on any of its assets, tangible or
intangible;
(e) any agreement concerning confidentiality or noncompetition;
(f) any agreement with any of the Stockholders or their
affiliates (as such terms defined in Rule 144 under the Securities Act);
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(g) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan or
arrangement for the benefit of its current or former directors, officers, and
employees;
(h) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis (other than agreements which
are terminable without causing a Material Adverse Effect);
(i) any agreement under which the consequences of a default or
termination would have a Material Adverse Effect; or
(j) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $100,000.
The Company has delivered to SFX a correct and complete copy of each written
agreement listed in Schedule 2.19 of the Disclosure Schedule and a written
summary setting forth the terms and conditions of each oral agreement referred
to in Schedule 2.19. With respect to each such agreement: (A) the agreement is
legal, valid, binding, enforceable, and in full force and effect; (B) the
agreement will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby (subject to obtaining the consents required by
Section 2.22); (C) to the actual knowledge of the Company, no party is in
breach or default, and no event has occurred which with notice or lapse of time
would constitute a breach or default, or permit termination modification, or
acceleration, under the agreement; and (D) no party has repudiated any
provision of the agreement.
2.20 Taxes.
(a) To the actual knowledge of the Companies and except as
otherwise disclosed in Schedule 2.20(a) and it the attached Disclosure
Schedules: (i) The Company has filed and has furnished to SFX (or received an
appropriate extension of time to file) all federal,
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state, local, and foreign Tax Returns required to be filed by them prior to the
Effective Date; (ii) From October 12, 1993 through the Effective Date, the
Company and the Subsidiaries filed consolidated U.S. federal income tax returns
as members of an affiliated group, the common parent of which is the Company,
other than CADCO, QN Corp. which has not filed any returns and which is not a
member of a consolidated group and CPAP which has filed partnership returns;
(iii) All such Tax Returns were true and correct in all material respects. The
Company and each of the Subsidiaries has paid all Taxes shown to be due on such
Tax Returns, and has made appropriate provisions in the Balance Sheet for any
Taxes not yet due, or which are being contested in good faith; (iv) The Company
and each of the Subsidiaries has withheld and paid over to the appropriate
Governmental Authority all Taxes required by law to have been withheld and paid
in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party; (v) All tax
deficiencies asserted or assessed against the Company and each of the
Subsidiaries have been paid or finally settled; (vi) Neither the Company nor
any of the Subsidiaries expects any federal, state, local or foreign taxing
authority to assess any additional Taxes for any period for which Tax Returns
have been filed; (vii) No claims have ever been made by any tax authority in a
jurisdiction where the Company and each of the Subsidiaries do not file Tax
Returns that it is or may be subject to taxation by that jurisdiction; (viii)
Neither the Company nor any of the Subsidiaries has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a tax assessment or deficiency; (ix) There is no pending or, to the
knowledge of the Company, threatened action, audit, proceeding or investigation
for the assessment or collection of any Taxes; (x) There are no requests for
rulings, subpoenas or requests for information pending with respect to any
taxing authority; (xi) Any adjustments of Taxes made by any federal taxing
authority in any examination which is required to be reported to a state,
local, or foreign taxing authority has been reported, and any additional Taxes
due with respect thereto have been paid; (xii) No power of attorney has been
granted by the Company or any of the Subsidiaries, and is currently in force,
with respect to any matter relating to Taxes; (xiii) There are no liens (other
than liens for Taxes that are not yet due or which are being contested in good
faith) on any assets of the Company or any of the Subsidiaries that arose in
connection with any failure (or alleged failure) to pay any Tax, except for
liens which would not, individually or in the aggregate, have a material
adverse
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effect; and (xiv) CADCO is and has been a valid Subchapter S Corporation (as
defined in the Code) since its incorporation.
(b) To the actual knowledge of the Companies and except as
otherwise disclosed in any of the attached Disclosure Schedules: (i) Neither
the Company nor any of the Subsidiaries has made an election under Section
341(f) of the Code; (ii) Neither the Company nor any of the Subsidiaries has
made any payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Section 280G of the Code; (iii)
Neither the Company nor any of the Subsidiaries has been a United States real
property holding company within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii); (iv) No
excess loss account (within the meaning of Treas. Reg. [section] 1.1502-19)
exists with respect to any of the Subsidiaries; (v) Neither the Company nor any
of the Subsidiaries has, or will have, as of the Effective Date, any deferred
gain or loss arising from deferred intercompany transactions within the meaning
of Treas. Reg. [section] 1.1502-13; (vi) Neither the Company nor any of the
Subsidiaries was acquired in a "qualified stock purchase" under Section
338(d)(3) of the Code and no election under Section 338(g) of the Code,
protective carryover basis election, or offset prohibition election is
applicable to the Company or any of the Subsidiaries; (vii) Neither the Company
nor any of the Subsidiaries has participated in or cooperated with any
international boycott within the meaning of Section 999 of the Code; (viii)
Neither the Company nor any of the Subsidiaries is required to include in
income any adjustment pursuant to Section 481(a) of the Code (or any similar
provision of law or regulations) by reason of a change in accounting method,
nor is any taxing authority considering such change in accounting method; (ix)
Neither the Company nor any of the Subsidiaries has disposed of any property
which has been accounted for tax purposes under the installment method. Neither
the Company nor any of the Subsidiaries is a party to any interest rate swap,
currency swap or similar transaction; (x) [INTENTIONALLY OMITTED]; (xi) As of
the Effective Date but prior to the Merger, the ability of the Company and each
of the Subsidiaries to use their net operating losses and carryovers will not
have been affected by Sections 382, 383 or 384 of the Code or by the SRLY or
CRCO limitations of Treas. Reg. [section][section] 1.1502-21 or 1.1502-22;
(xii) Neither the Company nor
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any of the Subsidiaries owns any interest in an entity which is characterized
as a partnership for U.S. federal income tax purposes; (xiii) Neither the
Company nor any of the Subsidiaries would be liable for any increase in Tax
under Section 47 of the Code, were such entity to dispose of all of its assets
on the Effective Date; (xiv) As of the Effective Date, neither the Company nor
any of the Subsidiaries will have sustained an "overall foreign loss" within
the meaning of Section 904(f) of the Code; (xv) As of the Effective Time,
neither the Company nor any of the Subsidiaries will have any "non-recapture
net section 1231 losses" within the meaning of Section 1231(c) of the Code; and
(xvi) No election under Section 1504(d) of the Code has been made with respect
to the Company or any of the Subsidiaries.
(c) Regarding the Merger: Neither the Company nor any of the
Subsidiaries is an investment company as defined in Section 368(a)(2)(F)(iii)
and (iv) of the Code. Except as set forth on Schedule 2.20(c) of the Disclosure
Schedule, neither Company nor any of the Subsidiaries is under the jurisdiction
of a court in Title 11 or similar case within the meaning of Section
368(a)(3)(A) of the Code. Neither the Company or any of the Subsidiaries holds
stock of SFX and will not hold stock of SFX prior to the Merger.
(d) For purposes of this Section 2.20, the following terms will
have the following meanings:
(i) "Tax" or "Taxes" shall mean any and all federal, state,
local, foreign, and other taxes, levies, fees, imposts, duties and charges of
whatever kind (including any income, franchise, profits, or gross receipts, and
also ad valorem, value added, sales, use, service, real or personal property,
capital stock, license, payroll, withholding, employment, social security,
workers' compensation, unemployment compensation, utility, severance,
production, excise, stamp, occupation, premium, windfall profits, transfer, and
gains taxes and interest, penalties or additions thereto imposed by any tax
authority payable by the Company or any of the Subsidiaries, or chargeable or
relating to the assets, income or revenue of the Company or any of its
Subsidiaries.
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(ii) "Tax Return" shall mean returns, reports, information
statements, or other documentation (including any additional or supporting
material) filed or maintained, or required to be filed or maintained in
connection with the calculation, determination, assessment or collection of any
Tax.
2.21 Litigation. Except as set forth in Schedule 2.21 of the
Disclosure Schedule, there are no lawsuits, claims, actions, administrative,
arbitration or other proceedings or governmental investigations or inquiries
(a) pending or, to the actual knowledge of the Company threatened, against or
involving the Company or any or its Subsidiaries or any property or rights of
the Company or any of its Subsidiaries, nor is there any order, judgment,
injunction or decree of any court, governmental agency or arbitrator
outstanding against the Company or any of its Subsidiaries, or (b) pending or,
to the actual knowledge of the Company threatened, against the Company or any
of its Subsidiaries which challenge the validity or propriety of this Agreement
or the transactions contemplated hereby, and the Companies have received no
notice of any complaints with respect to the Company or its Subsidiaries which
have been filed with any consumer protection agency.
2.22 Consents. Except as set for in Schedule 2.22 of the Disclosure
Schedule, and except for the approval of the transactions contemplated hereby
by the stockholders of the Company, no consent or approval under any agreement
entered into by the Company is required in connection with the execution,
delivery or performance by the Company of this Agreement or in connection with
the transactions contemplated hereby, which the failure to obtain or make,
either individually or in the aggregate with all other such failures, could
reasonably be expected to (a) have a Material Adverse Effect, or (b) prevent
the Company from consummating the transactions contemplated hereby.
2.23 Affiliate Transactions. Except as set forth on Schedule 2.23
hereof, none of the Stockholders, officers or directors, or any of their
immediate family members, or to the actual knowledge of the Company or its
Subsidiaries, none of its other employees, is currently a party (either
directly or through any ownership, beneficial, contingent or other interest in
an
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entity, business or enterprise of any kind) to any transaction with or
involving the Company or its Subsidiaries or any assets used in the operation
of the Company or its Subsidiaries including, without limitation, any
arrangement (other than for services in the ordinary course of business as
officers, directors or employees of the Companies) providing for (a) the
furnishing of services by or to, (b) the rental of the sites on which the Real
Property is located, (c) any loan or other indebtedness from or to, (d) the
grant of any mortgage, security interest, pledge or other encumbrance from or
to, or (e) otherwise requiring payments or other consideration (including a
promise of forbearance) from or to, any such person.
2.24 Broker's and Finder's Fees. The Company has not retained any
broker or finder or other person in connection with transactions contemplated
hereby.
2.25 Absence of Certain Business Practices. To the best of the
Company's knowledge, tickets sold in connection with the Companies and its
Subsidiaries operations are sold in compliance with all local laws and solely
through nationally recognized ticket outlets (including Protix) and not through
ticket brokers.
SECTION 3 REPRESENTATIONS AND WARRANTIES OF SFX
SFX hereby represent and warrants to each of NOC, CADCO, QN and the
Stockholders as follows:
3.1 Corporate Organization.
(a) SFX is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation and has the
full power and authority to own, operate and lease its properties and assets
and to carry on its business as now being conducted in the manner of and in the
places in which such business is now being conducted.
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(b) The copies of the Certificate of Incorporation and By-Laws of
SFX heretofore delivered to the Company are complete and correct copies of such
instruments as presently in effect.
3.2 Authorization. SFX has the full power and authority to enter into
this Agreement and to carry out the transactions contemplated hereby. The Board
of Directors of SFX has approved this Agreement and the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by SFX and (assuming this Agreement is a legal, valid and binding
obligation of the Company) constitutes a legal, valid and binding obligation of
SFX enforceable in accordance with its terms.
3.3 No Violation. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will: (a) violate
any provisions of the Certificate of Incorporation or By-Laws of SFX; (b)
violate, or constitute a default under, any agreement to which SFX is a party,
or by which SFX is bound, which violation or default could reasonably be
expected to (i) have a material adverse effect on the business, financial
condition or results of operations of the SFX and its subsidiaries taken as a
whole or (ii) prevent SFX from consummating the transactions contemplated
hereby; or (c) violate any statute or law or any judgment, decree, order,
regulation or rule of any court or governmental agency or body which SFX is
bound, which could reasonably be expected to (i) have a material adverse effect
on the business, financial condition or results of operations of SFX and its
subsidiaries taken as a whole or (ii) prevent SFX from consummating the
transactions contemplated hereby.
3.4 Litigation. There are no lawsuits, actions, administrative,
arbitration or other proceedings, or governmental investigations pending
against SFX or any of its subsidiaries challenging the validity or propriety of
this Agreement or the transactions contemplated hereby.
3.5 Consents. Except for (a) applicable requirements of (i) the
Securities Act, and the rules and regulations of the SEC thereunder, (ii) the
Securities Exchange Act of 1934 as amended and the rules and regulations of the
SEC thereunder (the "Exchange Act"), (iii) state
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securities laws ("Blue Sky Laws") and (iv) NASDAQ; and (b) the filing and
recordation of appropriate merger or other documents as required by CN Stock
Act; no consent, approval, authorization or order of (or registration or filing
with) any court or governmental agency or body or other third party is required
to be made or obtained by SFX in connection with the execution, delivery or
performance by SFX of this Agreement or in connection with the transactions
contemplated hereby, which the failure to obtain or make could reasonably be
expected to prevent SFX from consummating the transactions contemplated hereby.
SECTION 4 REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder represents and warrants for itself and not with
respect to any other Stockholder severally, but not jointly, to SFX as follows:
4.1 Authorization of Transaction. Such Stockholder has full power and
authority to execute and deliver this Agreement and to perform his, her or its
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of each Stockholder, enforceable in accordance with its terms and
conditions. Such Stockholder, if a natural person, is over 21 years of age and
has not had a legal representative appointed by a court of law or otherwise act
in his or her behalf or with respect to any of his or her property. If such
Stockholder is not a natural person: such Stockholder is a corporation or other
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or organization; the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate or
other action; no other corporate or other proceeding on the part of such
Stockholder is necessary to authorize this Agreement or to consummate the
transactions contemplated hereby; and this Agreement has been duly delivered by
such Stockholder. Such Stockholder need not give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any governmental
entity in order to consummate the transactions contemplated by this Agreement.
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4.2 Noncontravention. Neither the execution and the delivery of this
Agreement and the Consent, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which such Stockholder is
subject or the certificate of incorporation and bylaws or other organizational
documents of such Stockholder or (B) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which such Stockholder is a party, by which it is bound or to which any of
its assets is subject.
4.3 Brokers' Fees. Except as set forth on Schedule 4.3 of the
Disclosure Schedule, no Stockholder has any liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement. The fees set forth in Schedule 4.3
of the Disclosure Schedule shall be borne by the Stockholders.
4.4 Company Shares. Such Stockholder holds of record and owns
beneficially the number of shares of Company Stock set forth next to its name
on the signature page hereto, free and clear of any restrictions on transfer
(other than any restrictions under the Securities Act and state securities
laws), security interests, options, warrants, purchase rights, contracts,
commitments and equities. Such Stockholder is not a party to any option,
warrant, purchase right, or other contract or commitment that could require
such Stockholder to sell, transfer, or otherwise dispose of any capital stock
of the Company or any of its Subsidiaries (other than this Agreement). Such
Stockholder is not a party to any voting trust, proxy or other agreement or
understanding with respect to the voting of any capital stock of the Company
(other than this Agreement).
4.5 Accredited Investor. Such Stockholder is (i) a natural person
whose individual net worth, or whose joint net worth with that person's spouse,
exceeds $1,000,000; (ii)
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a corporation or partnership not formed for the specific purpose of acquiring
SFX Shares, with total assets in excess of $5,000,000; or (iii) an entity in
which all of the equity owners are "accredited investors" as that term is
defined in Regulation D of the Securities Act. Such Stockholder is a
sophisticated investor by virtue of his education, training and/or numerous
prior investments made on his or her behalf or through entities which he or
she, alone or with others, controls. Such Stockholder is knowledgeable and
experienced in financial and business matters, and is capable of evaluating the
merits and risks of an investment and of making an informed business decision.
4.6 Investment Intention. Such Stockholder is acquiring its SFX shares
for investment and not with a view to dispose of its SFX Shares to be issued in
the Merger in violation of the Security Act.
4.7 Receipt of Information. Such Stockholder has received a copy of
each of the following documents relating to SFX: (i) Annual Report on Form 10-K
for the year ended December 31, 1995; (ii) Quarterly Reports on Form 10-Q for
the quarters ended, March 31, 1996, June 30, 1996 and September 30, 1996; (iii)
Current Report on Form 8-K dated January 21, 1997 and January 28, 1997; (iv)
Proxy Statement relating to the 1996 Annual Meeting of Shareholders; and (v)
the 1995 Annual Report to Shareholders.
SECTION 5 REPRESENTATIONS AND WARRANTIES REGARDING SFX SUBS
SFX and each of the SFX Subs jointly and severally represent and
warrant to the Stockholders as follows (each SFX Sub represents and warrants
only with respect to itself):
5.1 Organization. Each of the SFX Subs is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Connecticut and is an indirect subsidiary of SFX.
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5.2 Authority Relative to This Agreement. Each of the SFX Subs has the
requisite corporate power to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by each of the SFX Subs' Board of Directors and approved by its sole
stockholder, and no other corporate proceedings on the part of the SFX Subs are
necessary to authorize this Agreement and the transactions contemplated hereby.
This Agreement constitutes a legal, valid and binding obligation of each Sub.
SECTION 6 COVENANTS AND AGREEMENTS.
6.1 Conduct of Business. Each of the Companies agrees that from the
date hereof until the Effective Date without the prior written consent of SFX
and the SFX Subs:
(a) the Companies shall operate their businesses and cause the
businesses of their Subsidiaries to be operated only in the ordinary course
consistent with past practice;
(b) the Companies shall use their commercially reasonable efforts
to preserve, in all material respects and consistent with past custom and
practice, its business and properties, including its present operations,
physical facilities, permits, approvals, licenses, working conditions and
relationships with persons having significant business relations with it,
including without limitation, suppliers and customers;
(c) the Companies shall not (i) amend their Certificates of
Incorporation or By-Laws or the charter documents or by-laws of any of its
Subsidiaries or CPAP's joint venture agreement, (ii) change the number of
authorized shares of its capital stock, as set forth on Schedule 2.2 hereof,
and (iii) split or reclassify any shares of its capital stock or declare, set
aside or pay any dividend or other distribution or payment in cash, stock or
property in respect of shares of its capital stock;
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(d) except otherwise expressly as set forth in this Agreement or
the Disclosure Schedules attached hereto, neither the Companies nor any of
their Subsidiaries shall (i) issue, grant, sell or pledge or agree or propose
to issue, grant, sell or pledge any shares of, or rights of any kind to acquire
any shares of, the capital stock of the Company or any of its Subsidiaries,
(ii) redeem, purchase or otherwise acquire or offer to redeem, purchase or
otherwise acquire, any shares of capital stock or other securities, (iii)
acquire any assets or properties, or enter into any other transaction, other
than consistent with usual and customary industry practices, (iv) sell,
transfer or otherwise dispose of or encumber or mortgage any assets or
properties which are material to the Company and its Subsidiaries, other than
consistent with usual and customary industry practices, (v) waive, release,
grant or transfer any rights of value or modify or change in any material
respect any existing license, lease, contract or other document, other than
consistent with usual and customary industry practices, (vi) enter into any
Contract other than those which would be consistent with usual and customary
industry practice, (vii) enter into any performance production agreements,
management agreements, ticketing agreements or other agreements relating to the
operation of the Real Property as a performance venue (viii) enter into any
"booking agreements" without the prior approval of SFX, which consent shall not
be unreasonably withheld or delayed and which consent shall be deemed granted
if not denied within 36 hours of delivery to SFX of notice of such booking,
(ix) enter into any employment contract or collective bargaining agreement, or
modify the terms of any existing such contract or agreement, (x) establish any
new Employee Benefit Plan, or modify or terminate any existing Employee Benefit
Plan, (xi) except to the extent contemplated by the CDA Loan, make any capital
expenditures other than those which would be consistent with usual and
customary industry practice, or make any capital expenditures in the aggregate
in excess of $50,000, (xii) take or agree to take any action that would or is
reasonably likely to result in any of Company's representations and warranties
set forth in this Agreement being untrue or in any of the conditions to the
Merger not being satisfied, or (xiii) enter into any contract, agreement,
commitment or arrangement with respect to any of the foregoing;
(e) except as set forth in the Disclosure Schedules, neither the
Companies nor any of their Subsidiaries will (i) incur or assume any
indebtedness for money
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borrowed (including any indebtness under the CDA Loan with respect to capital
improvements but excluding any other amounts under the CDA Loan up to $1
million) or (ii) guarantee any indebtedness;
(f) the Companies and their Subsidiaries shall (i) exercise
commercially reasonable efforts to keep in full force and effect insurance now
carried, (ii) exercise commercially reasonable efforts to perform in all
material respects all obligations under their Contracts relating to or
affecting their properties, assets and business, (iii) maintain their books of
account and records consistent with good business practices and (iv) exercise
commercially reasonable efforts to comply in all respects with all laws
applicable to them and to the conduct of their business;
(g) the Companies shall not (i) increase the compensation payable
to, or to become payable to, any employee, director or executive officer; (ii)
grant any severance or termination pay to, or enter into any employment or
severance agreement with, any director, officer or employee; (iii) establish,
adopt, enter into or amend any employee benefit plan or arrangement except as
may be required by applicable law; or (iv) hire any salaried employees or pay
any bonuses;
(h) the Companies shall not acquire or agree to acquire, by
merging or consolidating with, by purchasing an equity interest in, all or a
portion of the assets of, or by any other manner, any corporation, partnership,
association or other business, organization or division (other than a wholly
owned subsidiary) thereof, or otherwise acquire or agree to acquire any assets
of any other person (other than the purchase of assets from suppliers or
vendors in consistent with past practice) which are material, individually or
in the aggregate, to either of the Companies and their Subsidiaries; and
(i) from and after the date hereof until the Effective Date, the
Companies shall not initiate or solicit any Competing Transaction or enter into
discussions or negotiate with any person or entity in furtherance of such
inquiries to obtain a Competing
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Transaction, or enter into an agreement with respect to any Competing
Transaction and (other than with respect to any proposals or negotiations with
respect to any Competing Transactions which commenced prior to the date hereof)
the Companies shall promptly notify SFX of all relevant terms of any such
inquiries and proposals received by any of the Companies and if such inquiry or
proposal is in writing, the Companies shall deliver or cause to be delivered to
SFX a copy of such inquiry or proposal. For purposes of this Agreement,
"Competing Transaction" shall mean any of the following involving the
Companies, any of their Subsidiaries or any affiliate of the Companies: (i) any
merger, consolidation, share exchange, business combination, or other similar
transaction (other than the transactions contemplated by this Agreement); (ii)
any sale, lease, exchange, transfer or other disposition of 25% or more of the
assets of any of the Companies and their Subsidiaries, taken as a whole, in a
single transaction or series of transactions; (iii) any offer (whether cash or
securities) for 25% or more of the outstanding shares of capital stock of any
of the Companies; or (iv) any public announcement of a proposal, plan or
intention to do any of the foregoing.
6.2 Access. From the date hereof until the Effective Date, the
Companies shall (a) afford to SFX and to their respective representatives,
during regular business hours and upon reasonable notice, such access to the
plants, offices, warehouses, properties, books and records of the Companies and
their Subsidiaries as any of them may reasonably request in connection with the
transactions contemplated hereby; and (b) cause its officers and accountants
promptly to furnish to SFX and to its representative, such financial and
operating data and other information as any of them may from time to time
reasonably request in connection with the transactions contemplated hereby.
Notwithstanding the foregoing, any investigation made by SFX or its officers,
attorneys, accountants, or other representatives shall not in any manner affect
the representations and warranties of the Companies and the Stockholders
contained herein. In addition, the Companies and the Stockholders shall have
the right to update and amend any of the Schedules attached hereto at any time
prior to the Closing; provided, however, if the Schedules are updated by the
Companies in a manner which would have a Material Adverse Effect, SFX and the
SFX Subs shall have twenty (20) days from delivery of the last of the
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updated Schedules to complete its due diligence review of the Companies and the
Stockholders as set forth in section 9.4.
6.3 Filings and Governmental Consents. After the execution and
delivery hereof, the Companies, the Subsidiaries, SFX and the SFX Subs: each
shall use its best efforts to cooperate in obtaining any consent, approval,
authorization or order of, or in making any registration or filing with, any
governmental agency or body required in connection with the execution, delivery
or performance of this Agreement or in connection with the transactions
contemplated hereby.
6.4 RESERVED
6.5 Confidentiality.
(a) Except for disclosure to accountants, attorneys, financial
advisors and other consultants or advisors, each of SFX and the SFX Subs agrees
that they shall, and shall use their best efforts to cause their officers,
employees and authorized representatives to, hold in strict confidence all data
and information obtained by them from the Companies (unless such information is
a matter of public knowledge or has heretofore been or is hereafter published
or filed as public information or becomes readily ascertainable from public or
published information or trade sources) and shall use their best efforts to
ensure that such officers, employees and authorized representatives do not,
disclose such information to others without the prior written consent of each
of the Companies, except that SFX and such other persons may provide such
confidential information in response to legal process or applicable laws or
governmental regulations.
(b) The Companies each agree that it shall, and shall use its best
efforts to cause its officers, employees and authorized representatives to,
hold in strict confidence all data and information obtained by them from SFX
and the SFX Subs (unless such information is or becomes readily ascertainable
from public or published information) and shall not, and shall
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use its best efforts to ensure that such officers, employees and authorized
representatives do not, disclose such information to others without the prior
written consent of SFX and each of the SFX Subs.
(c) In the event this Agreement is terminated, the Companies, on
the one hand, and SFX and the SFX Subs, on the other, each agree if so
requested by the other party, to return promptly or to destroy every document
furnished to either of them by the other party or any division, associate or
affiliate of such other party and any copies thereof which may have been made,
and which is in its possession or under its control, in connection with the
transactions contemplated hereby, and to cause its representatives, and any
representative of financial institutions, partnerships and others to whom such
documents were furnished, promptly to return such documents and any copies
thereof any of them may have made, other than documents filed with the SEC or
otherwise public available.
6.6 Restrictions on Transfer. Each of the Stockholders agrees that
such Stockholder on a Several Basis (as defined below) will not, during the
period commencing on the Effective Date and ending on the second anniversary of
the Effective Date: (1) offer, pledge, sell, contract to sell, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, or otherwise transfer, except for
transfers to immediate family members of such Stockholder or transfers to
trusts for the benefit of immediate family members of the Stockholders as well
as Stockholder's estates, or dispose of, directly or indirectly, any SFX
Shares; or (2) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the SFX Shares owned by the Stockholder, whether any such transaction described
in clause (1) or (2) above is to be settled by delivery of SFX Shares, in cash
or otherwise.
6.7 Registration Statement for Registering of Stock. At the request of
any of the holders of any of the SFX Shares, SFX hereby undertakes to file a
Registration Statement under the Securities Act with the U.S. Securities and
Exchange Commission (the "SEC") at any time following the second anniversary of
the Effective Date, to register the resale of the SFX Shares pursuant to
brokerage transactions as defined in Rule 144 of the Securities Act and shall
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use its best efforts to effect registration under the Securities Act of such
Shares, provided that, SFX shall be required to effect no more than one such
registration pursuant to this Section 6.7. Any such registration statement
shall provide each of the holders with the opportunity to have its shares
included therein and shall remain in effect for not less than 12 months. SFX
shall notify the Stockholders of the disposition of said SFX Registration
Statement and, to the extent that the Registration Statement shall become
effective, shall, at such time, issue replacement certificates for the Shares
eliminating the portion of the legend which provides: "THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933 OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT. FURTHERMORE,"
6.8 Use of Financial Statements. Prior to the Effective Date, the
Companies and the Subsidiaries agree that they will (i) consent to the use of
their audited financial statements in any registration statement or other
document filed by SFX (or any of its Subsidiaries) under the Securities Act or
the Securities Exchange Act of 1934, as amended, and (ii) execute and deliver,
and cause its partners and officers to execute and deliver, such
"representation" letters as are customarily delivered in connection with audits
and as SFX's independent accountants may reasonably request.
6.9 "As Is, Where Is" Acquisition. Notwithstanding anything in this
Agreement to the contrary, it is expressly understood by and among the parties,
that there are no representations, warranties or covenants, express or implied,
made with respect to the condition of any of the assets which become property
of the Surviving Corporations by virtue of the Mergers, except as expressly set
forth herein. Furthermore, there are no representations, warranties or
covenants, express or implied, being made with respect to any obligations,
liabilities or potential liabilities associated with any of the assets except
as expressly set forth
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herein. Finally, there are no representations, warranties or covenants made,
express or implied, with respect to any information, projections, budgets or
other financial information provided to SFX and the SFX Subs except as
expressly set forth herein.
6.10 Stock Legend.
In addition to any legend imposed by applicable state securities laws,
the certificate of incorporation of SFX or the rules, regulations and polices
of the Federal Communications Commission, all stock issued by SFX pursuant to
this Agreement, shall bear a restrictive legend stating substantially as
follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED,
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933 OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
FURTHERMORE, THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN "CALL," "PUT", RIGHTS OF FIRST REFUSAL AND OFFSET
PROVISIONS SET FORTH IN THAT CERTAIN AGREEMENT OF MERGER BY AND AMONG
SFX BROADCASTING, INC., ("SFX") NOC-ACQUISITION CORP., CADCO
ACQUISITION CORP., QN-ACQUISITION CORP., NEDERLANDER OF CONNECTICUT,
INC. AND CONNECTICUT AMPHITHEATER DEVELOPMENT CORPORATION AND QN CORP.
AND CERTAIN OF THE STOCKHOLDERS THEREOF DATED FEBRUARY __, 1997 (THE
"AGREEMENT"). AS A RESULT OF THE
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OFFSET PROVISIONS IN THE AGREEMENT, SHARES NOT VOLUNTARILY SURRENDERED
TO SFX MAY BE CANCELED ON THE TRANSFER BOOKS OF SFX WITHOUT NOTICE TO
THE HOLDER HEREOF. TRANSFEREE'S OF THESE SHARES TAKE THESE SHARES
SUBJECT TO SUCH CANCELLATION RIGHT.
6.11 Further Actions. Each of the parties hereto agrees to use its
best efforts to take, or cause to be taken, all action and to do, or cause to
be done, all things necessary, proper or advisable to consummate and make
effective the transactions contemplated by this Agreement, including using its
best efforts: (i) to obtain all necessary waivers, consents and approvals, to
give all notices and to effect all necessary registrations and filings, and
(ii) to defend any lawsuits or other legal proceedings, whether judicial or
administrative and whether brought derivatively or on behalf of third parties
(including governmental agencies or officials), challenging this Agreement or
the consummation of the transactions contemplated hereby.
6.12 Casualty and Condemnation
(a) If, prior to the Effective Date all or a substantial portion
of the Real Property shall be (i) condemned or taken by eminent domain, or (ii)
destroyed or damaged, at the option of SFX (subject, however, to the rights of
the Stockholders set forth in the next succeeding sentence), this Agreement
shall be null and void and of no further effect, and all monies paid hereunder
shall be returned promptly to SFX, with interest thereon. As used in this
Section 6.12, "a substantial portion of the Real Property" shall mean (A) in
the event of a condemnation or taking, a condemnation or taking of five (5%)
percent or more of the improvements at the Real Property, or such portion of
the parking or the means of ingress and egress which would cause a default by
the landlord under any of the leases or provide any tenant thereunder with the
right to terminate any such lease or any other condemnation or taking of the
Real Property that would inhibit the use, enjoyment or operation of the Real
Property as it currently exists, or (B) in the event of a casualty, the cost of
repair and/or replacement resulting from such casualty exceeds $250,000 (unless
the Stockholders shall elect to bear any costs or repair of such casualty in
excess of $250,000). In the event of such a cancellation by SFX, the
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Companies shall be entitled to collect all proceeds from the condemnation or
eminent domain and all insurance proceeds payable by reason of such destruction
or damage. If SFX does not elect to exercise its right to terminate this
Agreement, there shall be no diminution of the Merger Consideration, but SFX
shall be entitled to receive all condemnation proceeds and all insurance
proceeds covering such loss or damage (plus payment from the Stockholders to
SFX in the amount of the deductible under the applicable insurance policy) and
the Company and its Subsidiaries shall assign irrevocably all such rights to
SFX at the Effective Date. The election of SFX hereunder must be exercised
within thirty (30) days after notice to SFX of the occurrence of the taking or
loss or damage, and if such taking or loss or damage occurs less than thirty
(30) days prior to the Effective Date, the Effective Date, shall be extended
for such additional period of time as may be necessary to afford SFX a full
thirty (30) days to make its election. The Companies covenant and agree to
notify SFX in writing immediately upon the Companies' or any of their
Subsidiaries having knowledge of any taking or the occurrence of any damage or
casualty.
(b) If, prior to the Effective Date, less than a substantial
portion of the Real Property shall be (i) condemned or taken by eminent domain
or (ii) destroyed or damaged, the Companies shall, cure, promptly restore, or
cause to be restored, the Real Property to substantially and materially the
same condition as existed immediately prior to such taking or casualty, and the
Effective Date shall be extended to the extent reasonably necessary to allow
the Companies to substantially complete, or cause the completion of, such
restoration. To the extent that such condemnation, taking, destruction or
damage could reasonably be expected to be cured for an amount less than
$250,000, then the Companies and their respective Subsidiaries shall assign to
SFX and the SFX Subsidiaries all insurance and/or condemnation proceeds and the
Effective Date should not change.
6.13 Environmental, Structural, Title and Zoning Unwind Provisions
6.13.1 (i) SFX and the SFX Subs shall have the right, for a
period of ninety (90) days from the date hereof, to assert a claim against the
Stockholders on a Several Basis (as
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hereinafter defined), for a breach of the representations and warranties set
forth in Sections 2.11(xxi)(the "Structural Warranty") and 2.17 (the
"Environmental Warranty"; the Structural Warranty and the Environmental
Warranty are collectively referred to as the "Unwind Warranties"). Anything
contained in this Agreement to the contrary notwithstanding, SFX and the SFX
Subs agree that the provisions of this Section 6.13.1 shall be the sole and
exclusive remedy of SFX and the SFX Subs with respect to any breach or
misrepresentation relating to the Unwind Warranties and/or the Additional
Unwind Warranties (as defined below) or otherwise relating to the structural or
physical condition of the Real Property, compliance with any Applicable
Environmental Laws or otherwise relating to presence of hazardous substances,
the environmental condition of the Real Property or any other environmental
matters (whether based upon a breach of the Unwind Warranties or any other
representations or warranties contained in this Agreement which relate to such
matters). In addition, SFX and the SFX Subs shall have the right, for a period
of forty-five (45) days from the date of delivery to SFX or the SFX Subs, or
the completion by SFX of an "As Built Survey" of the Real Property, to assert a
claim against the Stockholders, on a Several Basis, for a breach of the
representations and warranties set forth in Sections 2.11 (x); (xi); (xvi) or
(xxii) (the "Additional Unwind Warranties") regardless of the actual knowledge
of the Companies. During the period from the Effective Date through and
including the last date on which the Unwind Procedure (as hereinafter defined)
may be consummated (the "Outside Date"), SFX and the SFX Subs shall, for
benefit of the Stockholders, comply with each of the covenants and conditions
of Sections 6.1, 6.2 and 6.3 hereof, other than those contained in Section
6.1(c)(viii), which were binding on the Companies and Stockholders for the
benefit of SFX and the SFX Subs between the date of this Agreement and the
Effective Date. In addition, SFX shall not cause the preferred stock of CPA to
be canceled unless the Outside Date shall have occurred without the Unwind
Procedure having been exercised.
(ii) In the event that SFX or the SFX Subs shall elect to assert
a claim with respect to a breach of the Unwind Warranties or Additional Unwind
Warranties, SFX and/or the SFX Subs shall, within ninety (90) days from the
date hereof in the case of the Unwind Warranties or within thirty (30) days
following receipt of the "As Built Survey" in the case of the Additional Unwind
Warranties, to submit a written notice to the Stockholders (a "Demand
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Notice") which shall contain a detailed description of the basis for such claim
and the estimated cost of curing such breach or the projected loss to the
Companies or the Subsidiaries from the inability to rebuild or use the Real
Property as currently used or constructed (the "Claim Amount").
(iii) The Stockholders shall have a period of thirty (30) days
following receipt of a Demand Notice to elect by written notice to SFX and/or
the SFX Subs to either (a) accept the Demand Notice and the Claim Amount set
forth therein, (b) contest the Demand Notice, or (c) in the event that the
Claim Amount sought in such Demand Notice shall exceed $1,250,000 (inclusive of
any Claim Amount previously submitted in connection with the Additional Unwind
Warranties), elect to unwind the transactions contemplated by this Agreement in
accordance with Section 6.13(vii) hereof (the "Unwind Procedure").
(iv) In the event that the Stockholders shall elect to accept the
Demand Notice, the Stockholders shall, within ten (10) days following such
acceptance, deliver to SFX or the SFX Subs, as the case may be, on a Several
Basis, the number of SFX Shares equal the Claim Amount which number of shares
shall be determined on the basis of the Adjusted Closing Value.
(v) In the event that the Stockholders shall elect to contest the
Demand Notice, then the Stockholders shall and SFX or the SFX Subs, as the case
may be, shall attempt to mutually agree upon the Claim Amount. If the parties
are unable, within (10) days following the giving of notice of such contest, to
mutually agree upon the Claim Amount, then each of the parties shall submit
their determination of the appropriate Claim Amount (the Claim Amount submitted
by SFX or the SFX Subs is referred to as the "SFX Determination" and the Claim
Amount Submitted by the Stockholders is referred to as the "Stockholder
Determination") and the parties shall jointly appoint an independent structural
engineer and/or environmental engineer (the "Arbitrator") whose fee shall be
borne equally by SFX and the Stockholders. In the event that SFX and the
Stockholders are unable to jointly agree upon the Arbitrator within five (5)
days after they are requested to do so, then the parties agree to allow the
American Arbitration Association to designate the Arbitrator in accordance with
the rules, regulations and/or
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procedures then outstanding of the American Arbitration Association. The
Arbitrator shall conduct such hearings and investigations as the Arbitrator
shall deem appropriate and shall, within thirty (30) days after the designation
of the Arbitrator, choose either the SFX Determination or the Stockholder
Determination (the "Final Claim Amount"), and such choice by the Arbitrator
shall be conclusive and binding upon the parties. The Arbitrator shall not have
the power to add to, modify or change any of the provisions of this Agreement.
(vi) Within ten (10) days following the determination of the
Final Claim Amount, the Stockholders shall elect either to (x) accept the Final
Claim Amount, or (y) if the Final Claim Amount shall exceed $1,250,000, to
effectuate the Unwind Procedure. If the Stockholders elect to accept the Final
Claim Amount, then the Stockholders shall, within ten (10) days following such
acceptance, deliver to SFX or the SFX Subs, as the case may be, on a Several
Basis, the number of SFX Shares equal to the Final Claim Amount which number of
shares shall be based upon the Adjusted Closing Value. If the Stockholders
shall elect the Unwind Procedure, then the transactions contemplated hereunder
shall be subject to the unwind provisions set forth in Section 6.13(vii)
hereof.
(vii) In the event that the Stockholders shall elect the Unwind
Procedure, then SFX or the SFX Subs, as the case may be, shall have the right,
within thirty (30) days following notice of such election, to elect either to
(x) accept the Unwind Procedure, or (y) reject the Unwind Procedure. In the
event that SFX or the SFX Subs, as the case may be, shall elect to reject the
Unwind Procedure, then the transactions contemplated by this Agreement shall
remain in full force and effect, the Final Claim Amount shall be deemed to be
the $1,250,000 and the Stockholders shall, after payment to SFX of $1,250,000,
have no further liability or obligations to SFX or the SFX Subs with respect to
the Unwind Warranties or the Additional Unwind Warranties.
In the event that SFX or the SFX Subs, as the case may be, shall
accept the Unwind Procedure, then, within thirty (30) days following such
acceptance (the "Unwind Date"), the Stockholders, SFX and the SFX Subs shall
cause the following transactions to occur: (i) the
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Stockholders shall form and designate newly formed corporations for the purpose
of effectuating a merger with CPA, NOC and CADCO and the Subsidiaries by filing
Certificates of Merger in the manner contemplated by Section 1.2 hereof, (ii)
the Stockholders shall cause substitute letters of credit to be delivered and
replace the $110,000 on deposit with the City of Hartford and the $785,000 on
deposit with Fleet all as contemplated by Section 1.3 hereof, (iii) the
directors and officers of the Companies and the Subsidiaries shall resign
effective as of the Unwind Date, (iv) the Stockholders shall return the Merger
Consideration to SFX on the Unwind Date, (v) all books, records and accounts of
the Companies and the Subsidiaries shall be delivered by SFX to the
Stockholders on the Unwind Date, (vi) SFX and the Stockholders shall make an
adjustment of the assets and liabilities of the Companies effective as of the
Unwind Date in accordance with the procedures set forth in Section 1.12 hereof,
(vii) the parties shall take such other actions and make such other deliveries
in order to effectuate an unwind of the transactions contemplated hereby; and
(viii) the Stockholders shall replace the Bond contemplated by Section 1.3
hereof, to the extent that it has been posted.
SECTION 7 CONDITIONS
7.1 Conditions to Each Party's Obligation to Effect the Mergers. The
respective obligations of each party to effect the Mergers shall be subject to
the fulfillment at or prior to the Effective Date of the following conditions:
(a) No preliminary or permanent injunction or other order by any
Federal or state court or by any governmental or regulatory body in the United
States which prevents the consummation of the Mergers or the transactions
contemplated hereby shall have been issued and remain in effect (each party
agreeing to use its best efforts to have any such injunction lifted and to seek
to avoid any such injunction).
(b) No statute, rule or regulation shall have been enacted by the
government (or any governmental body or agency) of the United States or any
state thereof that prevents the consummation of the Mergers or the transactions
contemplated hereby.
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(c) No action or proceeding before any court or any governmental
or regulatory authority and no investigation by any governmental or regulatory
authority shall have been commenced (and be pending), against the Companies,
SFX, the SFX Subs or any of their respective affiliates, associates, officers
or directors seeking to prevent or materially delay the transactions
contemplated hereby or challenging any of the terms or provisions of this
Agreement or seeking material damages in connection therewith; provided,
however, that in the case of an action or proceeding brought by a person other
than a governmental or regulatory authority, the condition set forth in this
paragraph (d) shall be deemed to have been satisfied with respect to such
action or proceeding of SFX, the SFX Subs and the Companies shall have been
provided with an opinion of counsel satisfactory to them to the effect that it
is reasonably probable that the relief sought in such action or proceeding will
not be granted.
7.2 Conditions to Obligation of the Companies to Effect the Mergers.
The obligation of each Company to effect the relevant Merger shall be subject
to the fulfillment at or prior to the Effective Date of the following
additional conditions (unless waived):
(a) The representations and warranties of SFX and the SFX Subs
contained in this Agreement shall be true in all material respects when made
and on and as of the Effective Date with the same force and effect as though
made on and as of such times, except as affected by the transactions
contemplated hereby and except that any such representation and warranty made
as or a specified date shall have been true on and as of such date.
(b) SFX and the SFX Subs shall in all material respects have
performed each obligation and agreement and complied with each covenant to be
performed or complied with by it hereunder on or before the Effective Date.
(c) SFX shall have delivered to the Companies a written opinion of
its counsel, dated as of the Effective Date, substantially in the form attached
hereto as Exhibit A.
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(d) Except with respect to any obligations or liabilities arising
under this Agreement, the Stockholders, the Companies and their Subsidiaries
shall each execute and deliver mutual general releases of all liabilities and
obligations.
(e) The CDA Loan shall have closed.
7.3 Conditions to Obligations of SFX and SFX Subs to Effect the
Mergers. The obligations of SFX and SFX Subs to effect the Mergers shall be
subject to the fulfillment at or prior to the Effective Date of the following
additional conditions (unless waived):
(a) The representations and warranties of the Companies and the
Stockholders contained in this Agreement shall be true and correct in all
material respects when made and on and as of the Effective Date with the same
force and effect as though made on and as of such time, except as affected by
the transactions contemplated hereby and except that any such representation or
warranty made as of a specified date shall have been true in all material
respects on and as of such date.
(b) The Companies shall in all material respects have performed
each obligation and agreement and complied with each covenant to be performed
or complied with by it hereunder on or before the Effective Date.
(c) The consents referred to in Section 2.22 shall have been
obtained without any adverse effect on SFX or the SFX Subs or the continued
operations of the Companies and their Subsidiaries consistent with prior past
practice.
(d) The Companies shall have furnished such certificates of its
officers to evidence its compliance with Sections 2 and 6 as may be reasonably
requested by SFX or the SFX Subs.
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(e) On the Effective Date, Robert Nederlander and James Koplik
shall execute a non-competition agreement in the form attached hereto as
Exhibit B.
(f) The Companies shall have delivered to SFX and the SFX Subs
written opinions of their counsel, dated as of the Effective Date,
substantially in the form attached hereto as Exhibit C.
SECTION 8 TERMINATION PRIOR TO EFFECTIVE DATE
8.1 Termination Prior to Effective Date. Agreement may be terminated
and abandoned at any time prior to the Effective Date:
(a) by SFX prior to February 14, 1997;
(b) by the mutual consent of the respective Boards of Directors of
the Companies and SFX;
(c) by the Companies or SFX, by action of its Board of Directors,
in the event the transactions contemplated by this Agreement are not
consummated on or before June 1, 1997;
(d) as provided in any section of this Agreement which
specifically provides for termination; or
(e) by either SFX or the Companies, if any court or competent
jurisdiction in the United States or other United States governmental body
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions contemplated
by this Agreement and such order, decree, ruling or other action shall have
become final and nonappealable.
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8.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 8.1 hereof:
(a) neither the Companies nor SFX shall make or issue, or cause to
be made or issued, any announcement or written statement concerning termination
of this Agreement or the transactions contemplated hereby for dissemination to
the general public without the prior consent of the other party which consent
shall not be unreasonably withheld; provided, however, that such consent shall
not be required where such announcement or written statement is required by
applicable law; and
(b) this Agreement shall become wholly void and of no force or
effect, without any liability or further obligation on the part of the
Companies or SFX or the SFX Subs.
SECTION 9 DUE DILIGENCE REVIEW; PURCHASER'S TERMINATION OPTION
9.1 Notwithstanding anything to the contrary herein contained, the
Company hereby acknowledges that SFX has had the opportunity prior to the
execution of this Agreement to examine all of the relevant legal and business
information and documents relating to the structural and environmental aspects
Real Property and to conduct an inspection of the Real Property. SFX hereby
acknowledges that the Companies have heretofore provided such information
relating to the foregoing as has been requested by SFX. Notwithstanding the
foregoing, the Companies shall, at the Companies' sole expense, within five (5)
days from the date hereof, if requested by SFX, provide to SFX copies of such
other records, agreements, plans and specifications, title reports and all
other material information and documents in the possession or control of the
Companies or their Subsidiaries.
9.2 At all times prior to the Effective Date, SFX, its agents and
contractors shall have the right upon reasonable prior notice to enter upon the
Real Property for the purpose of conducting inspections and investigations of
any kind and nature. Notwithstanding the
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foregoing, SFX shall not conduct intrusive physical inspections of the Real
Property without the prior written consent of the Companies which consent shall
not be unreasonably withheld or delayed, with the understanding that time is at
the essence with respect to this Section. Any such entry shall not, however, in
any manner whatsoever restrict or materially interfere with the operations of
the Real Property or impose any liability upon the Companies. The Companies
reserve the right to impose reasonable conditions upon SFX's access to the Real
Property if such access will restrict or materially interfere with the
operations of the Real Property or impose liability upon Real Property. SFX
hereby agrees to indemnify, defend and hold the Companies harmless from and
against any and all loss, cost, damage and expense (including, without
limitation, reasonable attorneys' fees and disbursements) incurred by the
Companies in connection with SFX's access to the Real Property or the
activities of Purchaser, its agents, representatives, employees or contractors
thereon and to restore any damage resulting from its inspections thereof.
9.3 If, at any time on or before February 14, 1997 or any extensions
thereof pursuant to section 6.2 above, (the "Due Diligence Period"), SFX shall
determine in its sole discretion to rescind this Agreement as a result of SFX's
determination that any aspect of the financing, use, operation, maintenance or
occupancy of all or any portion of the Real Property (including, without
limitation, matters relating to title to the Real Property, engineering
conditions at the Real Property, the presence or potential presence or release
of Hazardous Substances, applicable zoning and/or building codes, rules,
regulations, laws and/or ordinances, real estate taxes, assessments or impact
fees, the existence of violations of applicable laws, rules, regulations, codes
and/or ordinances or conditions which constitute such a violation, and the
contract of any leases affecting this Real Property or any portion thereof) is
not satisfactory to SFX. SFX shall have the right to terminate this Agreement
by providing written notice (the "Due Diligence Termination Notice") of such
termination to the Companies. Upon receipt of such notice by the Companies,
SFX's termination shall become effective. In the event that SFX exercises its
right to terminate this Agreement pursuant to the terms of this Section 9.4,
except as otherwise provided herein to the contrary, the terms and conditions
of this Agreement shall immediately be deemed null and void and shall have no
further force or effect. Time shall be of
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the essence in regard to SFX timely providing the Companies with the Due
Diligence Termination Notice, and if SFX shall fail to timely give the Due
Diligence Termination Notice, the contingency otherwise provided for in this
Section 9.4 shall be conclusively deemed waived; provided, if and to the extent
SFX shall not be provided access to any portion of the Real Property or
documentation to be delivered by the Companies in accordance with this
Agreement, the Due Diligence Period shall toll.
SECTION 10 PUT AND CALL PROVISIONS AFTER MERGER
10.1 Put Option. Each of the holders of SFX shares as of a given date
(individually, a "Seller") may, at its option, by written notice given to SFX
any time after the second anniversary of the Effective Date and before the
seventh anniversary of the Effective Date (the "Put Period"), elect to transfer
to SFX any or all of the SFX Shares held by it, free and clear of any and all
encumbrances for an amount equal to the product of the Closing Value reduced by
10% multiplied by the number of SFX Shares being transferred pursuant to this
provision.
10.2 Put Closing. The closing of any purchase under section 10.1 shall
be held at a place and date specified by the Seller(s) by written notice given
to SFX not more than 10 days after the Seller(s) shall have exercised the
option pursuant hereto; the date of the closing shall not be more than 30 days
after the Seller(s) shall have exercised the option pursuant to Section 10.1.
At the closing, (i) the Seller(s) of the SFX Shares which are the subject of
the "put" shall deliver to SFX a certificate or certificates for all the Shares
being transferred, duly endorsed in blank and with all required stock transfer
stamps attached, if any, and (ii) SFX shall pay such Seller(s) the purchase
price for the SFX Shares. The purchase price shall be payable by wire transfer
of immediately available funds to an account specified by the holder(s) by
written notice given to SFX at least two business days before the closing. Each
holder of SFX Shares shall have the option hereunder without regard to whether
any other holder of SFX Shares has exercised the put option hereunder.
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10.3 Call Option. SFX (or its assignee) may, at its option, by written
notice given to all of the holders of the SFX Shares as of a given date, and at
any time after the Effective Date and before the seventh anniversary of the
Effective Date (the "Call Period"), elect to purchase from all said holders all
of the SFX Shares held by them, free and clear of any and all encumbrances for
an amount equal to the product of the Closing Value increased by 10% multiplied
by the number of SFX Shares being transferred pursuant to this provision. The
holders of the SFX Shares shall be prohibited from conveying their SFX Shares
after delivery of a notice by SFX pursuant to this Section.
10.4 Call Closing. The closing or any purchase under section 10.3
shall be held at a place and date specified by SFX in a written notice given to
each of the holders not more than 10 days after SFX shall have exercised the
option pursuant hereto; the date of the closing shall not be more than 30 days
after SFX shall have exercised the option pursuant to Section 10.3. At the
closing, (i) the holders of the SFX Shares which are the subject of the "call"
shall deliver to SFX a certificate or certificates for all the Shares being
transferred, duly endorsed in blank and with all required stock transfer stamps
attached, and (ii) SFX shall pay such holders the purchase price for the SFX
Shares in accordance with the amount set forth herein. The purchase price shall
be payable by wire transfer of immediately available funds to accounts
specified by each of the holders by written notice given to SFX at least two
business days before the closing.
10.5 Acceleration of Put. In the event of a material breach of this
agreement by SFX or an SFX Sub at any time after the Effective Date, each of
the holders shall immediately have the rights set forth in Sections 10.1 and
10.2 hereof, notwithstanding the fact that such rights would otherwise not
accrue until after the second anniversary of the Effective Date. For purposes
of this agreement, SFX shall be deemed to have materially breached this
agreement, if, among other things there shall be a "Change of Control" of SFX,
or SFX shall have failed to comply with the provisions of Section 6.7 hereof. A
"Change of Control" shall have be deemed to have occurred with respect to a
change in ownership of the outstanding voting stock of SFX held by Robert F.X.
Sillerman or his affiliates which such change in ownership shall be deemed a
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change of control pursuant to the rules and regulations of the Federal
Communications Commission.
SECTION 11 RIGHT OF FIRST REFUSAL.
11.1 If any Stockholder (a "Selling Stockholder") elects to sell (the
"Third Party Sale") all or a portion of such Stockholder's SFX Shares (the
"Sale Shares") at any time up to the seventh anniversary of the Effective Date
and such Third Party Sale is not then prohibited by Section 6.6 hereof or any
applicable laws, including without limitation any securities laws, then prior
to the date of the proposed Third Party Sale, the Selling Stockholder shall (i)
deliver written notice (an "Offering Notice") of his intent to consummate the
sale, which notice shall set forth the number of SFX Shares to be sold and the
price per Share at which such Shares are to be sold (the "Sale Price") and
shall irrevocably offer to sell to SFX such shares at the Sale Price. The date
of delivery of such Offering Notice shall hereby be defined as (the
"Determination Date"). SFX may, within forty-eight (48) hours after the
Determination Date, elect, by written notice to the Selling Stockholder (a
"Purchase Notice"), to purchase all of the Sale Shares for the Sale Price.
Within three (3) days after the receipt of the Purchase Notice, the Selling
Stockholder shall sell to SFX and SFX shall purchase from the Selling
Stockholder all of the Sale Shares for the Sale Price. If SFX shall fail to
deliver a Purchase Notice within said forty-eight hour period, then the selling
Stockholder may sell the Sale Shares; provided, however, if neither the Third
Party Sale nor the sale to SFX is consummated within thirty (30) days of the
Determination Date for "market" Third Party Sale transactions or sixty (60)
days of the Determination Date for "private" Third Party Sale transactions,
then neither sale shall be consummated. Any subsequent sales of SFX shares
(other than the Sale Shares) by the Selling Stockholder, shall continue to be
subject to the provisions of this Section 11.1.
SECTION 12 INDEMNIFICATION.
12.1 The Stockholders' Indemnitees. The Stockholders shall, on a
Several Basis, but not jointly, indemnify, defend by counsel reasonably
acceptable to SFX, and hold
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harmless SFX, its officers, directors, affiliates, employees, agents,
successors and permitted assigns (the "SFX Indemnitees") from and against all
demands, claims, actions, and causes of action ("Claims") and assessments,
losses, costs, damages, liabilities, interest, penalties, court costs, and
reasonable accounting, consulting, engineering and attorneys' fees ("Losses")
asserted against, imposed upon or incurred by any of the SFX Indemnitees,
directly or indirectly caused by a material breach by the Companies, the
Subsidiaries or the Stockholders of any of their representations, warranties
and/or covenants contained herein; provided that the Stockholders shall only be
required to indemnify SFX where the aggregate Losses is in an amount in excess
of $100,000 (the "Threshold Amount"), in which event the Stockholders shall be
liable for all such claims including the Threshold Amount. Notwithstanding
anything contained in this Agreement to the contrary, no Stockholder shall be
liable for any claim made under this Agreement for any default, breach or
misrepresentation, including provisions of this Section 12.1 and Section 6.13,
for any amounts in excess of thirty-three and one-third (33 1/3%) (the "Maximum
Amount") of the Adjusted Closing Value; provided, however, in no event shall
the Maximum Amount be reduced by greater than 10% for any amounts required to
be paid by the Stockholders pursuant to Section 6.13 hereof. No claim for
indemnification pursuant to this Section 12.1 may be made subsequent to the
date one (1) year after the Effective Date unless such claim is based upon a
fraudulent misrepresentation made herein. Solely for the purposes of this
Section 12.1, in calculating the amount of losses arising from any
mis-representation, breach of warranty, or covenant made by the Companies,
their Subsidiaries or the Stockholders in this Agreement, the applicable
provisions of this Agreement shall be read and interpreted as if the
qualification stated therein with respect to Materiality or Material Adverse
Effect was not contained therein.
12.2 SFX's Indemnitees. SFX shall indemnify, defend by counsel
reasonable acceptable to the Companies, and hold harmless the Companies, their
shareholders employees, agents, successors and permitted assigns and the
Stockholders (the "Companies Indemnitees") from and against all Claims and
Losses asserted against, imposed upon or incurred by any of the Companies
Indemnitees, directly or indirectly, resulting from or arising out of (i) the
ownership or operation of the Companies or their Subsidiaries by SFX from and
after the Effective Date, (ii) the failure of SFX to pay, perform or discharge
any of SFX's obligations, including any
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obligations expressly assumed by SFX pursuant to this Agreement, or (iii) the
breach by SFX of any of its representations and warranties contained herein.
12.3 Procedures.
12.3.1 Promptly after the receipt by any party (the "Indemnified
Party") of notice of (A) any claim or (B) the commencement of any action,
proceeding or litigation (collectively, "Litigation") which may entitle such
party to indemnification under this Section, such party shall give the other
party (the "Indemnifying Party") written notice of such claim or the
commencement of such claim or Litigation and shall permit the Indemnifying
Party to assume the defense of any such Litigation. The failure to give the
Indemnifying Party timely notice under this clause shall not preclude the
Indemnified Party from seeking indemnification from the Indemnifying Party
unless such failure has materially prejudiced the Indemnifying Party's ability
to defend such claim or Litigation.
12.3.2 If the Indemnifying Party assumes the defense of any such
claim or Litigation with counsel reasonably acceptable to the Indemnified
Party, the obligations of the Indemnifying Party as to such claim or Litigation
shall be limited to taking all steps necessary in the defense or settlement of
such claim or Litigation and to holding the Indemnified Party harmless from and
against any losses, damages and liabilities caused by or arising out of any
settlement approved by the Indemnifying Party or any judgment in connection
with such claim or Litigation; however, the Indemnified Party may participate,
at its or his expense, in the defense of such claim or Litigation provided that
the Indemnifying Party shall direct and control the defense of such claim or
Litigation. The Indemnified Party shall cooperate and make available all books
and records reasonably necessary and useful in connection with the defense. The
Indemnifying Party shall not, in the defense of such claim or Litigation,
consent to entry of any judgment, except with the written consent of the
Indemnified Party, or enter into any settlement, except with the written
consent of the Indemnified Party, which does not include as an unconditional
term thereof the giving by the claimant or the plaintiff to the Indemnified
Party of a release from all liability in respect of such claim or Litigation.
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12.3.3 If the Indemnifying Party shall not assume the defense of
any such claim or Litigation, the Indemnified Party may, but shall have no
obligation to, defend against such claim or Litigation in such manner as it may
deem appropriate. The Indemnifying Party shall promptly reimburse the
Indemnified Party for the amount of all reasonable expenses, legal or
otherwise, incurred by the Indemnified Party in connection with the defense
against or settlement of such claim or Litigation. If no settlement of the
claim or Litigation is made, the Indemnifying Party shall promptly reimburse
the Indemnified Party for the amount of any judgment rendered with respect to
such claim or in such Litigation and of all reasonable expenses, legal or
otherwise, incurred by the Indemnified Party in the defense against such claim
or Litigation.
12.3.4 Regardless of whether the Indemnifying Party shall have
assumed the defense of any such claim or Litigation, the Indemnified Party
shall not admit any liability with respect to, or settle, compromise or
discharge, such claim or Litigation without the Indemnifying Party's prior
written consent (which consent shall not be unreasonably withheld).
SECTION 13 MISCELLANEOUS PROVISIONS
13.1 Specific Performance. The Companies recognize that, in the event
they refuse to perform the provisions of this Agreement, monetary damages alone
will not be adequate. SFX shall, therefore, be entitled in such event, in
addition to bringing suit at law or equity for money or other damages, to
obtain specific performance of the terms of this Agreement. In any action to
enforce the provisions of this Agreement, the Companies and the Stockholders
shall waive the defense that there is an adequate remedy at law or equity and
agree that SFX shall have the right to obtain specific performance of the terms
of this Agreement without being required to prove actual damages, post bond or
furnish other security.
13.2 Amendment and Modification. This Agreement may be amended by the
parties hereto, by action taken by their respective Boards of Directors or duly
authorized committees thereof, at any time before or after approval hereof by
the stockholders of the
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Company, but, after any such approval, no amendment shall be made which reduces
the amount to be received by holders of shares of Stock of the Companies or
changes the medium of payment therefor or which in any way materially adversely
affects the rights of such stockholders without the further approval of the
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
13.3 Waiver. Any of the terms or conditions of this Agreement which
may be lawfully waived may be waived in writing at any time by the party which
is entitled to the benefits thereof. Any waiver of any of the provisions of
this Agreement by any party hereto shall be binding only if set forth in an
instrument in writing signed on behalf of such party. No failure to enforce any
provision of this Agreement shall be deemed to or shall constitute a waiver of
such provision and no waiver of any of the provisions of this Agreement shall
be deemed to or shall constitute a waiver of any other provision hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
13.4 Survival of Representations and Warranties. The respective
representations and warranties of the Companies and SFX and the SFX Subs
contained herein or in any certificates or other documents delivered prior to
or at the Effective Date shall expire at, and be terminated and extinguished on
the first anniversary of the Effective Date except for (i) the representations
and warranties contained in Section 2.11(vi) and 2.12 (other than the
representation and warranty that the Personal Property includes all such
properties used and necessary to conduct in all material respects the business
and operations of the Companies and their Subsidiaries as presently conducted)
which shall not survive the Effective Date and the representations and
warranties contained in Sections 2.11 (x), (xi), (xvi), (xxi) and 2.17 and or
(xxii which shall survive the Effective Date only to the extent provided in
Section 6.13, and thereafter neither the Companies nor SFX or the SFX Subs, nor
any officer, director or principal thereof, shall be under any liability
whatsoever with respect to any such representation or warranty. This Section
13.4 shall have no effect upon any other obligation of the parties hereto,
whether to be performed before or after the Effective Date. To the extent that
a claim is made alleging a breach of a representation and/or warranty by the
Companies and/or its Subsidiaries
- 63 -
<PAGE>
after the Effective Date but prior to the first anniversary of the Effective
Date which relates to an alleged failure of the Companies and/or its
Subsidiaries to disclose a material obligation, then, the liability of the
Companies and/or Subsidiaries on account of such failure shall be limited
(subject to the limitations as to the Maximum Amount) to a recoupment of the
shares of SFX distributed hereunder on a Several Basis to the extent of the
Adjusted Closing Value, provided, however, that there shall only be such a
recovery where the aggregate of all claims for all such omissions is in an
amount in excess of the Threshold Amount in which event the Companies and the
Subsidiaries shall then be liable for all such claims including the Threshold
Amount.
13.5 Expenses. Each party agrees that all fees and expenses (including
all fees of counsel) incurred by it in connection with this Agreement shall be
borne by it, except that any and all applicable real estate transfer tax or
entity transfer tax relating to the Mergers shall be paid by the Companies at
or prior to the Effective Date.
13.6 Materiality/Disclosure Schedule. Inclusion of information on the
Disclosure Schedule or any other writing delivered pursuant to this agreement
does not constitute an admission or acknowledgment of the materiality of such
information. Information disclosed in any particular Disclosure Schedule
annexed hereto shall, for the purposes of all representations and warranties
made herein, be deemed included in all other Disclosure Schedules attached
hereto.
13.7 Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand or five days after mailed by prepaid
registered or certified first class mail (return receipt requested), addressed
as follows:
(a) If to the Companies, to:
Robert Nederlander
810 Seventh Avenue
New York, NY 10019
- 64 -
<PAGE>
with copies to:
Proskauer Rose Goetz & Mendelssohn LLP
1585 Park Avenue
New York, New York 10036
Attn: Kenneth S. Hilton, Esq.
and
James P. Sandler
Sandler & Daniells, PC
1 Hardford Square West
Hardford, CT 06106
or to such other person or address as the Company shall furnish to SFX in
writing.
(b) If to SFX or an SFX Sub, to:
SFX Broadcasting, Inc.
150 East 58th Street, 19th Floor
New York, New York 10155
Attention: Legal Department
Facsimile: (212) 753-3188
with a copy to:
Baker & McKenzie
805 Third Avenue
New York, New York 10022
Attention: Howard Berkower
Facsimile: (212) 759-9133
or to such other person or address as SFX shall furnish to the Company in
writing.
13.8 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, and is not intended to confer upon
any other person any rights or remedies hereunder. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by
either of the parties hereto without the prior written consent of the other
party
- 65 -
<PAGE>
except that SFX and the SFX Subs may assign all or any part of their rights
hereunder to any subsidiary of SFX.
13.9 Publicity. So long as this Agreement is in effect, neither the
Company nor SFX shall, or shall permit any of its subsidiaries to, issue or
cause the publication of any press release or other announcement with respect
to the Merger or this Agreement other than a press release in the form of
Exhibit D attached hereto, without consulting with, and the consent of, the
other party; provided, however, that such consent shall not be required where
such release or announcement is required by applicable law.
13.10 Books and Records; Tax Closing Package. Unless otherwise
consented to in writing by the Company, SFX shall not permit the Companies or
the Subsidiaries to destroy or otherwise dispose of any of the existing books
and records of the Companies, all of which shall have been turned over to SFX
as of the closing, which books and records are less than six (6) years old at
the time of such proposed destruction, and SFX shall grant the Companies and
its Subsidiaries, and their representatives, reasonable access thereto during
normal business hours, provided that they will pay the costs incurred by SFX to
furnish any materials requested by them.
13.11 Closing. The closing of the transactions contemplated by this
agreement shall take place at the offices of Proskauer Rose Goetz & Mendelsohn
LLP, 1585 Broadway, New York, New York, or such other place as the parties may
agree, as promptly as practicable after the satisfaction or waiver or the
conditions set forth in Section 7.
13.12 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.13 Headings. The headings of the Sections of this Agreement are
inserted for convenience only and shall not constitute a part hereof or affect
in any way the meaning or interpretation of this Agreement.
- 66 -
<PAGE>
13.14 Entire Agreement. This Agreement, including the Disclosure
Schedule and the other documents, exhibits and certificates delivered pursuant
to the terms hereof, sets forth the entire agreement and understanding of the
parties hereto with respect to the subject matter contained herein, and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
party hereto or by any director, officer, employee, agent or representative of
any party hereto.
- 67 -
<PAGE>
13.15 Obligations of SFX Subs. Whenever this Agreement requires an SFX
Sub to take any action, such requirement shall be deemed to include an
undertaking on the part of SFX to cause the SFX Sub to take such action.
13.16 Governing Law. This Agreement and the legal relations between
the parties hereto shall be governed by and construed in accordance with the
laws of the state of New York, without regard to its conflicts of law
doctrines.
13.17 Jurisdiction. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK IN ANY ACTION, SUIT OR PROCEEDING ARISING IN CONNECTION
WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION, SUIT OR PROCEEDING SHALL
BE BROUGHT ONLY IN SUCH COURT (AND WAIVES ANY OBJECTION BASED ON FORUM NON
CONVENIENS OR ANY OTHER OBJECTION TO VENUE THEREIN); PROVIDED, HOWEVER, THAT
SUCH CONSENT TO JURISDICTION IS SOLELY FOR THE PURPOSE REFERRED TO IN THIS
SECTION 13.18 AND SHALL NOT BE DEEMED TO BE A GENERAL SUBMISSION TO THE
JURISDICTION OF SAID COURTS OTHER THAN FOR SUCH PURPOSE.
13.18. Several Obligations. Anything contained in this Agreement to
the contrary notwithstanding, the obligations and liability of the Stockholders
hereunder with respect to any misrepresentation, indemnification or breach of
any of the obligations of the Companies or the
[end of page]
- 68 -
<PAGE>
Subsidiaries hereunder shall be on a several and not on a joint basis. In
furtherance of the foregoing, SFX and the SFX Subs hereby agree that all such
liability shall be allocated (such allocation being sometimes referred to
herein as on a "Several Basis") as follows: (x) 60% to the Stockholders of NOC,
and (y) 40% to the Stockholders of CADCO.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
SFX BROADCASTING, INC.
By: /s/ Robert F.X. Sillerman
-------------------------------
Name: Robert F.X. Sillerman
Title: Executive Chairman
NOC-ACQUISITION CORP.
By: /s/ Robert F.X. Sillerman
-------------------------------
Name: Robert F.X. Sillerman
Title: Executive Chairman
CADCO ACQUISITION CORP.
By: /s/ Robert F.X. Sillerman
-------------------------------
Name: Robert F.X. Sillerman
Title: Executive Chairman
QN-ACQUISITION CORP.
By: /s/ Robert F.X. Sillerman
-------------------------------
Name: Robert F.X. Sillerman
Title: Executive Chairman
NEDERLANDER OF CONNECTICUT, INC.
By: /s/ Robert E. Nederlander
-------------------------------
- 69 -
<PAGE>
Name: Robert E. Nederlander
Title: President
CONNECTICUT AMPHITHEATER
DEVELOPMENT CORPORATION
By: /s/ James H. Koplik
-------------------------------
Name: James H. Koplik
Title: President
QN CORP.
By: /s/ Robert E. Nederlander
-------------------------------
Name: Robert E. Nederlander
Title: President
CONNECTICUT PERFORMING ARTS, INC.
By: /s/ Robert E. Nederlander
-------------------------------
Name: Robert E. Nederlander
Title: President
CONNECTICUT PERFORMING
ARTS PARTNERS
By: /s/ Robert E. Nederlander
-------------------------------
Name: Robert E. Nederlander
Title: President
- 70 -
<PAGE>
AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT
This Amendment No. 1 dated as of January 21, 1997 "Amendment
No. 1" 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 and the transactions contemplated thereby;
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 first recital of the Asset Purchase Agreement
is hereby amended in its entirety to read as follows:
"WHEREAS, Seller is the licensee of and operates radio
stations WFBQ-FM, WRZX-FM and WNDE-AM in Indianapolis, Indiana and
WDVE-FM and WXDX-FM in Pittsburgh, Pennsylvania (the "Owned Stations")
and, upon the consummation of the transactions contemplated by the
Asset Exchange Agreement (the "Exchange Agreement") dated as of May
31, 1996 by and among Seller, Nationwide Communications, Inc. and
Entercom (as defined below), Seller will become the licensee of and
have the right to operate radio stations WDSY-FM and WJJJ-FM (formerly
WNRQ-FM) in Pittsburgh, Pennsylvania (the "Purchased Stations") (the
Owned Stations and the Purchased Stations the "Stations")."
2. The third recital of the Asset Purchase Agreement
is hereby deleted.
3. Subsection (a) of Section 1.1 of the Asset Purchase
Agreement is hereby amended in its entirety to read as follows:
"(a) The broadcast licenses for the Stations (including the right to
use the call letters "WFBQ-FM," "WRZX-FM," "WNDE-AM," "WDVE-FM,"
WXDX-FM," "WDSY-FM" AND "WJJJ-FM") issued by the FCC and all other
Governmental Permits listed in Schedule 2.8";
4. Section 1.3 of the Asset Purchase Agreement is
hereby amended in its entirety to read as follows:
"1.3 Purchase Price. The purchase price for the Purchased Assets
(the "Purchase Price") shall be equal to $255,000,000."
<PAGE>
5. Section 1.6 (a) of the Asset Purchase Agreement is
hereby amended in its entirety to read as follows:
"(a) The Closing shall be consummated on a date to be selected by the
Buyer and agreed upon by the Seller, which date shall be no later than
July 15, 1997 if the conditions to Closing set forth in Sections 6.4,
6.5, 6.8, 7.4, 7.5 and 7.6 of this Agreement have been satisfied as of
or prior to July 15, 1997; provided, however, that if any of the
conditions set forth in Sections 6.4, 6.5, 6.8, 7.4, 7.5 or 7.6 of
this Agreement have not been satisfied as of July 15, 1997 the Closing
shall be held on the fifth business day after all of such conditions
have been satisfied. The Closing shall be held at 10:00 A.M., local
time, at the offices of Buyer, 150 East 58th Street, New York, New
York 10155 or at such other place or time as shall be agreed upon by
Buyer and Seller (the date and time on which the Closing is actually
held being hereinafter referred to as the "Closing Date")."
6. Section 2.1 of the Asset Purchase Agreement is
hereby amended in its entirety to read as follows:
"2.1. Organization of Seller. Seller is a limited partnership
duly organized, validly existing and in good standing under the laws
of the State of Delaware and is duly qualified and in good standing as
a foreign limited partnership in the States of Indiana and
Pennsylvania. Seller has full partnership power and authority, or will
have full partnership power and authority upon consummation of the
transactions contemplated by the Exchange Agreement (the "Exchange
Transaction"), to own or lease and to operate and use the Purchased
Assets and to carry on the business of the Stations as now conducted."
7. Section 5.3 of the Asset Purchase Agreement is
hereby amended in its entirety to read as follows:
"5.3. Covenant Not to Compete. In furtherance of the sale of
the Purchased Assets to Buyer hereunder by virtue of the transactions
contemplated hereby and more effectively to protect the value and
goodwill of the Stations, Seller covenants and agrees that it will not
directly or indirectly (whether as principal, agent, independent
contractor, partner or otherwise) own, manage, operate, control or
otherwise carry on for a period beginning on the Closing Date and
ending on the second anniversary thereafter, a radio station business
in the Indianapolis, Indiana or Pittsburgh, Pennsylvania radio
markets, each as determined by The Arbitron Company.
Notwithstanding the foregoing, nothing set forth in Section
5.5 shall prohibit Seller from owning not in excess of 25% in the
aggregate of any class of capital stock of any corporation if such
stock is publicly traded and listed on any national or regional stock
exchange or quoted on the Nasdaq Stock Market."
2
<PAGE>
8. Section 9.1(a)(iii) of the Asset Purchase Agreement
is hereby deleted.
9. Section 9.1(a)(v) of the Asset Purchase Agreement is
hereby amended in its entirety to read as follows:
"(v) by Buyer or Seller (A) if the Closing shall not have occurred on
or prior to July 15, 1997 and the conditions to Closing set forth in
Sections 6.4, 6.5, 6.8, 7.4, 7.5 and 7.6 have been satisfied on or
prior to such date or (B) if the Closing shall not have occurred on or
before September 30, 1997;"
10. Section 10.13 of the Asset Purchase Agreement is
hereby amended by deleting the definitions of "Aggregate 1996 Broadcast Cash
Flow of the Stations," "Broadcast Cash Flow," "Escrow Agent" and "Escrow
Agreement."
11. All references to radio stations WTAM-AM and WLFT-FM in
Cleveland, Ohio (the "Cleveland Stations") and any information relating thereto
shall be deemed to be deleted from the Schedules to the Asset Purchase
Agreement.
12. The Escrow Agreement dated as of October 15, 1996 among
Buyer, Seller and The First National Bank of Chicago, as escrow agent, is
hereby terminated.
13. The parties agree that if, on or before March 31, 1998,
Seller consummates the sale of all of the assets, business and property of the
Cleveland Stations to a non-affiliated third party for a purchase price of less
than $45,000,000, Buyer will pay to Seller by wire transfer of immediately
available funds within three business days of receipt of notice from Seller (in
the form contemplated by the Asset Purchase Agreement and specifying the
appropriate wire transfer instructions) of the consummation of such sale the
difference between $45,00,000 and the actual purchase price paid to Seller in
respect of the Cleveland Stations; provided, however, that in no event shall
the liability of Buyer pursuant to this Section 13 exceed $5,000,000. For
purposes of this Section 13, "purchase price" shall include cash and non-cash
consideration, including securities, property and the value of any
noncompetition or similar agreements benefitting Seller, and non-cash
consideration shall be valued at its fair market value on the date of
consummation of the sale of the Cleveland Stations.
14. Simultaneously with the execution of this Amendment No.
1, Buyer agrees to pay to Seller $10,000,000 in cash by wire transfer of
immediately available funds to the account specified by Seller. In addition,
simultaneously with the execution of this Amendment No. 1, Buyer is delivering
to Seller a letter of credit in the form attached hereto as Exhibit A in the
sum of $5,000,000 issued by Chase Manhattan, N.A. (the "Letter of Credit").
Pursuant to the terms of the Letter of Credit, Seller shall have the right on
or after May 30, 1997 to draw the amount of $5,000,000 in the Letter of Credit;
provided, however, that Seller agrees that it will not draw upon the Letter of
Credit if, prior to May 30, 1997, Buyer delivers to the account specified by
Seller by wire transfer of immediately available funds $5,000,000 in cash in
3
<PAGE>
satisfaction of Buyer's obligation to cause $5,000,000 to be paid to Seller
pursuant to this sentence. If the Closing (as defined in the Asset Purchase
Agreement) occurs, the $15,000,000 to be paid to Seller pursuant to this
Section 14 shall be credited towards the Purchase Price (as defined in the
Asset Purchase Agreement) to be paid to Seller by Buyer at the Closing.
15. Each of Buyer and Seller covenant and agree to file with
the Federal Trade Commission and the Antitrust Division of the Department of
Justice within 10 days of the date hereof the notifications and other
information required to be filed by such party under the Improvements Act (as
defined in the Asset Purchase Agreement), or the rules and regulations
promulgated thereunder, with respect to this Amendment No. 1.
16. This Amendment No. 1 shall be governed by and
construed in accordance with the internal laws (as opposed to the conflict of
laws provisions) of the State of Illinois.
17. This Amendment No. 1 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.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 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 K. Schiller
-----------------------------
Its: Secretary and General Counsel
SFX BROADCASTING, INC.
By: /s/ Howard J. Tytel
-------------------
Howard J. Tytel
Its: Executive Vice President
4
<PAGE>
March 4, 1997
Sunshine Promotions, Inc.
10089 Allisonville Road, Suite 100
Fishers, Indiana 46038
Attention: Dave Lucas
Steve Sybesma
Gentlemen:
This letter, when countersigned by you (the "Sellers"), shall represent a
statement of the mutual present intent of the parties hereto with regard to the
purchase and sale (the "Acquisitions") of all of your interests in the concert
and live entertainment businesses which currently consist of interests in
Sunshine Promotions, Inc., Deer Creek Music Center, The Polaris Amphitheater,
The Murat Centre, Suntex, Inc. and Tour Design, Inc. (collectively, the
"Companies"). You have represented that, except as previously disclosed, all of
your concert promotion and similar businesses are conducted through these
entities.
SFX Broadcasting, Inc., through one or more newly created wholly-owned
subsidiaries (the "Buyer" or "SFX"), will acquire the Companies from the
Sellers subject to the terms and conditions below.
We understand that you own 100% of certain of the Companies and that there
are minority interests with respect to the other Companies. The Acquisitions,
which will be structured as asset acquisitions (except to the extent otherwise
mutually agreed to), will be conditioned upon delivery of 100%, and not less
than 100%, of the interests in all of the Companies at prices no greater, on a
pro-rata basis, than those paid for your interests in the Companies. The
Acquisitions must be structured to comply with the requirements for capital
gains treatment to the Sellers for Federal Income Tax purposes. To the extent
that the parties agree to reformulate the Acquisitions from asset to stock
transactions, SFX will receive a decrease to the purchase prices to adjust for
any loss of tax basis in the assets.
Based upon your representations as to the equity capital structures and
long term debt levels of the Companies as set forth on Exhibit A attached
hereto and your ownership interests therein, SFX will pay, at closing, except
as otherwise noted, the following amounts for your interests in the Companies
(i) $712,011 in cash, $4 million in shares of SFX Class A
<PAGE>
Mr. Dave Lucas
Mr. Steve Sybesma
March 4, 1997
Page 2
Common Stock for Sunshine ($2 million at the closing and $1 million on each of
the first and second anniversaries of the closing date) and $2 million over 5
years, (ii) $13,592,681 for Deer Creek; (iii) $4,466.164 for Polaris; (iv)
$3,000,000 for Murat; (v) $922,267 for Suntex and (vi) $3,117,735 for Tour
Design. Shares of SFX delivered at the closing shall be valued at the average
closing price of SFX shares from the date that this letter is countersigned by
you through the closing date of the Acquisitions and shares to be delivered on
the anniversary of the closing date shall be valued at the average trading
price for the 20 business days immediately preceding such anniversary of the
closing date. In addition, SFX shall repay, at closing, all of the outstanding
long term debt on Deer Creek and Polaris based upon the current levels, which
you have represented to be approximately $12 million and $10 million
respectively.
The assets to be acquired in the Acquisitions shall, following the
repayment of certain of the Companies debt to be repaid by the Buyer pursuant
to the terms hereof, be free and clear of all liens and encumbrances other than
the long term debt of the Murat (which you have represented to be approximately
$4.8 million) and certain capital leases which have previously been disclosed
to the Buyer and which will be assumed by the Buyer. The Buyer will also assume
on-going contractual obligations related to the continued operation of the
Companies and which are disclosed in the schedules to the final agreements. The
Sellers shall be required to obtain all consents necessary to insure the
ability of the Buyer to continue the Companies' businesses as heretofore
conducted.
The Sellers agrees that during the thirty (30) day period following the
execution of this letter, it will allow the Buyer access to Sellers' financial
and operating records and personnel as reasonably required by Buyer to complete
the Buyer's due diligence examination of the Companies. As part of the Buyer's
due diligence, you will provide us with all documents filed in connection with
your previously withdrawn initial public offering with all exhibits updated as
though such filing were becoming effective in the first quarter of 1997 as well
as all documents listed on the attached Schedule. In addition, if we elect to
audit any of the Companies' operations, you will cooperate fully with our
auditors and cause your auditors to do the same.
The Acquisition Agreements shall also provide for the Sellers to have a
right of refusal, for a period of three (3) years from the closing of the
Acquisitions, to acquire the Buyer's interests in Deer Creek and Polaris. The
Buyer shall be required to provide the Sellers with notice prior to any third
party sale of its entire interest in either amphitheater and the Sellers shall
then have fifteen (15) days to submit a proposal to Buyers to acquire such
interest. Buyer's shall then have fifteen (15) days to respond to Sellers'
proposal. If the Buyer accepts such proposal, the Sellers shall have thirty
(30) days to enter into definitive documentation with the Buyer's, including a
definitive financing guarantee. If Buyer rejects Sellers' proposal, Buyer shall
be prohibited for a period of six (6) months from the date of Seller's notice
from concluding its third
<PAGE>
Mr. Dave Lucas
Mr. Steve Sybesma
March 4, 1997
Page 3
party transaction on economic terms which are less favorable than those which
were offered by the Sellers,
Except as required by law, and in accordance with the October 22, 1996
Non-Disclosure and Confidentiality Agreement with the Sellers, the Buyer will
maintain all information concerning the Sellers and the Companies as
confidential, disclosing it only to those individuals and institutions
consulted by Buyer in connection with the evaluation of the Acquisitions or
their financing. Notwithstanding the foregoing, to the extent deemed required
or advisable by the Buyer's counsel, information which normally would be
disclosed in a Registration Statement under the Securities Act of 1933 or in
periodic reports filed under the Securities Exchange Act of 1934 or are
otherwise publicly disclosed, may be disclosed by the Buyer in such
registration statements or reports, after notifying the Sellers of the proposed
disclosure
The acquisition agreements (the "Acquisition Agreements") shall contain:
(i) customary representations and warranties for a transaction of the proposed
nature of the Acquisitions including, but not limited to representations and
warranties regarding (a) Organization and Standing; (b) Authorization and
Binding Obligation; (c) Taxes; (d) Personal Property; (e) Real Property; (f)
Contracts; (g) Environmental Matters; (h) Financial Statements; (i) Personnel
Information; (j) Litigation; (k) Compliance With Laws; (ii) covenants as to the
operation of the Companies in the normal course in accordance with good
commercial practice and the prior established practices of the Sellers; (iii)
the required maintenance of the Companies physical assets in accordance with
governmental regulations, sound commercial practices and the Sellers' prior
operating procedures; (iv) maintenance of insurance as appropriate and in
accordance with past practices; (v) preservation of the business relationships
of the Companies, both contractual and otherwise, with suppliers, customers,
employees and patrons of the Companies; (vi) provisions for the survival of all
representations and warranties for a period of eighteen (18) months from the
closing secured to the mutually reasonable satisfaction of the parties; (vii)
standard asset based prorations; (viii) a provision requiring a good faith
deposit by the Buyer at the time of execution of the Acquisition Agreements to
secure Buyer's obligation to pay liquidated damages in the event that the Buyer
fails to consummate the Acquisitions due solely to Buyer's breach of the
Acquisition Agreements, including the Buyer's breach of representations and
warranties, and (ix) the guarantee of SFX Broadcasting, Inc.
The Acquisition Agreements shall condition the closing of the Acquisitions
upon: (i) obtaining all necessary consents to the Acquisitions so that the
Buyer shall enjoy the same benefits of ownership of the Companies as the
current shareholders currently enjoy; (ii) the continued truth and accuracy of
the representations and warranties in the Acquisition Agreements; (iii) the
maintenance of the Sellers' business and the Companies free of material adverse
damage or change; (iv) the conduct of the Companies' business in accordance
with
<PAGE>
Mr. Dave Lucas
Mr. Steve Sybesma
March 4, 1997
Page 4
present practices during the contract period; (v) delivery of audits from big
six accounting firms for those companies which have historically had audits
prepared, which audits the Companies shall cause SFX to be permitted to use in
any Securities and Exchange Commission filings; (vi) delivery of legal opinions
as to zoning and licensing of the Companies properties and the transferability
and effectiveness thereof; and (vii) Robert F.X. Sillerman being "in control"
of SFX, within the meaning of that term under the rules and regulations of the
Federal Communications Commission, at the time of the closing.
In addition, SFX will enter into mutually agreeable employment agreements
with each of you at a base salaries of $200,000 per year and minimum bonuses of
$50,000 per year. The agreements shall provide that you will be able to
participate in SFX's stock option plans, medical plans and other benefit plans
at the same level as other senior executives of SFX.
We will review with you and your counsel the proposed structure of these
transactions and make reasonable adjustments to maximize tax advantages, so
long as they are at no cost to SFX.
Unless and until the existence of this letter is publicly disclosed by the
Buyer in a public document filed under the securities laws, the existence and
contents of this letter shall be maintained as confidential by both parties
hereto.
The parties to this letter shall expeditiously proceed with the evaluation
of the Acquisitions and the finalization of due diligence by the Buyer and the
good faith negotiation of the Acquisition Agreements within thirty (30) days
from the date hereof.
The Sellers agree that from the signing of this letter of intent until
such time as the Acquisition Agreements are executed or this letter is
terminated, the Sellers will not seek other buyers for the Companies nor
cooperate in the evaluation of the operation of its business by a third party.
This letter shall, unless extended in writing, terminate thirty (30) days from
the date hereof.
Please indicate that this letter accurately reflects our mutual present
intent with respect to the Acquisitions, as well as your agreement to the
confidentiality provisions set forth herein, which provisions shall survive be
termination of this letter, by signing and returning the duplicate copy of this
letter provided for that purpose, by the close of business on Friday, March 7,
1997.
<PAGE>
Mr. Dave Lucas
Mr. Steve Sybesma
March 4, 1997
Page 5
We look forward to the successful consummation of this transaction.
Very truly yours,
SFX BROADCASTING, INC.
By: /s/ Robert F.X. Sillerman
----------------------------------
Name: Robert F.X. Sillerman
Title: Chairman
Agreed to:
/s/ Dave Lucas
- -------------------------------------
Dave Lucas
/s/ Steve Sybesma
- -------------------------------------
Steve Sybesma
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of this 22 day of
November, 1996, by and between SFX BROADCASTING, INC., a Delaware corporation
with its principal executive office at 150 East 58th Street, New York, New
York 10155 (the "Company"), and MICHAEL G. FERREL, an individual residing at
525 East 72nd Street, New York, New York 10021.
In consideration of the mutual covenants and agreements herein set forth, the
parties hereto agree, effective on the date hereof (the "Effective Date"), as
follows:
Employment and Acceptance; Term.
The Company hereby employs the Executive, and the Executive agrees to be
employed by the Company, for a term (the "Term") commencing on the Effective
Date and continuing for a period of five (5) years.
Duties.
1. During the Term of this Agreement, the Executive shall be employed as the
President and Chief Executive Officer of the Company at the Company's
principal executive office and shall perform such duties and responsibilities
which are customarily incident to the position of President and Chief
Executive Officer of a large multi-station broadcasting company as shall be
reasonably assigned to the Executive by the Company's Board of Directors (the
"Board").
2. The Company's principal executive office and the staff necessary for the
Executive to perform his duties and responsibilities specified in Section 2(a)
shall be located in New York, New York. The Company shall not move its
principal executive office outside New York, New York, without the Executive's
prior consent.
3. The Executive shall devote substantially all of his business time, labor,
skill and energy to the business and affairs of the Company and to the duties
and responsibilities specified in Section 2(a) of this Agreement; provided,
however, that the Executive may engage in other activities, such as
charitable, educational, religious and similar types of activities, to the
extent that such activities do not prohibit or prevent the performance of the
Executive's duties under this Agreement, or inhibit or conflict in any
material way with the business of the Company.
4. The Executive covenants and agrees that for so long as he is actively
employed by the Company he shall inform the Company of
1
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each business opportunity related to the business of the Company of which he
becomes aware, and that he will, not directly or indirectly, exploit any such
opportunity for his own account, nor will he render any services to any other
person or business, or acquire any interest of any type in any other business,
which is in competition with the Company; provided, however, that the
foregoing shall not be deemed to prohibit the Executive from acquiring, solely
as an investment, (i) up to 10% of any securities of a partnership, trust,
corporation or other entity so long as he remains a passive investor in such
entity and such entity is not, directly or indirectly, in competition with the
Company in any of the markets in which it owns or operates radio stations, or
(ii) up to .5% of any securities of any publicly traded partnership, trust,
corporation or other entity provided he remains a passive investor in such
entity.
Compensation and Benefits.
1. The Company shall, during the continuance of the Executive's employment
hereunder, pay to the Executive, and the Executive agrees to accept, in
consideration of his services, a salary (the "Base Salary") at the rate of
$300,000 per annum, payable in accordance with the Company's normal payroll
practices. The Base Salary shall be increased annually on the anniversary of
the Effective Date of this Agreement by 5% of the Base Salary in effect for
the immediately preceding twelve-month period.
2. During the Term of this Agreement, the Executive and his family shall be
entitled to participate in all group insurance, hospitalization, medical,
health and accident, disability or similar plans or programs of the Company on
the same basis as all other executive officers. Upon any termination of the
Executive's employment hereunder, other than any voluntary termination by the
Executive that is not related to a Change of Control (as defined in Section
9(b)), during the Term, the Company shall, upon the Executive's request and at
his expense, permit the Executive and his family to continue their
participation in all group health insurance plans or programs of the Company
beyond the coverage period provided for under the Consolidated Omnibus Budget
Reconciliation Act of 1985.
3. The Company shall deduct from the Base Salary and all other cash amounts
payable by the Company under the provisions of this Agreement to the
Executive, or, if applicable, to his estate, legal representatives or other
beneficiary designated in writing by the Executive (a "designee"), all social
security taxes, all federal, state and municipal taxes and all other charges
and deductions which now or hereafter are imposed by law as charges on the
compensation of the Executive or charges on cash benefits
2
<PAGE>
payable by the Company hereunder to his estate, legal representatives or
designee.
4. The Executive shall be entitled to receive an annual incentive bonus (the
"Bonus") during the continuance of the Executive's employment hereunder equal
to the greater of (i) $75,000 and (ii) an amount based upon the Company's
achievement of performance goals determined by the Board upon the
recommendation of the Compensation Committee of the Board. 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 Company.
5. On the Effective Date, the Company shall pay to the Executive a signing
bonus of $500,000, payable in cash. Prior to the Effective Date, the Company
has granted to the Executive fully vested options to purchase up to 50,000
shares of Class A Common Stock of the Company at $33.75 per share. On the
Effective Date and on each of the first through the fourth anniversary of the
Effective Date, the Company shall grant to the Executive fully vested options
to purchase up to 30,000 shares of Class A Common Stock at their fair market
value at the time of grant. All options and the shares of Class A Common Stock
issued upon exercise thereof shall not be subject to forfeiture and shall,
subject to restrictions under applicable securities laws, be freely
transferable.
Reimbursement of Certain Expenses.
1. The Company shall reimburse the Executive, upon production of reasonable
detailed accounts and vouchers or other reasonable evidence of payment by the
Executive, all in accordance with the Company's regular procedures in effect
from time to time and in form suitable to establish the validity of such
expenses for tax purposes, all ordinary, reasonable and necessary travel,
entertainment and other expenses as shall be incurred by him in the
performance of his duties hereunder.
2. Prior to the Effective Date, the Company has paid to the Executive a
relocation expense allowance of $25,000.
3. The Company shall, during the Term, arrange for the annual preparation of
the Executive's income tax returns by appropriately qualified personnel.
4. The Company shall reimburse the Executive all reasonable legal fees and
expenses incurred by him in connection with the negotiation, preparation, and
execution of this Agreement and related matters.
3
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Vacation.
THE EXECUTIVE SHALL BE ENTITLED TO PAID VACATION TIME AT THE RATE OF NOT LESS
THAN FOUR (4) WEEKS PER YEAR DURING THE TERM.
Total Disability.
The Company shall provide disability insurance coverage to the Executive as of
the Effective Date of this Agreement in an amount sufficient to assure that
annual disability payments equal at least two-thirds of the sum of (i) the
Base Salary then in effect and (ii) the Bonus paid or payable with respect to
the most recent fiscal year of the Company. If the Executive becomes disabled
during his employment hereunder so that he is unable for a period of six (6)
consecutive months to perform his duties under this Agreement ("Total
Disability"), the Company shall pay to the Executive his full Base Salary
during such six (6) month period; thereafter, the Company shall pay the
Executive his severance payments in accordance with Section 10 hereof.
Insurance.
The Executive agrees to submit himself, on request, for physical examination
by any physician designated by the Board as required or advisable in
connection with the obtaining of any key man insurance policy or similar
coverage which the Company may wish to obtain. The cost and expenses for such
medical examinations and any such insurance shall be borne by the Company.
Confidential Information.
All records, papers, models, programs and other documents and those kept or
made by the Executive relating to the business or affairs of the Company
and/or its clients or customers shall be and remain the property of the
Company, and to the extent available shall be delivered by the Executive to
the Company as required by the Board and, in any event, upon the expiration or
earlier termination of the Executive's employment by the Company.
Termination of Executive's Employment.
1. Notwithstanding the provisions of Section 1 hereof, this Agreement may be
terminated prior to the expiration of the Term by the Board, in the name and
on behalf of the Company, upon:
The death of the Executive;
the Total Disability of the Executive; or
the occurrence of any material breach of any material covenant of the
Executive contained in this Agreement and the continuation of such breach for
a period of thirty (30) days following written notice by the Company to the
Executive of such breach, or in the event of willful malfeasance in the
performance of his duties hereunder having a material adverse effect on the
business of the Company and the continuation of such malfeasance for a period
of ten (10) days following written notice by the Company to the Executive of
such malfeasance; provided, however, that any failure to attain the Company's
financial projections shall not constitute any such breach or malfeasance
(unless it results from any other material breach or willfull malfeasance).
4
<PAGE>
1. Notwithstanding the provisions of Section 1 hereof, this Agreement may be
terminated prior to the expiration of the Term by the Executive upon ten (10)
days prior notice upon any Change of Control. "Change of Control" means (A)
the acquisition by any party or group, other than stockholders of the Company
on the Effective Date, of 50% or more of the capital stock of the Company
entitled to vote for the election of directors, (B) the sale or disposition of
all or substantially all of the business of the Company, through a sale of
assets, sale of stock, merger, consolidation, or otherwise, or (C) the Board
ceasing to consist of Continuing Directors; and "Continuing Directors" means
all directors of the Company on the Effective Date and all subsequent
directors who were nominated or otherwise approved by a majority of the
directors who were directors on the Effective Date or were nominated or
approved in accordance with this definition.
Consequences of Termination of this Agreement.
1. In the event that this Agreement is terminated (A) by the Company under
Section 9(a)(i) or (ii) above or (B) by the Executive under Section 9(b)
above, the Executive (or, if applicable, his estate, legal representatives or
designee) shall be entitled to receive, in full satisfaction of all
obligations due to the Executive from the Company hereunder, the following
sums:
all accrued but unpaid Base Salary and any unpaid Bonus in respect of a fiscal
year ended prior to the Executive's death; and for a period of thirty-six (36)
months or until the end of the Term, whichever is longer, the Base Salary in
effect at the time of termination and an annual bonus equal to the Bonus paid
or payable for the most recent fiscal year of the Company prior to such
termination.
1. In the event that this Agreement is terminated by the Executive under
Section 9(b) above, the Executive shall further be entitled to receive fully
vested options to purchase, within ten (10) years of grant, up to 100,000
shares of Class A Common Stock of the Company at $13.75 per share.
2. Upon any termination of this Agreement under Section 9(a)(i) above, the
payments to be made under paragraph (a) above shall be made within thirty (30)
days after such termination in one lump sum equal to the present value of such
payments, discounted at a rate equal to 75% of the "Prime Rate" published by
the Wall Street Journal on the date of such termination. Upon any termination
of this Agreement under Section 9(a)(ii) above, the Company shall have the
right to offset against the payments under paragraph (a) above the amount of
any proceeds paid to the Executive under any disability insurance policies
maintained by the Company.
5
<PAGE>
3. In the event that this Agreement is terminated for any other reason, the
Executive shall be entitled to receive all accrued but unpaid Base Salary and
any earned but unpaid Bonus through the date of termination, and upon payment
of said sum the Company shall have no further obligations or liabilities to
the Executive hereunder.
Assignability.
This Agreement and the rights and obligations of the parties hereunder may not
be assigned by either party for any reason without the prior written consent
of the other party.
Arbitration of Disputes.
Any dispute or controversy between the parties relating to or arising out of
this Agreement or any amendment or modification hereof shall be determined by
arbitration in the City and State of New York by and pursuant to the rules
then prevailing of the American Arbitration Association. The arbitration award
shall be final and binding upon the parties and judgment may be entered
thereon by any court of competent jurisdiction. The service of any notice,
process, motion or other document in connection with any arbitration under
this Agreement or the enforcement of any arbitration award hereunder may be
effectuated either by personal service upon a party or by certified mail duly
addressed to him or to his executors, administrators, personal
representatives, next of kin, successors or assigns, at the last known address
or addresses of such party or parties. If the Executive is the prevailing
party on any issue in any such arbitration proceeding, he shall be entitled to
recover from the Company any actual expenses for attorney's fees and
disbursements incurred by him.
Governing Law.
This Agreement shall be construed in accordance with and governed by the laws
of the State of New York applicable to contracts executed in and to be
performed solely within the State of New York.
Ability to Fulfill Obligations.
Neither the Company nor the Executive is a party to or bound by any agreement
which would be violated by the terms of this Agreement.
Notice.
Any notice, direction or instruction required or permitted to be given
hereunder shall be given in writing and may be given by telex, telegram,
facsimile transmission or similar method if confirmed by mail as herein
provided; by mail if sent postage prepaid by registered mail, return receipt
requested; or by hand delivery to any party at the address of the party first
above set forth. If notice, direction or instruction is given by telex,
telegram or facsimile transmission or similar method or by hand delivery, it
shall be deemed to have been given or made on the day on which it was given,
and if mailed, shall be deemed to have been given or made on the third
business day following the day after which it was mailed. Any party may, from
time to time, by
6
<PAGE>
like notice give notice of any change of address and in such event, the
address of such party shall be deemed to be changed accordingly.
Further Assurances.
The parties hereto agree that, after the execution of this Agreement, they
will make, do, execute or cause or permit to be made, done or executed all
such further and other lawful acts, deeds, things, devices, conveyances and
assurances in law whatsoever as may be required to carry out the true
intention and to give full force and effect to this Agreement.
Entire Agreement.
This Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes any and all prior or
contemporaneous oral and prior written agreements and understandings. There
are no oral promises, conditions, representations, understandings,
interpretations or terms of any kind as conditions or inducements to the
execution hereof or in effect among the parties. No custom or trade usage, nor
course of conduct among the parties, shall be relied upon to vary the terms
hereof. This Agreement may not be amended, and no provision hereof shall be
waived, except by a writing signed by all of the parties to this Agreement
which states that it is intended to amend or waive a provision of this
Agreement. Any waiver of any rights or failure to act in a specific instance
shall relate only to such instance and shall not be construed as an agreement
to waive any rights or fail to act in any other instance, whether or not
similar.
Severability.
Should any provision of this Agreement be unenforceable or prohibited by any
applicable law, this Agreement shall be considered divisible as to such
provision which shall be inoperative, and the remainder of this Agreement
shall be valid and binding as though such provision were not included herein.
Counterparts.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed to be an original. It shall not be necessary when making proof
of this Agreement to account for more than one counterpart.
Headings.
All headings in this Agreement are for convenience only and will not affect
the meaning of any provision hereof.
Survival of Certain Provisions.
The provision of Sections 3(b), 8 and 10 shall, to the extent applicable,
continue in full force and effect notwithstanding the expiration or earlier
termination of this Agreement or of the Executive's employment in accordance
with the terms of this Agreement.
Successors and Assigns.
Except as otherwise provided herein, this Agreement shall inure to the benefit
of, and be binding upon, the Company and any corporation with which the
Company merges or consolidates, and upon the Executive and his executors,
administrators, heirs and legal representatives.
7
<PAGE>
IN WITNESS WHEREOF, the Executive has executed this Agreement and the Company
has caused this Agreement to be executed by a duly authorized officer as of
the day and year first above written.
SFX BROADCASTING, INC.
By: /s/ Robert F.X. Sillerman
----------------------------
Name: Robert F.X. Sillerman
Title: Chief Executive Officer
/s/ Michael G. Ferrel
- ------------------------------
MICHAEL G. FERREL
8
<PAGE>
FOURTH SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated
as of January 29, 1997, among DELSENER/SLATER ENTERPRISES, INC., a Delaware
corporation; DELSENER/SLATER ENTERPRISES, LTD., a New York corporation; IN
HOUSE TICKETS, INC., a New York corporation; CONNECTICUT CONCERTS INCORPORATED,
a Connecticut corporation; ARDEE FESTIVALS N.J., INC., a New Jersey
corporation; BEACH CONCERTS, INC., a New York corporation; ARDEE PRODUCTIONS,
LTD., a New York corporation; EXIT 116 REVISITED, INC., a New Jersey
corporation; DUMB DEAL, INC., a New York corporation; and BROADWAY CONCERTS,
INC., a New York corporation (each, a "Guarantor"), each of which is a direct
or indirect subsidiary of SFX Broadcasting, Inc., a Delaware corporation (the
"Company"); and The Chase Manhattan Bank, as trustee under the indenture
referred to below (the "Trustee").
WITNESSETH
WHEREAS, The Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of May 31, 1996, providing for
the issuance of an aggregate principal amount of $450,000,000 of 10 3/4% Senior
Subordinated Notes due 2006 (the "Securities"); and
WHEREAS, Section 4.15 of the Indenture provides that under certain
circumstances the Company is required to cause each Guarantor to execute and
deliver to the Trustee a supplemental indenture pursuant to which such
Guarantor shall unconditionally guarantee all of the Company's Obligations
under the Securities pursuant to a Subsidiary Guarantee on the terms and
conditions set forth herein;
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, each
Guarantor and the Trustee mutually covenant and agree for the equal and ratable
benefit of the holders of the Securities as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. Each Guarantor hereby agrees, jointly and
severally with all other Guarantors, to guarantee the Company's obligations
under the Securities on the terms and subject to the conditions set forth in
Article 11 of the Indenture and to be bound by all other applicable provisions
of the Indenture, including, without limitation, the provisions of Article 10
of the Indenture.
3. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, shareholder or agent of any Guarantor, as
such, shall have any liability for any obligations of the Company or any
Guarantor under the Securities, any Subsidiary Guarantees, the Indenture or
this Supplemental Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each holder of the Securities by
accepting a
<PAGE>
Security waives and releases all such liability. The waiver and release are
part of the consideration for issuance of the Securities. Such waiver may not
be effective to waive liabilities under the federal securities laws and it is
the view of the Commission that such a waiver is against public policy.
4. EFFECTIVENESS. This Supplemental Indenture shall be effective upon
execution by the parties hereto.
5. RECITALS. The recitals contained herein shall be taken as the
statements of the Company and the Guarantors and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations as
to the validity of this Supplemental Indenture.
6. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE.
- 2 -
<PAGE>
7. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
8. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
THE CHASE MANHATTAN BANK, N.A.,
as Trustee
By: /s/ Francine Springer
--------------------------------
Name: Francine Springer
Title: Trust Officer
ARDEE FESTIVALS N.J., INC.
By: /s/ Mitchell Slater
--------------------------------
Name: Mitchell Slater
Title: Co Pres-Co CEO
ARDEE PRODUCTIONS, LTD.
By: /s/ Mitchell Slater
--------------------------------
Name: Mitchell Slater
Title: Co Pres-Co CEO
BEACH CONCERTS, INC.
By: /s/ Mitchell Slater
--------------------------------
Name: Mitchell Slater
Title: Co Pres-Co CEO
- 3 -
<PAGE>
BROADWAY CONCERTS, INC.
By: /s/ Mitchell Slater
--------------------------------
Name: Mitchell Slater
Title: Co Pres-Co CEO
CONNECTICUT CONCERTS INCORPORATED
By: /s/ Mitchell Slater
--------------------------------
Name: Mitchell Slater
Title: Co Pres-Co CEO
DELSENER/SLATER ENTERPRISES, LTD.
By: /s/ Mitchell Slater
--------------------------------
Name: Mitchell Slater
Title: Co Pres-Co CEO
DELSENER/SLATER ENTERPRISES, INC.
By: /s/ Mitchell Slater
--------------------------------
Name: Mitchell Slater
Title: Co Pres-Co CEO
DUMB DEAL, INC.
By: /s/ Mitchell Slater
--------------------------------
Name: Mitchell Slater
Title: Co Pres-Co CEO
- 4 -
<PAGE>
EXIT 116 REVISITED, INC.
By: /s/ Mitchell Slater
--------------------------------
Name: Mitchell Slater
Title: Co Pres-Co CEO
IN HOUSE TICKETS, INC.
By: /s/ Mitchell Slater
--------------------------------
Name: Mitchell Slater
Title: Co Pres-Co CEO
- 5 -
<PAGE>
FORM OF
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
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<PAGE>
Default would exist before and after giving effect to such Permitted
Acquisition. Pursuant to the 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:
(i) KRLD-AM and the Texas State Networks in
Dallas, Texas for KKRW-FM in Houston, Texas;
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<PAGE>
(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."
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<PAGE>
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
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 the
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."
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<PAGE>
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:
"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 another 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.
- 5 -
<PAGE>
Please evidence your consent to these requests by executing
and returning at least two counterparts of this Consent to the Agent's
counsel, Sullivan & Cromwell, 125 Broad Street, New York, New York 10004,
attention of James Fitzpatrick, facsimile no. (212) 558-3567. 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:____________________________________
Title:
- 6 -
<PAGE>
Agreed as of the date first written above:
THE BANK OF NEW YORK
By:________________________________
Title:
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By:________________________________
Title:
BANKERS TRUST COMPANY
By:________________________________
Title:
BANK OF MONTREAL
By:________________________________
Title:
BANQUE NATIONALE DE PARIS
By:________________________________
Title:
- 7 -
<PAGE>
CIBC, INC.
By:________________________________
Title:
CORESTATES BANK N.A.
By:________________________________
Title:
THE FUJI BANK, LIMITED, NEW YORK
By:________________________________
Title:
LEHMAN COMMERCIAL PAPER INC.
By:________________________________
Title:
NATIONAL BANK OF CANADA
By:________________________________
Title:
NATIONAL CITY BANK
By:________________________________
Title:
- 8 -
<PAGE>
SOCIETE GENERALE
By:________________________________
Title:
SOUTHERN PACIFIC THRIFT
& LOAN ASSOCIATION
By:________________________________
Title:
THE SUMITOMO BANK, LIMITED
By:________________________________
Title:
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By:________________________________
Title:
- 9 -
<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.
<PAGE>
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.
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 SEX 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
- 2 -
<PAGE>
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.
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>
- 3 -
<PAGE>
FORM OF 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
<PAGE>
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 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
- 2 -
<PAGE>
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 the 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.
- 3 -
<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:
-------------------------------------
Its:
-------------------------------------
SFX BROADCASTING, INC.
By:
------------------------------------
Its:
------------------------------------
- 4 -
<PAGE>
MASTER RICHMOND STATION GROUP AGREEMENT
THIS MASTER RICHMOND STATION GROUP AGREEMENT is made
and entered into as of the 17th day of December, 1996, by and among SFX
BROADCASTING, INC., a Delaware corporation ("SFX"), ABS COMMUNICATIONS
INCORPORATED, a Virginia corporation ("ABS"), KENNETH A. BROWN ("KAB"), EBF
INC., a Delaware corporation ("EBFI"), EBF PARTNERS, a New York partnership
("EBFP" and, together with ABS, KAB and EBFI, the "Current Partners"), ABS
COMMUNICATIONS, L.L.C., a Virginia limited liability company (the "LLC"), ABS
RICHMOND PARTNERS, L.P., a Virginia limited partnership ("RICH-I"), ABS
RICHMOND PARTNERS II, L.P., a Virginia limited partnership ("RICH-II" and,
together with RICH-I, the "Partnerships"), ABS RICHMOND TOWERS, L.P., a
Virginia limited partnership and J. EDWIN CONRAD for certain limited purposes
specified herein.
W I T N E S S E T H:
WHEREAS, the Parties have entered into that certain
Letter of Intent, dated August 9, 1996 (the "Letter of Intent") which provides,
in part, the Parties' intention for SFX (i) to acquire (A) substantially all of
the Current Partners' partnership interests in the Partnerships and (B) the
Benchmark Assets through the LLC as well as the financing of the acquisition of
such assets by the LLC, (ii) to finance and assume certain liabilities of KAB
and ABS under the Benchmark Agreements, including the repayment of all
outstanding loans under the Signet Loan Agreement, (iii) to indemnify KAB and
ABS for any losses which may be incurred by KAB and ABS under the Benchmark
Agreements and (iv) to enter into such other arrangements and transactions with
the other Parties which are more particularly described in the Letter of Intent
(collectively, the "Contemplated Transactions"); and
WHEREAS, the Parties understand that the
Contemplated Transactions must occur in several stages and accordingly desire
to enter into this Agreement to identify the timing and execution of the
various agreements which must be entered into to consummate the Contemplated
Transactions;
NOW, THEREFORE, in consideration of the mutual
representations, warranties, covenants and agreements, and upon the terms and
subject to the conditions contained herein, and intending to be fully bound
hereby, the Parties hereby agree as follows:
<PAGE>
SECTION 1. Certain Definitions. When used in this
Agreement, the following words or phrases shall have the following meanings:
"Agreement" shall mean this Master Richmond Station
Group Agreement, as it may be amended, supplemented or otherwise modified from
time to time in accordance with the terms hereof.
"Amended and Restated Operating Agreement" shall
mean the Amended and Restated Operating Agreement substantially in the form
attached hereto as Exhibit A.
"Benchmark Agreements" shall mean all of the
agreements set forth on Schedule 1 attached hereto.
"Benchmark Asset Purchase Agreement" shall mean that
certain Asset Purchase Agreement, dated as of May 31, 1996 by and among
Benchmark Radio Acquisition Fund III Limited Partnership, WVGO License Limited
Partnership, WDCK License Limited Partnership and ABS Communications
Incorporated.
"Benchmark Assets" shall mean all of the assets to
be acquired by the LLC pursuant to the Benchmark Agreements.
"Benchmark Stations" shall mean collectively, radio
station WLEE(FM) in Williamsburg, Virginia and radio station
WBZU(FM) in Richmond Virginia.
"Brown Employment Agreement" shall mean the
Employment Agreement substantially in the form attached hereto as Exhibit B.
"Brown Non-Competition Agreement" shall mean the
Non-Competition Agreement substantially in the form attached hereto as Exhibit
C.
"Closing" shall mean, as applicable, the Closing as
defined under the KAB Contribution Agreement or the Purchase
and Sale Agreement.
"Collateral Assignment of Contracts" shall mean the
Collateral Assignment of Contracts substantially in the form attached hereto as
Exhibit O.
"Conrad Employment Agreement" shall mean the
Employment Agreement substantially in the form attached hereto as Exhibit D.
-2-
<PAGE>
"Conrad Non-Competition Agreement" shall mean the
Non-Competition Agreement substantially in the form attached hereto as Exhibit
E.
"Deed of Trust" shall mean the Deed of Trust
substantially in the form attached hereto as Exhibit N.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
"Escrow Agent" shall mean Signet Trust Company.
"Escrow Agreement" shall mean the Escrow Agreement
substantially in the form attached hereto as Exhibit F.
"KAB Contribution Agreement" shall mean the KAB
Contribution Agreement substantially in the form attached hereto as Exhibit G.
"Letter of Intent" shall mean that certain letter of
intent dated August 9, 1996 by and among SFX Broadcasting, Inc., KAB, ABS, the
LLC and each of the Partnerships.
"Liberty Entities" shall mean Liberty Acquisition
Subsidiary Corporation and Liberty Broadcasting of Maryland
II, Incorporated.
"Party" or "Parties" shall mean each of the parties,
either individually or collectively, as applicable, signatory
to this Agreement.
"Purchase and Sale Agreement" shall mean the
Purchase and Sale Agreement substantially in the form attached hereto as
Exhibit I.
"Put and Call Agreement" shall mean the Put and Call
Agreement substantially in the form attached hereto as Exhibit J.
"Related Agreements" shall mean each of the
agreements attached to this Agreement as an Exhibit.
"Rich Stations" shall mean, collectively, radio
station WKHK-FM in Colonial Heights, Virginia and radio station WVGO-FM in
Crewe, Virginia.
"Security Agreement" shall mean the Security
Agreement substantially in the form attached hereto as Exhibit H.
-3-
<PAGE>
"SFX Contribution Agreement" shall mean the SFX
Contribution Agreement substantially in the form attached hereto as Exhibit K.
"SFX Convertible Note Agreement" shall mean the
Convertible Note Agreement substantially in the form attached hereto as Exhibit
L.
"Signet Loan Agreement" shall mean that certain
Promissory Note, dated as of May 28, 1996, by and among Jacob Brown, KAB and
Signet Bank as assigned to the LLC pursuant to that certain Assignment dated
May 28, 1996.
"Tower Lease" shall mean the Tower Lease
substantially in the form attached hereto as Exhibit M.
SECTION 2. Order of Transactions.
(a) The applicable Parties shall have entered into
the following agreements and the following actions shall have taken place
simultaneously with the execution of this Agreement and the consummation of the
transactions contemplated by the Benchmark Agreements:
(i) SFX and the LLC shall have entered into
the SFX Convertible Note Agreement, the Security Agreement, the Deed of Trust
and the Collateral Assignment of Contracts and any and all other agreements or
documents contemplated thereunder;
(ii) SFX, the Current Partners, the LLC and the
Escrow Agent shall have entered into the Escrow Agreement;
(iii) All amounts outstanding under the Signet
Loan Agreement shall have been repaid, any and all security interests granted
to Signet Bank pursuant to the Signet Loan Agreement shall have been
terminated, extinguished and released and the Signet Loan Agreement shall have
been terminated;
(iv) KAB and the LLC shall have entered into,
and consummated the transactions under, the KAB Contribution
Agreement;
(v) The Current Partners and the LLC shall
have entered into the Purchase and Sale Agreement; and
(vi) The Liberty Entities, SFX and the LLC
shall have entered into the SFX Contribution Agreement.
-4-
<PAGE>
(b) The applicable Parties shall have executed each
of the following agreements contemporaneously herewith, which agreements shall
become effective automatically upon the consummation of the transactions
contemplated by the Purchase and Sale Agreement without any further action by
any of the applicable Parties thereto (other than on the date of its
effectiveness, the applicable Parties completing the appropriate blanks and
dates to reflect its effectiveness); provided, in the event the transactions
contemplated by the Purchase and Sale Agreement are not consummated, each of
the agreements listed below shall be null and void and of no force and effect:
The Amended and Restated Operating Agreement, the Brown Employment Agreement,
the Brown Non-Competition Agreement, the Conrad Employment Agreement, the
Conrad Non- Competition Agreement and the Put and Call Agreement.
(c) Contemporaneously herewith, ABS Richmond
Towers, L.P. ("ABS Tower") and RICH-I shall have entered into the Tower Lease.
ABS Tower and RICH-I hereby agree that until the closing of the Purchase and
Sale Agreement, neither ABS Tower nor RICH-I shall amend, modify, terminate or
revise in any manner the Tower Lease without the prior written consent of SFX.
SECTION 3. Payment of Expenses. SFX hereby agrees
to lend to the LLC sufficient funds under the SFX Convertible Note Agreement so
that the LLC may:
(a) reimburse or pay all reasonable costs and
expenses (including, without limitation, reasonable attorneys' fees and any
reasonable expenses relating to the provisions of Article V of the Purchase and
Sale Agreement) incurred by the Current Partners which are directly related to
the negotiation, preparation and closing of this Agreement, the Benchmark
Agreements, the Purchase and Sale Agreement and the other agreements
contemplated under this Agreement and the Contemplated Transactions and such
other reasonable costs and expenses incurred by KAB to date in connection with
the solicitation and achievement of finding a financing source to consummate
the Contemplated Transactions;
(b) pay all fees and expenses of Interstate/Johnson
Lane Corporation ("Interstate") when due as provided in that certain Placement
Agency Agreement, dated April 17, 1996 as modified by the partners thereto as
reflected in Annex A to the Letter of Intent between ABS and Interstate.
SECTION 4. [INTENTIONALLY OMITTED].
-5-
<PAGE>
SECTION 5. Certain Obligations of SFX. In addition
to the obligations of SFX contained in the agreements contemplated in this
Master Agreement, SFX hereby:
(a) agrees to cause to be performed, at its sole
expense, promptly after the execution of this Master Agreement, Phase I
environmental studies of the real property and transmitting equipment used by
the Partnerships in connection with the operation of the Rich Stations; and
(b) guaranties the obligations of the Liberty
Entities (as defined in the SFX Contribution Agreement) (and their assignees,
if any) under the SFX Contribution Agreement (in the event that such
obligations have not already been transferred to SFX by the Liberty Entities'
valid assignment to SFX of all of their respective rights and obligations
thereunder).
SECTION 6. Further Assurances. Each Party hereby
agrees and covenants to the other Parties that:
(a) such Party will use his or its commercially
reasonable best efforts to cause the completion of each of the Contemplated
Transactions as expeditiously as practical and in connection therewith, such
Party will avoid taking any actions that would prevent or delay the
consummation of the Contemplated Transactions;
(b) such Party will deal with the other Parties in
good faith in completing the Contemplated Transactions; and
(c) such Party will execute all such documents
which may be necessary or appropriate to consummate the Contemplated
Transactions as expeditiously as practical and does hereby consent to the
consummation of the Contemplated Transactions and waive any rights that such
Party has under any agreements other than under this Agreement and the Related
Agreements that would preclude the consummation of the Contemplated
Transactions.
SECTION 7. Indemnification.
(a) Current Partners' Indemnities. Each Current
Partner hereby agrees, severally and not jointly (based on such Current
Partner's respective percentage interests in the Partnerships), to indemnify,
defend and hold the LLC, SFX and each of their affiliates (collectively, the
"SFX Parties") harmless with respect to any and all demands, claims, actions,
suits, proceedings, assessments, judgments, costs, losses,
-6-
<PAGE>
damages, liabilities and expenses (including, without limitation, reasonable
attorneys' fees) (collectively, the "Losses") asserted against, resulting from,
imposed upon or incurred by the LLC or SFX or its assignees directly or
indirectly relating to or arising out of the breach of any of the
representations or warranties or failure by such Current Partner to perform any
covenants or agreements of such Current Partner set forth in this Agreement or
the Related Agreements.
(b) SFX's Indemnities. SFX hereby agrees to
indemnify, defend and hold the Current Partners and their affiliates harmless
with respect to any and all Losses asserted against, resulting from, imposed
upon or incurred by the Current Partners directly or indirectly relating to or
arising out of the breach of any of the representations, warranties, covenants
or agreements of SFX set forth in this Agreement or any of the Related
Agreements.
(c) Limitation on Indemnity.
(i) The SFX Parties shall be entitled to
indemnification under this Agreement only to the extent that the aggregate sum
of the SFX Parties' Losses under this Agreement and the Related Agreements for
which the Current Partners are responsible hereunder individually or in the
aggregate exceeds One Hundred Fifty Thousand Dollars ($150,000) (the "Threshold
Amount")(and only to the extent of such excess). The aggregate indemnification
liability for each of the Current Partners under this Agreement shall be
limited to an amount equal to such Current Partner's allocable portion of the
Purchase Price (as defined in the Purchase and Sale Agreement) paid to such
Current Partner pursuant to Section 3.2 of the Purchase and Sale Agreement.
Notwithstanding anything to the contrary contained herein, the SFX Parties
shall not be entitled to any indemnification under this Agreement relating to
any matter disclosed in the Environmental Report (as defined in the Purchase
and Sale Agreement).
(ii) The Current Partners shall be entitled to
indemnification under this Agreement only to the extent that the aggregate sum
of the Current Partners' Losses under this Agreement and the Related Agreements
exceeds the Threshold Amount (and only to the extent of such excess). The
indemnification liability of SFX under this Agreement shall be limited to an
amount equal to the total Purchase Price paid to the Current Partners pursuant
to Section 3.2 of the Purchase and Sale Agreement which amount will be offset
by such amounts received by the Current Partners under the Escrow Agreement.
-7-
<PAGE>
(d) Survival of Representations and Warranties.
The Current Partners and the SFX Parties shall have the right to bring an
action for indemnification for a period of eighteen (18) months following the
Conversion Date (as defined in the SFX Convertible Note Agreement); upon the
expiration of such period, such right shall lapse and be of no further force or
effect. Notwithstanding the foregoing, the representations and warranties made
in the KAB Contribution Agreement, the Purchase and Sale Agreement and the SFX
Contribution Agreement with respect to (A) (i) title to the partnership
interests being sold or contributed thereunder and (ii) taxes shall survive the
Closing until the expiration of any applicable statutes of limitations
including any extensions thereof and shall thereupon expire together with any
right to indemnification with respect thereto and (B) environmental matters,
three (3) years from the Conversion Date.
(e) Procedures.
(i) Any party seeking indemnification under
this Section 7 (the "Indemnified Party") shall give the party from whom
indemnification is being sought (the "Indemnifying Party") notice of any matter
which such Indemnified Party has determined has given or could give rise to a
right of indemnification under this Agreement, within 30 days of such
determination, stating the amount of the Loss, if known, and method of
computation thereof. The obligations of an Indemnifying Party under this
Section 7 with respect to Losses arising from claims of any third party which
are subject to the indemnification provided for in this Section 7 ("Third Party
Claims") shall be governed by and contingent upon the following additional
terms and conditions: Within 30 days after receipt by an Indemnified Party of
notice of (i) any Third Party Claim or (ii) the commencement of any action or
proceeding which may entitle such Indemnified Party to indemnification under
this Section 7, such Indemnified Party shall give the Indemnifying Party
written notice of such claim or the commencement of such action or proceeding
and shall permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting from such claim. The failure to give the
Indemnifying Party timely notice under this Section 7 shall not preclude the
Indemnified Party from seeking indemnification from the Indemnifying Party
unless the Indemnifying Party has been materially prejudiced by such failure.
(ii) If the Indemnifying Party assumes the
defense of any such claim or litigation resulting therefrom
with counsel reasonably acceptable to the Indemnified Party,
-8-
<PAGE>
the obligations of the Indemnifying Party as to such claim shall be limited to
assuming, in good faith, the defense of such claim or litigation and to holding
the Indemnified Party harmless from and against any losses, damages and
liabilities caused by or arising out of any settlement approved by the
Indemnifying Party or any judgment in connection with such claim or litigation
resulting therefrom; provided, however, that the Indemnified Party may
participate, at its expense, in the defense of such claim or litigation
provided that the Indemnifying Party shall direct and control the defense of
such claim or litigation. The Indemnified Party shall cooperate and make
available all books and records reasonably necessary and useful in connection
with the defense. Without the written consent of the Indemnified Party, the
Indemnifying Party shall not, in the defense of such claim or any litigation
resulting therefrom, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or the plaintiff to the Indemnified Party of a release from all
liability in respect of such claim or litigation. No such claim or litigation
resulting therefrom which is being defended in good faith by the Indemnifying
Party shall be settled or compromised without the written consent of the
Indemnifying Party.
(iii) If the Indemnifying Party shall not,
within 30 days of receipt of notice of any such claim or litigation, give
notice to the Indemnified Party of its intention to assume the defense of any
such claim or litigation resulting therefrom, the Indemnified Party may, but
shall have no obligation to, defend against such claim or litigation, acting in
good faith and in such manner as it may deem appropriate, and the Indemnified
Party may compromise or settle such claim or litigation without the
Indemnifying Party's consent. The Indemnifying Party shall promptly pay any
such settlement of such claim or litigation and shall also promptly reimburse
the Indemnified Party for the amount of all reasonable expenses, legal or
otherwise, incurred by the Indemnified Party in connection with the defense
against or settlement of such claim or litigation. In addition, the
Indemnifying Party shall promptly pay the amount of any judgment rendered with
respect to such claim or in such litigation.
(f) Sole Remedy. The indemnification provided in
this Section 7 shall be the sole and exclusive post-Closing remedy available to
any party with respect to any claims relating to this Agreement, the Purchase
and Sale Agreement, the KAB Contribution Agreement, the SFX Contribution
Agreement
-9-
<PAGE>
and the SFX Convertible Note Agreement. In furtherance of the foregoing, the
parties (on behalf of themselves and their respective affiliates, directors,
officers, employees, agents, successors and assigns) hereby waive from and
after the date of the Closing, to the fullest extent permitted under applicable
law, any and all rights, claims and causes of action they may have against any
other party relating to the subject matter of this Agreement or any of the
other agreements referred to in the preceding sentence arising under or based
upon any federal, state, local or foreign law, rule or regulation (including,
without limitation, any law, rule or regulation relating to environmental
matters).
SECTION 8. Rich LMA. The parties hereto contemplate
that there may be entered into a Local Marketing Agreement ("Rich LMA") between
the Partnerships and the LLC with respect to the Rich Stations. The parties
hereby acknowledge and agree that the Rich LMA shall be in a form satisfactory
to SFX, the LLC and the Partnerships.
SECTION 9. Consequential Damages. Notwithstanding
any provision contained herein, in the event that an arbitrator under the
Escrow Agreement determines that any Party shall have acted in bad faith in
connection with any of the Contemplated Transactions, any other Party who has
incurred a Loss may seek as one of its damages consequential damages.
SECTION 10. Restriction on Consents, Amendments,
Waivers and Modifications; Opinions. The LLC hereby agrees not to amend, waive
or modify any term or condition set forth in any Related Agreement or in any
other agreement contemplated hereby to which the LLC is a Party (or consent to
any change requested thereunder) without the prior written consent of SFX. In
addition, the LLC hereby agrees that any and all forms of opinions to be
delivered to the LLC under any of the Related Agreements shall be in a form
reasonably satisfactory to SFX.
SECTION 11. Restriction on Sale of Stations. While
the Purchase and Sale Agreement is in effect, each of (i) ABS, KAB and the LLC
(with respect to the Benchmark Stations) and (ii) EBFI, EBFP, RICH-I and
RICH-II (with respect to the Rich Stations) hereby agree that such Party shall
not sell, transfer or otherwise encumber any of the Benchmark Stations or the
Rich Stations, as applicable, without the prior written approval of SFX, other
than as part of the Contemplated Transactions.
-10-
<PAGE>
SECTION 12. Amendment. This Agreement may only be
amended with the written consent of all of the Parties.
SECTION 13. Governing Law. The construction and
performance of this Agreement shall be governed by the laws of the Commonwealth
of Virginia without giving effect to the choice of law provisions thereof.
SECTION 14. Notices. Any notice, demand or request
required or permitted to be given under the provisions of this Agreement shall
be in writing and shall be deemed to have been duly delivered and received on
the date of personal delivery or on the date of receipt, if mailed by
registered or certified mail, postage prepaid and return receipt requested, or
on the date of a stamped receipt, if sent by an overnight delivery service, and
shall be addressed to the following addresses, or to such other address as any
Party may request:
To KAB: Kenneth A. Brown
2002 Millington Court
Richmond, VA 23233
To ABS: ABS Communications Incorporated
300 Arboretum Place
Suite 590
Richmond, VA 23236
Attn: Kenneth A. Brown
To the LLC: ABS Communications, L.L.C.
300 Arboretum Place
Suite 590
Richmond, VA 23236
Attn: Kenneth A. Brown
To EBFI and EBFP: c/o Coleman Wortham, III
Davenport & Co. of Virginia, Inc.
901 East Cary Street
Richmond, VA 23219
To SFX: SFX Broadcasting, Inc.
150 East 58th Street
New York, NY 10155
Attn: Howard Tytel
To Partnerships: c/o Coleman Wortham, III
901 East Cary Street
Richmond, VA 23219
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<PAGE>
Copies of all notices to KAB, ABS, the LLC, EBFI, EBFP and the Partnerships
shall also be sent to:
LeClair Ryan
707 East Main Street, 11th Floor
Richmond, VA 23219
Attn: Kurt Magette, Esq.
SECTION 15. Schedules and Exhibits. This Agreement
and the Related Agreements contain various schedules and exhibits. The Parties
agree that disclosure in any one schedule or exhibit shall constitute
disclosure for all purposes under this Agreement and the Related Agreements;
provided, that the disclosure is detailed enough to indicate its applicability
to such other schedule or exhibit.
SECTION 16. Counterparts. This Agreement may be
executed in one or more counterparts, each of which will be deemed an original
and all of which together shall constitute one and the same instrument.
SECTION 17. Guarantee to Provide Purchase Price.
In the event that all of the conditions precedent set forth in Article XIII of
the Purchase and Sale Agreement have been satisfied, SFX hereby irrevocably and
unconditionally guarantees to the Current Partners that SFX shall pay or cause
to be paid the Purchase Price to the Current Partners. The obligations of SFX
under this Section 17 are absolute and direct, and constitute primary
obligations of SFX.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date and year first above written.
SFX BROADCASTING, INC.
By: /s/ Howard J. Tytel
-------------------------
Name: Howard J. Tytel
Title: Executive Vice President
ABS COMMUNICATIONS INCORPORATED
By: /s/ Ken A. Brown
-------------------------
Name: Ken A. Brown
Title:
KENNETH A. BROWN
/s/ Ken A. Brown
----------------------------
EBF INC.
By: /s/ Coleman Wortham, III
-------------------------
Name: Coleman Wortham, III
Title: President
EBF PARTNERS
By: /s/ Coleman Wortham, III
-------------------------
Partner Coleman Wortham, III
<PAGE>
ABS COMMUNICATIONS, L.L.C.
By: /s/ Ken A. Brown
-------------------------
Name: Ken A. Brown
Title:
ABS RICHMOND PARTNERS, L.P.
By: ABS COMMUNICATIONS
INCORPORATED,
its General Partner
By: /s/ Ken A. Brown
-------------------------
Name: Ken A. Brown
Title:
ABS RICHMOND PARTNERS II, L.P.
By: ABS COMMUNICATIONS
INCORPORATED,
its General Partner
By: /s/ Ken A. Brown
-------------------------
Name: Ken A. Brown
Title:
J. Edwin Conrad is executing
this Agreement solely to
evidence his rights and
obligations to enter into the
Conrad Employment Agreement
and the Conrad Non-Competition
Agreement as of the closing
under the Purchase and Sale
Agreement:
/s/ J. EDWIN CONRAD
-------------------------------
J. EDWIN CONRAD
<PAGE>
ABS RICHMOND TOWERS, L.P.
By: ABS Communications, Inc., its
-------------------------
General Partner
By: /s/ Ken A. Brown
-------------------------
Name: Ken A. Brown
Title:
<PAGE>
CONVERTIBLE NOTE AGREEMENT
DATED AS OF DECEMBER 17, 1996
AMONG
ABS COMMUNICATIONS, L.L.C.,
AS BORROWER,
AND
SFX BROADCASTING, INC.,
AS LENDER
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS ...................... 1
1.1 Certain Defined Terms...................... 1
1.2 Accounting Terms: Utilization of GAAP
for Purposes of Calculations Under
Agreement.................................. 19
SECTION 2. THE LOAN ......................... 20
2.1 Note; Procedure for Borrowings;
Prepayment................................. 20
2.2 Interest................................... 21
2.3 Payments of Principal and Interest......... 21
2.4 Use of Proceeds............................ 21
2.5 Taxes...................................... 22
SECTION 3. CONDITIONS TO THE LOANS........... 23
3.1 Conditions to Initial Loan................. 23
3.2 Conditions to Each Other Loan.............. 25
SECTION 4. BORROWER'S REPRESENTATIONS AND
WARRANTIES........................ 26
4.1 Existence; Compliance with Law............. 26
4.2 Executive Offices; Collateral Locations;
Corporate or Other Names................... 26
4.3 Power; Authorization; Enforceable
Obligations................................ 26
4.4 Financial Statements and Projections....... 27
4.5 Conduct of Business; Material Contracts.... 27
4.6 Subsidiaries............................... 28
4.7 FCC and Station Matters.................... 28
4.8 Real Property.............................. 29
4.9 Personal Property Liens.................... 29
4.10 No Material Adverse Change: No
Restricted Payments........................ 29
4.11 Title to Properties: Liens................ 29
4.12 Litigation................................. 29
4.13 Payment of Taxes........................... 30
4.14 Restrictions; No Default................... 30
4.15 Governmental Regulation.................... 30
4.16 Securities Activities...................... 31
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<PAGE>
age
4.17 Employee Benefit Plans..................... 31
4.18 Environmental Matters...................... 31
4.19 Ventures and Outstanding Stock............. 31
4.20 Labor Matters.............................. 32
4.21 Insurance.................................. 32
4.22 Disclosure................................. 32
SECTION 5. BORROWER'S AFFIRMATIVE COVENANTS.. 33
5.1 Financial Statements and Other Reports..... 33
5.2 Corporate Existence; Compliance with Laws.. 34
5.3 Payment of Taxes and Claims................ 34
5.4 Maintenance of Properties; Insurance....... 35
5.5 Tax Treatment.............................. 35
5.6 Books and Records.......................... 35
5.7 Litigation................................. 35
5.8 Environmental Laws......................... 36
5.9 Indemnity.................................. 36
5.10 Access..................................... 37
5.11 FCC Conversion Consent Filing.............. 37
SECTION 6. BORROWER'S NEGATIVE COVENANTS..... 38
6.1 Indebtedness............................... 38
6.2 Liens...................................... 38
6.3 Investments; Joint Ventures................ 39
6.4 Contingent Obligations..................... 39
6.5 Restricted Payments........................ 39
6.6 Restriction on Fundamental Changes:
Asset Sales and Acquisitions............... 39
6.7 Restriction on Leases...................... 40
6.8 Transactions with Affiliates............... 40
6.9 Conduct of Business........................ 40
6.10 Amendments or Waivers of Related
Documents.................................. 40
6.11 ERISA...................................... 41
6.12 Hazardous Materials........................ 41
6.13 Sale-Leasebacks............................ 41
6.14 Fiscal Year................................ 41
SECTION 7. EVENTS OF DEFAULT................. 42
7.1 Events of Default.......................... 42
7.2 Remedies................................... 43
ii
<PAGE>
Page
SECTION 8. CONVERSION OF NOTE................ 44
8.1 Conversion................................. 44
8.2 Conversion Date Procedures................. 45
8.3 Taxes on Conversion........................ 45
8.4 Termination of Loan Documents.............. 45
8.5 Termination of Conversion Right............ 45
SECTION 9. MISCELLANEOUS..................... 45
9.1 Expenses................................... 46
9.2 Amendments and Waivers..................... 46
9.3 Independence of Covenants.................. 46
9.4 Notices.................................... 46
9.5 Survival of Representations, Warranties
and Agreements............................. 47
9.6 Failure or Indulgence Not Waiver;
Remedies Cumulative........................ 47
9.7 Marshalling; Payments Set Aside............ 47
9.8 Severability............................... 48
9.9 Headings................................... 48
9.10 Applicable Law............................. 48
9.11 Successors and Assigns..................... 48
9.12 Consent to Jurisdiction and Service of
Process .................................. 48
9.13 Waiver of Jury Trial....................... 49
9.14 Counterparts; Effectiveness................ 49
iii
<PAGE>
Schedules
Schedule 1 - Benchmark Acquisition Documents
Schedule 2 - Rich Acquisition Documents
Schedule 4.2 - Collateral Locations
Schedule 4.4 - Financial Statements
Schedule 4.5 - Material Contracts
Schedule 4.7(a) - Radio Broadcast Stations
Schedule 4.7(b) - LMAs
Schedule 4.8 - Real Property
Schedule 4.9 - UCC-1 Filing Jurisdictions
Schedule 4.10 - Restricted Payments
Schedule 4.12 - Litigation
Schedule 4.18 - Environmental Matters
Schedule 4.19 - Options, Warrants; Members
Schedule 4.20 - Labor Matters
Schedule 4.21 - Insurance
Schedule 6.1 - Existing Indebtedness
Schedule 6.2 - Existing Liens
Schedule 6.4 - Existing Contingent Obligations
Schedule 6.8 - Leases
Exhibits
Exhibit A - Form of Compliance Certificate
Exhibit B - Form of Convertible Note
EXHIBIT C - Form of Notice of Borrowing
Exhibit D - Form of Security Agreement
Exhibit E - Form of Loan Certificate
Exhibit F - Form of Amended and Restated Operating
Agreement
EXHIBIT G - Form of Collateral Assignment of Contracts
iv
<PAGE>
CONVERTIBLE NOTE AGREEMENT
THIS CONVERTIBLE NOTE AGREEMENT is dated as of December 17, 1996
and entered into by and among ABS COMMUNICATIONS, L.L.C., a Virginia limited
liability company ("BORROWER") and SFX BROADCASTING, INC., a Delaware
corporation, as Lender ("LENDER").
R E C I T A L S
WHEREAS, Borrower has contractually agreed to acquire from
Benchmark radio stations WLEE(FM) and WBZU(FM) licensed to Williamsburg,
Virginia and Richmond, Virginia, respectively (collectively, the "BENCHMARK
STATIONS");
WHEREAS, Borrower desires to obtain loans from Lender under this
Agreement in order to (i) pay off and terminate the Signet Loan Agreement, (ii)
finance the working capital needs of Borrower to perform under the Benchmark
TBA, (iii) finance the acquisition of the Benchmark Stations, (iv) finance the
working capital needs of Borrower to operate the Benchmark Stations after the
Benchmark Acquisition, and (v) to finance the working capital needs of Borrower
under the Rich LMA, if applicable;
WHEREAS, Borrower desires to secure its Obligations by granting
to Lender, to the extent permitted by law, first priority security interests
(subject to Permitted Liens) in all of its assets, other than the Excluded
Assets, pursuant to the Security Agreement and the other Security Documents;
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, Borrower and Lender
agree as follows:
SECTION 1.
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. The following terms used in
this Agreement shall have the following meanings:
"ABS" means ABS Communications Incorporated, a Virginia
corporation.
"ACCELERATION EVENT" has the meaning set forth in
Section 2.2 hereof.
<PAGE>
"ACQUISITION" means the Benchmark Acquisition and the
Rich Acquisition.
"ACQUISITION DOCUMENTS" means collectively, the
Benchmark Acquisition Documents and the Rich Acquisition
Documents.
"AFFILIATE", as applied to any Person, means any other Person
directly or indirectly controlling, controlled by, or under common control
with, that Person. For the purposes of this definition, "control" (including,
with correlative meanings, the terms "controlling", "controlled by" and "under
common control with"), as applied to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of that Person, whether through the ownership of voting securities
or by contract or otherwise.
"AGREEMENT" means this Convertible Note Agreement, including all
exhibits and schedules hereto, as the same may be amended, restated or
otherwise modified from time to time.
"BANKRUPTCY CODE" means Title 11 of the United States Code
entitled "Bankruptcy," as now and hereafter in effect, or any successor
statute.
"BENCHMARK" means, collectively, Benchmark Radio
Acquisition Fund III Limited Partnership, WVGO License
Limited Partnership, and WDCK License Limited Partnership,
each a Maryland limited partnership.
"BENCHMARK ACQUISITION" means the acquisition by Borrower of the
Benchmark Stations pursuant to the Benchmark Acquisition Documents and upon
terms and conditions set forth therein.
"BENCHMARK ACQUISITION DOCUMENTS" means all of the purchase
agreements and related documents pursuant to which the Benchmark Acquisition is
implemented or evidenced as more particularly described on Schedule 1 annexed
hereto.
"BENCHMARK ACQUISITION FCC CONSENT" means the initial written
action or actions by the FCC approving the assignment of the FCC Licenses for
each Benchmark Station to be acquired as part of the Benchmark Acquisition to
Borrower in the manner contemplated by the Benchmark Acquisition Documents, in
form and substance satisfactory to Lender.
2
<PAGE>
"BENCHMARK LOAN" means a Loan in the amount of $14,500,000 made
by Lender to Borrower under this Agreement in order to consummate the Benchmark
Acquisition.
"BENCHMARK STATIONS" has the meaning set forth in the
recitals to this Agreement.
"BENCHMARK TBA" means that certain Time Brokerage Agreement,
dated May 31, 1996 between Benchmark and Buyer, as assigned by Buyer to
Borrower pursuant to that certain Assignment and Assumption Agreement, dated as
of June 1, 1996 by and between Buyer and Borrower.
"BENCHMARK TRANSACTIONS" means all of the transactions
contemplated by the Benchmark Acquisition Documents.
"BORROWER" has the meaning assigned to that term in the
introduction to this Agreement.
"BROWN" means Kenneth A. Brown, an individual resident
of the Commonwealth of Virginia.
"BUSINESS DAY" means any day excluding Saturday, Sunday and any
day which is a legal holiday under the laws of the State of New York or is a
day on which banking institutions located in such state are authorized or
required by law or other governmental action to close.
"BUYER" means ABS Communications Incorporated, a
Virginia corporation.
"CAPITAL LEASE", as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"CASH EQUIVALENTS" means, as at any date of determination, (i)
marketable securities (a) issued or directly and unconditionally guaranteed as
to interest and principal by the United States Government or (b) issued by any
agency of the United States the obligations of which are backed by the full
faith and credit of the United States, in each case maturing within one year
after such date, (ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or any
public instrumentality thereof, in each case maturing within one year after
such date and having, at
3
<PAGE>
the time of the acquisition thereof, the highest rating obtainable from either
Standard & Poor's or Moody's, (iii) commercial paper maturing no more than one
year from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least A-1 from Standard & Poor's or at
least P-1 from Moody's, (iv) certificates of deposit or bankers' acceptances
maturing within one year after such date and issued by any commercial bank
organized under the laws of the United States of America or any state thereof
or the District of Columbia that (a) is at least "adequately capitalized" (as
defined in the regulations of its primary Federal banking regulator) and (b)
has Tier 1 capital (as defined in such regulations) of not less than
$100,000,000; and (v) shares of any money market mutual fund that (a) has at
least 95 % of its assets invested continuously in the types of investments
referred to in clauses (i) through (iv) above, (b) has net assets of not less
than $500,000,000, and (c) has the highest rating obtainable from either
Standard & Poor's or Moody's.
"CHANGE OF CONTROL" means (i)(a) the failure of Brown and ABS to
own and control collectively 100% of the Membership Interests of Borrower, or
(b) either of Brown or ABS shall assign, delegate, encumber or otherwise
transfer or agree to assign, delegate, encumber or otherwise transfer in any
manner or to any extent, any of its rights or obligations as a Member (in each
case, other than as permitted under Section 8.1), or (ii) the failure of Brown
to be the Manager of Borrower other than because of Brown's death or
incapacity. For the purpose of this definition, "control" of a Person shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of its management or policies, whether through the ownership of
voting securities, by contract or otherwise.
"CLAIM" has the meaning set forth in Section 5.9
hereof.
"COLLATERAL" means, collectively, all real and personal property
securing the Obligations pursuant to the Security Documents in accordance with
the terms thereof.
"COLLATERAL ASSIGNMENT OF CONTRACTS" means the Collateral
Assignment of Contracts substantially in the form of Exhibit G annexed hereto.
"COMMITMENT PERIOD" means the period from and including
the date hereof to, but not including the Maturity Date or
4
<PAGE>
such earlier date in which Lender's obligation to make any Loans under this
Agreement shall terminate as provided herein.
"COMMUNICATIONS ACT" means the Communications Act of 1934, as
amended, including as amended by the Telecommunications Act of 1996, and the
rules, regulations and policies promulgated thereunder, as from time to time in
effect.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the
form of Exhibit A annexed hereto delivered to Lender by Borrower pursuant to
Section 3 hereof.
"CONTINGENT OBLIGATION", as applied to any Person, means any
direct or indirect liability, contingent or otherwise, of that Person (i) with
respect to any Indebtedness, lease, dividend or other obligation of another if
the primary purpose or intent thereof by the Person incurring the Contingent
Obligation is to provide assurance to the obligee of such obligation of another
that such obligation of another will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligation will be protected (in whole or in part) against loss in respect
thereof, (ii) with respect to any letter of credit issued for the account of
that Person or as to which that Person is otherwise liable for reimbursement of
drawings, or (iii) under any interest rate swap, hedge, cap, collar or similar
agreement. Contingent Obligations shall include, without limitation, (a) the
direct or indirect guaranty, endorsement (otherwise than for collection or
deposit in the ordinary course of business), co-making, discounting with
recourse or sale with recourse by such Person of the obligation of another, (b)
the obligation to make take-or-pay or similar payments if required regardless
of non-performance by any other party or parties to an agreement, and (c) any
liability of such Person for the obligation of another through any agreement
(contingent or otherwise) (X) to purchase, repurchase or otherwise acquire such
obligation or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise) or (Y) to maintain the solvency
or any balance sheet item, level of income or financial condition of another
if, in the case of any agreement described under subclauses (X) or (Y) of this
sentence, the primary purpose or intent thereof is as
5
<PAGE>
described in the preceding sentence. The amount of any Contingent Obligation
shall be equal to the amount of the obligation so guaranteed or otherwise
supported or, if less, the amount to which such Contingent Obligation is
specifically limited.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any
provision of any Stock issued by that Person or of any indenture, mortgage,
deed of trust, contract, undertaking, agreement or other instrument to which
that Person is a party or by which it or any of its properties is bound or to
which it or any of its properties is subject.
"CONVERSION CONSENT" means any Final Order approving Lender's
conversion of the Loan into Membership Interests pursuant to Section 8.1, in
form and substance satisfactory to Lender.
"CONVERSION DATE" has the meaning set forth in Section
8.1 hereof.
"CONVERSION EVENT" means the date on which all of the following
shall have occurred or shall be occurring contemporaneously: (i) the Rich
Acquisition shall have been completed, and (ii) all transactions contemplated
pursuant to that certain SFX Contribution Agreement dated of even date herewith
between Borrower, Lender and the other parties thereto (the "SFX CONTRIBUTION
AGREEMENT") shall have been completed.
"DEED OF TRUST" means a Deed of Trust substantially in
the form of Exhibit G annexed hereto
"DEFAULT" means a condition or event that, after notice or lapse
of time or both, would constitute an Event of Default.
"DOLLARS" and the sign "$" mean the lawful money of the
United States of America.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute.
"ERISA AFFILIATE", as applied to any Person, means (i) any
corporation which is, or was at any time, a member of a controlled group of
corporations within the meaning of Section 414(b) of the Internal Revenue Code
of which that
6
<PAGE>
Person is, or was at any time, a member, (ii) any trade or business (whether or
not incorporated) which is, or was at any time, a member of a group of trades
or businesses under common control within the meaning of Section 414(c) of the
Internal Revenue Code of which that Person is, or was at any time, a member,
and (iii) any member of an affiliated service group within the meaning of
Section 414(m) or (o) of the Internal Revenue Code of which that Person, any
corporation described in clause (i) above or any trade or business described in
clause (ii) above is, or was at any time, a member.
"ERISA EVENT" means (i) a "reportable event" within the meaning
of Section 4043 of ERISA and the regulations issued thereunder with respect to
any Pension Plan (excluding those for which the provision for 30-day notice to
the PBGC has been waived by regulation), (ii) the failure to meet the minimum
funding standard of Section 412 of the Internal Revenue Code with respect to
any Pension Plan (whether or not waived in accordance with Section 412(d) of
the Internal Revenue Code) or the failure to make by its due date a required
installment under Section 412(m) of the Internal Revenue Code with respect to
any Pension Plan or the failure to make any required contribution to a
Multiemployer Plan, (iii) the provision by the administrator of any Pension
Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate
such plan in a distress termination described in Section 4041(c) of ERISA, (iv)
the withdrawal by Borrower or any of its ERISA Affiliates from any Pension Plan
with two or more contributing sponsors or the termination of any such Pension
Plan resulting in liability pursuant to Sections 4063 or 4064 of ERISA, (v) the
institution by the PBGC of proceedings to terminate any Pension Plan, or the
occurrence of any event or condition which might constitute grounds under ERISA
for the termination of, or the appointment of a trustee to administer, any
Pension Plan, (vi) the imposition of liability on Borrower or any of its ERISA
Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the
application of Section 4212(c) of ERISA, (vii) the withdrawal by Borrower or
any of its ERISA Affiliates in a complete or partial withdrawal (within the
meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if
there is any potential liability therefor, or the receipt by Borrower or any of
its ERISA Affiliates of notice from any Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that
it intends to terminate or has terminated under Section
7
<PAGE>
4041A or 4042 of ERISA, (viii) the occurrence of an act or omission which could
give rise to the imposition on Borrower or any of its ERISA Affiliates of
fines, penalties, taxes or related charges under Chapter 43 of the Internal
Revenue Code or under Section 409 or 502(c), (i) or (1) or 4071 of ERISA in
respect of any Employee Benefit Plan, (ix) the assertion of a material claim
(other than routine claims for benefits) against any Employee Benefit Plan
other than a Multiemployer Plan or the assets thereof, or against Borrower or
any of its ERISA Affiliates in connection with any such Employee Benefit Plan,
(x) receipt from the Internal Revenue Service of notice of the failure of any
Pension Plan (or any other Employee Benefit Plan intended to be qualified under
Section 401(a) of the Internal Revenue Code) to qualify under Section 401(a) of
the Internal Revenue Code, or the failure of any trust forming part of any
Pension Plan to qualify for exemption from taxation under Section 501(a) of the
Internal Revenue Code, or (xi) the imposition of a Lien pursuant to Section
401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with
respect to any Pension Plan.
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as
defined in Section 3(3) of ERISA which is, or was at any time, maintained or
contributed to by Borrower or any of its ERISA Affiliates.
"ENVIRONMENTAL LAWS" means all statutes, ordinances, orders,
rules, regulations, plans, policies or decrees and the like relating to (i)
environmental matters, including, without limitation, those relating to fines,
injunctions, penalties, damages, contribution, cost recovery compensation,
losses or injuries resulting from the Release or threatened Release of
Hazardous Materials, (ii) the generation, use, storage, transportation or
disposal of Hazardous Materials, or (iii) occupational safety and health,
industrial hygiene, land use or the protection of human, plant or animal health
or welfare, in any manner applicable to Borrower, or any of its properties,
including, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. ss.9601 et seq.), the Hazardous
Materials Transportation Act (49 U.S.C. ss.1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. ss.6901 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. ss.1251 et seq.), the Clean Air Act (42 U.S.C.
ss.7401 et seq.), the Toxic Substances Control Act (15 U.S.C. ss.2601 et seq.),
the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. ss.136 et
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seq.), the Occupational Safety and Health Act (29 U.S.C. ss.651 et seq.) and
the Emergency Planning and Community Right-to-Know Act (42 U.S.C. ss.11001 et
seq.), each as amended or supplemented, and any analogous future or present
local, state and federal statutes and regulations promulgated pursuant thereto,
each as in effect as of the date of determination.
"ENVIRONMENTAL LIABILITIES AND COSTS" shall mean all liabilities,
obligations, responsibilities, remedial actions, removal costs, losses,
damages, punitive damages, consequential damages, treble damages, costs and
expenses (including all reasonable fees, disbursements and expenses of counsel,
experts and consultants and costs of investigation and feasibility studies),
fines, penalties, sanctions and interest incurred as a result of any claim,
suit, action or demand by any person or entity, whether based in contract,
tort, implied or express warranty, strict liability, criminal or civil statute
or common law (including any thereof arising under any Environmental Law,
permit, order or agreement with any Governmental Authority) and which relate to
any health or safety condition regulated under any Environmental Law or in
connection with any other environmental matter or Release, threatened Release,
or the presence of a Hazardous Material.
"ESCROW AGREEMENT" means that certain Escrow Agreement of even
date herewith entered into by and among Lender, Borrower and the other parties
signatory thereto.
"EVENT OF DEFAULT" means any of the events set forth in
Section 7.1.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute.
"EXCLUDED ASSETS" means the Limited Partnership Interests and the
distributions or proceeds related to such Limited Partnership Interests.
"EXCLUDED LOAN AMOUNTS" means any Loan amount made by Lender to
Borrower for working capital purposes under this Agreement for any given month
in excess of $100,000. For the avoidance of doubt, Excluded Loan Amounts shall
not include the Benchmark Loan and such other Loan amount used to pay off all
amounts outstanding under the Signet Loan Agreement.
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"FACILITIES" means any and all real property (including, without
limitation, all buildings, fixtures or other improvements located thereon) now,
hereafter or heretofore owned, leased, operated or used by Borrower or any of
its predecessors or Affiliates but specifically not including the transmission
tower currently used by radio station WKHK(FM).
"FCC" means the Federal Communications Commission and any
successor governmental agency performing functions similar to those performed
by the Federal Communications Commission on the date hereof.
"FCC LICENSE" means any license, permit or other authorization
issued by the FCC relating to the Stations.
"FINAL ORDER" means, as of any date of determination with respect
to any written action or consent by the FCC, such written action or consent
which shall have been obtained and (A)(i) which shall not have been reversed,
stayed, enjoined, annulled or suspended and (ii) for which the time for filing
a request for administrative or judicial review or for instituting
administrative review thereof sua sponte, shall have expired without any such
filing having been made or action for such review sua sponte having been taken,
or, in the event of such filing or review sua sponte, such filing or review sua
sponte shall have disposed of favorably to confirmation of such written action
or the grant of such consent and the time for seeking further relief or review
with respect thereto shall have expired without any request or action for such
further relief or review having been filed or taken or (B) Lender shall have
notified Borrower that it has determined in its sole discretion that there is
no reasonable basis for concluding that such written action or consent shall
not become a final order (as provided in clause (A) hereof) in due course.
"FINANCIAL STATEMENTS" means, for any period, the balance sheet
of Borrower as at the end of such period and the related statement of income
and the related statement of equity and cash flows of Borrower for such period
and for the period from the beginning of the then current Fiscal Year to the
end of such period, all in reasonable detail and certified by the chief
financial officer of Borrower that they fairly present the financial condition
of Borrower as at the dates indicated and the results of operations and cash
flows for the periods indicated, subject to changes resulting from audit and
normal year-end adjustments.
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"FISCAL YEAR" means the fiscal year of Borrower ending on
December 31 of each calendar year.
"FTC" means the Federal Trade Commission and the Antitrust
Department of the Department of Justice and any successor governmental agency
performing functions similar to those performed by the Federal Trade Commission
or the Antitrust Department of the Department of Justice on the date hereof.
"GAAP" means generally accepted accounting principles set forth
in opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, in each case as the same are applicable to the
circumstances as of the date of determination.
"GOVERNMENTAL AUTHORITY" means any federal, state or local
governmental authority, agency or court.
"GOVERNMENTAL AUTHORIZATION" means any permit, license,
authorization, plan, directive, consent, order or consent decree of or from any
federal, state or local governmental authority, agency or court.
"HAZARDOUS MATERIALS" means (i) any chemical, material or
substance at any time defined as or included in the definition of "hazardous
substances", "hazardous wastes", "hazardous materials", "extremely hazardous
waste", "restricted hazardous waste", "infectious waste", "toxic substances" or
any other formulations intended to define, list or classify substances by
reason of deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, "TCLP toxicity" or "EP
toxicity" or words of similar import under any applicable Environmental Laws or
publications promulgated pursuant thereto, (ii) any oil, petroleum, petroleum
fraction or petroleum derived substance, (iii) any drilling fluids, produced
waters and other wastes associated with the exploration, development or
production of crude oil, natural gas or geothermal resources, (iv) any
flammable substances or explosives, (v) any radioactive materials, (vi)
asbestos in any form, (vii) urea formaldehyde foam insulation, (viii)
electrical equipment which contains any oil or dielectric fluid containing
levels of polychlorinated
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biphenyls in excess of fifty parts per million, (ix) pesticides and (x) any
other chemical, material or substance, exposure to which is prohibited, limited
or regulated by any governmental authority or which may or could pose a hazard
to the health and safety of the owners, occupants or any Persons in the
vicinity of the Facilities.
"INDEBTEDNESS", as applied to any Person, means (i) all
indebtedness for borrowed money, (ii) that portion of obligations with respect
to Capital Leases that is properly classified as a liability on a balance sheet
in conformity with GAAP, (iii) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed
money, (iv) any obligation owed for all or any part of the deferred purchase
price of property or services (excluding any such obligations incurred under
ERISA), which purchase price is (a) due more than six months from the date of
incurrence of the obligation in respect thereof or (b) evidenced by a note or
similar written instrument, (v) all indebtedness secured by any Lien on any
property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person and (vi) obligations under non-compete
agreements and all other obligations that would be properly classified as a
liability on a balance sheet conforming with GAAP (other than current trade
payables and current accrued expenses).
"INDEMNIFIED PERSON" has the meaning set forth in
Section 5.9 hereof.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986,
as amended to the date hereof and from time to time hereafter.
"INVESTMENT" means (i) any direct or indirect purchase or other
acquisition by Borrower of, or of a beneficial interest in, any Stock of any
other Person (other than a Person that, prior to such purchase or acquisition,
was a wholly-owned Subsidiary of Borrower), or (ii) any direct or indirect
loan, advance (other than advances to employees for moving, entertainment and
travel expenses, drawing accounts and similar expenditures in the ordinary
course of business) or capital contribution by Borrower to any other Person
other than a wholly-owned Subsidiary of Borrower, including all indebtedness
and accounts receivable from that other Person that are not current assets or
did not arise from
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sales to that other Person in the ordinary course of business. The amount of
any Investment shall be the original cost of such Investment plus the cost of
all additions thereto, without any adjustments for increases or decreases in
value, or write-ups, write-downs or write-offs with respect to such Investment.
"JOINT VENTURE" means a joint venture, partnership or other
similar arrangement, whether in corporate, partnership or other legal form;
provided that in no event shall any corporate Subsidiary of any Person be
considered to be a Joint Venture to which such Person is a party.
"LIEN" means any lien, mortgage, pledge, assignment, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest) and any option, trust or other
preferential arrangement having the practical effect of any of the foregoing.
"LIMITED PARTNERSHIP INTERESTS" means the limited partnership
interests that Borrower owns in the Rich Partnerships.
"LMA" means any joint sales agreement, advertising sales
agreement, time brokerage agreement, local marketing agreement or similar
arrangement to which Borrower is a party (whether originally or pursuant to an
assignment).
"LOAN DOCUMENTS" means (i) this Agreement, (ii) the Note, and
(iii) the Security Documents.
"LOANS" means the revolving credit loans which may be made by
Lender to Borrower from time to time under the terms of this Agreement.
"MANAGER" means Brown, or any other person designated by the
Members from time to time to manage Borrower.
"MANAGER'S CERTIFICATE" means a certificate executed by the
Manager or, if the Members have not designated a Manager, a certificate
executed by any Member, in form and substance satisfactory to Lender.
"MARGIN STOCK" has the meaning assigned to that term in
Regulation U of the Board of Governors of the Federal Reserve System as in
effect from time to time.
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"MASTER AGREEMENT" means that certain Master Richmond Station
Group Agreement of even date herewith entered into by and among Lender,
Borrower and each of the other parties signatory thereto.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect
upon the business, operations, properties, assets, condition (financial or
otherwise) or prospects of Borrower or (ii) the impairment of any material
portion of the Collateral or the ability of Borrower to perform in any material
respect, or of Lender to enforce, the Obligations; provided, however, so long
as Borrower has not breached this Agreement through waiving any material rights
that it has under the Benchmark Acquisition Documents or Borrower has not taken
any actions or omitted to any actions under any of the Benchmark Acquisition
Documents which are willfully or grossly negligent, Material Adverse Effect
shall not include or be caused by the poor performance (financial or otherwise)
of the Benchmark Stations.
"MATERIAL CONTRACT" has meaning assigned to it in
Section 4.5.
"MATURITY DATE" means the earlier of (i) May 29, 1998, or (ii)
the date on which the Loan and other Obligations are declared immediately due
and payable in accordance with Section 7.2.
"MEMBER" has the meaning assigned to it in the
Operating Agreement.
"MEMBERSHIP INTEREST" has the meaning assigned to it in
the Operating Agreement.
"MOODY'S" means Moody's Investors Service, Inc., or any Person
succeeding thereto by merger, consolidation or acquisition of all or
substantially all of its assets, including substantially all of its business of
rating securities.
"MULTIEMPLOYER PLAN" means a "multiemployer plan", as defined in
Section 3(37) of ERISA, to which Borrower or any of its ERISA Affiliates is
contributing, or ever has contributed, or to which Borrower or any of its ERISA
Affiliates has, or ever has had, an obligation to contribute.
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"NOTE" means that certain Convertible Grid Note of even date
herewith executed by Borrower, substantially in the form of Exhibit B attached
hereto, and all renewals, amendments, restatements and replacements thereof.
"NOTICE OF BORROWING" means a notice substantially in the form of
Exhibit C annexed hereto delivered to Lender by Borrower pursuant to Section
2.1 hereof.
"OBLIGATIONS" means all obligations of every nature of Borrower
from time to time owed to Lender under the Loan Documents, whether for
principal, interest, expenses, indemnification or otherwise.
"OPERATING AGREEMENT" means the Operating Agreement of ABS
Communications, L.L.C., dated as of April 29, 1996.
"OPERATING LEASE" means, as applied to any Person, any lease
(including, without limitation, leases that may be terminated by the lessee at
any time) of any property (whether real or personal) that is not a Capital
Lease other than (i) any such lease under which that Person is the lessor or
(ii) any LMA.
"OTHER TAXES" has the meaning assigned to it in Section
2.5.
"PBGC" means the Pension Benefit Guaranty Corporation
(or any successor thereto).
"PENSION PLAN" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Section 412 of the Internal Revenue
Code or Section 302 of ERISA.
"PERMITTED ENCUMBRANCES" means the following types of
Liens:
(i) Liens for taxes, assessments or governmental
charges or claims the payment of which is not, at the
time, required by Section 5.3;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics and materialmen and other Liens imposed
by law incurred in the ordinary course of business for sums not
yet delinquent or being contested in good faith, if such reserve
or other appropriate provision, if any, as shall be required by
GAAP shall have been made therefor;
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(iii) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation,
unemployment insurance and other types of social security, or to
secure the performance of tenders, statutory obligations, surety
and appeal bonds, bids, leases, government contracts, trade
contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of
borrowed money);
(iv) any attachment or judgment Lien not
constituting an Event of Default under Section 7.1;
(vi) easements, rights-of-way, restrictions, minor
defects, encroachments or irregularities in title and other
similar charges or encumbrances not interfering in any material
respect with the ordinary conduct of the business of Borrower;
(viii) Liens arising from filing UCC financing statements
relating solely to leases permitted by this Agreement;
(ix) Liens of a collecting bank under Section
4-208 of the Uniform Commercial Code as in effect in
the relevant jurisdiction; and
(x) Liens related to the Excluded Assets.
"PERMITTED LIENS" means Liens permitted pursuant to
Section 6.2.
"PERSON" means and includes natural persons, corporations,
limited partnerships, general partnerships, limited liability companies, joint
stock companies, Joint Ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions
thereof.
"REGULATION D" means Regulation D of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"RELATED DOCUMENTS" means the (i) Acquisition Documents
and (ii) the LMAs.
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"RELEASE" means any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping,
leaching or migration of Hazardous Materials into the indoor or outdoor
environment (including, without limitation, the abandonment or disposal of any
barrels, containers or other closed receptacles containing any Hazardous
Materials), or into or out of any Facility, including the movement of any
Hazardous Material through the air, soil, surface water, groundwater or
property.
"RESTRICTED PAYMENT" means, with respect to any Person, (a) the
declaration or payment of any dividend or distribution or the occurrence of any
liability to make any other payment or distribution of cash or other property
or assets in respect of such Person's Stock, (b) any payment on account of the
purchase, redemption, defeasance or other retirement of such Person's Stock or
any other payment or distribution made in respect thereof, either directly or
indirectly, or (c) any payment, loan, contribution, or other transfer of funds
or other property to any stockholder, partner or member of such Person or any
Affiliate of such stockholder, partner or member.
"RETIREE WELFARE PLAN" means any Welfare Plan providing for
continuing coverage or benefits for any participant or any beneficiary of a
participant after such participant's termination of employment, other than
continuation coverage provided pursuant to Section 4980B of the Internal
Revenue Code and at the sole expense of the participant or the beneficiary of
the participant.
"RICH ACQUISITION" means the acquisition by Borrower of the Rich
Partnerships and the Rich Stations pursuant to the Rich Acquisition Documents
and upon terms and conditions set forth herein.
"RICH ACQUISITION DOCUMENTS" means all of the purchase agreements
and related documents pursuant to which the Rich Acquisition is implemented or
evidenced as more particularly described on Schedule 2 annexed hereto.
"RICH ACQUISITION FCC CONSENT" means the initial written action
or actions by the FCC approving the assignment of the FCC Licenses for each
Rich Station to be acquired as part of the Rich Acquisition to Borrower in the
manner contemplated by the Rich Acquisition Documents, in form and substance
satisfactory to Lender.
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"RICH LMA" means that certain Local Marketing Agreement that may
be entered into between the Rich Partnerships and Borrower with respect to the
Rich Stations.
"RICH PARTNERSHIPS" means ABS Richmond Partners, L.P., a Virginia
limited partnership and ABS Richmond Partners II, L.P., a Virginia limited
partnership.
"RICH STATIONS" means, collectively, radio station WKHK(FM),
licensed to Colonial Heights, Virginia and radio station WVGO(FM), licensed to
Crewe, Virginia.
"SECURITY AGREEMENT" means the Security Agreement to be executed
and delivered by Borrower on the date hereof, substantially in the form of
Exhibit D annexed hereto, as the same may be amended, supplemented or otherwise
modified from time to time.
"SECURITY DOCUMENTS" means the Security Agreement, the Deed of
Trust, the Collateral Assignment of Contracts, mortgages, security agreements,
pledge agreements, assignments, licenses, landlord consents and releases and
all other instruments or documents (including, without limitation, UCC-1
financing statements, fixture filings or similar documents required in order to
perfect the Liens created by the Security Documents) delivered by Borrower or
any other Person pursuant to this Agreement and the other Loan Documents to
grant to Lender Liens to secure the Obligations.
"SIGNET LOAN AGREEMENT" means that certain Promissory Note, dated
as of May 28, 1996 by and among Jacob Brown, Kenneth A. Brown and Signet Bank,
as assigned to the LLC pursuant to that certain Assignment dated April 29,
1996.
"STANDARD & POOR'S" means Standard & Poor's Ratings Group, a
division of McGraw-Hill, Inc., or any Person succeeding thereto by merger,
consolidation or acquisition of all or substantially all of its assets,
including substantially all of its business of rating securities.
"STATIONS" means the Rich Stations and the Benchmark
Stations.
"STOCK" means all membership interests, shares, options,
warrants, general or limited partnership interests, participation or other
equivalents (regardless of how designated) of or in a corporation, partnership,
limited
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liability company or equivalent entity whether voting or nonvoting, including
common stock, preferred stock, or any other "equity security" (as such term is
defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the
Securities and Exchange Commission under the Exchange Act).
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which more
than 50% of the total voting power of shares of stock or other ownership
interests entitled (without regard to the occurrence of any contingency) to
vote in the election of the Person or Persons (whether directors, managers,
trustees or other Persons performing similar functions) having the power to
direct or cause the direction of the management and policies thereof is at the
time owned or controlled, directly or indirectly, by that Person or one or more
of the other Subsidiaries of that Person or a combination thereof.
"TAXES" means taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding taxes imposed
on or measured by the net income of Lender by the United States of America or
the jurisdiction under the laws of which Lender is organized, or in each case,
any political subdivision thereof; provided, however, neither Taxes nor Other
Taxes shall include any item that is based on income, profits or gains or is in
lieu of such tax.
"TERMINAL DATE" means December 31, 1997 or such other date the
parties may mutually agree.
"WELFARE PLAN" means any welfare plan, as defined in Section 3(1)
of ERISA, which is maintained or contributed to by Borrower or any ERISA
Affiliate.
1.2 ACCOUNTING TERMS: UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS UNDER
AGREEMENT. Except as otherwise expressly provided in this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP. Financial statements required to be delivered
by Borrower to Lender shall be prepared in accordance with GAAP as in effect at
the time of such preparation. Calculations in connection with the definitions,
covenants and other provisions of this Agreement shall utilize accounting
principles and policies
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in conformity with those used to prepare the financial statements referred to
in Section 4.4.
SECTION 2.
THE LOAN
2.1 NOTE; PROCEDURE FOR BORROWINGS; PREPAYMENT.
a. Subject to the terms and conditions hereof, Lender hereby
agrees to make Loan(s) to Borrower from time to time during the Commitment
Period in an aggregate principal amount at any one time not to exceed the
amounts necessary to fund Borrower's obligations hereunder and under the Master
Agreement.
b. Borrower may borrow under the Note during the Commitment
Period on any Business Day; provided, Borrower shall give Lender irrevocable
Notice of Borrowing (which notice must be received by Lender before 1:00 P.M.,
New York City Time) signed by the Chief Financial Officer of Borrower. Lender
agrees to fund in accordance with such notice as expeditiously as practicable
but in no event later than three (3) Business Days after receipt of such
notice; provided, in any thirty (30) day period, Lender agrees to fund (only
once during such thirty (30) day period) within one (1) Business Day after
receipt of a Notice of Borrowing, so long as the requested amount does not
exceed two hundred and fifty thousand dollars ($250,000). Borrower may not
prepay the Loans before the Terminal Date without the prior consent of Lender.
c. On the date hereof, Borrower shall execute and deliver to
Lender a Notice of Borrowing and a Note substantially in the form of Exhibit B
annexed hereto. Lender agrees to make, on the date hereof, an initial loan in
the amount requested and Lender is hereby authorized to record the date and
amount of such initial Loan and each subsequent Loan made by Lender, and the
date and amount of each payment or prepayment of principal thereof on the
schedule annexed to and constituting a part of such Note, and any such
recordation shall constitute prima facie evidence of the accuracy of the
information so recorded; provided, however, that the failure to make such
notation shall not in any way limit, affect or modify the obligation of
Borrower to repay any of its Obligations, or the rights of Lender to any
amounts due under this Agreement or the Note.
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2.2 INTEREST. Borrower shall not pay any interest on the Loans until the
Terminal Date; provided, however, in the event the repayment of the Loans are
accelerated for any reason pursuant to Section 7.2 (the "ACCELERATION EVENT"),
Borrower shall pay interest on the Loans (i) from the date such applicable Loan
was made to the Terminal Date (or, if applicable, the date such Acceleration
Event shall have occurred) at a rate equal to the product of (A) 1/2 and (B)
the sum of the prime rate of Citibank, N.A. on the date of such Acceleration
Event plus 1% ("PRIME PLUS 1%") and thereafter until such time such Loan is
fully repaid at a rate per annum equal to Prime plus 1%. All computations of
interest shall be made by Lender and on the basis of a three hundred and sixty
(360) day year, in each case for the actual number of days occurring in the
period for which such interest is payable. Each determination by Lender of the
interest payable hereunder shall be conclusive and binding for all purposes,
absent manifest error or bad faith.
2.3 PAYMENTS OF PRINCIPAL AND INTEREST.
a. Borrower shall pay in full all outstanding
principal under the Loans on the Maturity Date.
b. In the event Borrower is required to pay interest on the Loans
under Section 2.2, Borrower shall pay all accrued interest within thirty (30)
days after the event causing the interest to accrue, and then monthly
thereafter until the Maturity Date.
c. All payments by Borrower of principal, interest, fees and
other Obligations hereunder and under the Note shall be made in Dollars in same
day funds, free of any restriction or condition, and delivered to Lender not
later than 12:00 Noon (New York City Time) on the date due. Funds received by
Lender after that time on such due date shall be deemed to have been paid by
Borrower on the next succeeding Business Day.
2.4 USE OF PROCEEDS. Borrower shall use the proceeds of the Loans for
Borrower's obligations as they arise under the Master Agreement, including,
without limitation, (i) to pay off all amounts outstanding under the Signet
Loan Agreement, (ii) for the payment of reasonable costs and expenses of the
Benchmark Transactions that are payable by Borrower, (iii) payment of
reasonable costs and expenses under the Benchmark TBA, (iv) to finance the
working capital requirements of Borrower to operate the Benchmark Stations
after the
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Benchmark Acquisition (other than the $3.9 million that Borrower will incur to
acquire the Rich Stations from any Person other than Lender (or if from Lender
not as part of this Agreement)), (v) to finance the working capital
requirements of Borrower under the Rich LMA, if applicable and (vi) to finance
the acquisition of the Rich Stations (each a "PERMITTED USE").
2.5 TAXES.
a. Any and all payments by, or on behalf of, Borrower hereunder
or under the Note or any other Loan Document, shall be made, in accordance with
this Section 2.5, free and clear of and without deduction for any and all
present or future Taxes. If Borrower shall be required by law to deduct any
Taxes from or in respect of any sum payable hereunder or under the Note or any
other Loan Document to Lender, (i) the sum payable shall be increased as may be
necessary so that after making all required deductions Lender receives an
amount equal to the sum it would have received had no such deductions been
made, (ii) Borrower shall make such deductions, and (iii) Borrower shall pay
the full amount deducted to the relevant taxing or other authority in
accordance with applicable law.
b. In addition, Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Document (hereinafter referred to as "OTHER
TAXES").
c. Borrower shall indemnify and pay, within ten (10) days of
demand therefor, Lender for the full amount of Taxes or Other Taxes (including
any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under
this Section 2.5) paid by Lender and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto, whether or
not such Taxes or Other Taxes were correctly or legally asserted.
d. Within thirty (30) days after the date of any such payment of
Taxes or Other Taxes, Borrower shall furnish to Lender, the original or a
certified copy of a receipt evidencing payment thereof.
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SECTION 3.
CONDITIONS TO THE LOANS
3.1 CONDITIONS TO INITIAL LOAN. The agreement of Lender to enter into this
Agreement is subject to the satisfaction of the following conditions:
a. This Agreement, the Note, the Security Agreement, the Deed of
Trust and the Collateral Assignment of Contracts shall have been duly executed
by Borrower and delivered to Lender and the security interest granted by the
Borrower to Lender under the Security Documents shall constitute, to the extent
permitted by law, a first priority perfected security interest in all of the
assets of the Borrower other than the Excluded Assets;
b. Lender shall have received such other documents,
financing statements, instruments, certificates, opinions
and agreements as Lender shall reasonably request in
connection with the transactions contemplated by this
Agreement;
c. Lender shall have received a loan certificate signed by the
Manager of Borrower, substantially in the form of Exhibit E attached hereto,
including a certificate of incumbency with respect to each authorized signatory
of Borrower, together with appropriate attachments which shall include, without
limitation, the following (i) a copy of the Articles of Organization of
Borrower certified to be true, complete and correct by the State Corporation
Commission for the Commonwealth of Virginia, (ii) a true, complete and correct
copy of the Operating Agreement and (iii) certificates of good standing from
each jurisdiction in which Borrower does business;
d. (i) Lender shall have received executed or conformed copies of
the Related Documents and any amendments thereto as of the date hereof, the
terms and conditions of which shall be in all respects satisfactory to Lender,
(ii) the Related Documents shall be in full force and effect and no term or
condition thereof shall have been amended, modified or waived after the
execution thereof, (iii) Borrower shall not have failed in any respect to
perform any obligation or covenant required by the Related Documents to be
performed or complied with by it on or before the date hereof (other than such
failures of which Lender has actual knowledge), and (iv) Lender shall have
received a Manager's Certificate from Borrower in form and substance
satisfactory
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to Lender to the effect set forth in clauses (i), (ii) and (iii) above;
e. The Benchmark Acquisition FCC Consent shall have
been obtained and shall have become a Final Order;
f. Borrower shall deliver to Lender a Manager's Certificate
stating that (i) the Benchmark Acquisition has been duly approved, (ii) all
actions necessary by it to consummate the Benchmark Acquisition have been taken
(other than the payment of the purchase price which shall not exceed
$14,500,000 and the conveyance of the appropriate assets) and (iii) Borrower
will proceed to consummate the Benchmark Acquisition immediately upon the
making of the initial Loan on the Closing Date. The Benchmark Acquisition shall
become effective in accordance with the Benchmark Acquisition Documents without
any variation therefrom (other than immaterial variations), except as disclosed
to Lender;
g. Borrower shall have delivered copies of any environmental
audit reports delivered in connection with the Benchmark Acquisition and all
other environmental information and reports (other than immaterial
environmental information and reports) received in connection therewith to
Lender;
h. The assets of the Benchmark Stations shall be free and clear
of all Liens (other than Permitted Liens) and all assets and liabilities
assumed by Borrower pursuant to the Benchmark Acquisition Documents and the
transactions contemplated thereby shall be acceptable to Lender;
i. (i) No event which would constitute an Event of Default or
Default (after giving effect to the making of the Loan on the Closing Date)
shall have occurred and be continuing, (ii) the representations and warranties
in Section 4 shall be true, correct and complete in all material respects,
(iii) since April 29, 1996, no Material Adverse Effect shall have occurred,
(iv) no litigation, inquiry or other action and no injunction or restraining
order shall be pending or threatened with respect to the making of the Loan
hereunder or the transactions contemplated hereby, and (v) Borrower shall have
delivered to Lender a Manager's Certificate to such effect, in form and
substance reasonably satisfactory to Lender;
j. Borrower shall have delivered to Lender a
Compliance Certificate, dated as of the Closing Date and
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calculated to give effect to the funding of the Loan under this Agreement,
demonstrating compliance with the covenants set forth in this Agreement as of
the Closing Date; and
k. Lender shall have received originally executed copies of the
favorable written opinions of each of the counsel referred to in the Benchmark
Acquisition Documents, dated as of the Closing Date, and each such opinion of
counsel shall state that Lender is entitled to rely thereon.
l. Lender shall have received originally executed copies of one
or more favorable written opinions, dated as of the date hereof, of LeClair
Ryan, counsel for Borrower, in form and substance reasonably satisfactory to
Lender and its counsel.
m. Borrower shall have certified to Lender that the
Loan will be for a Permitted Use.
Lender agrees to act reasonably and diligently in exercising
Lender's rights under this Section 3.1.
3.2 CONDITIONS TO EACH OTHER LOAN. The agreement of Lender to make any other
Loans requested to be made by it on any date after the date hereof is subject
to the satisfaction of the following conditions as of the date such Loan is
requested to be made:
a. Each of the representations and warranties made by Borrower,
in or pursuant to the Loan Documents shall be true and correct in all material
respects on and as of such date as if made on and as of such date, except to
the extent a representation or a warranty made by Borrower which specifically
relates to an earlier date;
b. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the
Loan requested to be made on such date; and
c. There shall not have occurred any change, or
development or event which could reasonably be expected to
have a Material Adverse Effect.
d. Borrower shall have certified to Lender that the
Loan will be for a Permitted Use.
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SECTION 4.
BORROWER'S REPRESENTATIONS AND WARRANTIES
In order to induce Lender to enter into this Agreement and to
make the initial Loan on the Closing Date, Borrower represents and warrants to
Lender that, as of the date hereof (after giving effect to the Benchmark
Acquisition) the following statements are true, correct and complete:
4.1 EXISTENCE; COMPLIANCE WITH LAW. Borrower (a) is a limited liability company
duly formed, validly existing and in good standing under the laws of the
Commonwealth of Virginia and is duly qualified to do business and is in good
standing in each other jurisdiction where its ownership or lease of property or
the conduct of its business requires such qualification, (b) has the requisite
power and authority and the legal right to own, pledge, mortgage or otherwise
encumber and operate its properties, to lease the property it operates under
lease, and to conduct its business as now, heretofore and proposed to be
conducted and to enter into the transactions contemplated by this Agreement,
(c) has all licenses, permits, consents or approvals from or by, and has made
all filings with, and has given all notices to, all Governmental Authorities
having jurisdiction, to the extent required for such ownership, operation and
conduct, (d) is in compliance with the Operating Agreement and its Articles of
Organization and (e) is in compliance with all rules and regulations of the FCC
and the terms of all FCC Licenses, and is in compliance in all material
respects with all other applicable provisions of law.
4.2 EXECUTIVE OFFICES; COLLATERAL LOCATIONS; CORPORATE OR OTHER NAMES. The
current locations of Borrower's executive office, principal place of business,
corporate offices, all warehouses and premises within which any Collateral is
stored or located, and the locations of all of Borrower's records concerning
the Collateral are set forth in Schedule 4.2 and, except as set forth in
Schedule 4.2, such locations have not changed during the preceding 12 months.
During the prior five (5) years, except as set forth in Schedule 4.2, Borrower
(or any of its predecessors in interest) has not been known as or used any
corporate, fictitious or trade name.
4.3 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The execution, delivery and
performance by Borrower of the Loan Documents and the creation of all Liens
provided for herein
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and therein (a) are within Borrower's power, (b) have been duly authorized by
all necessary action by Borrower under applicable law and under the Operating
Agreement and its Articles of Organization, (c) are not in contravention of any
provision of the Operating Agreement or Borrower's Articles of Organization,
(d) will not violate any law or regulation, or any order or decree of any court
or governmental instrumentality, (e) will not conflict with or result in the
breach or termination of, constitute a default under or accelerate any
performance required by, any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which Borrower is a party or by which Borrower
or any of its property is bound, (f) will not result in the creation or
imposition of any Lien upon any of the property of Borrower other than those in
favor of Lender, all pursuant to the Loan Documents, and (g) do not require the
consent or approval of any Governmental Authority or any other Person, all of
which will have been duly obtained, made or complied with before the date
hereof and which will be in full force and effect as of the date hereof. At or
prior to the date hereof, each of the Loan Documents to which Borrower is a
party shall have been duly executed and delivered for the benefit of or on
behalf of Borrower, and each shall then constitute a legal, valid and binding
obligation of Borrower to the extent it is a party thereto, enforceable against
Borrower in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, moratorium, reorganization or other similar
laws affecting creditors' rights and to equitable principles of general
applicability.
4.4 FINANCIAL STATEMENTS AND PROJECTIONS. Borrower has delivered the
Financial Statements for the period ended October 31, 1996 and projections
identified in Schedule 4.4.
4.5 CONDUCT OF BUSINESS; MATERIAL CONTRACTS. Borrower is engaged only in the
businesses permitted to be engaged in pursuant to Section 6.9 and is conducting
its business in accordance with the provisions of Section 6.9. Borrower holds
all licenses (including, without limitation, FCC Licenses), permits,
franchises, certificates of authority, or any waivers of the foregoing that are
necessary to permit it to conduct its businesses as now conducted or to be
conducted and to hold and operate its properties. All such licenses, permits,
franchises, certificates of authority, and waivers are valid and in full force
and effect. Schedule 4.5 contains a complete list, as of the date hereof, of
each contract, agreement, arrangement or
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understanding to which Borrower is a party or any of its assets are bound,
except for those time sales agreements which (i) are on Borrower's standard
form, (ii) are terminable by Borrower within thirteen (13) weeks or less notice
without penalty, and (iii) provide for annual payments of fifty thousand
dollars ($50,000) or less (each a "MATERIAL CONTRACT"); provided, Lender
acknowledges that the tower for the WKHK(FM) radio station is not owned by the
Rich Partnerships.
4.6 SUBSIDIARIES. Borrower has no Subsidiaries.
4.7 FCC AND STATION MATTERS. Upon and following consummation of each
Acquisition, each of the following representations and warranties will be true,
correct and complete in all respects (other than such inaccuracies which are
immaterial):
(i) Schedule 4.7(a) annexed hereto correctly
describes each of the radio broadcast stations owned by
Borrower.
(ii) Borrower has duly filed in a timely manner all
filings which are required to be filed by Borrower under the
Communications Act and is in all respects in compliance with the
Communications Act, including, without limitation, the rules and
regulations of the FCC relating to the broadcast of radio
signals. Borrower owns or has valid leasehold interests in all
property necessary to operate in compliance with the
Communications Act the Stations Borrower has acquired in such
Acquisition.
(iii) Schedule 4.7(b) annexed hereto correctly sets forth
each of the LMAs for Borrower and sets forth the termination
date, if any, of each such agreement and the amounts payable or
receivable thereunder. Each such LMA is in full force and effect
and Borrower is in substantial compliance therewith. Other than
as contemplated in connection with the exercise by Borrower of
any option to acquire any radio station which is the subject of
such LMA, no event has occurred which permits, or after notice or
lapse of time would permit, the early termination of any such
LMA, and Borrower has no knowledge of any fact or circumstance
which is likely to result in the non-renewal of any LMA.
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4.8 REAL PROPERTY. Borrower does not own any interest in real property other
than the real property identified in Schedule 4.8.
4.9 PERSONAL PROPERTY LIENS. Upon the filing of Uniform Commercial Code
financing statements naming Borrower as "debtor", naming Lender as "secured
party" and describing the Collateral (as defined in the Security Agreement) in
the filing offices set forth in Schedule 4.9 hereto, the security interests in
such Collateral granted to Lender will, to the extent a security interest in
such Collateral may be perfected by filing Uniform Commercial Code financing
statements, constitute valid and perfected security interests therein prior to
all other Liens. The Collateral has been duly and validly pledged to Lender
pursuant to the Security Agreement and the Deed of Trust and the Security
Agreement and the Deed of Trust create in favor of Lender a valid, perfected
first priority security interest in the Collateral as security for the
Obligations subject to no equal or prior security interest.
4.10 NO MATERIAL ADVERSE CHANGE: NO RESTRICTED PAYMENTS. Since April 29, 1996,
no event or change has occurred that has caused or evidences, either in any
case or in the aggregate, a Material Adverse Effect. Except as set forth on
Schedule 4.10, Borrower has not directly or indirectly declared, ordered, paid
or made, or set apart any sum or property for, any Restricted Payment or agreed
to do so.
4.11 TITLE TO PROPERTIES: LIENS. Borrower has (a) good, sufficient and legal
title to (in the case of fee interests in real property), (b) valid leasehold
interests in (in the case of leasehold interests in real or personal property),
and (c) good title to (in the case of all other personal property), all of its
properties and assets reflected in the financial statements referred to in
Section 4.4, except for assets disposed of since the date of such financial
statements in the ordinary course of business. Except for Permitted Liens, all
such properties and assets are free and clear of Liens.
4.12 LITIGATION. There are no actions, suits, proceedings, arbitrations or
governmental investigations (whether or not purportedly on behalf of Borrower)
at law or in equity or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, including, without limitation, the FCC, pending or, to the
knowledge of
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Borrower, threatened against or affecting Borrower or any property of Borrower
other than those listed on Schedule 4.12.
4.13 PAYMENT OF TAXES. Except to the extent permitted by Section 5.3, all tax
returns and reports of Borrower required to be filed by, or on behalf of,
Borrower have been timely filed, and all taxes, assessments, fees and other
governmental charges upon Borrower and upon its properties, assets, income,
businesses and franchises which are due and payable have been paid when due and
payable. There is no proposed tax assessment against Borrower or any of its
Members which is not being actively contested by Borrower or such Member in
good faith and by appropriate proceedings.
4.14 RESTRICTIONS; NO DEFAULT. No Contractual Obligation, lease, agreement,
instrument or other document to which Borrower is a party or by which it or any
of its properties or assets is bound or affected and no provision of the
Operating Agreement, Borrower's Articles of Organization, applicable law or
governmental regulation has resulted in or will result in a Material Adverse
Effect. Borrower is not subject to any final judgments, writs, injunctions,
decrees, rules or regulations of any court or any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect. Borrower
is not in default and, to Borrower's knowledge, no third party is in default,
under or with respect to any Contractual Obligation, lease, agreement,
instrument or other document to which Borrower is a party, or any final
judgment, writ, injunction, decree, rule or regulation of any court or any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, by which Borrower or
any of its properties or assets is bound, which default could result in a loss
or liability to Borrower in excess of $100,000. No Default has occurred and is
continuing.
4.15 GOVERNMENTAL REGULATION. Borrower is not subject to regulation under the
Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any
other federal or state statute or regulation which may limit its ability to
incur Indebtedness or which may otherwise render all or any portion of the
Obligations unenforceable.
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4.16 SECURITIES ACTIVITIES. Borrower is not engaged principally, or as one of
its important activities, in the business of extending credit for the purpose
of purchasing or carrying any Margin Stock.
4.17 EMPLOYEE BENEFIT PLANS.
a. Borrower and each of its ERISA Affiliates are in compliance with
all applicable provisions and requirements of ERISA and the regulations and
published interpretations thereunder with respect to each Employee Benefit
Plan, and have performed all their obligations under each Employee Benefit
Plan.
b. No ERISA Event has occurred or is reasonably expected to occur.
c. Except to the extent required under Section 4980B of the Internal
Revenue Code, no Employee Benefit Plan provides health or welfare benefits
(through the purchase of insurance or otherwise) for any retired or former
employees of Borrower or any of its ERISA Affiliates.
d. As of the most recent valuation date for any Pension Plan, the
amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of
ERISA), individually or in the aggregate for all Pension Plans (excluding for
purposes of such computation any Pension Plans with respect to which assets
exceed benefit liabilities), does not exceed $25,000.
4.18 ENVIRONMENTAL MATTERS. Except for routine operations in the ordinary
course of business in compliance with applicable permits issued by a
Governmental Authority, each Facility is free of any Hazardous Material and
Borrower has not caused or suffered to occur any Release at, under, above or
within any Facility. There are no existing or potential Environmental
Liabilities and Costs of Borrower of which Borrower, after due inquiry, has
knowledge, which could result in liability to Borrower in excess of $100,000.
Except as set forth on Schedule 4.18, Borrower is not involved in operations
which could lead to the imposition of any material Environmental Liabilities
and Costs on it, or any owner of any premises which it occupies, or any Lien
securing the same under any Environmental Law.
4.19 VENTURES AND OUTSTANDING STOCK. Borrower is not
engaged in any Joint Venture with any other Person. Except
as set forth in Schedule 4.19, there are no outstanding
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rights to purchase options, warrants or similar rights or agreements pursuant
to which Borrower or any Member may be required to issue, sell or purchase any
Membership Interests, Stock or other equity security. Schedule 4.19 sets forth,
as of the date hereof (and as of the Benchmark Loan date, if applicable), the
name and description of each of Borrower's Members, the percentage interest of
each such Member in the profits of Borrower and the percentage voting rights of
each such Member in Borrower.
4.20 LABOR MATTERS. There are no strikes or other labor disputes against
Borrower that are pending or, to Borrower's knowledge, threatened. Hours worked
by, and payment made to, employees of Borrower have not been in violation of
the Fair Labor Standards Act or any other material applicable law dealing with
such matters. All payments due from Borrower on account of employee health and
welfare insurance have been paid or accrued as a liability on the books of
Borrower. Except as set forth in Schedule 4.20, Borrower has no obligation
under any collective bargaining agreement, management agreement, or any
employment agreement, and a correct and complete copy of each agreement listed
on Schedule 4.20 has been provided to Lender. There is no organizing activity
involving Borrower pending or, to Borrower's knowledge, threatened by any labor
union or group of employees.
4.21 INSURANCE. Borrower maintains, with financially sound and reputable
insurers, insurance with respect to its properties and business against loss or
damage of the kinds customarily insured against by corporations of established
reputation engaged in the same or similar business of such types and in such
amounts as are customarily carried under similar circumstances by such other
corporations. Attached as Schedule 4.21 hereto is a complete and accurate
description of all policies of insurance of Borrower that will be in effect as
of the date hereof (and as of the Benchmark Loan Date, as applicable).
4.22 DISCLOSURE. No information contained in this Agreement, the other Loan
Documents, the Financial Statements or any written statement furnished by or on
behalf of Borrower, any Member of Borrower, or any Affiliate thereof pursuant
to the terms of this Agreement or any other Loan Document, which has previously
been delivered to Lender, contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained
herein or therein not misleading in
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light of the circumstances under which they were made. With respect to all
business plans and other forecasts and projections furnished by, or on behalf
of, Borrower and made available to Lender relating to the financial condition,
operations, business, properties or prospects of Borrower (a) all facts stated
as such therein are true and complete, (b) all facts upon which the forecasts
or projections therein contained are based are true and complete in all
material respects and no material fact was omitted therefrom, (c) all
assumptions made on that basis are reasonable under the circumstances and are
disclosed therein, and (d) the forecasts or projections are reasonably based on
those facts and assumptions.
SECTION 5.
BORROWER'S AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of the
Loans and other Obligations (or until the exercise of the Conversion Option),
unless Lender shall otherwise consent in writing, Borrower shall perform all
covenants in this Section 5.
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS. Borrower will maintain a system of
accounting established and administered in accordance with sound business
practices to permit preparation of financial statements in conformity with
GAAP. Borrower will deliver to Lender:
(i) as soon as available and in any event within 30 days
after the end of each month ending after the date hereof, copies
of Borrower's Financial Statements for such month, together with
the monthly sales reports and, if applicable, cash flow for such
month of each Station as furnished to Borrower by each Station.
In addition, Borrower shall cause the accountants who prepared
any audited or unaudited Financial Statements relating to
Borrower (or the Benchmark Stations) to consent to the use of
such Financial Statements by Lender in its filings with the
Securities and Exchange Commission as well as filing such
auditor's consents with any such filing with the Securities and
Exchange Commission. Concurrently with the delivery of such
Financial Statements, Borrower shall deliver to Lender a
certificate of Borrower's chief financial officer certifying that
no Default under the Loan Documents has
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occurred and is continuing or specifying each such
Default;
(ii) promptly upon their becoming available, copies of
all information required to be filed by Borrower with the FCC and
all press releases and other statements made available generally
by Borrower to the public and all material FCC notices and
correspondence received by Borrower;
(iii) promptly upon any officer of Borrower obtaining
knowledge of any condition or event that constitutes an Event of
Default or Default, or becoming aware that Lender has given any
notice or taken any other action with respect to a claimed Event
of Default or Default, a Manager's Certificate specifying the
nature and period of existence of such event, change, Event of
Default, Default, or condition, and what action Borrower has
taken, is taking and proposes to take with respect thereto;
(iv) promptly upon their becoming available, all copies
of subscribed Arbitron rating reports with respect to the
Stations, in a form agreed upon by Borrower and Lender; and
(v) with reasonable promptness, such other information
and data with respect to Borrower or any of its Affiliates as
from time to time may be reasonably requested by Lender.
5.2 CORPORATE EXISTENCE; COMPLIANCE WITH LAWS. Borrower will at all times (a)
preserve and keep in full force and effect its legal existence and all rights,
licenses and other authorizations, and franchises material to its business, (b)
comply with all provisions of all franchises and licenses, all FCC Licenses,
and all material agreements and leases to which it is a party, and shall suffer
no loss or forfeiture thereof or thereunder and (c) comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority (other than non- compliances which are immaterial).
5.3 PAYMENT OF TAXES AND CLAIMS. Borrower will, and will cause each of its
Members to, pay all taxes, assessments and other governmental charges imposed
upon it or any of its properties or assets or in respect of any of its income,
businesses or franchises before any penalty accrues thereon,
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and all claims, including, without limitation, claims for labor, services,
materials and supplies (other than immaterial claims) for sums that have become
due and payable and that by law have or may become a Lien upon any of its
properties or assets, before the time when any penalty or fine shall be
incurred with respect thereto; provided that no such charge or claim need be
paid if being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted and if such reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have been
made therefor.
5.4 MAINTENANCE OF PROPERTIES; INSURANCE. Borrower will maintain or cause to be
maintained in good repair, working order and condition, ordinary wear and tear
excepted, all material properties used or useful in the business of Borrower
and from time to time will make or cause to be made all appropriate repairs,
renewals and replacements thereof. Borrower will maintain or cause to be
maintained, with financially sound and reputable insurers, insurance with
respect to its properties and business against loss or damage of the kinds
customarily carried or maintained under similar circumstances by corporations
of established reputation engaged in similar businesses. Each such policy of
insurance shall name Lender as the loss payee and additional insured, as
applicable, thereunder, and shall provide for at least 30 days prior written
notice to Lender of any modification or cancellation of such policy.
5.5 TAX TREATMENT. Borrower will take all reasonably necessary actions to
ensure that Borrower is not taxable as a corporation for Federal income tax
purposes and will take all reasonable actions to ensure that Borrower is not
taxable as a corporation under any applicable law of any state or political
subdivision thereof (other than any state or political subdivision which taxes
all limited liability companies as corporations).
5.6 BOOKS AND RECORDS. Borrower shall keep adequate records and books of
account with respect to its business activities, in which proper entries,
reflecting all of its financial transactions, are made in accordance with GAAP
and on a basis consistent with the Financial Statements.
5.7 LITIGATION. Borrower shall notify Lender in writing, promptly upon
learning thereof, of any litigation, Claim or other action commenced or
threatened against Borrower, and of the institution against Borrower of
any suit or
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administrative proceeding which (a) may involve an amount in excess of $100,000
individually or in the aggregate or (b) could have or result in a Material
Adverse Effect if adversely determined.
5.8 ENVIRONMENTAL LAWS. Borrower shall comply with all Environmental Laws.
Borrower shall promptly take any and all necessary remedial action in
connection with the presence, storage, use, disposal, transportation or Release
of any Hazardous Materials on, under or about any Facility in order to comply
with all applicable Environmental Laws and Governmental Authorizations, except
when, and only to the extent that, Borrower's liability for such presence,
storage, use, disposal, transportation or discharge of any Hazardous Materials
is being contested in good faith by Borrower.
5.9 INDEMNITY. Borrower shall indemnify and hold Lender and its Affiliates,
officers, directors, employees, attorneys and agents (each, an "INDEMNIFIED
PERSON"), harmless from and against any and all suits, actions, costs, fines,
deficiencies, penalties, proceedings, claims, damages, losses, liabilities and
expenses (including reasonable attorneys' fees and disbursements and other
costs of investigations or defense, including those incurred upon any appeal)
(each, a "CLAIM") which may be instituted or asserted against or incurred by
such Indemnified Person as the result of credit having been extended under this
Agreement or any other Loan Document or otherwise arising in connection with
the transactions contemplated hereunder and thereunder, including any and all
Environmental Liabilities and Costs and regardless of whether the Indemnified
Person is a party to such Claim; provided, that Borrower shall not be liable
for any indemnification to such Indemnified Person with respect to any portion
of any such Claim which results solely from such Indemnified Person's gross
negligence or willful misconduct as determined by a final judgment of a court
of competent jurisdiction; provided, further, that no member of Borrower shall
have any personal liability to Lender except as provided in the Master
Agreement and that Lender shall have no right to attach, liquidate or otherwise
take any interest in the Excluded Assets or their proceeds. NEITHER LENDER NOR
ANY OTHER INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY
HERETO, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR
ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR
INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS
A RESULT OF
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CREDIT HAVING BEEN EXTENDED UNDER THE LOAN DOCUMENTS OR OTHERWISE IN CONNECTION
WITH THE TRANSACTIONS CONTEMPLATED THEREBY.
5.10 ACCESS. Borrower shall, upon reasonable advance notice and during normal
business hours (unless a Default shall have occurred and be continuing, in
which event no notice shall be required and Lender shall have such access at
any and all times) (a) provide access to Lender and any of its officers,
employees and agents, as frequently as Lender determines to be appropriate to
the properties and facilities of Borrower, (b) permit Lender and any of its
officers, employees and agents to inspect, audit and make extracts from all of
Borrower's records, files and books of account, and (c) permit Lender to
conduct audits to inspect, review and evaluate the Collateral, and Borrower
agrees to render to Lender at Borrower's cost and expense, such clerical and
other assistance as may be reasonably requested with regard thereto. Borrower
shall make available to Lender and its counsel, as quickly as practicable under
the circumstances, originals or copies of all books, records, Member minutes,
contracts, insurance policies, environmental audits, business plans, files,
financial statements (actual and pro forma), filings with federal, state and
local regulatory agencies, and other instruments and documents which Lender may
request. Borrower shall deliver any document or instrument reasonably necessary
for Lender, as it may from time to time request, to obtain records from any
service bureau or other Person which maintains records for Borrower, and shall
maintain duplicate records or supporting documentation on media, including
computer tapes and discs owned by Borrower. Borrower agrees to make available
to Lender upon its reasonable request information and records prepared by its
independent certified public accountants and its banking and other financial
institutions.
5.11 FCC CONVERSION CONSENT FILING. Lender and Borrower shall use their
reasonable best efforts (i) to file with the FCC, within twelve (12) days
following the date of this Agreement, the requisite applications to obtain the
Conversion Consent and (ii) to obtain the prompt grant of such applications.
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SECTION 6.
BORROWER'S NEGATIVE COVENANTS
Borrower covenants and agrees that until payment in full of the
Loan and other Obligations (or until the exercise of the Conversion Option),
unless Lender shall otherwise consent in writing or unless otherwise permitted
under the Master Agreement, Borrower shall perform all covenants in this
Section 6.
6.1 INDEBTEDNESS. Borrower shall not directly or indirectly, create, incur,
assume or guaranty, or otherwise become or remain directly or indirectly liable
with respect to, any Indebtedness, except:
(i) the Obligations;
(ii) Indebtedness existing on the date hereof and
disclosed on Schedule 6.1;
(iii) Contingent Obligations permitted by Section
6.4;
(iv) Indebtedness in respect of Capital Leases; provided
that such Capital Leases are permitted under the terms of Section
6.7; and
(v) Liabilities related to the Excluded Assets.
6.2 LIENS. Borrower shall not directly or indirectly, create, incur, assume or
permit to exist any Lien on or with respect to any property or asset of any
kind (including any document or instrument in respect of goods or accounts
receivable) of Borrower whether now owned or hereafter acquired, or any income
or profits therefrom, or file or permit the filing of, or permit to remain in
effect, any financing statement or other similar notice of any Lien with
respect to any such property, asset, income or profits under the Uniform
Commercial Code of any State or under any similar recording or notice statute,
except for the following:
(i) Permitted Encumbrances;
(ii) Liens granted pursuant to the Security
Documents;
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(iii) Liens securing Capital Leases permitted
under Section 6.7;
(iv) Liens existing on the date hereof and
disclosed on Schedule 6.2; and
(v) Liens related to the Excluded Assets.
6.3 INVESTMENTS; JOINT VENTURES. Borrower shall not
directly or indirectly, make or own any Investment in any
Person, including any Joint Venture, except:
(i) Investments in Cash Equivalents;
(ii) as it relates to the Limited Partnership
Interests; and
(iii) Investments contemplated by the Acquisition
Documents in connection with any Acquisition.
6.4 CONTINGENT OBLIGATIONS. Borrower shall not directly or indirectly, create
or become or remain liable with respect to any Contingent Obligation, except:
(i) Contingent Obligations with respect to transactions
permitted pursuant to Section 6.6 (including, without limitation,
any escrow deposits made in connection with the Acquisition);
(ii) Other Contingent Obligations existing as of
the date hereof as set forth in Schedule 6.4; and
(iii) As related to the Excluded Assets.
6.5 RESTRICTED PAYMENTS. Borrower shall not make any Restricted Payment to any
Person; provided, however, so long as no Event of Default shall have occurred
and be continuing, (i) Borrower may from time to time make distributions to
each Member for payment of such Member's federal, state and local income tax
liability in respect of the net income of Borrower in accordance with the
Operating Agreement and (ii) Borrower may distribute to its Members at any time
distributions from, or proceeds related to, the Excluded Assets.
6.6 RESTRICTION ON FUNDAMENTAL CHANGES: ASSET SALES AND ACQUISITIONS. Until
such time Borrower has repaid in full all of the Loans or upon the occurrence
of the Conversion
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Event, Borrower shall not alter its corporate, capital or legal structure or
amend or modify in any respect the Operating Agreement or its Articles of
Organization or enter into any transaction of merger or consolidation, or
liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, lease, sublease, transfer or otherwise dispose
of, in one transaction or a series of transactions, all or any part of its
business, property or fixed assets, whether now owned or hereafter acquired
(other than in the ordinary course of business), or acquire by purchase or
otherwise all or substantially all the business, property or fixed assets of,
or Stock or other evidence of beneficial ownership of, any Person or any
division or line of business of any Person or enter into any local management
agreement, local marketing agreement, time brokerage agreement or similar
arrangement with respect to any broadcast properties (including, without
limitation, the Stations) except (i) in connection with any Acquisition and
(ii) Investments permitted pursuant to Section 6.3.
6.7 RESTRICTION ON LEASES. Except as set forth in Schedule 6.7, Borrower shall
not become liable in any way, whether directly or by assignment or as a
guarantor or other surety, for the obligations of the lessee under any
Operating Lease or Capital Lease.
6.8 TRANSACTIONS WITH AFFILIATES. Borrower shall not directly or indirectly,
enter into or permit to exist any transaction (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with any Affiliate of Borrower on terms that are less favorable to
Borrower than those that might be obtained at the time from Persons who are not
an Affiliate.
6.9 CONDUCT OF BUSINESS. From and after the date hereof, Borrower shall not
engage in any business other than (i) the business engaged in by Borrower on
the date hereof, (ii) owning and operating the Benchmark Stations and holding
of the FCC Licenses for the Benchmark Stations, (iii) performing under the Rich
LMA, and (iv) any other activities agreed to by the parties hereto.
6.10 AMENDMENTS OR WAIVERS OF RELATED DOCUMENTS. Borrower shall not agree to
any amendment to, or waive any of its rights under, any of the Related
Documents, including without limitation, without obtaining the written consent
of Lender to such amendment or waiver.
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6.11 ERISA. Neither Borrower nor any ERISA Affiliate shall, without Lender's
prior written consent, acquire any new ERISA Affiliate that maintains or has an
obligation to contribute to a Pension Plan that has either an "accumulated
funding deficiency," as defined in Section 302 of ERISA, or any "unfunded
vested benefits," as defined in Section 4006(a)(3)(E)(iii) of ERISA in the case
of any Pension Plan other than a Multiemployer Plan and in Section 4211 of
ERISA in the case of a Multiemployer Plan. Additionally, neither Borrower nor
any ERISA Affiliate shall (a) terminate any Title IV Plan where such
termination could reasonably be anticipated to result in liability to Borrower,
(b) permit any accumulated funding deficiency, as defined in Section 302(a)(2)
of ERISA, to be incurred with respect to any Pension Plan, (c) fail to make any
contributions or fail to pay any amounts due and owing as required by the terms
of any Plan before such contributions or amounts become delinquent, (d) make a
complete or partial withdrawal (within the meaning of Section 4201 of ERISA)
from any Multiemployer Plan; (e) fail to provide Lender with copies of any Plan
documents or governmental reports or filings, if reasonably requested by
Lender, (f) fail to make any contribution or pay any amount due as required by
Internal Revenue Code Section 412 or Section 302 of ERISA, (g) allow any ERISA
Event or event described in Section 4062(e) of ERISA to occur with respect to
any Title IV Plan, or (h) with respect to all Retiree Welfare Plans, allow the
present value of future anticipated expenses to exceed $100,000 or fail to
provide copies of such projections to Lender.
6.12 HAZARDOUS MATERIALS. Except as set forth in Schedule 4.18, Borrower shall
not, and shall not permit any Person within its control (a) to cause a Release
of Hazardous Material on, under, in or about any Facility, (b) to use, store,
generate, treat or dispose of Hazardous Materials, except in compliance with
the Environmental Laws, or (c) to transport any Hazardous Materials to or from
any Facility, except in compliance with the Environmental Laws.
6.13 SALE-LEASEBACKS. Borrower shall not engage in any sale-leaseback or
similar transaction involving any of its property or assets.
6.14 FISCAL YEAR. Borrower shall not shall change its Fiscal Year end from
December 31 without the consent of Lender.
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SECTION 7.
EVENTS OF DEFAULT
7.1 EVENTS OF DEFAULT. The occurrence of any one or more of the following
events (regardless of the reason therefor) shall constitute an "EVENT OF
DEFAULT" hereunder:
a. Borrower shall fail to make any payment in respect of any
Obligations hereunder or under any of the other Loan Documents when due and
payable or declared due and payable in accordance with the terms hereof or of
the other Loan Documents;
b. Borrower shall fail or neglect to perform, keep or observe
any of the provisions of Section 2, Section 5 or Section 6 which is likely to
result in a Material Adverse Effect;
c. Any representation or warranty herein or in any Loan Document
or in any written statement pursuant thereto or hereto, made by any Person
(other than Lender) any report, financial statement or certificate made or
delivered to Lender by Borrower shall be untrue or incorrect in any material
respect as of the date when made;
d. A case or proceeding shall have been commenced against
Borrower or any Member, as the case may be, in a court having competent
jurisdiction seeking a decree or order (i) under the Bankruptcy Code, or any
other applicable federal, state or foreign bankruptcy or other similar law,
(ii) appointing a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) of Borrower or Member or of any substantial
part of its properties, or (iii) ordering the winding up, dissolution or
liquidation of the affairs of Borrower or such Member and such case or
proceeding shall remain undismissed or unstayed for sixty (60) consecutive days
or such court shall enter a decree or order granting the relief sought in such
case or proceeding;
e. Borrower or any Member (i) shall file a petition seeking
relief under the Bankruptcy Code, or an application seeking dissolution of
Borrower under any applicable federal, state or foreign bankruptcy or other
similar law, (ii) shall consent to the institution of proceedings thereunder or
to the filing of any such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) of Borrower or any Member or of any
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substantial part of Borrower's or such Member's properties, (iii) shall fail
generally to pay its debts as such debts become due, or (iv) shall take any
corporate action in furtherance of any such action;
f. Any material provision of any Loan Document shall for any
reason cease to be valid, binding and enforceable in accordance with its terms
or Borrower shall so state in writing, or any Lien created under any Collateral
Document shall cease to be a valid and perfected Lien having the first priority
security interest in any of the Collateral purported to be covered thereby,
provided such events are not caused by Lender's acts or omission;
g. There shall occur a Change of Control (other than
pursuant to the Master Agreement);
h. Any FCC License (other than non-material auxiliary
service licenses) relating to a Station shall be canceled,
revoked, materially and adversely modified, terminated or
finally denied renewal for any reason;
i. (i) Borrower shall not receive (A) the Rich Acquisition FCC
Consent before the Terminal Date, or Borrower shall fail to comply with the
Rich Acquisition FCC Consent, or the Rich Acquisition FCC Consent shall be
rescinded, shall no longer be in full force and effect, or the effectiveness
thereof shall have been stayed by judicial proceedings, or the Rich Acquisition
FCC Consent shall not have become a Final Order before the Terminal Date, or
(B) any other required consents to the consummation of the Rich Acquisition
before the Terminal Date, including any required consent of the FTC (which may
be evidenced by the expiration of any premerger notification waiting period),
(ii) Lender shall not receive the Conversion Consent before the Terminal Date,
or (iii) the Rich Acquisition shall not be completed before the Terminal Date.
j. Any breach or default (other than immaterial breaches or
defaults) by any party to the Purchase and Sale Agreement (as defined in the
Master Agreement) shall have occurred.
7.2 REMEDIES. Upon the occurrence of any Event of Default described in Section
7.1(d) or (e), the unpaid principal amount of the Loan and all other
Obligations shall automatically become immediately due and payable, without
presentment, demand, protest or other requirements of any
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kind, all of which are hereby expressly waived by Borrower. Upon the occurrence
and during the continuation of any other Event of Default, Lender may, at its
option, by written notice to Borrower, declare all or any portion of the
amounts described in the preceding sentence to be, and the same shall forthwith
become, immediately due and payable. Additionally, upon the occurrence of an
Event of Default, Lender shall have all the rights and remedies granted to it
under any Loan Document or under applicable law, including (subject to
applicable FCC requirements, if any) all remedies of a secured party under the
Uniform Commercial Code in any applicable jurisdiction. Notwithstanding the
rights of Lender as set forth herein, Lender agrees that it shall not exercise
its right to foreclose on any assets of Borrower until the Terminal Date other
than in the event where Borrower shall have willfully and knowingly breached or
caused an Event of Default under Section 7.1(b) or 7.1(c) or shall have
intentionally and in bad faith attempted to prevent the consummation of any of
the transactions contemplated in this Agreement.
7.3 EVOLUTION OF REMEDIES AND STANDARDS. The parties contemplate that Borrower
may enter into the Rich LMA. Upon Borrower entering into the Rich LMA, Lender
agrees that the standard for a Material Adverse Effect shall be related to all
of the Stations as a whole.
SECTION 8.
CONVERSION OF NOTE
8.1 CONVERSION. Simultaneously with the occurrence of the Conversion Event (the
"CONVERSION DATE"), all Loan amounts, other than the Excluded Loan Amounts,
outstanding hereunder (together with the contribution of the radio station
assets under the SFX Contribution Agreement) shall automatically convert into
Membership Interests in Borrower representing 96% of the Percentage Interest
(as defined in the Amended and Restated Operating Agreement) in Borrower. Any
Excluded Loan Amounts outstanding on the Conversion Date shall remain as an
intercompany loan on the books of Borrower after the Conversion Date with
commercially reasonably terms of repayment. Notwithstanding anything in this
Agreement to the contrary, no such conversion into Membership Interests shall
occur unless and until the Conversion Consent shall (i) have been obtained and
(ii) be in full force and effect at the time of such conversion.
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8.2 CONVERSION DATE PROCEDURES. On the Conversion Date, Lender will surrender
the Note to Borrower and furnish appropriate endorsements or transfer documents
as required by Borrower; provided, in the event there shall be any Excluded
Loan Amounts outstanding on the Conversion Date, Borrower shall execute a new
promissory note in favor of Lender in such principal amount equal to the
Excluded Loan Amounts which note shall bear interest at Prime plus 1% and which
principal shall be amortized on commercially reasonable terms. On the
Conversion Date, Borrower shall issue in Lender's name that percentage of
Membership Interest as may be determined in accordance with the Amended and
Restated Operating Agreement substantially in the form of Exhibit F hereto and,
if such Membership Interests are certificated, deliver to Lender such
certificates evidencing the Membership Interests. Additionally, on the
Conversion Date, Borrower and Lender shall, and Borrower shall cause its
Members to, execute such Amended and Restated Operating Agreement.
8.3 TAXES ON CONVERSION. On the Conversion Date, Borrower shall pay any
documentary, stamp or similar issue or transfer tax due on the issue on its
Membership Interests to Lender upon the conversion.
8.4 TERMINATION OF LOAN DOCUMENTS. Upon the completion of all matters set forth
in Sections 8.2 and 8.3 above, this Agreement and the other Loan Documents and
all of Borrower's obligations hereunder and thereunder (other than those
obligations which expressly survive the termination of this Agreement), shall
terminate, and Lender shall take such actions, at Borrower's expense, that are
reasonably necessary to release Lender's Liens on and security interest in, the
Collateral.
8.5 TERMINATION OF CONVERSION RIGHT. On and after the Terminal Date: (i) Lender
shall have no further right to convert the Note to any equity interest in
Borrower and (ii) Lender agrees to cooperate in good faith with Borrower until
the Maturity Date in Borrower's solicitation of debt or equity to fund the
transactions contemplated in the Acquisition Documents and the extinguishment
of the Note.
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SECTION 9.
MISCELLANEOUS
9.1 EXPENSES. Subject to Section 3(a) of the Master Agreement, Borrower agrees
to pay promptly all the reasonable costs and expenses of Lender (including the
reasonable fees, expenses and disbursements of counsel to Lender) in connection
with the negotiation, preparation, execution and administration of the Loan
Documents and the Loan and any consents, amendments, waivers or other
modifications hereto or thereto and any other documents or matters requested by
Borrower; provided, that any and all costs and expenses must be reasonable and
Lender has loaned the amounts necessary to fund these costs and expenses under
the Note. Borrower agrees to pay promptly, after the occurrence of an Event of
Default, all reasonable costs and expenses, including attorneys' fees
(including allocated costs of internal counsel) and reasonable costs of
settlement, incurred by Lender in enforcing any Obligations of or in collecting
any payments due from Borrower hereunder or under the other Loan Documents by
reason of such Event of Default or in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement in the
nature of a "work-out" or pursuant to any insolvency or bankruptcy proceedings;
provided, all such amounts shall become part of the Note and will be due and
payable in accordance with Sections 2.2 and 2.3.
9.2 AMENDMENTS AND WAIVERS. No amendment, modification, termination or waiver
of any provision of this Agreement or of the Note, or consent to any departure
by Borrower therefrom, shall in any event be effective without the written
concurrence of Lender.
9.3 INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or would otherwise be within the limitations of, another covenant shall not
avoid the occurrence of an Event of Default or Default if such action is taken
or condition exists.
9.4 NOTICES. Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile or United States
mail or courier service and shall be deemed to
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have been given when delivered in person or by courier service, upon receipt of
telefacsimile or telex if received by 5 p.m. (local time) on a Business Day (or
if not received by such time on a Business Day, the telefacsimile or telex
shall be deemed received on the next Business Day), or three Business Days
after depositing it in the United States mail with postage prepaid and properly
addressed; provided that notices to Lender shall not be effective until
received. For the purposes hereof, the address of each party hereto shall be as
set forth below (or shall be such other address as may be designated by such
Person in a written notice delivered to the other party hereto):
If to Borrower: ABS Communications, L.L.C.
300 Arboretum Place
Suite 590
Richmond, VA 23236
Attn: Kenneth A. Brown
If to Lender: SFX Broadcasting, Inc.
150 East 58th Street
New York, New York 10155
Attention: Howard Tytel
9.5 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
a. All representations, warranties and agreements
made herein shall survive the execution and delivery of this
Agreement and the making of the Loan hereunder.
b. Notwithstanding anything in this Agreement or implied by law
to the contrary, the agreements of Borrower set forth in Sections 2.5, 5.9 and
9.1 shall survive the payment of the Loans and the termination of this
Agreement.
9.6 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or delay
on the part of Lender in the exercise of any power, right or privilege
hereunder or under any other Loan Document shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other power,
right or privilege. All rights and remedies existing under this Agreement and
the other Loan Documents are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
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9.7 MARSHALLING; PAYMENTS SET ASIDE. Lender shall not be under any obligation
to marshal any assets in favor of Borrower or any other party or against or in
payment of any or all of the Obligations. To the extent that Borrower makes a
payment or payments to Lender or Lender shall enforce any security interests or
exercise any right of setoff, and such payment or payments or the proceeds of
such enforcement or setoff or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law, any
other state or federal law, common law or any equitable cause, then, to the
extent of such recovery, the obligation or part thereof originally intended to
be satisfied, and all Liens, rights and remedies therefor or related thereto,
shall be revived and continued in full force and effect as if such payment or
payments had not been made or such enforcement or setoff had not occurred.
9.8 SEVERABILITY. In case any provision in or obligation under this Agreement
or the Note shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.
9.9 HEADINGS. Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
9.10 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
COMMONWEALTH OF VIRGINIA, WITHOUT REGARD TO CONFLICTS OR CHOICE OF LAWS
PRINCIPLES THEREOF.
9.11 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the parties
hereto and their respective successors and assigns and shall inure to the
benefit of the parties hereto and the successors and assigns of Lender. Neither
Borrower's rights nor obligations hereunder nor any interest therein may be
assigned or delegated by Borrower without the prior written consent of Lender.
9.12 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL PROCEEDINGS
BROUGHT AGAINST Borrower ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT OR
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ANY OBLIGATION MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE COMMONWEALTH OF VIRGINIA, AND BY EXECUTION AND DELIVERY OF
THIS AGREEMENT Borrower ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
AGREEMENT, SUCH OTHER LOAN DOCUMENT OR SUCH OBLIGATION. Borrower hereby agrees
that service of all process in any such proceeding in any such court may be
made by registered or certified mail, return receipt requested, to Borrower at
its address provided in Section 9.4, such service being hereby acknowledged by
Borrower to be sufficient for personal jurisdiction in any action against
Borrower in any such court and to be otherwise effective and binding service in
every respect. Nothing herein shall affect the right to serve process in any
other manner permitted by law or shall limit the right of Lender to bring
proceedings against Borrower in the courts of any other jurisdiction.
9.13 WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES
TO WAIVE ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION
OR LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this
waiver is intended to be all-encompassing of any and all disputes that may be
filed in any court and that relate to the subject matter of this transaction,
including without limitation contract claims, tort claims, breach of duty
claims and all other common law and statutory claims. Each party hereto
acknowledges that this waiver is a material inducement to enter into a business
relationship, that each has already relied on this waiver in entering into this
Agreement, and that each will continue to rely on this waiver in their related
future dealings. Each party hereto further warrants and represents that it has
reviewed this waiver with its legal counsel and that it knowingly and
voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOAN
MADE HEREUNDER. In the event of
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litigation, this Agreement may be filed as a written consent to a trial by the
court.
9.14 COUNTERPARTS; EFFECTIVENESS. This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument.
This Agreement shall become effective upon the execution of a counterpart
hereof by each of the parties hereto and receipt by Borrower and Lender of
written or telephonic notification of such execution and authorization of
delivery thereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their respective officers hereunto duly
authorized as of the date first written above.
BORROWER: ABS COMMUNICATIONS, L.L.C.
By: /s/ Ken A. Brown
----------------------------------
Name: Ken A. Brown
Title:
LENDER: SFX BROADCASTING, INC.
By: /s/ Howard J. Tytel
----------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
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SFX CONTRIBUTION AGREEMENT
THIS SFX CONTRIBUTION AGREEMENT is made and entered
into as of the 17th day of December, 1996, by and among LIBERTY ACQUISITION
SUBSIDIARY CORPORATION, a Delaware corporation ("Liberty 1"), LIBERTY
BROADCASTING OF MARYLAND II INCORPORATED, a Maryland corporation ("Liberty 2"
and, together with Liberty 1, the "Liberty Entities"), SFX BROADCASTING, INC.,
a Delaware corporation ("SFX") and ABS COMMUNICATIONS, L.L.C., a Virginia
limited liability company (the "Company").
W I T N E S S E T H:
WHEREAS, radio station WMXB-FM in Richmond, Virginia
(the "Station") is operated pursuant to a license issued to Liberty 1 by the
Federal Communications Commission (together with any successor agency or body,
the "FCC"); and
WHEREAS, all of the assets (other than the FCC
Licenses) used in connection with the operation of the Station
are owned by Liberty 2; and
WHEREAS, simultaneously with the execution of this
Agreement, SFX has entered into the Master Agreement (as defined) pursuant to
which SFX has agreed to contribute to the Company the Contributed Assets;
WHEREAS, on the Closing Date the Liberty Entities,
which are controlled by SFX, shall assign all of the Contributed Assets to SFX
and SFX shall contribute the Contributed Assets to the Company in accordance
with this Agreement; and
NOW, THEREFORE, in consideration of the mutual
representations, warranties, covenants and agreements, and upon the terms and
subject to the conditions contained herein, and intending to be fully bound
hereby, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. When used in this
Agreement, the following words or phrases shall have the following meanings:
<PAGE>
"Agreement" shall mean this SFX Contribution
Agreement, as it may be amended, supplemented or otherwise modified from time
to time in accordance with the terms hereof.
"Amended Operating Agreement" shall mean that
certain amended and restated operating agreement governing the Company, dated
as of the date hereof.
"Closing" shall have the meaning assigned to such
term in Section 3.1 of this Agreement.
"Closing Date" shall mean the date on which the
Closing shall be deemed to occur and shall be the date of this Agreement.
"Communications Act" shall mean the Communications
Act of 1934, as amended, including as amended by the Telecommunications Act of
1996, and the rules, regulations and policies promulgated thereunder.
"Company" shall have the meaning assigned to such
term in the first paragraph of this Agreement.
"Contracts" shall mean all contracts, agreements, or
binding commitments or arrangements, written or oral, by which
any of the Contributed Assets may be bound.
"Contributed Assets" shall mean the FCC Licenses and
the Station Assets.
"Convertible Note Agreement" shall mean that certain
Convertible Note Agreement, dated as of even date herewith between the Company
and SFX.
"Disclosure Schedule" shall mean the separate
Disclosure Schedule attached to this Agreement regarding certain
representations and warranties made by the Liberty Entities or SFX as further
described in Article V or Article VI of this Agreement.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
"FCC" shall have the meaning assigned to such term
in the recitals to this Agreement.
"FCC Licenses" shall mean the main transmitter
licenses for the Station together with each of the other
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consents, rights, licenses, permits and authorizations issued or granted by the
FCC for the operation of or used in connection with the ownership or operation
of the Station, together with any renewals or extensions thereof.
"Governmental Authority" shall mean a federal, state
or local court, legislature, governmental agency, commission or regulatory or
administrative authority or instrumentality.
"Law" shall mean applicable common law and any
statute, ordinance, code or other law, rule, permit, permit condition,
regulation, order, technical or other standard, requirement or procedure
enacted, adopted, promulgated, applied or followed by any Governmental
Authority or court.
"Lien" shall mean any security agreement or
financing statement filed with an appropriate Governmental Authority,
conditional sale or other title retention agreement, any lease, consignment or
bailment given for security purposes, any lien, mortgage, pledge, option,
encumbrance, adverse interest, constructive trust or other trust, claim,
attachment, exception to or defect in title or other ownership interest
(including, without limitation, reservations, rights of entry, possibilities of
reverter, encroachments, easements, rights of way, restrictive covenants,
leases and licenses) of any kind, which (i) creates or confers an interest in
property to secure payment or performance of a liability, obligation or claim,
or which retains or reserves such an interest for such purpose; (ii) grants to
any Person the right to purchase or otherwise acquire, or obligates any Person
to sell or otherwise dispose of, or otherwise results or may result in any
Person acquiring, any property or interest therein; (iii) restricts the
transfer of, or the exercise of any rights or the enjoyment of any benefits
arising by reason of ownership of, any property; or (iv) otherwise constitutes
an interest in or claim against property whether or not arising pursuant to any
Law, FCC License or Contract.
"Master Agreement" shall mean that certain Master
Richmond Station Group Agreement, dated as of even date herewith by and among
the Company, SFX and the other signatories party thereto.
"Permitted Liens" shall mean any Liens that do not
interfere materially with the ability to use, for the purpose currently being
used, the properties or assets subject thereto or affected thereby to the
extent granted by the Liberty Entities or SFX.
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"Person" shall mean an individual, corporation,
partnership, limited liability company, association, joint stock company,
Governmental Authority, business trust, unincorporated organization or other
legal entity.
"Purchase and Sale Agreement" shall mean that
certain Purchase and Sale Agreement, dated as of even date herewith by and
among the Company, EBF, Inc., EBF Partners and the other parties thereto.
"RCRA" shall mean the Resource Conservation and
Recovery Act, as amended.
"Real Estate Contracts" shall have the meaning
assigned to such term in Section 5.9 of this Agreement.
"SFX" shall mean SFX Broadcasting, Inc., a Delaware
corporation.
"Station" shall have the meaning assigned to such
term in the recitals to this Agreement.
"Station Assets" shall mean, with the exception of
the FCC Licenses, all assets, properties, rights, titles and privileges of
every kind, character and description, whether tangible, intangible, real,
personal or mixed, of whatever description and wherever located, used
exclusively in connection with the operation of the Station including, without
limitation, all additions, accessions, and substitutions made before the
Closing as permitted pursuant to the terms of this Agreement.
ARTICLE II
CONTRIBUTION
SECTION 2.1 Assignment and Contribution. (a)
Subject to FCC consent as provided in Section 3.1 hereof, immediately prior to
the Closing hereunder, the Liberty Entities and SFX shall enter into an
assignment and assumption agreement pursuant to which each of the Liberty
Entities shall assign to SFX and SFX shall accept and assume all of each
Liberty Entities' respective right, title, interest and obligations in and to
the Contributed Assets owned by it, free and clear of any and all Liens other
than Permitted Liens.
(b) Upon the terms and subject to the conditions
set forth in this Agreement, on the Closing Date, SFX shall
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contribute to the Company, and the Company shall accept from SFX the
Contributed Assets, free and clear of any and all Liens other than Permitted
Liens. In consideration for the Contributed Assets and together with the
conversion of the loans as contemplated under the Convertible Note Agreement
and SFX's other obligations under the Amended Operating Agreement, SFX's
Percentage Interest (as defined in the Amended Operating Agreement) in the
Company shall equal 96%.
SECTION 2.2 Payment of Taxes and Other Charges.
SFX shall pay, at the Closing or, if due thereafter, promptly when due, any and
all taxes (collectively, "Transfer Taxes") payable in connection with the
transfer of the Contributed Assets to the Company. Subject to the Company's
right of reasonable review and comment prior to filing, SFX shall prepare and
file any tax returns with respect to such Transfer Taxes.
ARTICLE III
CLOSING
SECTION 3.1 The Closing. The consummation of the
transactions contemplated herein (the "Closing") shall take place at the
offices of Paul, Hastings, Janofsky & Walker LLP, 399 Park Avenue, New York,
New York 10022, commencing at 9:00 a.m. local time concurrently with the
closing of the transactions contemplated under the Purchase and Sale Agreement.
Notwithstanding anything in this Agreement to the
contrary, the Closing shall not be consummated without prior FCC consent (the
"FCC Consents") with respect thereto having been obtained. It shall be a
condition precedent to the parties' obligation to consummate the Closing that
such consent shall have become a Final Order (defined below) without materially
adverse conditions. For purposes of this Agreement, a Final Order shall mean an
FCC consent or grant as to which the time within which any party in interest
other than the FCC may seek administrative or judicial reconsideration or
review of such consent or grant has expired and no petition for such
reconsideration or review has been timely filed with the FCC or with a court of
competent jurisdiction, and the normal time within which the FCC may review
such consent or grant on its own motion has expired and the FCC has not
undertaken such review. The parties shall, within ten (10) business days
following the date of this Agreement, file an appropriate application with the
FCC
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seeking its consent to the transactions contemplated hereunder and shall use
their best efforts to obtain such consent and a Final Order thereof promptly.
If the Closing would fall after the period permitted by such consent, the
parties shall file appropriate requests with the FCC for an extension of time
within which to complete the Closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby makes the following
representations and warranties to the Liberty Entities and SFX, each of which
is true and correct on the date hereof, shall be unaffected by any notice to
SFX other than in the Disclosure Schedule and shall survive the Closing to the
extent provided in the Master Agreement. Such representations and warranties
are subject to, and qualified by, any fact or facts disclosed in the
appropriate section of the Disclosure Schedule.
SECTION 4.1 Organization and Standing. The Company
is a limited liability company duly organized, validly existing and in good
standing under the laws of the Commonwealth of Virginia, and, as of the date
hereof, the Company is duly qualified to do business and is in good standing in
the Commonwealth of Virginia.
SECTION 4.2 Authorization and Binding Obligation.
Subject to obtaining FCC consent as set forth in Section 3.1 hereof, the
Company has all necessary power and authority to enter into and perform this
Agreement and the transactions contemplated hereby, and the Company's
execution, delivery and performance of this Agreement and the transactions
contemplated hereby have been duly and validly authorized by all necessary
action on its part. This Agreement has been duly executed and delivered by the
Company and this Agreement constitutes, and the other agreements to be executed
in connection herewith will constitute, the valid and binding obligation of the
Company, enforceable in accordance with their terms, except as limited by laws
affecting creditors' rights or equitable principles generally.
SECTION 4.3 Litigation. There is no litigation,
administrative, arbitration or other proceeding, or petition, complaint or
investigation before any court or governmental body, pending against the
Company that would adversely affect the Company's ability to perform its
obligations pursuant to this Agreement or the agreements to be executed in
connection herewith.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE LIBERTY ENTITIES
The Liberty Entities hereby jointly (other than with
respect to Sections 5.1, 5.2, 5.3 and 5.5 which are made severally and not
jointly) make the following representations and warranties to the Company, each
of which is true and correct on the date hereof. Such representations and
warranties are subject to, and qualified by, any fact or facts disclosed in the
appropriate section of the Disclosure Schedule.
SECTION 5.1 Organization and Standing. (a) Liberty
1 is a corporation duly organized, validly existing and in good standing under
the laws of Delaware, and (b) Liberty 2 is a corporation duly organized,
validly existing and in good standing under the laws of Maryland and as of the
date hereof, Liberty 2 is duly qualified to do business and is in good standing
in the Commonwealth of Virginia.
SECTION 5.2 Authorization and Binding Obligation.
Subject to obtaining FCC consent as set forth in Section 3.1 hereof, each of
the Liberty Entities has all necessary power and authority to enter into and
perform its obligations under this Agreement and the transactions contemplated
hereby and the execution, delivery and performance of this Agreement by each of
the Liberty Entities, and the transactions contemplated hereby, have been duly
and validly authorized by all necessary action on the part of each of them.
This Agreement has been duly executed and delivered by each of the Liberty
Entities and this Agreement and the agreements to be executed in connection
herewith will constitute the valid and binding obligation of the Liberty
Entities enforceable in accordance with their terms, except as limited by laws
affecting the enforcement of creditor's rights or equitable principles
generally.
SECTION 5.3 Absence of Conflicting Agreements or
Required Consents. Except as set forth in Section 5.3 of the Disclosure
Schedule and except as set forth in Section 3.1 hereof, the execution, delivery
and performance of this Agreement by the Liberty Entities: (i) does not require
the consent of any third party; (ii) will not violate any applicable law,
judgment, order, injunction, decree, rule, regulation or ruling of any
governmental authority to which either of the Liberty Entities is a party or by
which either of them or the Contributed Assets is or are bound; (iii) will
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not, either alone or with the giving of notice or the passage of time, or both,
conflict with, constitute grounds for termination of or result in a breach of
the terms, conditions or provisions of, or constitute a default under, any
contract, agreement, instrument, license or permit to which either of the
Liberty Entities or the Contributed Assets is or are now subject; and (iv) will
not result in the creation of any Lien, charge or encumbrance on any of the
Contributed Assets.
SECTION 5.4 Litigation. There is no litigation,
administrative, arbitration or other proceeding, or petition, complaint or
investigation before any court or governmental body, pending against either of
the Liberty Entities that would adversely affect the ability of either of them
to perform its obligations pursuant to this Agreement or the agreements to be
executed in connection herewith.
SECTION 5.5 Title to Contributed Assets. Except as
set forth in Section 5.5 of the Disclosure Schedule, (a) Liberty 1 has good,
valid and marketable title to, or other legal right to use, all the FCC
Licenses, and (b) Liberty 2 has good, valid and marketable title to, or other
legal right to use all the Station Assets, in both cases free and clear of any
Lien other than Permitted Liens.
SECTION 5.6 Government Authorizations.
(a) Section 5.6 of the Disclosure Schedule contains
a true and complete list of the FCC Licenses and other material licenses,
permits or other authorizations from governmental and regulatory authorities
which are necessary for the lawful conduct of the business and operations of
the Station in the manner and to the full extent they are presently conducted.
Liberty 1 is the authorized legal holder of the FCC Licenses and other
licenses, permits and authorizations listed in said Section 5.6, none of which
is subject to any restrictions or condition which would limit in any respect
the full operation of the Station as now operated.
(b) Except as set forth in said Section 5.6 of the
Disclosure Schedule, there are no applications, complaints or proceedings
pending (and as of the Closing, material applications, complaints or
proceedings) or, to the best knowledge of either of the Liberty Entities,
threatened as of the date hereof by or before the FCC relating to the business
or operations of the Station other than applications, complaints or proceedings
which generally affect the broadcasting industry. The FCC Licenses listed in
said Section 5.6 are in good standing, are in full force and effect and are
unimpaired, and as of the Closing are unimpaired in
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any material respects, by any act or omission of Liberty 1 or any of its
respective officers, directors or employees; and the operation of the Station
is in accordance with the FCC Licenses. No proceedings are pending or, to the
knowledge of either of the Liberty Entities, are threatened with respect to the
FCC Licenses which may result in the revocation, adverse modification,
non-renewal or suspension of any of the FCC Licenses, the denial of any pending
applications for the Station, the issuance of any cease and desist order
against the Station, the imposition of any administrative sanctions by the FCC
with respect to the FCC Licenses which as of the date of this Agreement may
have an adverse effect on or which as of the Closing may have a material
adverse effect on the Company's ability to continue to operate the Station as
it is currently operated. Liberty 1 knows of no fact that would reasonably
preclude the FCC Licenses that are renewable in the ordinary course from being
renewed in the ordinary course. All material reports, forms and statements
required to be filed by Liberty 1 with the FCC with respect to the Station
since the grant of the last renewal of the FCC Licenses have been filed and are
substantially complete and accurate. Liberty 1 knows of no facts which, under
the Communications Act, or the existing rules and regulations of the FCC, would
disqualify Liberty 1 as an assignor of the FCC Licenses.
SECTION 5.7 Compliance with FCC Regulations. The
operation of the Station is and all of the Contributed Assets are in compliance
in all material respects with (i) all applicable engineering standards required
to be met under applicable FCC rules and (ii) all other applicable rules,
regulations, requirements and policies of the FCC, including, but not limited
to, ANSI Radiation Standards C95.1 - 1982 to the extent required to be met
under applicable FCC rules and regulations; and there are no existing claims
known to the Liberty Entities to the contrary.
SECTION 5.8 Taxes. Except as set forth in Section
5.8 of the Disclosure Schedule, the Liberty Entities have filed with respect to
the Station all applicable federal, state, local and foreign income, franchise,
sales, use, property, excise, payroll and other tax returns required by law and
has paid in full all taxes, estimated taxes, interest, assessments, and
penalties due and payable. All returns and forms which have been filed have
been true and correct in all material respects and no tax or other payment in a
material amount other than as shown on such returns and forms are required to
be paid and have been paid by either of the Liberty Entities. There are no
present disputes as to taxes of any nature payable by either of the Liberty
Entities
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relating to the Station which in any event could materially adversely affect
any of the Contributed Assets or the operation of the Station.
SECTION 5.9 Real Property.
(a) Section 5.9 to the Disclosure Schedule contains
a complete and accurate list of all real property constituting the Contributed
Assets and used by the Station and all Contracts relating exclusively to the
tower, transmitter, studio site and offices of the Station (collectively the
"Real Estate Contracts") and a summary of the applicable leases.
(b) The Real Estate Contracts listed in Section 5.9
constitute valid and binding obligations of the respective Liberty Entity (as
set forth therein) and, to the best knowledge of the Liberty Entities, of all
other persons purported to be parties thereto and are in full force and effect
as of the date hereof and will on the Closing Date constitute valid and binding
obligations of SFX and, to the best knowledge of each of the Liberty Entities,
of all other persons purported to be parties thereto and shall be in full force
and effect. Neither of the Liberty Entities is in default under any of such
Real Estate Contracts nor has either of them received or given written notice
of any default thereunder from or to any of the other parties thereto.
SECTION 5.10 Contracts. Section 5.10 of the
Disclosure Schedule lists all Contracts as of the date of this Agreement,
except (A) Contracts entered into in the ordinary course of business (i) of
less than three (3) months duration and which impose monetary obligations of
less than Five Thousand Dollars ($5,000) each or Fifty Thousand Dollars
($50,000) in the aggregate, (ii) for the sale or sponsorship of broadcast time
on the Station for cash, for which no prepayment has been received and with not
more than twelve (12) months remaining in their terms, or (iii) Contracts which
are currently scheduled to expire before the Closing Date and (B) time sales
agreements which (i) are on the Liberty Entities' standard form, (ii) are
terminable by the Liberty Entities within thirteen (13) weeks or less notice
without penalty, and (iii) provide for annual payments of fifty thousands
dollars ($50,000) or less.
SECTION 5.11 Status of Contracts. Except as noted
in Section 5.11 of the Disclosure Schedule, each of the Liberty Entities has
delivered to the Company true and complete copies of all Contracts, including
any and all
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amendments and other modifications to such Contracts. All Contracts are valid,
binding and enforceable by the Liberty Entity party thereto in accordance with
their respective terms, except as limited by laws affecting creditors' rights
or equitable principles generally. Each of the Liberty Entities has complied in
all material respects with all Contracts to which it is a party and is not in
default beyond any applicable grace periods under any of the Contracts, and no
other contracting party is in default under any of the Contracts.
SECTION 5.12 Environmental Matters. Neither of the
Liberty Entities has unlawfully disposed of any hazardous waste or hazardous
substance including Polychlorinated Byphenyls ("PCBs") in a manner which has
caused, or could cause, the Company to incur any liability under applicable law
in connection therewith; and the Liberty Entities warrant that the technical
equipment included in the Contributed Assets do not contain any PCBs which are
required by law to be removed and if any equipment does contain PCBs, that such
equipment is stored and maintained in compliance with applicable law. Each of
the Liberty Entities has complied in all material respects with all federal,
state and local environmental laws, rules and regulations applicable to the
Station and its operations, including but not limited to the FCC's guidelines
regarding RF radiation. To the best of the Liberty Entities' knowledge, no
hazardous waste has been disposed of by any other person, on the real estate
occupied by the Station or its transmitters. As used herein, the term
"hazardous waste" shall mean as defined in the RCRA and in the equivalent state
statute under the law of the state in which such real estate is located.
SECTION 5.13 Copyrights, Trademarks and Similar
Rights.
(a) Except for the FCC Licenses, Section 5.13 of
the Disclosure Schedule is a true and complete list of all copyrights,
trademarks, trade names, licenses, patents, permits, jingles and other similar
intangible property rights and interests applied for, issued to or owned by
either of the Liberty Entities or under which it is a licensee or franchisee
and used exclusively in the conduct of the business and operations of the
Station.
(b) All of such rights and interests are issued to
or owned by the Liberty Entity indicated on the Disclosure Schedule or if
licensed or franchised to either of the Liberty Entities to the best of such
Liberty Entity's knowledge, are valid and in good standing and uncontested. The
Liberty Entities have delivered or made available to the Company
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copies of all documents establishing such rights, licenses or other authority.
Neither of the Liberty Entities has received written notice nor has any
knowledge of any infringements or unlawful use of such property. The properties
listed in Section 5.13 of the Disclosure Schedule include all such properties
necessary to conduct in all respects the business and operations of the Station
as now conducted.
SECTION 5.14 Personnel Information.
(a) Section 5.14 of the Disclosure Schedule
contains a true and complete list of all persons employed exclusively by the
Station in connection with the operation of the Station, including a
description of material compensation arrangements (other than employee benefit
plans set forth in Section 5.14 of the Disclosure Schedule) and a list of other
terms of any and all agreements affecting such persons. Neither of the Liberty
Entities has received notification that any of the current key employees listed
in Section 5.14 of the Disclosure Schedule presently plan to terminate their
employment, whether by reason of the transactions contemplated hereby or
otherwise and the applicable Liberty Entity shall immediately notify the
Company upon receipt of any such notice.
(b) The Station is not subject to any Contract with
any labor organization, and the Station has not agreed to recognize any union
or other collective bargaining unit, nor has any union or other collective
bargaining unit been certified as representing any of their employees.
(c) Except as disclosed in Section 5.14 of the
Disclosure Schedule, each of the Liberty Entities has, with respect to the
Station, complied in all material respects with all laws relating to the
employment of labor, including, without limitation, ERISA and those laws
relating to wages, hours, collective bargaining, unemployment insurance,
workers' compensation, equal employment opportunity and payment and withholding
of taxes.
SECTION 5.15 Litigation. Except as set forth in
Section 5.15 of the Disclosure Schedule, the Station is not subject to any
judgment, award, order, writ, injunction, arbitration decision or decree
materially adversely affecting the conduct of the business of the Station or
the Contributed Assets, and to the best knowledge of each of the Liberty
Entities, there is no litigation or proceeding threatened against either of
them or the Station in any federal, state or local court, or before any
administrative agency or arbitrator
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(including, without limitation, any proceeding which seeks the forfeiture of,
or opposes the renewal of, the FCC Licenses), or before any other tribunal duly
authorized to resolve disputes, which would reasonably be expected to have any
material adverse effect upon the business, property, assets or condition
(financial or otherwise) of the Station or which seeks to enjoin or prohibit,
or otherwise questions the validity of, any action taken or to be taken
pursuant to or in connection with this Agreement. In particular, but without
limiting the generality of the foregoing, except as set forth in Section 5.6 of
the Disclosure Schedule, there are no applications, complaints or proceedings
pending or to the best knowledge of each of the Liberty Entities threatened
before the FCC or any other governmental organization with respect to the
business or operations of the Station other than applications, complaints or
proceedings which affect the broadcasting industry generally.
SECTION 5.16 Compliance With Laws. Except as set
forth in Section 5.16 of the Disclosure Schedule, neither of the Liberty
Entities has received any notice asserting any non-compliance by it in
connection with the business or operation of the Station with any applicable
statute, rule or regulation, federal, state or local. Neither of the Liberty
Entities nor the Station is in default with respect to any judgment, order,
injunction or decree of any court, administrative agency or other Governmental
Authority or any other tribunal duly authorized to resolve disputes in any
respect material to the transactions contemplated hereby. Each of the Liberty
Entities and the Station are in compliance in all material respects with all
laws, regulations and governmental orders applicable to the conduct of the
business and operations of the Station, the failure to comply with which would
have a material adverse effect on the business, operations or financial
condition of the Station, and the present use of the Contributed Assets do not
violate any of such laws, regulations or orders (other than immaterial
violations).
SECTION 5.17 Employee Benefit Plans. Section 5.17
of the Disclosure Schedule contains a true and complete list as of the date of
this Agreement of all employee benefit plans applicable to the employees at the
Station. The Station does not maintain any other employee benefit plan as the
term is defined in Section 3 of the Employee Retirement Income Security Act of
1984, as amended, applicable to the employees of the Station.
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SECTION 5.18 Accuracy of Information. No written
statements made by either of the Liberty Entities herein and no information
provided by either of the Liberty Entities herein or in the documents,
instruments or other written communications made or delivered directly by
either of the Liberty Entities to the Company covering the contribution of the
Contributed Assets contains any untrue statement of a material fact or omits a
material fact necessary to make the statements contained therein or herein not
misleading, and there is no fact known to either of the Liberty Entities which
relates to any information contained in any such written document, instrument
or communications which the applicable Liberty Entity has not disclosed to the
Company in writing which materially affects adversely the Station or the
Contributed Assets.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF SFX
SFX hereby makes the following representations and
warranties to the Company, each of which shall be true and correct on the
Closing Date, and SFX makes the representations and warranties set forth in
Sections 6.1, 6.2, 6.3 and 6.4, each of which is true and correct on the
Closing Date and on the date hereof). Such representations and warranties are
subject to, and qualified by, any fact or facts disclosed in the appropriate
section of the Disclosure Schedule.
SECTION 6.1 Organization and Standing. SFX is a
corporation duly organized, validly existing and in good standing under the
laws of Delaware.
SECTION 6.2 Authorization and Binding Obligation.
Subject to obtaining FCC consent as set forth in Section 3.1 hereof, SFX has
all necessary power and authority to enter into and perform its obligations
under this Agreement and the transactions contemplated hereby and SFX's
execution, delivery and performance of this Agreement and the transactions
contemplated hereby, have been duly and validly authorized by all necessary
action on its part. This Agreement has been duly executed and delivered by SFX
and this Agreement and the agreements to be executed in connection herewith
will constitute the valid and binding obligation of SFX enforceable in
accordance with their terms, except as limited by laws affecting the
enforcement of creditor's rights or equitable principles generally.
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SECTION 6.3 Absence of Conflicting Agreements or
Required Consents. Except as set forth in Section 5.3 of the Disclosure
Schedule and except as set forth in Section 3.1 hereof, the execution, delivery
and performance of this Agreement by SFX: (i) does not require the consent of
any third party; (ii) will not violate any applicable law, judgment, order,
injunction, decree, rule, regulation or ruling of any governmental authority to
which SFX is a party or by which it or the Contributed Assets are bound; (iii)
will not, either alone or with the giving of notice or the passage of time, or
both, conflict with, constitute grounds for termination of or result in a
breach of the terms, conditions or provisions of, or constitute a default
under, any contract, agreement, instrument, license or permit to which SFX or
the Contributed Assets are now subject; and (iv) will not result in the
creation of any Lien, charge or encumbrance on any of the Contributed Assets.
SECTION 6.4 Litigation. There is no litigation,
administrative, arbitration or other proceeding, or petition, complaint or
investigation before any court or governmental body, pending against SFX that
would adversely affect its ability to perform its obligations pursuant to this
Agreement or the agreements to be executed in connection herewith.
SECTION 6.5 Title to Contributed Assets. On the
Closing Date, except as set forth in Section 5.5 of the Disclosure Schedule,
SFX will have (i) good, valid and marketable title to, or other legal right to
use, all the Station Assets, free and clear of any Lien other than Permitted
Liens, and (ii) the legal right to assign to the Company all the FCC Licenses,
free and clear of any Lien other than Permitted Liens.
SECTION 6.6 Government Authorizations.
(a) Section 5.6 of the Disclosure Schedule contains
a true and complete list of the FCC Licenses and other material licenses,
permits or other authorizations from governmental and regulatory authorities
which are necessary for the lawful conduct of the business and operations of
the Station in the manner and to the full extent they are presently conducted.
As of the Closing Date, SFX will be the authorized legal holder of the FCC
Licenses and other licenses, permits and authorizations listed in said Section
5.6, none of which is subject to any restrictions or condition which would
limit in any respect the full operation of the Station as now operated.
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(b) Except as set forth in Section 5.6 of the
Disclosure Schedule, there are no applications, complaints or proceedings
pending or, to the best of SFX's knowledge, threatened as of the date hereof by
or before the FCC relating to the business or operations of the Station other
than applications, complaints or proceedings which generally affect the
broadcasting industry. The FCC Licenses listed in said Section 5.6 are in good
standing, are in full force and effect and are unimpaired by any act or
omission of SFX or any of its respective officers, directors or employees; and
the operation of the Station is in accordance with the FCC Licenses. No
proceedings are pending or, to the knowledge of SFX, are threatened with
respect to the FCC Licenses which may result in the revocation, adverse
modification, non-renewal or suspension of any of the FCC Licenses, the denial
of any pending applications for the Station, the issuance of any cease and
desist order against the Station, the imposition of any administrative
sanctions by the FCC with respect to the FCC Licenses or which may adversely
affect the Company's ability to continue to operate the Station as it is
currently operated. SFX has no reason to believe that the FCC Licenses that are
normally renewable in the ordinary course will not be renewed in their ordinary
course. All material reports, forms and statements required to be filed by SFX
or any affiliate thereof with the FCC with respect to the Station since the
grant of the last renewal of the FCC Licenses have been filed and are
substantially complete and accurate. Subject to obtaining the required FCC
consents as contemplated by Section 3.1 hereof and subject to the assignment of
the Contributed Assets as contemplated in Section 2.1 hereof, there are no
facts which, under the Communications Act, or the existing rules and
regulations of the FCC, would disqualify SFX as an assignor of the Contributed
Assets.
SECTION 6.7 Compliance with FCC Regulations. The
operation of the Station and all of the Contributed Assets are in compliance in
all material respects with (i) all applicable engineering standards required to
be met under applicable FCC rules and (ii) all other applicable rules,
regulations, requirements and policies of the FCC, including, but not limited
to, ANSI Radiation Standards C95.1 - 1982 to the extent required to be met
under applicable FCC rules and regulations; and there are no existing claims
known to SFX to the contrary.
SECTION 6.8 Taxes. Except as set forth in Section
5.8 of the Disclosure Schedule, SFX or an applicable affiliate thereof has
filed with respect to the Station all applicable federal, state, local and
foreign income, franchise, sales,
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use, property, excise, payroll and other tax returns required by law and has
paid in full all taxes, estimated taxes, interest, assessments, and penalties
due and payable. All returns and forms which have been filed have been true and
correct in all material respects and no tax or other payment in a material
amount other than as shown on such returns and forms are required to be paid
and have been paid by SFX or its affiliates. There are no present disputes as
to taxes of any nature payable by SFX relating to the Station which in any
event could materially adversely affect any of the Contributed Assets or the
operation of the Station.
SECTION 6.9 Real Property.
(a) Section 5.9 to the Disclosure Schedule contains
a complete and accurate list of all real property constituting the Contributed
Assets and used by the Station and all Contracts relating exclusively to the
tower, transmitter, studio site and offices of the Station (collectively the
"Real Estate Contracts") and a summary of the applicable leases.
(b) On the Closing Date, the Real Estate Contracts
listed in Section 5.9 constitute valid and binding obligations of SFX and, to
the best of SFX's knowledge, of all other persons purported to be parties
thereto and constitute valid and binding obligations of SFX and, to the best of
SFX's knowledge, of all other persons purported to be parties thereto and shall
be in full force and effect. SFX is not in default under any of such Real
Estate Contracts nor has it received or given written notice of any default
thereunder from or to any of the other parties thereto.
SECTION 6.10 Contracts. Section 5.10 of the
Disclosure Schedule lists all Contracts as of the date of this Agreement,
except (A) Contracts entered into in the ordinary course of business (i) of
less than three (3) months duration and which impose monetary obligations of
less than Five Thousand Dollars ($5,000) each or Fifty Thousand Dollars
($50,000) in the aggregate, (ii) for the sale or sponsorship of broadcast time
on the Station for cash, for which no prepayment has been received and with not
more than twelve (12) months remaining in their terms, or (iii) Contracts which
are currently scheduled to expire before the Closing Date and (B) time sales
agreements which (i) are on SFX's (or any of its affiliates') standard form,
(ii) are terminable by SFX or any of its affiliates within thirteen (13) weeks
or less notice without penalty, and (iii) provide for annual payments of fifty
thousands dollars ($50,000) or less.
-17-
<PAGE>
SECTION 6.11 Status of Contracts. Except as noted
in Section 5.11 of the Disclosure Schedule, SFX (or an affiliate thereof) has
delivered to the Company true and complete copies of all Contracts, including
any and all amendments and other modifications to such Contracts. All Contracts
are valid, binding and enforceable by SFX in accordance with their respective
terms, except as limited by laws affecting creditors' rights or equitable
principles generally. SFX and its affiliates have complied in all material
respects with all Contracts and are not in default beyond any applicable grace
periods under any of the Contracts, and no other contracting party is in
default under any of the Contracts.
SECTION 6.12 Environmental Matters. Neither SFX
nor any affiliate thereof has in connection with the operation of the Station
unlawfully disposed of any hazardous waste or hazardous substance including
Polychlorinated Byphenyls ("PCBs") in a manner which has caused, or could
cause, the Company to incur any liability under applicable law in connection
therewith; and SFX warrants that the technical equipment included in the
Contributed Assets do not contain any PCBs which are required by law to be
removed and if any equipment does contain PCBs, that such equipment is stored
and maintained in compliance with applicable law. SFX has complied in all
material respects with all federal, state and local environmental laws, rules
and regulations applicable to the Station and its operations, including but not
limited to the FCC's guidelines regarding RF radiation. No hazardous waste has
been disposed of by SFX, and to the best of SFX's knowledge, no hazardous waste
has been disposed of by any other person, on the real estate occupied by the
Station or its transmitters. As used herein, the term "hazardous waste" shall
mean as defined in the RCRA and in the equivalent state statute under the law
of the state in which such real estate is located.
SECTION 6.13 Copyrights, Trademarks and Similar
Rights.
(a) Except for the FCC Licenses, Section 5.13 of
the Disclosure Schedule is a true and complete list of all copyrights,
trademarks, trade names, licenses, patents, permits, jingles and other similar
intangible property rights and interests applied for, issued to or owned by SFX
or under which such SFX is a licensee or franchisee and used exclusively in the
conduct of the business and operations of the Station.
-18-
<PAGE>
(b) All of such rights and interests are issued to
or owned by SFX or if licensed or franchised to SFX to the best of SFX's
knowledge, are valid and in good standing and uncontested. SFX has delivered or
made available to the Company copies of all documents establishing such rights,
licenses or other authority. SFX has received no written notice and has no
knowledge of any infringements or unlawful use of such property. The properties
listed in Section 5.13 of the Disclosure Schedule include all such properties
necessary to conduct in all respects the business and operations of the Station
as now conducted.
SECTION 6.14 Personnel Information.
(a) Section 5.14 of the Disclosure Schedule
contains a true and complete list of all persons employed exclusively by the
Station in connection with the operation of the Station, including a
description of material compensation arrangements (other than employee benefit
plans set forth in Section 5.14 of the Disclosure Schedule) and a list of other
terms of any and all agreements affecting such persons. SFX has not received
notification that any of the current key employees listed in Section 5.14 of
the Disclosure Schedule presently plan to terminate their employment, whether
by reason of the transactions contemplated hereby or otherwise and SFX shall
immediately notify the Company upon receipt of any such notice.
(b) The Station is not subject to any Contract with
any labor organization, and the Station has not agreed to recognize any union
or other collective bargaining unit, nor has any union or other collective
bargaining unit been certified as representing any of their employees.
(c) Except as disclosed in Section 5.14 of the
Disclosure Schedule, SFX has, with respect to the Station, complied in all
material respects with all laws relating to the employment of labor, including,
without limitation, ERISA and those laws relating to wages, hours, collective
bargaining, unemployment insurance, workers' compensation, equal employment
opportunity and payment and withholding of taxes.
SECTION 6.15 Litigation. Except as set forth in
Section 5.15 of the Disclosure Schedule, the Station is not subject to any
judgment, award, order, writ, injunction, arbitration decision or decree
materially adversely affecting the conduct of the business of the Station or
the Contributed Assets, and to the best of SFX's knowledge, there is no
-19-
<PAGE>
litigation or proceeding threatened against SFX or the Station in any federal,
state or local court, or before any administrative agency or arbitrator
(including, without limitation, any proceeding which seeks the forfeiture of,
or opposes the renewal of, the FCC Licenses), or before any other tribunal duly
authorized to resolve disputes, which would reasonably be expected to have any
material adverse effect upon the business, property, assets or condition
(financial or otherwise) of the Station or which seeks to enjoin or prohibit,
or otherwise questions the validity of, any action taken or to be taken
pursuant to or in connection with this Agreement. In particular, but without
limiting the generality of the foregoing, except as set forth in Section 5.6 of
the Disclosure Schedule, there are no applications, complaints or proceedings
pending or to the best of SFX's knowledge threatened before the FCC or any
other governmental organization with respect to the business or operations of
the Station other than applications, complaints or proceedings which affect the
broadcasting industry generally.
SECTION 6.16 Compliance With Laws. Except as set
forth in Section 5.16 of the Disclosure Schedule, SFX has not received any
notice asserting any non-compliance by it in connection with the business or
operation of the Station with any applicable statute, rule or regulation,
federal, state or local. Neither SFX nor the Station is in default with respect
to any judgment, order, injunction or decree of any court, administrative
agency or other Governmental Authority or any other tribunal duly authorized to
resolve disputes in any respect material to the transactions contemplated
hereby. SFX and the Station are in compliance in all material respects with all
laws, regulations and governmental orders applicable to the conduct of the
business and operations of the Station, the failure to comply with which would
have a material adverse effect on the business, operations or financial
condition of the Station, and the present use of the Contributed Assets do not
violate any of such laws, regulations or orders (other than immaterial
violations).
SECTION 6.17 Employee Benefit Plans. Section 5.17
of the Disclosure Schedule contains a true and complete list as of the date of
this Agreement of all employee benefit plans applicable to the employees at the
Station. The Station does not maintain any other employee benefit plan as the
term is defined in Section 3 of the Employee Retirement Income Security Act of
1984, as amended, applicable to the employees of the Station.
-20-
<PAGE>
SECTION 6.18 Accuracy of Information. No written
statements made by SFX herein and no information provided by SFX herein or in
the documents, instruments or other written communications made or delivered
directly by SFX to the Company covering the contribution of the Contributed
Assets contains any untrue statement of a material fact or omits a material
fact necessary to make the statements contained therein or herein not
misleading, and there is no fact known to SFX which relates to any information
contained in any such written document, instrument or communications which SFX
has not disclosed to the Company in writing which materially affects adversely
the Station or the Contributed Assets.
ARTICLE VII
CONDITIONS TO CLOSING
SECTION 7.1 SFX's Condition to Closing. The
obligations of SFX hereunder are, at SFX's option, subject to satisfaction, on
the Closing Date, of each of the following conditions:
a. The representations and warranties of the Company set
forth in Article IV hereof being true and correct in all material respects on
the Closing Date.
b. The consummation of all of the transactions
contemplated by the Purchase and Sale Agreement shall have occurred or shall
occur contemporaneously with the Closing of the transactions contemplated by
this Agreement.
c. The FCC Consents shall have become a Final Order.
SECTION 7.2 The Company's Conditions to Closing. The
obligations of the Company hereunder are, at the Company's option, subject to
satisfaction, on the Closing Date, of each of the following conditions:
a. The representations and warranties of SFX set forth
in Article VI hereof are true and correct in all material respects; and
b. SFX shall have delivered the Contributed Assets to
the Company, free and clear of any and all liens and encumbrances.
-21-
<PAGE>
ARTICLE VIII
DOCUMENTS TO BE DELIVERED AT CLOSING
SECTION 8.1 SFX's Documents. At the Closing, SFX shall
deliver to the Company the following:
(a) With respect to the Contributed Assets, SFX shall
deliver an assignment and assumption agreement to effect the assignment of the
Contributed Assets to the Company, free and clear of any and all Liens other
than Permitted Liens.
(b) Certified resolutions of the Board of Directors
of SFX approving the execution and delivery of this Agreement;
(c) Governmental certificates showing that SFX is
in good standing in the Commonwealth of Virginia dated not
more than five (5) days before the Closing Date;
(d) Articles of Incorporation and Bylaws of SFX
certified by the secretary of SFX as of the Closing Date; and
(e) Such additional information and materials as
the Company shall have reasonably requested.
SECTION 8.2 The Company's Documents. At the
Closing, the Company shall deliver or cause to be delivered to SFX the
following:
(a) An assumption agreement assuming all of the
liabilities and obligations relating to the Contributed
Assets, effective as of the Closing Date.
(b) Governmental certificates from the Commonwealth
of Virginia showing that the Company is duly organized and in good standing in
the Commonwealth of Virginia dated not more than five (5) days before the
Closing Date;
(c) Certified resolutions of each of the members of
the Company approving the execution and delivery of this Agreement and each of
the other documents and agreements referred to herein and authorizing the
consummation of the transactions contemplated hereby and thereby;
(d) Articles of Organization and the Amended
Operating Agreement certified by the manager of the Company as
of the Closing Date; and
-22-
<PAGE>
(e) Such additional information and materials as
SFX shall have reasonably requested.
ARTICLE IX
OTHER PROVISIONS
SECTION 9.1 Severability. If any part or any
provision of this Agreement shall be invalid or unenforceable under applicable
law, said part or provisions shall be ineffective to the extent of such
invalidity or unenforceability only, without in any way affecting the remaining
provisions of this Agreement which shall be construed as if such invalid parts
or provisions had not been inserted, and such invalid or unenforceable
provisions shall become and be immediately amended and reformed to include only
the portions thereof as are enforceable by the court or such other body having
jurisdiction of this Agreement; and the parties agree that such portions as so
amended and reformed shall be valid and binding as though any wholly invalid or
unenforceable portion had not been included herein.
SECTION 9.2 Benefit and Assignment. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns. No party may voluntarily or
involuntarily assign its interest under this Agreement without the prior
written consent of the other party; provided, the Liberty Entities shall have
the right, subject to applicable FCC requirements, to assign any and all of
their respective rights in this Agreement or any of the Contributed Assets to
any of their affiliates without the prior written consent of the Company so
long as SFX, on the Closing Date, shall contribute the Contributed Assets to
the Company as contemplated in this Agreement.
SECTION 9.3 Entire Agreement. This Agreement and
the Schedules hereto embody the entire agreement and understanding of the
parties hereto and supersede any and all prior agreements, arrangements and
understandings relating to the matters provided for in this Agreement other
than the Master Agreement. No amendment, waiver of compliance with any
provision or condition hereof or consent pursuant to this Agreement shall be
effective unless evidenced by an instrument in writing signed by the party
against whom enforcement of any waiver, amendment, change, extension or
discharge is sought.
-23-
<PAGE>
SECTION 9.4 Headings. The headings set forth in
this Agreement are for convenience only and will not control or affect the
meaning or construction of the provisions of this Agreement.
SECTION 9.5 Governing Law. The construction and
performance of this Agreement shall be governed by the laws of the Commonwealth
of Virginia without giving effect to the choice of law provisions thereof.
SECTION 9.6 Notices. Any notice, demand or request
required or permitted to be given under the provisions of this Agreement shall
be in writing and shall be deemed to have been duly delivered and received on
the date of personal delivery or on the date of receipt, if mailed by
registered or certified mail, postage prepaid and return receipt requested, or
on the date of a stamped receipt, if sent by an overnight delivery service, and
shall be addressed to the following addresses, or to such other address as any
party may request:
To the SFX Broadcasting, Inc.
Liberty 150 East 58th Street
Entities New York, NY 10155
or SFX: Attn: Howard Tytel
To the ABS Communications, L.L.C.
Company: 300 Arboretum Place
Suite 590
Richmond, VA 23236
Attn: Kenneth A. Brown
SECTION 9.7 Counterparts. This Agreement may be
executed in one or more counterparts, each of which will be deemed an original
and all of which together shall constitute one and the same instrument.
SECTION 9.8 Survival of Representations and
Warranties; Indemnification. The survival period of the representations and
warranties set forth in this Agreement and the indemnification obligations of
SFX under this Agreement shall be set forth in, and controlled by, the Master
Agreement.
-24-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date and year first above written.
ABS COMMUNICATIONS, L.L.C.
By: /s/ Ken A. Brown
-----------------------------------
Name: Ken A. Brown
Title:
LIBERTY ACQUISITION SUBSIDIARY
CORPORATION
By: /s/ Howard J. Tytel
------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
LIBERTY BROADCASTING OF MARYLAND, II
INCORPORATED
By: /s/ Howard J. Tytel
------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
SFX BROADCASTING, INC.
By: /s/ Howard J. Tytel
-------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
-25-
<PAGE>
Exhibit 11.1
Statement Regarding Calculation of Per Share Earnings
<TABLE>
<CAPTION>
Years Ended December 31,
(dollars in thousands, except per share amounts)
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Primary and Fully Diluted:
Average shares outstanding ........................................ 7,563,600 6,595,728 5,749,999
Net effect of dilutive stock options - based on the
treasury stock method using average market price.................. -- -- 42,386
Total.............................................................. 7,563,600 6,595,728 5,792,385
============= ============= ===========
Net (loss) income $ (50,852) $ (4,396) $ 1,836
Less: preferred stock dividends and accretion...................... 6,061 291 348
Net (loss) income attributable to common shareholders............. $ (56,913) $ (4,687) $ 1,488
============= ============= ==========
Net (loss) income per common share................................. $ (7.52) $ (0.71) $ 0.26
============= ============= ===========
</TABLE>
<PAGE>
SUBSIDIARIES OF THE REGISTRANT
STATE OF
NAME INCORPORATION
- --------------------------------------------------------- --------------------
1. SFX Broadcasting of the Southwest, Inc. Delaware
2. SFX Broadcasting of Texas (KRLD) Licensee, Inc. Delaware
3. SFX Broadcasting of Texas (TSN) Licensee, Inc. Delaware
4. KODA-FM Licensee, Inc. Delaware
5. KJQY-FM Licensee, Inc. Delaware
6. SFX Broadcasting of Texas (KTCK), Inc Delaware
7. SFX Broadcasting of Texas (KTCK) Licensee, Inc. Delaware
8. SFX Broadcasting of the Southeast, Inc. Delaware
9. SFX Broadcasting of South Carolina (WMYI), Inc. Delaware
10. SFX Broadcasting of South Carolina (WMYI) Licensee Delaware
11. SFX Broadcasting of South Carolina (WSSL), Inc Delaware
12. SFX Broadcasting of South Carolina (WSSL) Licensee Delaware
13. SFX Broadcasting of Mississippi, Inc. Delaware
14. SFX Broadcasting of Mississippi Licensee, Inc. Delaware
15. SFX Broadcasting of Jackson, Inc. Delaware
16. SFX Broadcasting of Jackson Licensee, Inc. Delaware
17. SFX Broadcasting of Tennessee Licensee, Inc. Delaware
18. SFX Broadcasting of Central North Carolina, Inc. Delaware
19. SFX Broadcasting of North Carolina, Inc. Delaware
20. SFX Broadcasting of North Carolina Licensee, Inc. Delaware
21. SFX Broadcasting of San Diego, Inc. Delaware
22. SFX Broadcasting of San Diego Licensee, Inc. Delaware
23. Parker Broadcasting Company California
<PAGE>
STATE OF
NAME INCORPORATION
- --------------------------------------------------------- -------------------
24. SFX Acquisition Corporation Delaware
25. SFX Broadcasting of Hartford, Inc. Delaware
26. Multi-Market Radio, Inc. Delaware
27. Southern Starr Broadcasting Group, Inc. Delaware
28. Southern Starr of Arkansas, Inc. Arkansas
29. General Communicorp, Inc. Connecticut
30. General Broadcasting of Connecticut, Inc. Connecticut
31. Southern Starr of Mississippi, Inc. Mississippi
32. Southern Starr Communications, Inc. Delaware
33. Southern Starr Limited Partnership Delaware
34. Multi-Market Radio of Augusta, Inc. Delaware
35. Multi-Market Radio of Myrtle Beach, Inc. Delaware
36. Multi-Market Radio of Northampton, Inc. Delaware
37. Multi-Market Radio of Hartford, Inc. Delaware
38. Multi-Market Radio of Springfield, Inc. Delaware
39. Southern Starr Management, Inc. Delaware
40. General Broadcasting of Florida Inc. Florida
41. General Broadcasting Corp. Connecticut
42. Liberty Acquisition Subsidiary Corporation Delaware
43. Liberty Broadcasting, Inc. Delaware
44. Liberty Broadcasting Group Incorporated Delaware
45. Beck-Ross Communications, Inc. Delaware
46. W.B.L.I., Inc. New York
47. WBLI-FM, Inc. Delaware
2
<PAGE>
STATE OF
NAME INCORPORATION
- --------------------------------------------------------- ----------------
48. WHCN, Inc. Connecticut
49. WHCN-FM, Inc. Delaware
50. WSNE, Inc. Rhode Island
51. WSNE-FM, Inc. Delaware
52. WPYX, Inc. New York
53. WTRY, Inc. New York
54. WYSR, Inc. Connecticut
55. WPOP, Inc. Connecticut
56. WHJY, Inc. Rhode Island
57. WHJJ, Inc. Rhode Island
58. Liberty Broadcasting of New York Incorporated New York
59. WBAB, Inc. New York
60. WHFM, Inc. New York
61. WGBB, Inc. New York
62. Liberty Broadcasting of Albany Incorporated New York
63. WGNA, Inc. New York
64. WGNA-FM, Inc. New York
65. WHFS, Inc. Maryland
66. Liberty Broadcasting of Maryland II Incorporated Maryland
67. WMXB, Inc. Virginia
68. WXTR, Inc. Maryland
69. Musical Heights, Inc. Maryland
70. WQSI, Inc. Delaware
71. WZYQ, Inc. Delaware
3
<PAGE>
STATE OF
NAME INCORPORATION
- --------------------------------------------------------- --------------------
72. Delsner/Slater Enterprises, Inc. New York
73. Delsner/Slater Enterprises, Ltd. New York
74. In-House Tickets, Inc. New York
75. Connecticut Concerts, Incorporated Connecticut
76. Ardee Festivals NJ, Inc. New York
77. Beach Concerts, Inc. New York
78. Ardee Productions, Inc. New York
79. Exit 116 Revisited, Inc. New Jersey
80. Dumb Deal, Inc. New York
81. Broadway Concerts, Inc. New York
82. NOC-Acquisition Corp. Connecticut
83. CADCO-Acquisition Corp. Connecticut
84. QN-Acquisition Corp. Connecticut
85. FP1 Concerts, Inc. Delaware
86. SFX Broadcasting of Kansas, Inc. Delaware
87. SFX Broadcasting of Florida, Inc. Delaware
88. SFX Operating Company of North Carolina, Inc. Delaware
89. SFX Broadcasting of South Carolina, Inc. Delaware
90. SFX Operating Company of Mississippi, Inc. Delaware
91. SFX Operating Company of Tennessee, Inc. Delaware
92. SFX Broadcasting of Virginia, Inc. Delaware
93. SFX Broadcasting of New York, Inc. Delaware
94. SFX Broadcasting of Connecticut, Inc. Delaware
95. SFX Broadcasting of Rhode Island, Inc. Delaware
4
<PAGE>
STATE OF
NAME INCORPORATION
- ---------------------------------------------------------- ---------------
96. SFX Broadcasting of Massachusetts, Inc. Delaware
97. SFX Broadcasting of California, Inc. Delaware
98. SFX Broadcasting of Arizona, Inc. Delaware
99. SFX GP Inc. Delaware
100. SFX TN Limited Partnership Delaware
101. SFX Performance Marketing, Inc. Delaware
102. SFX Delaware, Inc. Delaware
103. SFX Operating GP, Inc. Delaware
104. SFX Texas Limited Partnership Delaware
105. SFX Broadcasting of Connecticut Licensee, Inc. Delaware
106. SFX Broadcasting of Massachusetts Licensee, Inc. Delaware
107. SFX Broadcasting of Indiana, Inc. Delaware
108. SFX AZ Limited Partnership Delaware
109. SFX FL Limited Partnership Delaware
110. SFX KS Limited Partnership Delaware
111. SFX TX Limited Partnership Delaware
112. SFX MS Limited Partnership Delaware
113. SFX BS Limited Partnership Delaware
114. SFX SC Limited Partnership Delaware
115. SFX NC Limited Partnership Delaware
5
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statements No. 333-15469 (Form S-3); No. 333-21127 (Form S-3);
No. 333-06793 (Form S-3); and No. 333-16995 (Form S-3) and to the incorporation
by reference therein of our report dated February 20, 1997, except for Note 13
as to which the date is March 27, 1997, with respect to the consolidated
financial statements of SFX Broadcasting, Inc. and Subsidiaries at
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996.
/s/ Ernst & Young LLP
-----------------
ERNST & YOUNG LLP
New York, New York
March 31, 1997
<PAGE>
CONSENT
We hereby consent to the use of our firm name in the SFX Broadcasting,
Inc. ("SFX") Annual Report on Form 10-K for the year ended December 31, 1996
and consent to the incorporation by reference in the Registration Statements
of SFX on Form S-3 (File Nos. 333-15669, 333-21127, 333-06793 and 333-16995).
/s/ Fisher Wayland Cooper Leader
& Zaragoza L.L.P.
--------------------------------
FISHER WAYLAND COOPER LEADER
& ZARAGOZA L.L.P.
Dated: March 31, 1997
<PAGE>
BIA Publications, Inc.
14595 Avion Parkway, Suite 500
Chantilly, Virginia 22021
March 20, 1997
SFX Broadcasting, Inc.
150 East 58th Street, 19th Floor
New York, New York 10155
Gentlemen:
BIA Publications, Inc. hereby consents to the use of the
radio station and market data which has been or will be provided to you in
connection with certain periodic reports which will be filed with the
Securities and Exchange Commission.
Very truly yours,
BIA PUBLICATIONS, INC.
By: /s/ Debra L. Metcalf
____________________________
Authorized Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 30,601,000
<SECURITIES> 0
<RECEIVABLES> 48,895,000
<ALLOWANCES> 1,620,000
<INVENTORY> 0
<CURRENT-ASSETS> 88,689,000
<PP&E> 73,012,000
<DEPRECIATION> 10,192,000
<TOTAL-ASSETS> 859,327,000
<CURRENT-LIABILITIES> 40,326,000
<BONDS> 481,079,000
152,053,000
0
<COMMON> 93,000
<OTHER-SE> 94,424,000
<TOTAL-LIABILITY-AND-EQUITY> 859,327,000
<SALES> 0
<TOTAL-REVENUES> 143,061,000
<CGS> 0
<TOTAL-COSTS> 145,434,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34,897,000
<INCOME-PRETAX> (35,153,000)
<INCOME-TAX> 480,000
<INCOME-CONTINUING> (35,633,000)
<DISCONTINUED> 0
<EXTRAORDINARY> (15,219,000)
<CHANGES> 0
<NET-INCOME> (50,852,000)
<EPS-PRIMARY> (7.52)
<EPS-DILUTED> (7.52)
</TABLE>
