<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) August 23, 1999
Citadel Communications Corporation
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(Exact Name of Registrant as Specified in its Charter)
Nevada
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(State or Other Jurisdiction of Incorporation)
000-24515 86-0748219
- -------------------------------- ---------------------------------
(Commission File Number) (IRS Employer Identification No.)
City Center West, Suite 400
7201 West Lake Mead Boulevard
Las Vegas, Nevada 89128
- ---------------------------------------- -------------
(Address of Principal Executive Offices) (Zip Code)
(702) 804-5200
------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
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This report includes forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These forward-looking statements are based
largely on current expectations and projections about future events and
financial trends affecting Citadel Communications Corporation's business. The
words "intends", "believes" and similar words are intended to identify
forward-looking statements. In addition, any statements that refer to
expectations or other characterizations of future events or circumstances are
forward-looking statements. The forward-looking statements in this report are
subject to risks, uncertainties and assumptions including, among other things:
o the realization of Citadel Communications' business strategy,
o general economic and business conditions, both nationally and in Citadel
Communications' radio markets,
o Citadel Communications' expectations and estimates concerning future
financial performance, financing plans and the impact of competition,
o anticipated trends in Citadel Communications' industry, and
o the impact of current or pending legislation and regulation and antitrust
considerations.
In light of these risks and uncertainties, the forward-looking events and
circumstances discussed in this report might not transpire. Citadel
Communications undertakes no obligation to publicly update or revise any
forward-looking statements because of new information, future events or
otherwise.
ITEM 5. OTHER EVENTS
Michigan Acquisition
On December 3, 1999, Citadel Communications and its subsidiary, Citadel
Broadcasting Company, entered into an asset purchase agreement with Liggett
Broadcast, Inc. and certain of its affiliates to acquire four FM and two AM
radio stations serving the Lansing, Michigan market, two FM radio stations
serving the Saginaw, Michigan market and one FM radio station serving the Flint,
Michigan market for the aggregate purchase price of approximately $120.5
million, consisting of 200,000 shares of common stock of Citadel Communications
valued at $50.375 per share, based on the closing share price of the common
stock on December 2, 1999, and approximately $110.4 million in cash. However, if
the value of the common stock at the time of closing, based on the 20-day
average closing sale price per share prior to closing, is less than 90% of the
value on December 2, 1999, then no common stock will be issued and the purchase
price will be paid entirely in cash. Citadel Broadcasting has delivered an
irrevocable letter of credit in favor of Liggett Broadcast, issued by
BankBoston, N.A., in the amount of $6.0 million to secure Citadel
Communications' and Citadel Broadcasting's obligations under the asset purchase
agreement.
The asset purchase agreement contains customary representations and
warranties of the parties, and completion of the acquisition of the stations is
subject to conditions including (1) the receipt of FCC consent to the
assignment of the station licenses to Citadel Broadcasting, (2) the expiration
or termination of the applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and (3) the receipt of consents
to the assignment to Citadel Broadcasting of certain contracts relating to the
stations. An application seeking FCC approval has not yet been filed with the
FCC. In addition to the conditions noted, Citadel Broadcasting expects to sell
one or more of its stations serving the Saginaw market to comply with the
ownership limits of the Telecommunications Act of 1996. See the financial
statements of Liggett Broadcast, Inc. contained in Item 7 of this report.
Massachusetts Acquisition
On December 3, 1999, Citadel Broadcasting entered into two asset
purchase agreements with Montachusett Broadcasting, Inc. to acquire a total of
two FM radio stations serving the Worcester, Massachusetts market for an
aggregate purchase price of approximately $24.5 million in cash. Citadel
Broadcasting has delivered two irrevocable letters of credit in favor of
Montachusett Broadcasting, issued by BankBoston, N.A., in the aggregate amount
of $1.2 million to secure Citadel Broadcasting's obligations under the asset
purchase agreements.
The asset purchase agreements contain customary representations and
warranties of the parties, and completion of the acquisition of the stations is
subject to conditions including (1) the receipt of FCC consent to the
assignment of the station licenses to Citadel Broadcasting, (2) the receipt of
consents to the assignment to Citadel Broadcasting of certain contracts
relating to the stations and (3) with respect to one of the stations to be
acquired (which accounts for approximately $3.5 million of the aggregate
purchase price), the receipt of an FCC order reallocating an FM channel from
Spencer, Massachusetts to Webster, Massachusetts. An application seeking FCC
approval was filed with the FCC on December 9, 1999.
New York, New Jersey, Texas, Louisiana, Connecticut, Massachusetts and Maine
Acquisition
On October 27, 1999, Citadel Broadcasting entered into an asset
purchase agreement with Broadcasting Partners Holdings, L.P. to acquire 23 FM
and 13 AM radio stations in Buffalo, Syracuse and Ithaca, New York, Atlantic
City, New Jersey, Tyler-Longview, Texas, Monroe, Louisiana, New London,
Connecticut, New Bedford, Massachusetts and Augusta-Waterville, Presque
Isle-Caribou and Dennysville-Calais, Maine, as well as the right to operate an
additional FM radio station in Atlantic City under a program service and time
brokerage agreement. The aggregate purchase price is approximately $190.0
million in cash. The stations indicated include one AM radio station in Buffalo
and one FM radio station in New London which affiliates of Broadcasting Partners
Holdings have entered into agreements to purchase. If either of these two
transactions has not been completed prior to completion of Citadel
Broadcasting's acquisition, Citadel Broadcasting will be assigned the rights
under the relevant purchase agreement. Citadel Broadcasting has delivered an
irrevocable letter of credit in favor of Broadcasting Partners Holdings, issued
by BankBoston, N.A., in the amount of $12.0 million to secure Citadel
Broadcasting's obligations under the asset purchase agreement.
The asset purchase agreement contains customary representations and
warranties of the parties, and completion of the acquisition of the stations is
subject to conditions including (1) the receipt of FCC consent to the assignment
of the station licenses to Citadel Broadcasting, (2) the expiration or
termination of the applicable waiting periods under the Hart-Scott-Rodino Act,
and (3) the receipt of consents to the assignment to Citadel Broadcasting of
certain contracts relating to the stations. An application seeking FCC approval
was filed with the FCC on November 9, 1999. See the financial statements of
Broadcasting Partners Holdings Radio Group contained in Item 7 of this report.
Oklahoma Acquisition
On August 23, 1999, Citadel Broadcasting entered into a purchase
agreement with Cat Communications, Inc and Desert Communications III, Inc. to
acquire all of the equity interests of Caribou Communications Co. for the
aggregate purchase price of approximately $60.0 million in cash. This amount
includes repayment of indebtedness of the sellers that may be outstanding at the
time of closing, and is subject to adjustment for other conditions existing at
the time of the closing. Caribou Communications owns four FM radio stations and
one AM radio station in Oklahoma City, Oklahoma. Citadel Broadcasting has
delivered an irrevocable letter of credit in favor of Cat Communications and
Desert Communications, issued by BankBoston, N.A., in the amount of $3.0 million
to secure Citadel Broadcasting's obligations under the purchase agreement.
The agreement contains customary representations and warranties of the
parties, and consummation of the transaction is subject to conditions including
(1) the receipt of FCC consent to the transfer of control of the station
licenses to Citadel Broadcasting, (2) the expiration or termination of the
applicable waiting periods under the Hart-Scott-Rodino Act and (3) the receipt
of consents to
1
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the change of control under certain contracts relating to the radio stations. An
application seeking FCC approval was filed with the FCC on September 2, 1999 and
a grant of the application was received on October 28, 1999. The Company
received early termination of the applicable Hart-Scott-Rodino Act waiting
period on October 4, 1999. See the financial statements of Caribou
Communications Co. contained in Item 7 of this report.
Other Pending Transactions
In addition to the transactions described above, the following
transactions are also pending. On October 5, 1999, Citadel Broadcasting entered
into a purchase and sale agreement with Kenneth A. Rushton, as trustee of the
Chapter 7 bankruptcy estate of Venture Broadcasting, Inc., to acquire an AM
radio station serving the Salt Lake City, Utah market, including the related
tower site, for approximately $0.6 million in cash. The closing of this
transaction may be delayed as a petition to deny the transfer of the broadcast
license has been filed with the FCC. On October 8, 1999, Citadel Broadcasting
entered into an exchange agreement with Titus Broadcasting Systems, Inc. to
acquire one AM radio station in Binghamton, New York in exchange for one AM
radio station in Binghamton owned by Citadel Broadcasting and approximately $0.6
million in cash. On November 16, 1999, Citadel Broadcasting entered into a
definitive agreement with KSMB/KACY Radio Broadcasting Company, KVOL Radio
Broadcasting Company and Powell Broadcasting Company, Inc. to acquire two FM and
two AM radio stations in Lafayette, Louisiana for the purchase price of
approximately $8.5 million in cash. On November 16, 1999, Citadel Broadcasting
entered into an exchange agreement with LifeTalk Broadcasting Association to
acquire one AM radio station in Albuquerque, New Mexico in exchange for one AM
station in Albuquerque owned by Citadel Broadcasting and approximately $5.4
million in cash. The closing of each of these transactions is also subject to
various conditions.
Closing Matters
Although Citadel Communications believes that the conditions to closing
for each of its pending transactions are generally customary for transactions of
this type, there can be no assurance that such conditions will be satisfied.
Citadel Broadcasting expects to finance a portion of the pending
acquisitions with amounts borrowed under a new credit facility currently being
negotiated and proceeds from the recent sale of radio stations. The new credit
facility is expected to be in the form of (i) a multiple-draw term loan
facility and (ii) a revolving credit facility which will include a letter of
credit facility.
Citadel Broadcasting expects that (a) amounts may be borrowed under the
new term loan facility to (i) repay amounts outstanding under Citadel
Broadcasting's existing credit facility, (ii) finance a portion of Citadel
Broadcasting's pending acquisitions and (iii) pay related fees and expenses, (b)
amounts may be borrowed under the new revolving credit facility for general
corporate purposes, including working capital, capital expenditures and pending
and permitted future acquisitions, and (c) letters of credit will be issued to
support Citadel Broadcasting's payment obligations incurred in the ordinary
course of business.
Citadel Communications will guaranty payment of amounts borrowed under
the new credit facility, and such amounts will be secured by a security
interest in the assets of Citadel Broadcasting and a pledge of the outstanding
common stock of Citadel Broadcasting.
Although Citadel Broadcasting anticipates finalizing the new credit
facility prior to year end, there can be no assurances that Citadel
Broadcasting will be able to replace its current credit facility on the terms
described above or at all. If a new credit facility having terms substantially
similar to those described above cannot be obtained, Citadel Communications and
Citadel Broadcasting would be required to seek other financing alternatives to
complete the pending acquisitions.
Following entry into any new credit facility, management expects that
Citadel Broadcasting's subsidiary, Citadel License, Inc., will be merged with
and into Citadel Broadcasting.
Changes in the Board of Directors
Effective as of November 24, 1999, Patricia Diaz Dennis resigned as a
director of each of Citadel Communications and Citadel Broadcasting. Effective
as of November 30, 1999, Robert F. Fuller was appointed as a director of each
of Citadel Communications and Citadel Broadcasting to serve until the next
election of directors by the respective stockholders and until his successor
has been duly elected and qualified or until his earlier death, retirement,
resignation or removal. Mr. Fuller was a principal of Fuller-Jeffrey
Broadcasting Companies, Inc., which, together with its subsidiaries, was
acquired by Citadel Broadcasting in August 1999.
Financial Statements
Certain financial information of each of Liggett Broadcast, Inc.,
Broadcasting Partners Holdings Radio Group, Wicks Radio Group (a division of
Wicks Broadcast Group Limited Partnership), Citywide Communications, Inc.,
Caribou Communications Co. and Tele-Media Broadcasting Company and its
Partnership Interests, as well as certain pro forma financial information of
Citadel Communications Corporation and its Subsidiary, is set forth below in
Item 7 and is incorporated herein by reference. Citadel Broadcasting acquired 10
FM and six AM radio stations from Wicks Broadcast Group Limited Partnership and
related entities in June 1999, it acquired Citywide Communications, Inc. and its
six FM and three AM radio stations in March 1999 and it acquired Tele-Media
Broadcasting and the ownership or the right to operate 16 FM and 10 AM radio
stations that Tele-Media Broadcasting owned or operated in July 1997. Citadel
has since sold 11 of the stations acquired in the Tele-Media acquisition.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements. The following financial statements are included
pursuant to Item 7(a):
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Combined Balance Sheets as of December 31, 1997 and 1998 and for September 30,
1999 (unaudited)
Combined Statements of Operations for the years ended December 31, 1997 and 1998
and for the nine months ended September 30, 1998 and 1999 (unaudited)
Combined Statements of Partners' Capital for the nine months ended September 30,
1999 (unaudited)
Combined Statements of Cash Flows for the years ended December 31, 1997 and 1998
and for the nine months ended September 30, 1998 and 1999 (unaudited)
Notes to Combined Financial Statements
LIGGETT BROADCAST, INC.
Report of Independent Auditors
Combined Balance Sheet as of December 31, 1998
Combined Statement of Shareholder's Equity for the year ended December 31, 1998
Combined Statement of Operations for the year ended December 31, 1998
Combined Statement of Cash Flows for the year ended December 31, 1998
Notes to Combined Financial Statements
Combined Balance Sheet as of September 30, 1999 (unaudited)
Combined Statement of Shareholder's Equity for the nine months ended
September 30, 1999 (unaudited)
Combined Statements of Operations for the nine months ended
September 30, 1999 (unaudited)
Combined Statements of Cash Flows for the nine months ended
September 30, 1999 (unaudited)
Notes to Combined Financial Statements (unaudited)
WICKS RADIO GROUP (A DIVISION OF WICKS BROADCAST GROUP LIMITED PARTNERSHIP)
Independent Auditors' Report
Balance Sheets as of December 31, 1998 and June 30, 1999 (unaudited)
Statements of Operations and Changes in Division Equity
For the year ended December 31, 1998 and for the six months ended
June 30, 1998 and June 30, 1999 (unaudited)
Statements of Cash Flows
For the year ended December 31, 1998 and for the six months ended
June 30, 1998 and June 30, 1999 (unaudited)
Notes to financial statements
CITYWIDE COMMUNICATIONS, INC.
Independent Auditors' Report
Consolidated Balance Sheet as of December 31, 1998
Consolidated Statement of Operations and Accumulated Deficit for the year ended
December 31, 1998
Consolidated Statement of Stockholders' Deficit for the year ended December 31,
1998
Consolidated Statement of Cash Flows for the year ended December 31, 1998
2
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Notes to Consolidated financial Statements
CARIBOU COMMUNICATIONS CO.
Independent Auditors' Report
Balance Sheets as of December 31, 1997 and 1998
Statements of Operations as of December 31, 1997 and 1998
Statements of Changes in Partners' Equity for the years ended December 31, 1997
and 1998
Statements of Cash Flows for the years ended December 31, 1997 and 1998
Notes to Financial Statements
TELE-MEDIA BROADCASTING COMPANY AND ITS PARTNERSHIP INTERESTS
Independent Auditors' Report
Consolidated Balance Sheet as of December 31, 1995 and 1996
Consolidated Statement of Operations for the years ended December 31, 1994, 1995
and 1996
Consolidated Statement of Deficiency in Net Assets for the years ended
December 31, 1994, 1995 and 1996
Consolidated Statement of Cash Flows for the years ended December 31, 1994, 1995
and 1996
Notes to Consolidated Financial Statement
Condensed Consolidated Balance Sheet as of June 30, 1997 (unaudited)
Condensed Consolidated Statements of Operations and Changes in Deficit for the
six months ended June 30, 1996 and 1997 (unaudited)
Condensed Consolidated Statements of Cash Flows for the six months ended June
30, 1996 and 1997 (unaudited)
Notes to Unaudited Condensed Consolidated Financial Statements
(b) Pro Forma Financial Information. The following pro forma financial
information is included herein pursuant to Item 7(b):
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30,
1999
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the nine
months ended September 30, 1999
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
twelve months ended December 31, 1998
(c) Exhibits. The following exhibits are filed as part of this report:
2.1 Asset Purchase Agreement dated October 27, 1999 by and between Citadel
Broadcasting Company and Broadcasting Partners Holdings, L.P.
(incorporated by reference to Exhibit 2.1 to Citadel Communications
Corporation's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1999).
2.2 Stock Purchase Agreement dated April 30, 1999 by and between Robert F.
Fuller and Citadel Broadcasting Company (incorporated by reference to
Exhibit 2.1 to Citadel Broadcasting Company's Current Report on Form
8-K filed on September 14, 1999).
2.3 Stock Purchase Agreement dated April 30, 1999 by and between Joseph N.
Jeffrey, Jr. and Citadel Broadcasting Company (incorporated by
reference to Exhibit 2.2 to Citadel Broadcasting Company's Current
Report on Form 8-K filed on September 14, 1999).
2.4 Asset Purchase Agreement dated December 3, 1999 by and among Liggett
Broadcast, Inc., Rainbow Radio, LLC, New Tower, Inc., LLJ Realty, LLC,
Robert G. Liggett, Jr., Citadel Communications Corporation, Citadel
Broadcasting Company and Citadel License, Inc.
23.1 Consent of KPMG LLP.
23.2 Consent of Andrews Hooper & Pavlik P.L.C.
23.3 Consent of KPMG LLP.
23.4 Consent of Faulk & Winkler LLC.
23.5 Consent of Cole & Reed P.C.
23.6 Consent of Deloitte & Touche LLP.
3
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INDEPENDENT AUDITORS' REPORT
The Partners
Broadcasting Partners Holdings, L.P.:
We have audited the accompanying combined balance sheets of Broadcasting
Partners Holdings Radio Group as of December 31, 1997 and 1998 and the related
combined statements of operations, cash flows and partners' capital for the
period from January 9, 1997 (inception) through December 31, 1997 and for the
year ended December 31, 1998. These financial statements are the responsibility
of the Group's management. Our responsibility is to express an opinion on these
combined financial statements based on our audit.
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 combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall combined
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Broadcasting
Partners Holdings Radio Group as of December 31, 1997 and 1998 and the results
of its operations and its cash flows for the period from January 9, 1997
(inception) through December 31, 1997 and for the year ended December 31, 1998
in conformity with generally accepted accounting principles.
/s/ KPMG LLP
March 30, 1999
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BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Combined Balance Sheets
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
ASSETS 1997 1998 1999
------------ ----------- -----------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 1,436,701 1,584,767 770,876
Receivables, less allowance for doubtful accounts of
approximately $487,000, $638,000 and $568,000, respectively 6,247,361 8,970,792 9,256,148
Other receivables 377,704 925,267 417,861
Trade receivables 798,904 863,299 1,146,714
Due from seller -- 35,477 33,286
Prepaid and other current assets 500,480 736,411 1,233,070
------------ ----------- -----------
Total current assets 9,361,150 13,116,013 12,857,955
Notes receivable 150,000 -- --
Property and equipment, net 7,144,294 9,518,274 9,407,590
Intangible assets, net 92,843,007 95,582,524 89,791,919
Due from related party 4,189 55,445 53,621
Other noncurrent assets, net 1,500,550 1,384,799 1,258,718
============ =========== ===========
$111,003,190 119,657,055 113,369,803
============ =========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current installments of long-term debt $ 1,307,549 10,671,518 6,800,642
Current installments of capital lease obligations 48,052 57,232 63,218
Accounts payable 1,100,135 3,057,798 2,154,362
Trade payables 772,109 940,729 1,249,681
Due to related party 160,401 132,584 426,225
Accrued expenses 1,127,376 1,184,869 1,249,082
Accrued interest 912,407 1,057,608 541,914
Due to receiver 159,971 96,733 86,762
Other current liabilities 96,532 292,883 349,767
------------ ----------- -----------
Total current liabilities 5,684,532 17,491,954 12,921,653
Long-term debt, less current installments 61,788,358 60,323,402 58,364,881
Capital lease obligations, less current installments 148,188 87,884 39,693
Due to related party, non-current 181,944 365,278 155,677
Other noncurrent liabilities 258,937 543,194 624,717
------------ ----------- -----------
Total liabilities 68,061,959 78,811,712 72,106,621
Partners' capital 42,941,231 40,845,343 41,263,182
Commitments and contingencies
============ =========== ===========
$111,003,190 119,657,055 113,369,803
============ =========== ===========
</TABLE>
See accompanying notes to combined financial statements
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BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Combined Statements of Operations
<TABLE>
<CAPTION>
JANUARY 9, 1997 (UNAUDITED) (UNAUDITED)
(INCEPTION) THROUGH YEAR ENDED NINE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1998 1999
------------------- ------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Revenue:
Broadcast revenues $ 21,920,579 37,855,506 26,386,524 30,355,319
Trade revenues 3,093,236 4,228,085 2,685,088 3,480,862
Other revenues 756,503 500,416 346,133 445,652
------------ ----------- ----------- -----------
Gross revenues 25,770,318 42,584,007 29,417,745 34,281,833
Less: agency commissions (2,377,182) (3,956,627) (2,642,053) (3,050,681)
------------ ----------- ----------- -----------
Net revenue 23,393,136 38,627,380 26,775,692 31,231,152
------------ ----------- ----------- -----------
Operating costs:
Station operating expenses 5,225,267 8,430,940 5,522,473 6,511,384
Selling expenses 4,654,221 9,337,926 6,606,509 7,678,736
General and administrative expenses 4,591,520 7,177,313 5,205,757 5,921,451
Trade expenses 3,112,187 4,220,219 2,432,924 3,537,733
LMA fees 1,842,475 353,675 314,446 106,902
Depreciation and amortization 555,273 1,400,758 1,001,789 1,236,163
Amortization of intangible assets 3,862,133 7,497,199 5,599,156 5,624,128
------------ ----------- ----------- -----------
23,843,076 38,418,030 26,683,054 30,616,497
------------ ----------- ----------- -----------
Operating income (loss) (449,940) 209,350 92,638 614,655
------------ ----------- ----------- -----------
Other income (expense):
Interest expense (3,179,183) (6,560,152) (4,675,185) (4,959,905)
Interest income 29,261 60,667 33,827 22,506
Other 38,692 (17,289) (10,251) (52,457)
------------ ----------- ----------- -----------
Loss before cumulative effect
of accounting change (3,561,170) (6,307,424) (4,558,971) (4,375,201)
Cumulative effect of accounting change:
Write-off of organization costs -- -- -- (517,416)
------------ ----------- ----------- -----------
Net loss $ (3,561,170) (6,307,424) (4,558,971) (4,892,617)
============ =========== =========== ===========
</TABLE>
See accompanying notes to combined financial statements
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BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Combined Statements of Partners' Capital
<TABLE>
<CAPTION>
<S> <C>
Partners' capital, January 9, 1997 (inception) $ --
Capital contributions 49,415,200
Net activity with affiliated broadcast property (2,912,799)
Net loss (3,561,170)
------------
Partners' capital, December 31, 1997 42,941,231
Capital contributions 4,201,087
Net activity with affiliated broadcast property 54,999
Distributions to members (44,550)
Net loss (6,307,424)
------------
Partners' capital, December 31, 1998 40,845,343
Capital contributions (unaudited) 876,472
Net activity with affiliated broadcast property (unaudited) 4,444,096
Distributions to members (unaudited) (10,112)
Net loss (unaudited) (4,892,617)
------------
Partners' capital, September 30, 1999 (unaudited) $ 41,263,182
============
</TABLE>
See accompanying notes to combined financial statements
7
<PAGE> 9
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Combined Statements of Cash Flows
<TABLE>
<CAPTION>
JANUARY 9, 1997 (UNAUDITED) (UNAUDITED)
(INCEPTION) THROUGH YEAR ENDED NINE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1998 1999
------------------- ------------ ----------------- -----------------
Cash flows from operating activities:
<S> <C> <C> <C> <C>
Net loss $ (3,561,170) (6,307,424) (4,558,971) (4,892,617)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Bad debt expense 469,875 451,675 319,284 390,725
Amortization of intangibles 3,862,133 7,497,199 5,599,156 5,622,378
Write-off of organization costs -- -- -- 517,416
Amortization of deferred debt costs 86,905 254,358 132,217 166,076
Depreciation and amortization 555,273 1,400,758 1,001,789 1,236,163
Net trade expense (revenue) (104,669) 104,225 (404,513) 56,871
Change in assets and liabilities, net of effects
from purchase of broadcast properties:
Increase in receivables, net (4,117,613) (3,175,106) (2,506,359) (676,081)
Decrease (increase) in prepaid and other
current assets (144,879) (1,082,513) (283,101) (28,809)
Decrease (increase) in other noncurrent assets 8,832 18,546 (464,579) (44,048)
Increase (decrease) in accounts payable, accrued
expenses and other liabilities 1,267,756 2,309,207 1,342,875 (1,299,127)
Decrease in due to receiver -- (63,238) -- (9,971)
Increase (decrease) in due to related party 28,601 415,628 (73,823) 86,440
Increase (decrease) in other
noncurrent liabilities 143,907 (149,371) 297,191 79,775
------------ ----------- ----------- -----------
Net cash provided by (used in) operating
activities (1,505,049) 1,673,944 401,166 1,205,191
------------ ----------- ----------- -----------
Cash flows from investing activities:
Costs to acquire broadcast properties, net of cash
acquired (78,769,710) (10,514,010) (7,674,850) --
Capital expenditures (475,166) (2,411,882) (2,180,117) (1,296,994)
Increase in organization costs (421,591) (213,349) (43,840) --
Distributions to Partners -- (44,550) -- (10,112)
Cash received from disposal of assets -- 27,499 15,767 86,000
Other -- (286,503) (200,928) 3,058
------------ ----------- ----------- -----------
Net cash used in investing activities (79,666,467) (13,442,795) (10,083,968) (1,218,048)
------------ ----------- ----------- -----------
Cash flows from financing activities:
Repayment of long-term debt (3,371,108) (1,386,779) (865,081) (42,188,271)
Cash received from long term debt 48,850,000 7,350,000 4,850,000 36,150,000
Cash received from loans -- 362,424 40,165 --
Net borrowings (repayments) on line of credit (433,866) 1,620,000 1,290,000 208,874
Repayments of capital lease obligations -- -- (37,047) (42,205)
Loan acquisition fees (1,177,500) (284,814) (18,932) (250,000)
Net activity with affiliated broadcast property (2,912,799) 54,999 -- 4,444,096
Proceeds from partners' capital contributions 41,415,165 4,201,087 4,200,000 876,472
------------ ----------- ----------- -----------
Net cash provided by (used in)
financing activities 82,369,892 11,916,917 9,459,105 (801,034)
------------ ----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 1,198,376 148,066 (223,697) (813,891)
Cash and cash equivalents, beginning of period 238,325 1,436,701 1,436,701 1,584,767
============ =========== =========== ===========
Cash and cash equivalents, end of period $ 1,436,701 1,584,767 1,213,004 770,876
============ =========== =========== ===========
</TABLE>
See accompanying notes to combined financial statements.
8
<PAGE> 10
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Notes to Combined Financial Statements
(1) BASIS OF COMBINATION AND BUSINESS DESCRIPTION
Broadcasting Partners Holdings Radio Group ("Broadcasting Partners")
represents the broadcasting properties of Broadcasting Partners Holding
Limited Partnership (the "Partnership") which are subject to an asset
purchase agreement with Citadel Communications Corporation. These
financial statements exclude broadcasting properties sold to third
parties.
The corporate overhead costs of the Partnership principally consist of
salaries and facility costs. The platform companies reimburse the salary
expenses through a management fee, which has been included in these
financial statements. Corporate facilities costs aggregating $247,000 and
$78,000 for 1997 and 1998 have been excluded from these financial
statements as they relate to the Partnership's headquarters which will
not be acquired in the acquisition.
Partners' capital represents the combined partner capital of the
individual platform companies, and includes the capital allocable to the
Partnership as well as the minority investors in the Partnership's
subsidiaries.
The Partnership operates the broadcasting properties through its
subsidiaries Spring Broadcasting, LLC, Pilot Communications, LLC, Mercury
Radio Communications, LLC, Sound Broadcasting, LLC and Gleiser
Communications, L.P. (collectively the platform companies) which operate
the following radio stations, either through direct ownership, or through
Time Brokerage Agreements, Joint Sales Agreements or Local Marketing
Agreements (collectively LMAs):
<TABLE>
<CAPTION>
Subsidiary Broadcast Properties City of License
---------- -------------------- ---------------
<S> <C> <C> <C>
Spring Broadcasting, LLC WBSM-AM New Bedford, MA
WFHN-FM New Bedford, MA
WFPG-AM/FM Atlantic City, NJ
WKOE-FM (LMA) Atlantic City, NJ
WPUR-FM Atlantic City, NJ
WQGN-FM Groton, CT
WSUB-AM Groton, CT
Pilot Communications, LLC WAQX-FM Syracuse, NY
WNTQ-FM Syracuse, NY
WLTI-FM Syracuse, NY
WNSS-AM Syracuse, NY
WMME-FM Augusta-Waterville, ME
WEZW-AM Augusta-Waterville, ME
WEBB-FM Augusta-Waterville, ME
WTVL-AM Augusta-Waterville, ME
WBPW-FM Presque Isle, ME
WQHR-FM Presque Isle, ME
WOZI-FM Presque Isle, ME
WCRQ-FM Dennysville, ME
(formerly WHRR-FM)
WIII-FM Cortland, NY
WKRT-AM Cortland, NY
Mercury Radio WGRF-FM Buffalo, NY
Communications, LLC WEDG-FM Buffalo, NY
WHTT-AM/FM Buffalo, NY
CKEY-FM (JSA) Niagara Falls, Ontario
Sound Broadcasting, LLC KYEA-FM Monroe, LA
KMYY-FM Monroe, LA
KCTO-FM Monroe, LA
Gleiser Communications, L.P. KDOK-FM Tyler-Longview, TX
Gleiser Communications, LLC KTBB-AM Tyler-Longview, TX
KGLD-AM Tyler-Longview, TX
KEES-AM Tyler-Longview, TX
KYZS-AM Tyler-Longview, TX
</TABLE>
9
(Continued)
<PAGE> 11
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Notes to Combined Financial Statements
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) CASH EQUIVALENTS
For purposes of the statement of cash flows, Broadcasting Partners
considers all highly liquid investments with an original maturity
of three months or less to be cash equivalents. The fair market
value of such investments approximates cost.
(B) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation expense is
computed using the straight-line method, or an accelerated method,
over the estimated useful lives of the assets, which range from
three to thirty-nine years.
The costs of leasehold improvements are amortized using the
straight-line method over the lesser of their estimated useful
lives or the terms of the respective leases.
(C) INTANGIBLE ASSETS
Intangible assets consist principally of network affiliation
agreements, broadcasting licenses, covenants not to compete, and
the excess of costs over the fair value of net assets acquired.
Amortization expense is computed on a straight-line basis over the
estimated lives of the assets which range from 2-15 years.
(D) INCOME TAXES
The platform companies are pass-through entities for income tax
purposes since profits and losses and the related tax attributes
are deemed to be distributed to, and to be reportable by, the
members of the platform companies on their respective income tax
returns.
(E) LIMITED LIABILITY AGREEMENT
The allocation of Partnership profits and losses, cash
distributions, voting rights, certain equity preference and
appreciation rights, and other matters are defined in the Limited
Liability Agreement.
(F) REVENUES
Broadcast revenues are derived principally from the sale of
program time and spot announcements to local, regional, and
national advertisers. Advertising revenue is recognized in the
period during which the program time and spot announcements are
broadcast.
10
(Continued)
<PAGE> 12
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Notes to Combined Financial Statements
(G) TRANSACTIONS WITH AFFILIATED BROADCAST PROPERTIES
Broadcasting Partners previously owned additional radio properties
which were sold to a third party. The assets, liabilities and
results of operations of these properties have been excluded from
these financial statements. However, Broadcasting Partners had
certain activities with these properties, including advancing
funds and receiving excess cash from these stations' operations.
Additionally, during the nine months ended September 30, 1999, the
affiliated broadcast properties were sold. Broadcasting Partners
received the net proceeds from the sale. These activities have
been presented as capital transactions under the caption Net
activity with affiliated broadcast properties.
(H) SALES AGREEMENTS
Broadcasting Partners enters into joint sales agreements (JSA),
local marketing agreements (LMA), and time brokerage agreements
(TBA) with third party broadcast properties or in connection with
its acquisitions of broadcast properties. Under certain of these
agreements, the Company purchases all advertising time of the
stations in exchange for a monthly fee. The revenue from the sale
of such advertising time is recorded as broadcast revenues in the
accompanying statements of operations. The monthly fee is recorded
as a separate component of operating expenses captioned LMA fees.
The other expenses relating to stations operated under LMAs are
classified in the same manner as owned properties.
Other agreements call for the Partnership to act as a sales agent
for the other broadcast properties and share in the revenues
generated. These activities are included in other revenues.
(I) BARTER TRANSACTIONS (TRADE REVENUES AND EXPENSES)
Barter transactions are recorded at the estimated fair values of
the products and services received. Barter revenues are recognized
when commercials are broadcast. The assets or services received in
exchange for broadcast time are recorded when received or used.
(J) USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(K) CONCENTRATION OF CREDIT RISK
A significant portion of the Broadcasting Partners accounts
receivable are due from local, regional, and national advertising
agencies.
(L) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE
DISPOSED OF
Broadcasting Partners accounts for the impairment of long-lived
assets in accordance with the provisions of SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of. This Statement requires that
long-lived assets and certain identifiable intangibles be reviewed
for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable.
11
(Continued)
<PAGE> 13
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Notes to Combined Financial Statements
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash
flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets
exceed the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less
costs to sell.
(M) DERIVATIVE FINANCIAL INSTRUMENTS
Broadcasting Partners has purchased an interest rate ceiling and
an interest rate collar, which are amortized to interest expense
over the term of the agreements. Unamortized premiums are
included in other assets in the consolidated balance sheet.
Amounts receivable under the ceiling agreements and payable under
the floor agreement are accrued as a component of interest
expense. No amounts have been due under these arrangements (note
14).
(N) COMPREHENSIVE INCOME
As of January 1, 1998, Broadcasting Partners adopted Statement of
Financial Accounting Standard No. 130 (SFAS No. 130), Reporting
Comprehensive Income. SFAS No. 130 establishes new rules for
reporting and display of comprehensive income and its components:
however, the adoption of SFAS No. 130 had no impact on the
financial statements as the Partnership had no transactions which
would be considered Other Comprehensive Income.
(O) ACCOUNTING FOR ORGANIZATION COSTS
As of January 1, 1999, Broadcasting Partners adopted the
provisions of Statement of Position No. 98-5, Reporting on the
Costs of Start-up Activities ("SOP 98-5"), which requires costs of
start-up activities, including organization costs, to be expensed
as incurred. Broadcasting Partners has capitalized certain
organization costs associated with the set-up of some of its radio
stations and platform companies. The remaining balances of the
organization costs were written-off as of January 1, 1999 in
implementing SOP 98-5. Broadcasting Partners recognized a charge
to income of $517,416 for the nine months ended September 30, 1999
as a cumulative effect of a change in accounting principle.
(P) ADVERTISING AND PROMOTION
Advertising and promotion costs consist primarily of media
advertising and listener prizes, and are expensed as incurred.
(Q) UNAUDITED INTERIM FINANCIAL INFORMATION
The unaudited combined balance sheet, statements of operations and
changes in partners' capital, and cash flows as of September 30,
1999 and for the nine months ended September 30, 1998 and 1999
have been prepared in accordance with generally accepted
accounting principles for interim financial information and with
the instructions of Regulation S-X. In the opinion of management,
all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the interim period are not necessarily
indicative of the results that may be expected for any future
period including the year ending December 31, 1999.
12
(Continued)
<PAGE> 14
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Notes to Combined Financial Statements
(3) ACQUISITION OF BROADCAST PROPERTIES
In January 1997, Spring acquired WBSM-AM and WFHN-FM (New Bedford, MA),
WFPG-AM/FM (Atlantic City, NJ) and the LMA rights for, and an option to
purchase, WKOE-FM (Atlantic City, NJ), WQGN-FM and WSUB-AM (Groton, CT)
and other broadcast properties, out of receivership, for $14.0 million.
$2.4 million was applicable to these other broadcast properties which
were sold during 1999 and will not be included as part of the sale to
Citadel.
Also in January 1997, the Partnership acquired a 62.5 percent interest in
Pilot for $6.25 million. At the date of acquisition Pilot operated
WAQX-FM, WNTQ-FM and WNSS-AM (Syracuse, NY) and WMME-FM, WEZW-AM, WEBB-FM
and WTVL-AM (Augusta-Waterville, ME). Pilot then purchased the assets of
WLTI-FM (Syracuse, NY) for $2.8 million.
In October 1997, the Partnership acquired a 60.3 percent interest in
Mercury Radio Communications, LLC through a leveraged buy-out
transaction. Broadcast properties include WGRF-FM, WEDG-FM, and
WHTT-AM/FM (Buffalo, NY), which had a value of $62 million.
In November 1997, Sound purchased the assets of KYEA-FM, KMYY-FM, and
KCTO-FM in three separate transactions for an aggregate purchase price of
$4.97 million. This amount includes cash paid as well as notes payable to
the seller and amounts due under noncompete agreements.
In November 1997, Gleiser purchased the assets of KDOK-FM, KTBB-AM and
KGLD-AM (Tyler, TX) for $2.3 million plus the assumption of certain
liabilities. From August 8, 1997 through the date of acquisition, Gleiser
operated the station through an LMA agreement with Gleiser
Communications, Inc.
In October 1998, Spring purchased substantially all of the assets of
WPUR-FM (Atlantic City, NJ) - (formerly WZZP-FM) for $2.9 million. From
May 1998 through the date of acquisition, Spring operated the station
through an LMA agreement.
In April 1998, Pilot purchased substantially all of the assets of
WBPW-FM, WQHR-FM, WOZI-FM (Presque Isle, ME) and WCRQ-FM (formerly
WHRR-FM) (Dennysville, ME) for $5.2 million.
In June 1998, Pilot purchased substantially all of the assets of WIII-FM
and WKRT-AM (Cortland, NY) for $1.6 million. From March 1998 through the
date of acquisition, Pilot operated the stations through a Time Brokerage
Agreement.
In July 1998, Gleiser purchased substantially all of the assets of
KEES-AM and KYZS-AM (Tyler, TX) for $950,000. From November 1997 through
the date of acquisition, Gleiser operated the stations through an LMA
agreement.
13
(Continued)
<PAGE> 15
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Notes to Combined Financial Statements
These acquisitions have been accounted for under the purchase method of
accounting and, accordingly, the assets acquired and liabilities assumed
have been recorded at their estimated fair value as of the acquisition
date, as estimated by management. The acquisitions are generally financed
through a combination of capital contributions and borrowing arrangements
with financial institutions. In instances where the former owners have
retained a minority interest, the portion of the assets and liabilities
owned by the former owners has been maintained at the predecessors'
carrying value at the date of the transaction. The allocation of the
aggregate purchase prices is summarized as follows (in thousands):
<TABLE>
<CAPTION>
1997 1998
-------- ------
<S> <C> <C>
Land $ 640 184
Property and equipment 6,235 937
Cash and cash equivalents 183 --
Accounts receivable 3,512 --
Prepaid expenses and other current assets 394 --
Programming contract rights 103 --
Intangible assets 97,482 10,258
Accounts payable and accrued interest (2,309) --
Debt assumed (17,487) --
-------- ------
Total consideration $ 88,753 11,379
======== ======
</TABLE>
(4) PROPERTY AND EQUIPMENT
A summary of property and equipment is as follows (in thousands):
<TABLE>
<CAPTION>
(Unaudited)
December 31, December 31, September 30,
1997 1998 1999
------------ ------------ -------------
<S> <C> <C> <C>
Land $ 640 898 881
Land improvements 17 17 17
Leasehold improvements 197 453 337
Buildings and improvements 951 1,889 2,346
Office equipment, furniture, and fixtures 953 1,738 1,837
Tower and antenna equipment 2,039 1,909 1,461
Broadcast and production equipment 2,521 5,440 6,305
Tools and materials 125 125 388
Vehicles 173 466 500
Construction in progress 83 200 130
------ ------ ------
7,699 13,135 14,202
Less accumulated depreciation (555) (3,617) (4,794)
------ ------ -----
$7,144 9,518 9,408
====== ====== ======
</TABLE>
14
(Continued)
<PAGE> 16
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Notes to Combined Financial Statements
(5) INTANGIBLE ASSETS AND AMORTIZATION
Intangible assets are comprised of the following (in thousands):
<TABLE>
<CAPTION>
(UNAUDITED)
USEFUL LIFE DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
IN YEARS 1997 1998 1999
----------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
FCC licenses 15 $86,652 96,218 96,218
Network affiliations 15 2,681 2,681 2,681
Noncompete agreements 2 - 5 880 1,007 1,007
Goodwill 15 3,538 3,649 3,649
Other intangibles 2 - 15 2,984 3,486 3,099
--------- --------- ---------
96,735 107,041 106,654
Accumulated amortization (3,892) (11,458) (16,862)
--------- --------- ---------
$92,843 95,583 89,792
========= ========= =========
</TABLE>
The useful lives for licenses, network affiliations and goodwill are
determined to be 15 years. The useful lives of noncompete agreements and
other intangibles are based on contracted periods.
15
<PAGE> 17
(6) LONG-TERM DEBT
Details of long-term debt are as follows (in thousands):
<TABLE>
<CAPTION>
(Unaudited)
December 31, December 31, September 30,
1997 1998 1999
------------ ------------ -------------
<S> <C> <C> <C>
Spring Broadcasting Term Loans, payable in quarterly installments through
December 31, 2001, bearing interest at the Bank's base rate plus 1%, 8.75%
and 9.25% as of December 31, 1998
and September 30, 1999 (unaudited), respectively $ 8,030 7,220 6,170
Spring Broadcasting credit facility due December 31, 2001,
bearing interest at 8.75% and 9.25% as of December 31, 1998
and September 30, 1999 (unaudited), respectively -- 1,480 650
Spring Broadcasting Acquisition Loan, due March 31, 1999,
bearing interest at the Bank's base rate plus 1%,
8.75% and 9.25% as of December 31, 1998
and September 30, 1999 (unaudited), respectively -- 2,500 --
Mercury Radio Communications Term Loans, payable in quarterly installments
through June 30, 2006, bearing interest at LIBOR plus 2.75%, 8.098% as of
December 31, 1998 and
ranging from 8.52% - 9.02% as of September 30, 1999 (unaudited) 37,000 37,000 34,900
Mercury Radio Communications credit facility due June 30, 2005, bearing
interest at 8.39% as of September 30, 1999 (unaudited) -- -- 1,000
Pilot Communications Term Loans, payable quarterly in installments
through 2003, bearing interest at the Bank's base rate plus 1.75%, 9.5% and
10.0% as of December 31, 1998 and September 30, 1999
(unaudited), respectively 10,880 10,400 9,815
Pilot Communications Term Loan, payable in quarterly installments
through March 31, 2003, bearing interest at the Bank's base rate plus 1.75%,
9.5% and 10.0% as of December 31, 1998 and September 30,
1999 (unaudited), respectively -- 3,750 3,469
Pilot Communications credit facility due March 31, 2000 bearing interest
at 9.5% and 10.0% as of December 31, 1998 and September 30, 1999
(unaudited), respectively -- -- 1,039
Pilot Communications Notes Payable, Pi-Com Partners, L.P.,
due January 31, 2001, bearing interest at 12% 589 589 589
Pilot Communications Notes Payable, Pi-Com Partners, L.P.,
due January 31, 2001, bearing interest at 15% 2,061 2,061 2,061
Pilot Communications Notes Payable, Salt City Communications,
due 2002 bearing interest at the greater of 8% or prime 800 800 800
Pilot Communications payable to Cayuga Radio Partners Limited Partnership,
secured by letter of credit, payable in annual installments
through June 2002, accrues interest at 10% -- 200 100
Sound Broadcasting and Gleiser Communications Term Loans,
payable in installments beginning March 31, 1999 through December 31, 2004,
bearing interest at LIBOR plus 3%, ranging from 8.313% - 8.69% as of
December 31, 1998 and
8.18% - 8.46% as of September 30, 1999 (unaudited) 3,550 4,650 4,185
Sound Broadcasting Notes Payable, Tom Gay, due in installments
through October 2007, bearing interest at a rate of 8.5% 148 139 131
Gleiser Communications credit facility bearing interest at 8.335% and
ranging from 8.18% - 9.5% as of December 31, 1998 and September 30,
1999 (unaudited), respectively -- 140 205
Capital lease obligations 196 145 103
Other 38 66 51
-------- ------- -------
Total 63,292 71,140 65,268
Less current installments (1,355) (10,729) (6,864)
======== ======= =======
Long-term debt $ 61,937 60,411 58,404
======== ======= =======
</TABLE>
16
(Continued)
<PAGE> 18
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Notes to Combined Financial Statements
The Radio Group also has working capital and acquisition credit
facilities available for each of the platform companies.
Mercury IBJ Schroder, as agent, $2,000,000
revolving credit facility as of December 31, 1998,
expires 2000, $2,000,000 and $1,000,000
available as of December 31, 1998 and
September 30, 1999 (unaudited),
respectively
During 1999, IBJ Schroder, as agent, $8,000,000
acquisition facility, expires 2000, $8,000,000
available as of September 30, 1999 (unaudited)
Spring Summit Bank $1,750,000 revolving credit facility and
$4,250,000 acquisition facility, expire 2001,
$2,020,000 and $5,350,000 available as of
December 31, 1998 and September 30, 1999 (unaudited),
respectively
Pilot Summit Bank $1,500,000 revolving credit facility,
expires 2000, $1,500,000 and $461,000 available as of
December 31, 1998 and September 30, 1999 (unaudited),
respectively
Sound and
Gleiser IBJ Schroder, as agent, $2,000,000 revolving loans
facility as of December 31, 1998, expires 1999,
$1,860,000 available as of December 31, 1998
During 1999, the IBJ Schroder revolving credit
facility was reduced to $350,000, $105,000 was
available as of September 30, 1999 (unaudited).
The interest rate for borrowings under the Mercury, Spring, Pilot, Sound
and Gleiser facilities are based upon either LIBOR or the lender's Base
rate and have a margin ranging from 0% to 3.00% for LIBOR borrowings and
0% to 1.75% for Base rate borrowings.
The aggregate future maturities of long-term debt are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
<S> <C> <C>
1999 $10,729
2000 8,418
2001 16,024
2002 11,156
2003 14,328
Thereafter 10,485
=======
$71,140
=======
</TABLE>
17
(Continued)
<PAGE> 19
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Notes to Combined Financial Statements
In addition, each of the Term Loans require prepayments, at the lenders'
option, to the extent that certain operating or cash flow results are
obtained. Furthermore, Broadcasting Partners has the ability to prepay a
portion of the Term Loans without penalty.
Each of the Term Loans and credit facilities are secured by substantially
all of the assets and membership interests of the respective platform
companies. The credit agreements contain certain restrictive covenants
and operating requirements, including a restriction on the payment of
dividends from the platform companies to the members or partners,
including the Partnership.
Pilot is currently in default of its loan agreements; however, management
believes that it will be able to renegotiate the debt agreements and has
obtained stand-by commitments for financing with similar terms should it
be unable to satisfactorily negotiate the events of default.
In June 1998, Pilot issued irrevocable letters of credit in the amount of
$230,000 to an escrow agent for Cayuga Radio Partners Limited Partnership
in conjunction with the purchase of broadcast properties. The first
$100,000 may be fully drawn upon within one year of the above date, and
the remaining $130,000 within two years; which includes accrued interest.
The letter of credit is to be drawn against the unused credit facility
for each due date. As of December 31, 1998, no amounts had been drawn
under this letter of credit. As of September 30, 1999, $100,000 had been
drawn under this letter of credit (unaudited).
In April 1999, Sound issued an irrevocable letter of credit in the amount
of $40,000 to the current owners of KTJC in conjunction with the purchase
of broadcast property. This letter of credit reduced the amount available
under the IBJ Schroder revolving loan facility as of September 30, 1999
(unaudited).
(7) LEASES
Broadcasting Partners leases certain property and equipment under
noncancelable operating lease agreements. Rental expense charged to
earnings was approximately $271,000 for the period from January 9, 1997
(inception) through December 31, 1997, $508,951 for the year ended
December 31, 1998 and $343,883 and $370,152 for the nine months ended
September 30, 1998 and 1999 (unaudited), respectively.
Future minimum lease payments under noncancelable operating leases,
exclusive of LMAs, as of December 31, 1998 is approximately (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
<S> <C> <C>
1999 $ 467
2000 455
2001 401
2002 323
2003 225
Thereafter 448
======
$2,319
======
</TABLE>
18
(Continued)
<PAGE> 20
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Notes to Combined Financial Statements
(8) LOCAL MARKETING AGREEMENTS, TIME BROKERAGE AGREEMENTS AND JOINT
SALES AGREEMENTS
In January 1997, Spring Broadcasting, LLC assumed the rights to an LMA to
operate WKOE-FM (Atlantic City, NJ). In October 1999, Spring exercised an
option to extend the LMA through March 2003. The LMA agreement includes
monthly payments of $10,500 through March 2000 and decreases on March 27,
2000 to $9,500 per month. Spring has an additional option to extend the
LMA through 2006. Total LMA fees were $115,500 for the period January 9,
1997 (inception) through December 31, 1997, $126,000 for the year ended
December 31, 1998 and $94,500 for each nine month period ended September
30, 1998 and 1999 (unaudited).
On June 30, 1997, Broadcasting Partners Buffalo, LLC entered into an LMA
with Mercury Radio Communications, L.P. (Old Mercury) to operate WGRF-FM,
WEDG-FM and WHTT-AM/FM. Payments under this LMA totaled $1,645,000. This
LMA was terminated with the merger between Old Mercury and BT resulting
in the formation of Mercury Radio Communications, LLC.
On August 6, 1997, Gleiser Communications, LLC, entered into a Time
Brokerage Agreement with Gleiser Communications, Inc. to operate the
stations KDOK-FM, KGLD-AM and KTBB-AM, Tyler, Texas. Payments under the
agreement totaled $47,168 through contract termination during 1997.
On October 15, 1997, Mercury entered into a Joint Sales Agreement with
CKEY-FM (Niagara Falls, Ontario Canada) in which Mercury obtained
exclusive rights to sell advertising time in the U.S. on the Canadian
station. Under the terms of the agreement, Mercury and CKEY will share
all U.S. revenues, net of agency and sales commissions and national
representation fees on a 50/50 basis. The agreement extends through
November 2008, at which time it may be terminated with 90 days written
notice.
In November 1997, Gleiser entered into an LMA to operate KEES-AM and
KYZS-AM. Total LMA fees were $10,000 for the period from January 9, 1997
(inception) through December 31, 1997 and $59,743 for the year ended
December 31, 1998 and consisted of the LMA fees of $5,000 per month and
any related costs to operate the station. The LMA agreement was
terminated when these stations were purchased by Gleiser in July 1998.
In March 1998, Pilot entered into a Time Brokerage Agreement to operate
WIII-FM and WKRT-AM, Cortland, NY. Payments under the agreement totaled
$25,500 for the year ended December 31, 1998. This agreement was
terminated in June 1998 when Pilot acquired the assets of the station.
In June 1998, Spring entered into an LMA to broker all programming rights
for WZZP-FM for $23,800 per month LMA fee plus reimbursement of expenses.
The LMA agreement was terminated in October 1998 when Spring acquired the
station (currently called WPUR-FM). Total LMA fees were $142,432 for the
year ended December 31, 1998.
During April 1999, Sound entered into an LMA to broker all programming
rights for KTJC-FM for $1,750 per month LMA fees plus reimbursement of
expenses. Total LMA fees were $10,602 for the nine months ended September
30, 1999 (unaudited).
During August 1999, Mercury entered into an LMA to broker all programming
rights for WHLD-AM for $1,200 per month LMA fee plus reimbursement of
expenses. Total LMA fees were $1,800 for the nine months ended September
30, 1999 (unaudited). This agreement terminates during August 2007.
19
(Continued)
<PAGE> 21
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Notes to Combined Financial Statements
(9) SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest totaled approximately $2,229,000 for the period
January 9, 1997 (inception) through December 31, 1997, $5,512,229 for the
year ended December 31, 1998 and $4,294,419 and $4,940,731 for the nine
months ended September 30, 1998 and 1999 (unaudited).
In connection with the acquisitions during the period January 9, 1997
(inception) through December 31, 1997, the Company assumed certain
liabilities of $19,796,000. Additionally, the Company issued $950,000 in
notes payable to the sellers of broadcast properties acquired.
In connection with the acquisitions for the year ended December 31, 1998,
Broadcasting Partners committed to pay $200,000 in the future which is
supported by a $230,000 letter of credit.
(10) RELATED PARTY TRANSACTIONS
(A) FINANCIAL ADVISORY AGREEMENT
Broadcasting Partners has entered into various agreements which
require payments to Veronis Suhler & Associates (VS&A), and other
affiliates, upon the disposal or purchase of additional stations
or receipt of additional capital contributions to certain of the
platform companies. These payments are based upon a fixed
percentage of the purchase price should additional station
acquisitions or disposals occur. For the periods January 9, 1997
(inception) through December 31, 1997, the year ended December 31,
1998 and the nine months ended September 30, 1999 (unaudited),
fees for these services totaling $1,128,000, $64,000 and $43,000,
respectively, were capitalized as acquisition costs.
(B) MANAGEMENT AND MONITORING FEES
Pursuant to the platform companies' operating agreements,
Broadcasting Partners pays management fees to Broadcasting
Partners Management Corporation, an affiliate. These fees are
generally a defined percentage of net revenues. Additionally,
Broadcasting Partners pays monitoring fees to VS&A. Some of the
monitoring fee payments are deferred until the sale or rollup of
the platform company. As of December 31, 1997 and 1998 and
September 30, 1999 (unaudited), $242,345, $497,862 and $581,902,
respectively, are due to these related parties for such fees,
including deferred amounts.
In April 1999, Spring Broadcasting, LLC paid a one-percent
transaction fee of $43,000 to VS&A for the March 1999 sale of
WXLC-FM and WKRS-AM in Waukegan, IL (unaudited).
(11) EMPLOYEE BENEFITS PLAN
Broadcasting Partners maintains qualified profit-sharing plans with
trustees, which include thrift provisions qualifying under Section 401(k)
of the Internal Revenue Code, covering substantially all employees. The
provisions allow the participants to contribute up to 15 percent of their
compensation in the plan year, subject to statutory limitations. The
Partnership does not contribute to the plan.
20
(Continued)
<PAGE> 22
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Notes to Combined Financial Statements
(12) COMMITMENTS AND CONTINGENCIES
Broadcasting Partners is involved in certain litigation matters arising
in the normal course of business. In the opinion of management, these
matters are not significant and will not have a material adverse effect
on the Partnership's financial position.
(A) SPRING PURCHASE PRICE ADJUSTMENTS
Broadcasting Partners is currently negotiating the final purchase
price of the broadcast properties acquired with the receiver from
whom Spring acquired its broadcasting assets. The dispute relates
to the interpretation of the purchase agreement.
(B) EQUITY BASED COMPENSATION AND EMPLOYMENT AGREEMENTS
The Partnership maintains various equity based compensation
agreements for certain key executives of the platform companies.
Such plans are deemed to be variable plans for accounting
purposes, and as such compensation expense is determined based
upon the fair value, and is recognized over the vesting term. No
amounts were earned under these agreements for the periods January
9, 1997 (inception) through December 31, 1997, the year ended
December 31, 1998 and the nine months ended September 30, 1998 and
1999 (unaudited). The Partnership has also entered into employment
agreements in the ordinary course of business.
The pending transaction with Citadel Broadcasting Company will
trigger some of these compensation plans; however, these plans are
generally dependent upon the final allocation of the purchase
price to the various platform companies and the actual date that
the transaction closes. As a result, management can not currently
estimate the amounts to be earned under these agreements with any
accuracy, and therefore has not recognized any expense under these
plans.
(C) PENDING ACQUISITIONS
In February 1999, Sound entered into an asset purchase agreement
to acquire KTJC-FM (Monroe, LA) for $650,000. This acquisition is
pending subject to FCC approval.
In June 1999, Spring entered into an asset purchase agreement to
acquire WVVE-FM (Stonington, CT) for $3,850,000. This acquisition
has been approved by the FCC and will be completed upon the close
of the Citadel acquisition (unaudited).
In 1999, Mercury entered into an asset purchase agreement to
acquire WHLD-AM (Buffalo, NY) for $750,000. This acquisition is
pending subject to FCC approval (unaudited).
The Partnership continues to evaluate potential acquisitions and
consider other transactions to maximize the Partners' interests
however, as of September 30, 1999 the Company has not committed to
any other transaction (unaudited).
(D) YEAR 2000 (UNAUDITED)
As of September 30, 1999, one of the Broadcasting Partners'
broadcasting systems is not year 2000 compliant. Broadcasting
Partners is awaiting the delivery of a piece of equipment from a
vendor and, upon installation of this equipment, expects to be
year 2000 compliant, for all mission critical systems.
21
(Continued)
<PAGE> 23
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Notes to Combined Financial Statements
(E) LITIGATION
One of the platform companies has been named in an administrative
filing alleging that certain members of management have committed
sexual harassment. Broadcasting Partners intends to vigorously
defend against this matter; however, assessment of the outcome of
the potential damages cannot be reasonably determined at this
time.
(13) SALE OF BROADCAST PROPERTIES (UNAUDITED)
In October 1999, the Partnership entered into an agreement with Citadel
Broadcasting Company to sell the broadcasting properties of the platform
companies to Citadel for $185 million, subject to approval from the
Federal Communication Commission. The purchase price may be adjusted for
the pending acquisitions or other customary adjustments.
(14) FINANCIAL INSTRUMENTS
(A) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, receivables,
accounts payable, and due to receiver approximate their fair value
due to the short duration to maturity. The carrying value and
related estimated fair value of Broadcasting Partners' remaining
financial instruments are as follows (in thousands):
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1998
------------------------ -----------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
-------- ---------- -------- -----------
Assets:
<S> <C> <C> <C> <C>
Note receivable $ 150 150 -- --
Liabilities:
Term loans 59,460 59,460 61,770 61,770
Other notes payable 3,598 3,731 3,589 3,722
Other long-term debt 234 234 5,781 5,781
Interest rate ceilings 48 48 36 36
Off-balance sheet:
Lines of credit -- 35 -- 20
</TABLE>
The carrying value of the Term Loans approximates fair value as
these notes are variable rate instruments. The carrying value of
the Notes Receivable, Other Notes Payable and Other Long-Term Debt
was estimated based upon the related cash flows discounted at
Broadcasting Partners current borrowing rates for similar
instruments.
Unused credit facilities and lines of credit are estimated based
upon the fees currently charged for similar agreements or on the
estimated cost to sell or terminate.
The fair value of the interest rate ceilings reflect the estimated
amounts that Broadcasting Partners would receive or pay to
terminate the contacts on the reporting date based upon quotes
from commercial banks.
22
(Continued)
<PAGE> 24
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Notes to Combined Financial Statements
(B) DERIVATIVE FINANCIAL INSTRUMENTS
The Partnership uses derivative financial instruments to hedge
interest rate risk associated with borrowing under variable rate
credit facilities. These interest rate hedges are required
pursuant to the provisions of the debt agreements and apply to the
current balance under the specified borrowing. As of December 31,
1997 and 1998 and September 30, 1999, (unaudited) the Partnership
has an interest rate ceiling with a notional principal of
$8,030,000 and an interest rate ceiling of 8.5625 percent plus the
applicable margin for LIBOR loans and 11 percent plus the
applicable margin on Base rate loans. The ceiling expires in
January 2000. The Partnership entered into interest rate collar
agreements with a notional principal of $20,000,000, an interest
rate ceiling of 9.0 percent plus the applicable margin for LIBOR
loans, and an interest rate floor of 4.0 percent plus the
applicable margin for LIBOR loans. The collar expires in February
2001.
23
<PAGE> 25
[Andrews Hooper & Pavlik P.L.C. Letterhead]
Report of Independent Auditors
Shareholder
Liggett Broadcast, Inc.
We have audited the accompanying combined balance sheet of Liggett Broadcast,
Inc. as of December 31, 1998, and the related combined statements of operations,
shareholder's equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of Liggett Broadcast,
Inc. at December 31, 1998, and the combined results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ Andrews Hooper & Pavlik P.L.C.
Okemos, Michigan
December 6, 1999
24
<PAGE> 26
Liggett Broadcast, Inc.
Combined Balance Sheet
December 31, 1998
<TABLE>
<S> <C>
ASSETS (Note 3)
Current assets:
Cash $ 1,299,670
Accounts receivable, less allowance of $195,000 3,020,767
Other 183,893
-----------
Total current assets 4,504,330
Property and equipment (Note 1):
Land and improvements 453,856
Buildings and improvements 1,875,355
Broadcasting equipment 3,717,854
Furniture and fixtures 972,843
Vehicles and equipment 380,066
-----------
7,399,974
Less accumulated depreciation 3,107,765
-----------
4,292,209
Other assets (Note 1):
Broadcasting rights, net of amortization 26,292,310
Note receivable from shareholder 125,000
Other 48,305
-----------
26,465,615
-----------
$35,262,154
===========
</TABLE>
See accompanying notes.
25
<PAGE> 27
<TABLE>
<S> <C>
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 766,461
Dividends payable in lieu of taxes 450,000
Employee compensation 319,573
Accrued interest 98,452
Taxes, other than income tax 179,544
Other 34,954
Current portion of long-term debt (Note 3) 1,517,085
-----------
Total current liabilities 3,366,069
Long-term debt (less current portion) (Note 3) 17,494,741
Minority interest in consolidated subsidiary 18,000
Shareholder's equity:
Common stock, par value $1 per share--authorized 50,000
shares, issued and outstanding 7,400 shares 7,400
Additional paid-in capital 1,000,000
Retained earnings (Note 3) 13,375,944
-----------
14,383,344
-----------
$35,262,154
===========
</TABLE>
See accompanying notes.
26
<PAGE> 28
Liggett Broadcast, Inc.
Combined Statement of Shareholder's Equity
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS
---------------------------------------------
<S> <C> <C> <C>
Balance at January 1, 1998 $ 7,400 $ 1,000,000 $12,008,196
Net earnings 2,090,322
Dividends to shareholder in lieu of taxes and other (722,574)
---------------------------------------------
Balance at December 31, 1998 $ 7,400 $ 1,000,000 $13,375,944
=============================================
</TABLE>
See accompanying notes.
27
<PAGE> 29
Liggett Broadcast, Inc.
Combined Statement of Operations
Year ended December 31, 1998
<TABLE>
<S> <C>
Operating revenues including trade revenue of $432,000 $ 19,585,374
Less direct agency commissions 2,685,807
------------
16,899,567
Operating expenses:
Technical 375,157
Program 2,774,215
Sales 2,943,051
Promotion 1,152,152
Administrative 4,332,377
Depreciation and amortization 1,766,865
------------
13,343,817
------------
Operating earnings 3,555,750
Other revenues (expenses):
Interest expense (1,565,384)
Management fees 25,825
Loss on sale of property and equipment (79,850)
Interest income 54,192
Rent 98,511
Other 1,278
------------
(1,465,428)
------------
Net earnings $ 2,090,322
============
</TABLE>
See accompanying notes.
28
<PAGE> 30
Liggett Broadcast, Inc.
Combined Statement of Cash Flows
Year ended December 31, 1998
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net earnings $ 2,090,322
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 1,766,865
Loss on sale of property and equipment 79,850
Changes in operating assets and liabilities:
Accounts receivable (372,399)
Other current assets (67,063)
Other assets 76,763
Accounts payable 246,285
Other current liabilities (5,386)
-----------
Net cash provided by operating activities 3,815,237
INVESTING ACTIVITIES
Purchases of property and equipment (549,643)
Purchase of broadcast entity (3,779,306)
Proceeds from sale of property and equipment 26,200
-----------
Net cash used in investing activities (4,302,749)
FINANCING ACTIVITIES
Repurchase of membership interest in consolidated
subsidiary (20,000)
Cash dividends to shareholder in lieu of taxes and other (606,574)
Proceeds from long-term debt and note payable 4,200,000
Principal payments on long-term debt and notes payable (2,310,874)
-----------
Net cash provided by financing activities 1,262,552
-----------
Increase in cash 775,040
Cash at beginning of year 524,630
-----------
Cash at end of year $ 1,299,670
===========
Supplemental cash flow information:
Interest paid $ 1,575,012
</TABLE>
See accompanying notes.
29
<PAGE> 31
Liggett Broadcast, Inc.
Notes to Combined Financial Statements
December 31, 1998
1. ACCOUNTING POLICIES
ORGANIZATION AND NATURE OF OPERATIONS
Liggett Broadcast, Inc. (the Company) is a subchapter S Corporation which
includes several divisions and Rainbow Radio LLC (a limited liability company
82% owned by Liggett Broadcast, Inc.) and certain assets and operations of
specified properties held by New Tower, Inc. (an affiliated subchapter S
Corporation under common ownership) and LLJ Realty, LLC (an affiliated limited
liability company under common management and control). The Company operates
radio stations.
In December 1999, the Company agreed to sell certain tangible personal property,
improvements and fixtures, and certain real property and leasehold interests,
certain FCC licenses and certain other assets used in operation of the radio
stations as specified in the asset purchase agreement with Citadel
Communications Corporation, Citadel Broadcasting Company and Citadel License,
Inc., (the "Asset Purchase Agreement"). The sale price for the assets sold is
$120,500,000.
The accompanying combined financial statements include the accounts of Liggett
Broadcast, Inc., Rainbow Radio LLC, and the assets and operations of those
properties held by New Tower, Inc. and LLJ Realty, LLC that are included in the
Asset Purchase Agreement. LLJ Realty, LLC had no assets or operations as of
December 31, 1998.
All intercompany accounts are eliminated upon combination. The shareholder of
the Company controls another affiliate (D&B Realty) that leases certain property
to the Company. The assets of D&B Realty are excluded from the assets to be sold
in the Asset Purchase Agreement and are not included in the accompanying
combined financial statements.
On November 2, 1998, the Company acquired the assets of WTCF in Saginaw/Bay
City, Michigan for $3,779,000 including the costs to acquire. The Company
acquired substantially all of the assets of the station including net accounts
receivable ($119,000), property and equipment ($25,000), and an FCC license and
other intangibles ($3,635,000).
30
<PAGE> 32
Liggett Broadcast, Inc.
Notes to Combined Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
Like any other company, advances and changes in available technology can
significantly affect the business and operations of the Company. For example, a
challenging problem exists as many computer systems do not have the capability
of recognizing the year 2000 or years thereafter. This "Year 2000 Computer
Problem" creates risk for the Company from unforeseen problems in its own
computer systems. The effects of the "Year 2000 Computer Problem" may be
experienced before, on or after January 1, 2000, and if not addressed, the
impact on operations and financial reporting may affect the Company's ability to
conduct normal business operations.
ACCOUNTS RECEIVABLE
Accounts receivable represent amounts due primarily from advertising agencies
and direct customers located in Michigan. Accounts receivable are not secured by
any collateral arrangements.
INCOME TAXES
As of January 1, 1987 the shareholder of the Company elected under Subchapter S
of the Internal Revenue Code to include the Company's operating results in his
own income for federal income tax purposes. Accordingly, there is no provision
for federal income taxes. At the time of the election, the Company had
approximately $315,000 of net operating losses for financial reporting purposes
and $575,000 of net operating losses for tax reporting purposes. The net
operating losses, which expire in 1999, were suspended by this election and are
not available to the shareholder to offset future income generated by the
Company as long as the Company continues to maintain its Subchapter S election.
PROPERTY AND EQUIPMENT
Property and equipment are stated on the basis of cost. Depreciation is computed
by the straight-line method for financial reporting purposes based upon the
estimated useful lives of the assets.
BROADCASTING RIGHTS AND OTHER INTANGIBLES
Broadcasting rights at December 31, 1998 include FCC licenses for all of the
stations and goodwill. Substantially all FCC licenses and goodwill are amortized
over a 25 year period. Total accumulated amortization was $3,352,491 at December
31, 1998.
31
<PAGE> 33
Liggett Broadcast, Inc.
Notes to Combined Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
ESTIMATES
Management uses estimates and assumptions in preparing financial statements in
accordance with generally accepted accounting principles. Those estimates and
assumptions affect the reported amounts and disclosures for assets and
liabilities, including amounts for property and equipment, broadcasting rights
and other intangibles, and the reported revenues and expenses. Actual results
could vary from the estimates that were assumed in preparing the financial
statements.
CASH
Cash includes repurchase agreements and other amounts not covered by FDIC
insurance.
2. RENT EXPENSE
The Company leases, under a month to month agreement, an office facility and
studio from D & B Realty. Rent expense under this agreement approximated $25,000
in 1998. Rent expense for all operating leases including the amount above,
approximated $170,000 in 1998.
Future minimum lease payments under noncancellable operating leases are as
follows:
<TABLE>
<S> <C>
1999 $ 72,000
2000 49,000
2001 14,000
2002 14,000
2003 14,000
2004 and thereafter 757,000
---------
$ 920,000
=========
</TABLE>
The future minimum lease payments include annual payments for three tower site
leases. One of these leases terminates in December of 2085. The current lease
rate is $5,500 per year and increasing every ten years by the increase in the
producer price index but not more than 10%. Another tower site lease requires
payments of $6,000 per year plus increases each January based on the consumer
price index through 2007. A third tower site lease requires payments of $2,000
per year plus increases based on the consumer price index through 2015. This
lease agreement also has twenty year renewal options.
32
<PAGE> 34
Liggett Broadcast, Inc.
Notes to Combined Financial Statements (continued)
3. LONG-TERM DEBT AND NOTES PAYABLE TO BANK
Substantially all assets of the Company are pledged as collateral under terms of
the notes payable to bank. The bank notes are guaranteed by the Company's sole
shareholder and the Company has guaranteed payment of the shareholder's bank
debt of $546,000 at December 31, 1998. The bank loan agreements require, among
other things, that the Company maintain certain cash flow ratios and restrict
the Company from the payment of cash dividends, except for the purpose of
shareholder tax payments and other approved payments.
Aggregate maturities of long-term debt for the years following 1998 are as
follows: 1999--$1,517,085; 2000--$2,515,580; 2001--$1,838,565; 2002--$1,818,315;
2003--$1,811,565; 2004--$9,510,716.
Long-term debt at December 31 consisted of the following obligations:
<TABLE>
<CAPTION>
1998
-----------
<S> <C>
Note payable to bank at 9%. Note refinanced in February 1999.
See below. Proceeds used to acquire WMMQ and WITL $ 8,693,000
Note payable to bank at 9%. Note refinanced in February 1999
See below. Proceeds used to acquire WJIM and WJIM (AM) 1,260,000
Note payable to bank at 7.86%. Note refinanced in February 1999.
See below. Proceeds used to acquire WTCF 3,750,000
The above notes were refinanced and consolidated into one new note on February
1, 1999. The new note, for $13,609,250, is payable in quarterly installments of
$340,231 plus interest at 1/2% over the bank's prime rate and is due February 1,
2004. The current portion of debt reflects the terms of the new note
Note payable to bank refinanced on February 1, 1999. The new note is payable in
quarterly installments of $112,660 plus interest at 1/2% over the bank's prime
rate and is due February 1, 2004. The current portion of debt reflects the terms
of the refinanced note.
Proceeds used to acquire WFBE 4,506,400
Note payable to bank at 9.26%, due May 1, 2000 714,676
Note payable to bank at 9%, due January 2, 2002 87,750
-----------
19,011,826
Less current portion 1,517,085
-----------
$17,494,741
===========
</TABLE>
33
<PAGE> 35
Liggett Broadcast, Inc.
Notes to Combined Financial Statements (continued)
3. LONG-TERM DEBT AND NOTES PAYABLE TO BANK (CONTINUED)
The Company also has a $850,000 line of credit with the bank which is subject to
annual renewal each year on April 1. Interest on borrowings thereunder ($0 at
December 31, 1998) is at 9.0%.
4. DEFINED CONTRIBUTION PLAN
Effective January 1, 1997, the Company formed a 401(k) retirement plan covering
all eligible employees of the Company. Participation and deferral percentages
(maximum 15% of eligible compensation for employee's contributions) are at the
employee's discretion. The Company may make a discretionary contribution.
Employer contributions under this plan were $57,994 in 1998.
5. SUBSEQUENT EVENTS
In 1999, the Company (specifically LLJ Realty, LLC) began construction of a
building in Saginaw, Michigan with estimated total construction costs of
$1,200,000.
In 1999, the Company has an outstanding offer to purchase the assets of a radio
station for approximately $350,000 plus costs to acquire.
In December 1999, the Company agreed to sell certain assets of the Company to
Citadel Broadcasting Company and Citadel License, Inc. as described in the Asset
Purchase Agreement (see Note 1).
6. UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
The Asset Purchase Agreement (described in Note 1) specifically excludes: (1)all
cash, cash equivalents or similar type investments, (2)accounts receivable,
(3)assets not used in connection with the operations of the stations, (4)any and
all claims with respect to transactions occurring or arising prior to the
closing date, including, without limitation, claims for tax refunds, and
(5)certain personal property and real property and other assets specified in the
Asset Purchase Agreement and exhibits and schedules thereto.
34
<PAGE> 36
Liggett Broadcast, Inc.
Notes to Combined Financial Statements (continued)
6. UNAUDITED PRO FORMA CONDENSED BALANCE SHEET (CONTINUED)
<TABLE>
<CAPTION>
December 31, 1998
----------------------------------------------------------
Combined Balance Excluded Assets Pro Forma Assets
Sheet & Liabilities to be Sold
---------------- --------------- ----------------
<S> <C> <C> <C>
Assets
Cash $ 1,299,670 $ 1,299,670 --
Accounts Receivable 3,020,767 3,020,767 --
Other current assets 183,893 183,893 --
Property and equipment 4,292,209 334,348 $ 3,957,861
Broadcasting rights 26,292,310 26,292,310
Note receivable from shareholder 125,000 125,000 --
Other assets 48,305 48,305 --
----------- ----------- -----------
$35,262,154 $ 5,011,983 $30,250,171
=========== =========== ===========
Liabilities
Current liabilities $ 3,366,069 $ 3,366,069 --
Long-term debt (less current portion) 17,494,741 17,494,741 --
Minority interest in consolidated subsidiary 18,000 18,000 --
Shareholder's equity 14,383,344 14,383,344 --
----------- ----------- -----------
$35,262,154 $35,262,154 --
=========== =========== ===========
</TABLE>
35
<PAGE> 37
Liggett Broadcast, Inc.
Combined Balance Sheet
(Unaudited)
September 30, 1999
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash $ 1,917,048
Accounts receivable, less allowance of $110,000 3,114,369
Other 179,333
-----------
Total current assets 5,210,750
Property and equipment:
Land and improvements 479,763
Buildings and improvements 1,741,730
Broadcasting equipment 3,897,367
Construction in process 681,142
Furniture and fixtures 1,220,834
Vehicles and equipment 479,555
-----------
8,500,391
Less accumulated depreciation 3,611,097
-----------
4,889,294
Other assets:
Broadcasting rights, net of amortization 25,428,667
Note receivable from shareholder 175,000
Other 199,791
-----------
25,803,458
-----------
$35,903,502
===========
</TABLE>
See accompanying notes.
36
<PAGE> 38
<TABLE>
<S> <C>
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 737,796
Dividends payable in lieu of taxes 456,000
Employee compensation 463,572
Accrued interest 246,264
Accrued taxes 187,751
Other 21,207
Current portion of long-term debt 1,879,865
-----------
Total current liabilities 3,992,455
Long-term debt (less current portion) 16,598,721
Minority interest in consolidated subsidiary 18,000
Shareholder's equity:
Common stock, par value $1 per share--authorized 50,000
shares, issued and outstanding 7,400 shares 7,400
Additional paid-in capital 1,005,000
Retained earnings 14,281,926
-----------
15,294,326
-----------
$35,903,502
===========
</TABLE>
See accompanying notes.
37
<PAGE> 39
Liggett Broadcast, Inc.
Combined Statement of Shareholder's Equity
(Unaudited)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS
---------------------------------------------
<S> <C> <C> <C>
Balance at January 1, 1999 $ 7,400 $ 1,000,000 $13,375,944
Net earnings 2,242,686
Dividends to shareholder in lieu of taxes and other (1,336,704)
Members equity contribution for LLJ Realty, LLC 5,000
---------------------------------------------
Balance at September 30, 1999 $ 7,400 $ 1,005,000 $14,281,926
=============================================
</TABLE>
See accompanying notes.
38
<PAGE> 40
Liggett Broadcast, Inc.
Combined Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
1999 1998
-----------------------------------
<S> <C> <C>
Operating revenues including trade revenue of $352,000
in 1999 and $288,000 in 1998 $ 16,232,441 $ 13,934,769
Less direct agency commissions 2,140,516 1,896,784
-----------------------------------
14,091,925 12,037,985
Operating expenses:
Technical 310,857 274,744
Programming 2,400,931 2,004,766
Promotion 968,517 769,156
Selling 2,253,202 2,079,294
Administrative 3,597,564 3,226,508
Depreciation and amortization 1,401,772 1,305,788
-----------------------------------
10,932,843 9,660,256
-----------------------------------
Operating earnings 3,159,082 2,377,729
Other revenues (expenses):
Interest expense (1,148,456) (1,147,772)
Management fees from affiliated entities 9,000 9,000
Gain (loss) on sale of property and equipment 32,391 (75,250)
Interest income 24,578 29,534
Rent 99,720 69,740
Other 66,371 10,476
-----------------------------------
(916,396) (1,104,272)
-----------------------------------
Net earnings $ 2,242,686 $ 1,273,457
===================================
</TABLE>
See accompanying notes.
39
<PAGE> 41
Liggett Broadcast, Inc.
Combined Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
1999 1998
----------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 2,242,686 $ 1,273,457
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 1,401,772 1,305,788
(Gain) loss on sale of property and equipment (32,391) 75,250
Changes in operating assets and liabilities:
Accounts receivable (93,602) (322,730)
Other current assets 4,560 48,836
Other assets (151,486) (464,553)
Accounts payable (28,665) 9,567
Other current liabilities 292,271 26,413
----------------------------------
Net cash provided by operating activities 3,635,145 1,952,028
INVESTING ACTIVITIES
Purchases of property and equipment (631,748) (178,805)
Construction in process (681,142) --
Proceeds from sale of property and equipment 210,067 --
Decrease (increase) in note receivable from shareholder (50,000) 25,000
----------------------------------
Net cash used in investing activities (1,152,823) (153,805)
FINANCING ACTIVITIES
Repurchase of membership interest in consolidated subsidiary -- (2,000)
Members equity contribution for LLJ Realty, LLC 5,000 --
Cash dividends to shareholder in lieu of taxes and other (1,336,704) (501,573)
Proceeds from long-term debt and note payable 513,377 450,000
Principal payments on long-term debt and notes payable (1,046,617) (1,846,382)
----------------------------------
Net cash used in financing activities (1,864,944) (1,899,955)
----------------------------------
Increase in cash 617,378 (101,732)
Cash at beginning of year 1,299,670 524,630
----------------------------------
Cash at end of year $ 1,917,048 $ 422,898
==================================
Supplemental cash flow information:
Interest paid $ 1,003,282 $ 1,155,477
</TABLE>
See accompanying notes.
40
<PAGE> 42
Liggett Broadcast, Inc.
Notes to Combined Financial Statements
(Unaudited)
(1) ORGANIZATION AND NATURE OF OPERATIONS
Liggett Broadcast, Inc. (the Company) is a subchapter S Corporation which
includes several divisions and Rainbow Radio LLC (a limited liability company
82% owned by Liggett Broadcast, Inc.) and certain assets and operations of
specified properties held by New Tower, Inc. (an affiliated subchapter S
Corporation under common ownership) and LLJ Realty, LLC (an affiliated limited
liability company under common management and control). The Company operates
radio stations.
In December 1999, the Company agreed to sell certain tangible personal property,
improvements and fixtures, and certain real property and leasehold interests,
certain FCC licenses and certain other assets used in operation of the radio
stations as specified in the asset purchase agreement with Citadel
Communications Corporation, Citadel Broadcasting Company and Citadel License,
Inc., (the "Asset Purchase Agreement"). The sale price for the assets sold is
$120,500,000.
The accompanying combined financial statements include the accounts of Liggett
Broadcast, Inc., Rainbow Radio LLC, and the assets and operations of those
properties held by New Tower, Inc. and LLJ Realty, LLC that are included in the
Asset Purchase Agreement.
All intercompany accounts are eliminated upon combination. The shareholder of
the Company controls another affiliate (D&B Realty) that leases certain property
to the Company. The assets of D&B Realty are excluded from the assets to be sold
in the Asset Purchase Agreement and are not included in the accompanying
combined financial statements.
On November 2, 1998, the Company acquired the assets of WTCF in Saginaw/Bay
City, Michigan for $3,779,000 including the costs to acquire. The Company
acquired substantially all of the assets of the station including net accounts
receivable ($119,000), property and equipment ($25,000), and an FCC license and
other intangibles ($3,635,000).
Like any other company, advances and changes in available technology can
significantly affect the business and operations of the Company. For example, a
challenging problem exists as many computer systems do not have the capability
of recognizing the year 2000 or years thereafter. This "Year 2000 Computer
Problem" creates risk for the Company from unforeseen problems in its own
computer systems. The effects of the "Year 2000 Computer Problem" may be
experienced before, on or after January 1, 2000, and if not addressed, the
impact on operations and financial reporting may affect the Company's ability to
conduct normal business operations.
41
<PAGE> 43
Liggett Broadcast, Inc.
Notes to Combined Financial Statements (continued)
(Unaudited)
(2) BASIS OF PRESENTATION
The accompanying unaudited combined financial statements of Liggett Broadcast,
Inc have been prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments, consisting of normal recurring accruals, considered necessary for a
fair presentation have been included. Operating results for the nine months
ended September 30, 1999 are not necessarily indicative of the results that may
be expected for the year ending December 31, 1999. For further information,
refer to the combined financial statements and notes thereto for the year ended
December 31, 1998.
(3) INCOME TAXES
As of January 1, 1987 the shareholder of the Company elected under Subchapter S
of the Internal Revenue Code to include the Company's operating results in his
own income for federal income tax purposes. Accordingly, there is no provision
for federal income taxes.
(4) BROADCASTING RIGHTS AND OTHER INTANGIBLES
Broadcasting rights at September 30, 1999 include FCC licenses for all of the
stations and goodwill. Substantially all FCC licenses and goodwill are amortized
over a 25 year period.
(5) COMMITMENTS AND GUARANTEES
In 1999, the Company (specifically LLJ Realty, LLC) began construction of a
building in Saginaw, Michigan with estimated total construction costs of
$1,200,000. Estimated costs to complete as of September 30, 1999 were
approximately $450,000.
In 1999, the Company has an outstanding offer to purchase the assets of a radio
station for approximately $350,000 plus costs to acquire.
(6) SUBSEQUENT EVENTS
In December 1999, the Company agreed to sell certain assets of the Company to
Citadel Broadcasting Company and Citadel License, Inc. as described in the Asset
Purchase Agreement (see Note 1).
42
<PAGE> 44
Liggett Broadcast, Inc.
Notes to Combined Financial Statements (continued)
(Unaudited)
(7) UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
The Asset Purchase Agreement (described in Note 1) specifically excludes: (1)all
cash, cash equivalents or similar type investments, (2)accounts receivable,
(3)assets not used in connection with the operations of the stations, (4)any and
all claims with respect to transactions occurring or arising prior to the
closing date, including, without limitation, claims for tax refunds, and
(5)certain personal property and real property and other assets specified in the
Asset Purchase Agreement and exhibits and schedules thereto.
<TABLE>
<CAPTION>
September 30, 1999
---------------------------------------------------------
Combined Balance Excluded Assets Pro Forma Assets
Sheet & Liabilities to be sold
---------------- --------------- ----------------
<S> <C> <C> <C>
Assets
Cash $ 1,917,048 $ 1,917,048
Accounts Receivable 3,114,369 3,114,369
Other current assets 179,333 179,333
Property and equipment 4,889,294 421,492 $ 4,467,802
Broadcasting rights 25,428,667 25,428,667
Note receivable from shareholder 175,000 175,000
Other assets 199,791 199,791
----------- ----------- -----------
$35,903,502 $ 6,007,033 $29,896,469
=========== =========== ===========
Liabilities
Current liabilities $ 3,992,455 $ 3,992,455
Long-term debt (less current portion) 16,598,721 16,598,721
Minority interest in consolidated subsidiary 18,000 18,000
Shareholder's equity 15,294,326 15,294,326
----------- -----------
$35,903,502 $35,903,502
=========== ===========
</TABLE>
43
<PAGE> 45
INDEPENDENT AUDITORS' REPORT
The Partners
Wicks Radio Group
(a division of Wicks Broadcast Group Limited Partnership)
We have audited the accompanying balance sheet of Wicks Radio Group (a division
of Wicks Broadcast Group Limited Partnership) as of December 31, 1998, and the
related statements of operations and changes in division equity, and cash flows
for the year then ended. These financial statements are the responsibility of
Wicks Radio Group's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wicks Radio Group (a division
of Wicks Broadcast Group Limited Partnership) as of December 31, 1998 and the
results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/ KPMG LLP
McLean, Virginia
May 17, 1999
44
<PAGE> 46
WICKS RADIO GROUP
(A Division of the Wicks Broadcast Group Limited Partnership)
Balance Sheets
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, 1999
ASSETS 1998 (UNAUDITED)
----------- ----------
<S> <C> <C>
Cash $ 253,206 144,823
Accounts receivable, net of allowance for doubtful accounts of
$425,854 at December 31, 1998 and $541,721 at June 30, 1999
(unaudited) 2,528,518 3,168,419
Prepaid expenses and other assets 162,347 21,245
----------- ----------
Total current assets 2,944,071 3,334,487
Property and equipment, net 6,100,272 5,588,795
Intangible assets, net 37,493,172 35,988,898
=========== ==========
Total assets 46,537,515 44,912,180
=========== ==========
LIABILITIES AND DIVISION EQUITY
Current liabilities - accounts payable and accrued expenses 637,343 623,097
Deferred income taxes 520,000 500,000
----------- ----------
Total liabilities 1,157,343 1,123,097
Division equity 45,380,172 43,789,083
=========== ==========
Total liabilities and division equity $46,537,515 44,912,180
=========== ==========
</TABLE>
See accompanying notes to financial statements.
45
<PAGE> 47
WICKS RADIO GROUP
(A Division of Wicks Broadcast Group Limited Partnership)
Statements of Operations and Changes in Division Equity
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
YEAR ENDED -------------------------------
DECEMBER 31, 1998 1999
1998 (UNAUDITED) (UNAUDITED)
------------ ----------- -----------
<S> <C> <C> <C>
Revenue:
Broadcast revenue $ 18,923,947 9,079,789 10,293,380
Other revenue 542,865 260,339 326,982
------------ ----------- -----------
Gross revenue 19,466,812 9,340,128 10,620,362
Less - agency commissions (2,045,395) (925,949) (1,077,334)
------------ ----------- -----------
Net revenue 17,421,417 8,414,179 9,543,028
Operating costs:
Station operating expenses 12,195,132 5,961,548 6,761,030
Depreciation and amortization 4,059,157 2,031,709 2,023,565
Corporate overhead 890,378 360,989 478,268
------------ ----------- -----------
17,144,667 8,354,246 9,262,863
Net income before income taxes 276,750 59,933 280,165
Income taxes (benefit) (40,000) (20,000) (20,000)
------------ ----------- -----------
Net income 316,750 79,933 300,165
Division equity, beginning of period 30,902,034 30,902,034 45,380,172
Net corporate transfers (distributions) 14,161,388 16,839,505 (1,891,254)
============ =========== ===========
Division equity, end of period $ 45,380,172 47,821,472 43,789,083
============ =========== ===========
</TABLE>
See accompanying notes to financial statements
46
<PAGE> 48
WICKS RADIO GROUP
(A Division of Wicks Broadcast Group Limited Partnership)
Statements of Cash Flows
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
YEAR ENDED ------------------------------
DECEMBER 31, 1998 1999
1998 (UNAUDITED) (UNAUDITED)
------------ ----------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 316,750 79,933 300,165
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 4,059,157 2,031,709 2,023,565
Deferred tax benefit (40,000) (20,000) (20,000)
Increase in receivables (404,546) (1,054,237) (639,901)
(Increase) decrease in prepaid
expenses and other current assets (104,248) (12,740) 141,102
Increase (decrease) in accounts
payable and accrued expenses 148,105 221,696 (14,246)
------------ ----------- ----------
Net cash provided by operating
activities 3,975,218 1,246,361 1,790,685
------------ ----------- ----------
Cash flows used in investing activities
Purchase of property and equipment (164,114) (71,623) (7,814)
Acquisition of broadcast properties (17,824,226) (17,824,226) --
------------ ----------- ----------
Cash flows used in investing activities (17,988,340) (17,895,849) (7,814)
------------ ----------- ----------
Cash flows provided by (used in) financing
activities - net corporate transfers
(distributions) 14,161,388 16,839,505 (1,891,254)
------------ ----------- ----------
Net increase (decrease) in cash
and cash equivalents 148,266 190,017 (108,383)
Cash and cash equivalents, beginning of period 104,940 104,940 253,206
============ =========== ==========
Cash and cash equivalents, end of period $ 253,206 294,957 144,823
============ =========== ==========
</TABLE>
See accompanying notes to financial statements.
47
<PAGE> 49
WICKS RADIO GROUP
(A Division of Wicks Broadcast Group Limited Partnership)
Notes to financial statements
(1) BUSINESS DESCRIPTION
The Wicks Radio Group (the "Broadcast Group") is a division of Wicks
Broadcast Group Limited Partnership (the "Partnership"). The Broadcast
Group consists of the sixteen radio stations (10 FMs and 6 AMs) serving
the Charleston, South Carolina, Binghamton, New York, Kokomo, Indiana,
and New Castle, Indiana markets.
(See Note 3)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) CASH AND CASH EQUIVALENTS
For the purposes of the statement of cash flows, cash equivalents
consist of highly liquid investments with original maturities of
three months or less. The fair market value of such investments
approximates cost.
(b) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation expense is
computed using the straight-line method over the estimated useful
lives of the assets, which range from three to twenty years.
(c) INTANGIBLE ASSETS AND RECOVERY OF LONG-LIVED ASSETS
Intangible assets consist principally of network affiliation
agreements, broadcasting licenses, covenants not to compete and
the excess of costs over the fair value of net assets acquired.
Amortization expense is computed on a straight-line basis over the
estimated lives of the assets which range from 2-15 years.
The Partnership's policy is to review its long-lived assets for
impairment whenever events or changes in circumstances indicated
that the carrying amount may not be recoverable. The Partnership
recognizes an impairment loss when the sum of the expected future
undiscounted cash flows is less than the carrying amount of the
asset. The measurement of the impairment losses to be recognized
is based upon the difference between the fair value and the
carrying amount of the assets.
(d) INCOME TAXES
The Broadcast Group is not an entity subject to income taxes. The
Broadcast Group's income or loss is passed through to the
Partnership and the related tax attributes are deemed to be
distributed to, and to be reportable by, the partners of the
Partnership on their respective income tax returns.
48
<PAGE> 50
WICKS RADIO GROUP
(A Division of Wicks Broadcast Group Limited Partnership)
Notes to financial statements (continued)
However, the Broadcast Group contains the Partnership's
subsidiary, Regional Group, Inc. Regional Group, Inc. and its
subsidiaries are Subchapter C corporations, and are, therefore,
responsible for the income taxes attributable to their profit and
losses.
Income taxes for Regional Group, Inc. and its subsidiaries are
accounted for under the asset and liability method. Deferred tax
assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating losses and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using the enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized into income in
the period that includes the enactment date. The income tax
benefit is a result of the amortization of the deferred tax
liability.
(e) REVENUE
Broadcasting revenue are derived principally from the sale of
program time and spot announcements to local, regional, and
national advertisers. Advertising revenue is recognized in the
period during which the program time and spot announcements are
broadcast.
(f) BARTER TRANSACTIONS
Barter transactions are recorded at the estimated fair values of
the products and services received. Barter revenues are recognized
when commercials are broadcast. The assets or services received in
exchange for broadcast time are recorded when received or used.
(g) CORPORATE OVERHEAD
A number of overhead services are maintained centrally by the
Partnership and are allocated to its business units based on the
benefits provided. These services include most of the costs
associated with the human resources function and certain general
and administrative costs of the corporate function such as
accounting and finance, treasury and legal.
In addition, the Partnership provides for the working capital
needs of the Broadcast Group. There is no borrowing arrangement
between the Partnership and the Broadcast Group. Accordingly, no
interest expense is recorded in the accompanying financial
statements. However, all of the assets of the Broadcast Group have
been pledged as collateral on the Partnership's credit facility.
(h) USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of
49
<PAGE> 51
WICKS RADIO GROUP
(A Division of Wicks Broadcast Group Limited Partnership)
Notes to financial statements (continued)
the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
(i) CONCENTRATION OF CREDIT RISK
A significant portion of the Broadcast's Group accounts receivable
are due from advertising agencies.
(j) UNAUDITED INTERIM FINANCIAL INFORMATION
The unaudited balance sheet as of June 30, 1999 and the statements
of operations and changes in division equity, and cash flows for
the six months ended June 30, 1998 and June 30, 1999 have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions of Regulation S-X. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for fair presentation have been included. Operating
results for the interim period are not necessarily indicative of
the results that may be expected for any future period including
the year ending December 31, 1999.
(3) ACQUISITION OF BROADCAST RADIO STATIONS
In January 1998, the Partnership acquired certain broadcasting assets of
WWKI-FM (Kokomo, Indiana) and WMDH-FM and WMDH-AM (New Castle, Indiana).
Total consideration paid for these acquisitions including costs of
acquisitions was approximately $17,824,000 in 1998. These acquisitions
have been accounted for under the purchase method of accounting and,
accordingly, the assets acquired and liabilities assumed have been
recorded at their estimated fair value as of the acquisition date, as
determined by an independent appraiser. The allocation of the purchase
price is summarized as follows:
1998
-----------
Land $ 107,000
Property and equipment 2,209,000
Intangible assets 15,508,000
===========
Total consideration paid 17,824,000
===========
50
<PAGE> 52
WICKS RADIO GROUP
(A Division of Wicks Broadcast Group Limited Partnership)
Notes to financial statements (continued)
(4) PROPERTY AND EQUIPMENT
A summary of property and equipment is as follows:
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, 1999
1998 (UNAUDITED)
----------- ----------
<S> <C> <C>
Land $ 275,318 275,318
Building and improvements 989,438 989,438
Office equipment, furniture, and fixtures 591,018 598,832
Broadcast and production equipment 6,457,025 6,457,025
Vehicles 94,660 94,660
----------- ----------
8,407,459 8,415,273
Less accumulated depreciation (2,307,187) (2,826,478)
=========== ==========
Total consideration paid $ 6,100,272 5,588,795
=========== ==========
</TABLE>
(5) INTANGIBLE ASSETS AND AMORTIZATION
Intangible assets are comprised of the following:
<TABLE>
<CAPTION>
JUNE 30,
USEFUL LIFE DECEMBER 31, 1999
IN YEARS 1998 (UNAUDITED)
------------ ----------
<S> <C> <C> <C>
FCC licenses 15 $ 23,996,860 23,996,860
Network affiliations 15 3,053,439 3,053,439
Goodwill 15 14,179,232 14,179,232
Non-compete agreements 2-5 500,000 500,000
Other intangibles 2-15 1,814,744 1,814,744
------------ ----------
43,544,275 43,544,275
Accumulated amortization (6,051,103) (7,555,377)
============ ==========
$ 37,493,172 35,988,898
============ ==========
</TABLE>
51
<PAGE> 53
WICKS RADIO GROUP
(A Division of Wicks Broadcast Group Limited Partnership)
Notes to financial statements (continued)
(6) DEFERRED INCOME TAXES
The Partnership has established a deferred tax liability arising from the
acquisition of Regional Group, Inc. of $600,000. This liability is
attributable to the difference between the book basis of Regional Group,
Inc. and the carryover basis of the former shareholders at the
acquisition date. As the liability was principally attributable to the
book/tax difference in long-term tangible and intangible assets, the
deferred tax liability was classified as a long-term liability. The
Broadcast Group recognized an income tax benefit of $40,000 in 1998 and
$20,000 (unaudited) for the six months ended June 30, 1999 as a result of
amortization of the deferred tax liability.
(7) LEASES
The Broadcast Group leases certain property and equipment under
noncancelable operating lease agreements. Rental expense was
approximately $311,000 for the year ended December 31, 1998.
Future minimum lease payments under noncancelable operating leases are
approximately:
YEAR ENDING DECEMBER 31:
1999 $ 329,000
2000 293,000
2001 231,000
2002 213,000
2003 225,000
Thereafter 1,051,000
----------
2,342,000
==========
(8) SUBSEQUENT EVENTS
In November 1998, the Partnership entered into an agreement with Citadel
Broadcasting Company ("Citadel") to sell the Wicks Radio Group to Citadel
for approximately $77 million. The transaction was closed on June 30,
1999.
52
<PAGE> 54
[FAULK & WINKLER LOGO]
INDEPENDENT AUDITORS' REPORT
Board of Directors
Citywide Communications, Inc.
Baton Rouge, Louisiana
We have audited the accompanying consolidated balance sheet of CITYWIDE
COMMUNICATIONS, INC. as of December 31, 1998, and the related consolidated
statements of operations and accumulated deficit, stockholders' deficit and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated 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 consolidated
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CITYWIDE
COMMUNICATIONS, INC. as of December 31, 1998, and the results of its operations
and its cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ Faulk & Winkler LLC
----------------------------
Certified Public Accountants
Baton Rouge, Louisiana
March 12, 1999 (except for Note 13
as to which the date is March 19, 1999)
6811 Jefferson Highway - Baton Rouge, LA 70806
Business: (225) 927-9470 - Facsimile: (225) 932-0000
706 Railroad Avenue - Donaldsonville, LA 70346 - (225) 473-7719
An independent member of BKR International
53
<PAGE> 55
CITYWIDE COMMUNICATIONS, INC.
Baton Rouge, Louisiana
CONSOLIDATED BALANCE SHEET
December 31, 1998
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT
Cash $ 33,051
Accounts receivable, less allowance for doubtful
accounts of $485,000 1,367,999
Prepaid expenses and other assets 37,064
-----------
Total current assets 1,438,114
PROPERTY AND EQUIPMENT - NET 1,829,857
INTANGIBLES - NET 10,920,009
-----------
Total assets $14,187,980
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Notes payable $15,055,940
Accounts payable 1,142,149
Accrued interest 122,128
Accrued expenses and other 117,379
Income and franchise taxes payable 258,653
-----------
Total current liabilities 16,696,249
DEFERRED OBLIGATIONS 1,654,343
-----------
Total liabilities 18,350,592
-----------
STOCKHOLDERS' DEFICIT
Common stock, no par value
Class A voting, 8,000 shares authorized,
1,028 shares issued and outstanding 1,100
Class B non-voting, 2,000 shares authorized,
254 shares issued and outstanding 3,780,000
Less treasury stock (warrants) (1,778,519)
Accumulated deficit (6,165,193)
-----------
Total stockholders' deficit (4,162,612)
-----------
Total liabilities and stockholders' deficit $14,187,980
===========
</TABLE>
The accompanying notes to consolidated financial statements are
an integral part of this financial statement.
54
<PAGE> 56
CITYWIDE COMMUNICATIONS, INC.
Baton Rouge, Louisiana
CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
For the year ended December 31, 1998
<TABLE>
<CAPTION>
<S> <C>
REVENUES
Broadcasting $ 8,035,132
Agency commissions (783,020)
Trade (215,809)
Other 79,131
-----------
Net revenues 7,115,434
-----------
OPERATING EXPENSES
Technical 51,616
Programming 1,811,302
Sales 1,136,512
General and administrative 2,798,932
-----------
Total operating expenses 5,798,362
-----------
Income from operations 1,317,072
OTHER EXPENSES
Depreciation and amortization 1,343,598
Interest 2,029,551
Loss on sale of fixed assets 55,017
-----------
Net loss (2,111,094)
ACCUMULATED DEFICIT
Beginning of year (4,054,099)
-----------
End of year $(6,165,193)
===========
</TABLE>
The accompanying notes to consolidated financial statements are
an integral part of this financial statement.
55
<PAGE> 57
CITYWIDE COMMUNICATIONS, INC.
Baton Rouge, Louisiana
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
For the year ended December 31, 1998
<TABLE>
<CAPTION>
CAPITAL STOCK TOTAL
------------------------------- ACCUMULATED TREASURY STOCKHOLDERS'
SHARES AMOUNT DEFICIT STOCK DEFICIT
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997 1,282 $3,781,100 $(4,054,099) $(1,778,519) $(2,051,518)
Net loss -- -- (2,111,094) -- (2,111,094)
--------------- --------------- --------------- --------------- ---------------
BALANCE, DECEMBER 31, 1998 1,282 $3,781,100 $(6,165,193) $(1,778,519) $(4,162,612)
=============== =============== =============== =============== ===============
</TABLE>
The accompanying notes to financial statements are
an integral part of this financial statement.
56
<PAGE> 58
CITYWIDE COMMUNICATIONS, INC.
Baton Rouge, Louisiana
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended December 31, 1998
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(2,111,094)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 1,343,598
Allowance for doubtful accounts 255,604
Loss on sale of fixed assets 55,017
Deferred obligations charges 701,753
Operating assets and liabilities:
Accounts receivable (476,142)
Prepaid expenses 15,230
Accounts payable 65,879
Accrued expenses and liabilities 263,636
------------
Net cash provided by operating activities 113,481
------------
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment acquisitions (23,410)
Proceeds from sale of property and equipment 200
------------
Net cash used by financing activities (23,210)
------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long term debt 80,893
Repayments of long-term debt (217,862)
Decrease in stockholder loans (21,868)
------------
Net cash used by financing activities (158,837)
------------
Net decrease in cash (68,566)
CASH
Beginning of period 101,617
------------
End of period $ 33,051
============
</TABLE>
The accompanying notes to consolidated financial statements are
an integral part of this statement.
57
<PAGE> 59
CITYWIDE COMMUNICATIONS, INC.
Baton Rouge, Louisiana
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND OPERATIONS
Citywide Communications, Inc. (the Company) and its wholly-owned
subsidiaries, Citywide Broadcasting Corporation (CBC), Citywide
Broadcasting Corporation of Lafayette, Inc. (CBL), Southern
Communications, Inc. (SCI), and WXOK, Inc., operate nine radio stations
throughout south-central Louisiana. The Company grants credit to
qualified customers and generally requires no collateral from its
customers.
Revenues arise from the sale of advertising time. Advertising rates are
based on the estimated size of the audience during specified
broadcasting periods. Expenses of the Company include programming,
technical, selling, general and administrative, and corporate.
PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of the Company and its
subsidiaries. All intercompany balances and transactions have been
eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates. Estimates are used primarily when accounting for
allowance for doubtful accounts, depreciation, amortization and income
taxes.
BASIS OF ACCOUNTING
The Company's financial statements have been prepared in accordance
with generally accepted accounting principles on a going concern basis.
These principles contemplate the realization of assets and the
satisfaction of liabilities and commitments in the normal course of
business. The Company has significant debt obligations and has
experienced shortages of cash that have prevented timely payment of
certain operating expenses. At December 31, 1998, the Company was not
in compliance with certain terms of its long-term debt agreements.
Accordingly, the Company was in default on its senior debt and certain
payments for notes payable have been deferred. See Notes 5 and 6.
58
<PAGE> 60
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BASIS OF ACCOUNTING (CONTINUED)
During 1998, the Company's stockholders and warrant holders approved
the sale of their interest in the Company. The effect of the sale will
be to retire obligations of the Company and redeem the interests of the
current stockholders and warrant holders. See Notes 2 and 13.
CASH AND CASH EQUIVALENTS
Cash, for purposes of the statement of cash flows, consists of cash on
hand and demand deposit accounts. The Company has no cash equivalents
at December 31, 1998. At times during the year, the Company maintains
bank accounts in excess of the FDIC insured limits. Management believes
that the risk is limited.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The allowance for doubtful accounts is based on management's evaluation
of the collectibility of outstanding accounts receivable.
PROPERTY, EQUIPMENT AND DEPRECIATION
Property and equipment are stated at cost. Expenditures for additions,
major renewals and betterments are capitalized; expenditures for
maintenance and repairs are charged to expenses as incurred.
Depreciation is computed on both straight-line and accelerated methods
for income tax and financial reporting purposes over the estimated
useful lives of the assets.
INTANGIBLES AND AMORTIZATION
Intangible assets have been recorded at acquisition cost and are being
amortized on the straight-line method over their estimated useful
lives.
TRADE-OUT TRANSACTIONS
The Company enters into agreements in which advertising time is traded
for various products or services. Trade-out transactions are reported
at normal advertising rates in effect.
INCOME TAXES
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes, which
requires recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been included in
the financial statements or tax returns. Under this method, deferred
tax assets and liabilities are determined based on the difference
between the financial statement and tax basis of assets and liabilities
using enacted tax rates in effect for the year in which the differences
are expected to reverse.
59
<PAGE> 61
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash, receivables and accounts payable
approximate fair value due to the short-term maturity of these
instruments. The carrying value of short and long-term debt
approximates fair value based on the current rates offered for debt of
comparable maturities and collateral requirements. None of the
financial instruments are held for trading purposes.
ADVERTISING
The Company incurred $71,890 in advertising costs during 1998. The
Company expenses advertising costs as incurred.
NOTE 2 - SALE OF EQUITY INTEREST
In November 1998, the stockholders and warrant holders of the Company
reached an agreement to sell their equity interest to Citadel
Broadcasting Company. Under terms of the sale, the amount received by
the equity holders was based on the fair market value of the radio
properties and other corporate assets with reduction for the retirement
of debt and certain other obligations.
Regulatory consent by the Federal Communications Commission to the
transfer of control of the broadcasting licenses has been secured. The
closing of the transaction is scheduled to occur in March 1999.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment, related service lives and accumulated
depreciation are as follows:
<TABLE>
<CAPTION>
Estimated
Service Lives
-------------
<S> <C> <C>
Used in operations:
Land -- $ 306,195
Building and improvements 5 - 39 years 825,253
Equipment - engineering 5 - 7 years 5,629,275
Equipment - office 5 - 7 years 777,216
Vehicles 5 years 73,477
-----------
7,611,416
Less accumulated depreciation (5,944,454)
-----------
1,666,962
Not used in operations:
Land and building, net of accumulated
depreciation of $14,893 162,895
-----------
$ 1,829,857
===========
</TABLE>
60
<PAGE> 62
NOTE 3 - PROPERTY AND EQUIPMENT (CONTINUED)
Depreciation expense amounted to $357,246 for 1998. The property is
pledged to secure notes payable of the Company.
Land and buildings not used in operations are available for sale;
therefore, depreciation has not been computed for such property. This
classification is the result of the duplication of office facilities
from (1) the acquisition of WXOK-AM radio station and (2) the
relocation of the Company's office to leased facilities as described in
Note 12.
Certain telephone equipment of $20,656 is accounted for under a capital
lease. Amortization of equipment under capital lease obligations of
$2,955 is included in depreciation expense.
NOTE 4 - INTANGIBLES
<TABLE>
<CAPTION>
Intangible assets consisted of the following:
Estimated Life 1998
---------------- --------------
<S> <C> <C>
Costs in excess of net assets
acquired 12-30 years $12,442,581
Organizational costs 5 years 586,905
Deferred loan fees 5 years 1,289,013
--------------
14,318,499
Less accumulated amortization (3,398,490)
--------------
$10,920,009
==============
</TABLE>
Amortization expense amounted to $986,352 for 1998.
NOTE 5 - NOTES PAYABLE
At December 31, 1998, the Company's indebtedness, in order of
subordination, is summarized as follows:
Senior note payable to Finova Capital
Corporation, in the amount of $10,450,000,
bearing interest only at Citibank prime
plus 2.5% (or 10.25% at December 31, 1998)
until January 1998, maturing October 31,
2001, secured by a first lien on all assets,
a collateral stock pledge of 100% of the
voting common stock, and the continuing
guarantees of two stockholders of the company.
Quarterly installments of $187,500 commence in
1998 and increase annually to $350,000 in 2001.
The Company deferred three payments in 1998. $10,262,500
61
<PAGE> 63
NOTE 5 - NOTES PAYABLE (CONTINUED)
Subordinated (#1) notes payable bearing
interest at 12%, payable interest only, a
balloon note due at the maturity date of
December 15, 2001, secured by a lien on all
assets, a collateral stock pledge of 100%
of the voting common stock, and the continuing
guarantees of two stockholders of the Company,
subordinate only to the senior note payable.
Interest payments have been deferred on these
obligations since March 1, 1997, which results
in an additional 2% interest and a 5% penalty
on delinquent installments. See Note 6. 2,200,000
Subordinated (#2) notes payable bearing
interest at 12-14%, payable interest only,
a balloon note due at the maturity date of
December 15, 2001, secured by a lien on all
assets, a collateral stock pledge of 100% of
the voting common stock, and the continuing
guarantees of two stockholders of the Company,
subordinate to the senior note payable and
subordinated notes payable #1. Interest payments
have been deferred on these obligations since
March 1, 1997, which results in an additional 2%
interest and a 5% penalty on delinquent
installments. See Note 6. 840,360
Purchase warrant (#1) notes payable dated
December 13, 1996, in the original amounts
totaling $1,195,449, bearing interest at a
below market rate of 8%, payable interest only
until computed principal payments commence in
1998, remaining principal balloon note due at the
maturity date of December 15, 2001, secured by
a lien on all assets, a collateral stock pledge
of 100% of the voting common stock, and the
continuing guarantees of two stockholders of the
Company, subordinate to the senior note payable
and subordinated note holders #1 and #2. The
obligation has been discounted to present value
utilizing an imputed interest rate of 12%. Interest
payments have been deferred on these obligations
since March 1, 1997. See Note 6. 1,080,605
62
<PAGE> 64
NOTE 5 - NOTES PAYABLE (CONTINUED)
Purchase warrant (#2) notes payable dated
December 13, 1996, in the original amounts
totaling $830,735, bearing interest at a below
market rate of 2.5%, no scheduled payments until
interest and principal balloon payment due at
the maturity date of December 15, 2001, subordinate
to the senior note payable, subordinated note
holders #1 and #2, and warrant note holders #1.
The obligation has been discounted to present
value utilizing an imputed interest rate of 12%.
Interest payments have been deferred on these
obligations since March 1,1997. See Note 5. 623,680
Notes payable (3) at 12% per annum, payable in
monthly installments of $1,295, including interest
maturing in April 2001, and secured by three vehicles. 31,233
Lease payable dated March 27, 1998, in the amount of
$20,686, payable in 60 monthly installments of $474.50,
imputed interest at 13.3% per annum, secured by telephone
equipment. 17,562
------------
Total $15,055,940
============
The loan agreements with Finova Capital Corporation ("Finova")
concerning the senior note payable contain various restrictive
covenants primarily preventing the Company from incurring additional
indebtedness, additional liens on property, entering into business
combinations, and disposing of any assets. Further, the Company is
required to maintain specified ratios and cash flow amounts.
At December 31, 1998, the Company was in default on certain debt
covenants primarily concerning operating, cash flow and debt service
ratio requirements. The Company did not secure waivers from Finova for
its violations; therefore all notes payable have been classified as
current.
As a result of its default on the Finova debt, debt service payments on
certain subordinated debt (subordinated #1, 2 and warrant #1) is
deferred. The terms of the subordinated debt provide for additional
compensation of interest and warrants to such creditors. See Note 7.
63
<PAGE> 65
NOTE 6 - DEFERRED OBLIGATIONS
INTEREST
Under the terms of the subordinated and warrant notes, monthly payments
are deferred while the Company is in default on its senior note
payable. While payments are deferred, an additional 2% interest charge
is computed on the outstanding principal and a 5% late payment penalty
on the delinquent payments are accrued on the subordinated notes
payable #1 and #2.
The Company has not made monthly payments since March 1, 1997, on their
subordinated and warranty notes payable. Approximately $1,089,600 is
due to the note holders as of December 31, 1998, payment of which is
deferred to December 2001.
SUCCESS FEE
The Company incurred an obligation for a "success fee" with the
origination of credits provided by Finova. The fee is considered to be
earned on the credit's closing date and payable on the earlier of the
maturity date, October 31, 2001, or the date of the prepayment, in
full, of the principal balance. The obligation amounts to $800,000 at
maturity and has been discounted to present value utilizing an imputed
interest rate of 12%.
NOTE 7 - COMMON STOCK
CLASS B COMMON STOCK
Class B common stock was issued to Finova in connection with the
purchase of Southern Communications, Inc. A stock purchase agreement
permits Finova to request the redemption of all or a portion of its
stock by the Company from December 13, 2001, through December 13, 2007.
The redemption price is to be based on the aggregate fair market value
of the Company as determined by appraisal. No provision has been made
in the financial statements for such redemption.
Furthermore, under the terms of the agreement, the relative percentage
of stock issued to Finova is to remain at its current level.
Accordingly, the Company is required to issue 182 additional shares
without consideration in connection with the sale in 1999.
In March 1999, Finova sold its stock holdings as part of the sale
agreement with Citadel Broadcasting Company. See Note 13.
64
<PAGE> 66
NOTE 7 - COMMON STOCK (CONTINUED)
COMMON STOCK WARRANTS
In connection with the terms of financing the subordinated #1, #2 and
warrant #1 notes payable as discussed in Note 5, the Company issued
stock purchase warrants. Under the terms of those agreements, the
creditors of the subordinated #1, #2 and warrant #1 notes payable are
entitled to additional stock purchase warrants for each quarter that
debt service is deferred. Accordingly, the outstanding warrants provide
for the purchase of 736.091 (33.46%) shares of stock.
The purchase price of the warrants is nominal. The warrants are
exercisable through the last day of the sixth year after the maturity
date. At maturity, the lenders have the right to put the warrants on
the underlying stock at fair market value. Concurrently, the Company
has the right to call such securities provided all indebtedness has
been paid in full.
In March 1999, the warrant holders purchased stock of the Company and
sold their interest to Citadel Broadcasting Company. See Note 13.
NOTE 8 - PROVISION FOR INCOME TAXES
The tax effects of temporary timing differences that create deferred
income tax assets are as follows:
<TABLE>
<CAPTION>
1998
---------
<S> <C>
Bad debt allowance $194,000
Depreciation 600
Amortization 215,800
---------
Deferred income tax assets 410,400
Deferred income tax assets valuation allowance (410,400)
---------
Deferred income tax assets $ --
=========
</TABLE>
65
<PAGE> 67
NOTE 8 - PROVISION FOR INCOME TAXES (CONTINUED)
The income tax benefit is different from that which would be computed
by applying the applicable income tax rates to income before taxes as
follows:
<TABLE>
<CAPTION>
1998
---------
<S> <C>
Tax benefit at statutory rate $ 667,900
Depreciation 200
Bad debt allowance (102,300)
Amortization 20,200
Net operating loss carryforward (516,200)
Recognition of deferred income tax asset --
Others - primarily non-deductible expenses (69,800)
---------
Income tax benefit $ --
=========
</TABLE>
The Company has net operating loss carryforwards ($2,490,000 on a
consolidated basis and $3,759,000 on a pre-consolidation basis for
SCI) that will expire from 2009 to 2013.
NOTE 9 - NONMONETARY TRANSACTIONS
The Company has nonmonetary transactions included in revenues and
expenses that arise from advertising time traded for goods and
services. The transactions are recorded when advertisement is aired or
when goods and services are received. Nonmonetary transactions were
$215,809 in 1998.
NOTE 10 - SUPPLEMENTAL CASH FLOW INFORMATION
The Company made cash payments for interest of $1,200,300 in 1998. No
cash payments were made for income taxes in 1998.
The Company has a non-cash financing transaction relating to the
acquisition of a lease in the amount of $20,686 in 1998.
NOTE 11 - RELATED PARTIES
Accounts receivable of $2,843 is due from a stockholder as of December
31, 1998.
The senior credit, as described in Note 5, is payable to Finova, a
non-voting stockholder of the Company.
The Company transferred two partially depreciated vehicles during 1998
to two major stockholders. The sale resulted in a loss of
approximately $55,000.
66
<PAGE> 68
NOTE 12 - COMMITMENTS AND CONTINGENCIES
OPERATING LEASES - LESSEE
The Company is committed as a lessee under several operating leases
for the office premises and certain movable property as follows:
1. Land and building for WIBR-AM. The lease is payable monthly at
$3,600 per month until July 31, 2001, at which time the lease will
run month to month. The Company is responsible for all property
taxes, insurance, reasonable repairs and maintenance, and approved
alterations.
2. Land and building for the corporate office. The lease is payable
monthly at $5,833 per month until September 30, 2001. The Company
is responsible for all property taxes, insurance, reasonable
repairs and maintenance, and approved alterations.
3. Land for the WXOK transmitter site. The lease is payable monthly at
$4,302 per month through February 1998, then adjusted annually
using the CPI until December 31, 2006. The Company is responsible
for all property taxes, insurance, reasonable repairs and
maintenance, and approved alterations.
4. Land for the KFXZ transmitter site. The lease is payable monthly at
approximately $417 per month with the rate based on the CPI
adjusted annually until June 30, 2000. The Company is responsible
for all property taxes, insurance, reasonable repairs and
maintenance, and approved alterations.
5. Land and building for an office in Lafayette at $6,841 per month
until August 31, 2007. The Company is responsible for all property
taxes, insurance, reasonable repairs and maintenance, and approved
alterations.
6. Telephone equipment for the corporate office in Baton Rouge at $956
per month until October 2000.
7. Various lease agreements (3) for tower and transmitter sites
ranging from 5 to 40 years and payable at $2,000 to $4,875 per
year.
The following is a summary of all future minimum lease payments for
the Company as of December 31, 1998:
<TABLE>
<CAPTION>
<S> <C>
1999 $ 282,873
2000 283,807
2001 227,289
2002 146,800
2003 147,353
Thereafter 648,608
-----------
$1,736,730
===========
</TABLE>
Rent expense was $279,882 for the year ended December 31, 1998.
67
<PAGE> 69
NOTE 12 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
OPERATING LEASES - LESSORS
The Company is also lessor under multiple operating lease agreements
for transmitter space on its towers. The terms of these leases are
approximately three to five years, payable monthly in amounts ranging
from $300 to $900 per month. Upon maturity, the leases run month to
month. Future annual lease income from these leases is approximately
$38,700.
Rental income, under non-cancelable leases, was approximately $22,300
for the year ended December 31, 1998.
LITIGATION
The Company is involved in a lawsuit concerning copyright infringement
relating to unpaid license fees with ASCAP. The Company has offered a
settlement on the suit. At December 31, 1998, the Company recorded
approximately $323,000 as accounts payable due to ASCAP.
The Company is involved in a lawsuit arising in the normal course of
business. Management believes that any financial responsibility that
may be incurred in settlement of such lawsuit would not be material to
the Company's financial position.
ENVIRONMENTAL
The Company has an above ground fuel tank with no containment
facilities to prevent a spill. In addition, the Company has an
abandoned high voltage capacitor, which must be properly disposed of.
Management believes these compliance issues will not have a material
adverse effect on the financial condition or reported results of
operations of the Company.
NOTE 13 - SUBSEQUENT EVENT
On March 17, 1999, the stockholders, inclusive of warrant holders, of
the Company consummated the transfers of their investment in the
Company to Citadel Broadcasting Company.
68
<PAGE> 70
[COLE & REED, P.C. LETTERHEAD]
Independent Auditors' Report
Board of Managers
Caribou Communications Co.
Oklahoma City, Oklahoma
We have audited the accompanying balance sheets of Caribou Communications Co.
(an Oklahoma General Partnership) as of December 31, 1998 and 1997, and the
related statements of operations, changes in partners' equity, and cash flows
for the years then ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express and opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Caribou Communications Co. at
December 31, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted
accounting principles.
/s/ COLE & REED P.C.
--------------------
Oklahoma City, Oklahoma
February 12, 1999
69
<PAGE> 71
BALANCE SHEETS
CARIBOU COMMUNICATIONS CO.
<TABLE>
<CAPTION>
December 31
1998 1997
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 177,865 $ 20,174
Accounts receivable, net of allowance for doubtful
accounts of $47,038 for 1998 and $76,863 for 1997 1,831,835 1,293,589
Inventories 7,264 19,332
Prepaid expenses and other current assets 201,901 138,437
Deposit in escrow 350,000 500,000
----------- -----------
TOTAL CURRENT ASSETS 2,568,865 1,971,532
NET PROPERTY AND EQUIPMENT 1,446,399 1,379,265
OTHER ASSETS
Deposits 9,061 8,961
Intangible assets 13,428,710 8,837,007
----------- -----------
13,437,771 8,845,968
----------- -----------
$17,453,035 $12,196,765
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 313,471 $ 136,739
Accrued expenses 592,866 369,211
Payroll taxes payable 62,807 50,415
Current portion of long-term debt 685,000 975,000
----------- -----------
TOTAL CURRENT LIABILITIES 1,654,144 1,531,365
LONG-TERM DEBT 8,719,072 6,453,168
PARTNERS' EQUITY 7,079,819 4,212,232
----------- -----------
$17,453,035 $12,196,765
=========== ===========
</TABLE>
See notes to financial statements.
70
<PAGE> 72
STATEMENTS OF OPERATIONS
CARIBOU COMMUNICATIONS CO.
<TABLE>
<CAPTION>
Year Ended
December 31
1998 1997
---- ----
<S> <C> <C>
REVENUES
KATT-FM $ 3,705,522 $3,245,684
KYIS-FM 2,197,300 1,589,118
KTNT-FM 1,047,819 1,144,209
KNTL-FM 1,013,871 --
Other revenue 285,381 356,482
----------- ----------
TOTAL REVENUES 8,249,893 6,335,493
OPERATING EXPENSES
Program expenses 2,705,578 2,027,569
Technical expenses 323,779 274,441
Sales expenses 2,021,146 1,368,604
Advertising and promotion 245,123 296,802
KATT products 74,891 49,360
Corporate expenses 713,161 477,216
General and administrative 884,418 786,424
Loan fees 200,904 217,646
Amortization expense 1,019,607 766,740
Depreciation expense 395,455 406,256
----------- ----------
8,584,062 6,671,058
----------- ----------
LOSS FROM OPERATIONS (334,169) (335,565)
OTHER EXPENSE
Interest expense 787,732 634,221
Miscellaneous expense 10,512 25,075
----------- ----------
798,244 659,296
----------- ----------
NET LOSS $(1,132,413) $ (994,861)
=========== ==========
</TABLE>
See notes to financial statements.
71
<PAGE> 73
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
CARIBOU COMMUNICATIONS CO.
<TABLE>
<CAPTION>
CAT Desert
Communications, Communications
Inc. III, Inc. Total
--------------- -------------- -----
<S> <C> <C> <C>
Partners' equity at January 1, 1997 $3,020,114 $2,186,979 $ 5,207,093
Net loss (577,019) (417,842) (994,861)
---------- ---------- -----------
Partners' equity at December 31, 1997 2,443,095 1,769,137 4,212,232
Capital contribution 2,320,000 1,680,000 4,000,000
Net loss (656,800) (475,613) (1,132,413)
---------- ---------- -----------
Partners' equity at December 31, 1998 $4,106,295 $2,973,524 $ 7,079,819
========== ========== ===========
</TABLE>
See notes to financial statements.
72
<PAGE> 74
STATEMENTS OF CASH FLOWS
CARIBOU COMMUNICATIONS CO.
<TABLE>
<CAPTION>
Year Ended
December 31
1998 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(1,132,413) $(994,861)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Bad debt expense 79,125 65,633
Depreciation 395,455 406,256
Amortization 1,019,607 766,740
Loan fees expense 200,904 217,646
Increase in accounts receivable (617,371) (135,634)
(Increase) decrease in inventories 12,068 (4,188)
Increase in prepaid expenses and other assets (63,564) (65,701)
Increase (decrease) in accounts payable
and accrued expenses 403,520 (170,144)
----------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 297,331 85,747
INVESTING ACTIVITIES
Purchases of property and equipment (154,989) (68,770)
Cash paid for the purchase of KNTL-FM
and SportsTalk net assets (5,909,651) --
Cash paid for intangible assets -- (23,195)
Net receipt (payment) of earnest money from (to) escrow agent 150,000 (500,000)
----------- ---------
NET CASH USED IN INVESTING ACTIVITIES (5,914,640) (591,965)
FINANCING ACTIVITIES
Proceeds from long-term debt 3,269,608 750,000
Payments on long-term debt (1,494,608) (280,000)
Capital contribution by partners 4,000,000 --
----------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 5,775,000 470,000
----------- ---------
INCREASE (DECREASE) IN CASH 157,691 (36,218)
CASH AT BEGINNING OF YEAR 20,174 56,392
----------- ---------
CASH AT END OF YEAR $ 177,865 $ 20,174
=========== =========
</TABLE>
See notes to financial statements.
73
<PAGE> 75
NOTES TO FINANCIAL STATEMENTS
CARIBOU COMMUNICATIONS CO.
December 31, 1998
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of the Company's Business: Caribou Communications Co. (the
"Partnership") is an Oklahoma General Partnership, organized to engage in the
radio broadcasting business through the control and operation of KATT-FM,
KYIS-FM, KTNT-FM, and KNTL-FM radio stations in Oklahoma City. The Partnership
was organized on December 29, 1994 and started business on January 1, 1995. The
Partnership's corporate offices are located in Denver, Colorado, and operations
facilities are located in Oklahoma City, Oklahoma.
Financial Statement Presentation: The Partnership prepares its financial
statements in accordance with generally accepted accounting principles. The
preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Partnership Formation: The Partnership was formed through the contributions of
substantially all of the respective properties and assets at the appraised
values, subject to substantially all of the respective liabilities and
obligations of Cat Communications, Inc. ("CAT") and Desert Communications III,
Inc. ("DCI") to the capital account of the Partnership having an aggregate net
asset value of $6,769,378 on December 29, 1994. The Partnership equity was
divided $3,926,239 (58%) to CAT and $2,843,139 (42%) to DCI. Earnings and
losses of the Partnership are divided based on the aforementioned percentages.
Inventories: Inventory is valued at lower of cost or market using the first-in,
first-out (FIFO) cost flow assumption. Inventory consists of merchandise with
the radio stations' logos. These items are sold through area record stores or
given away to the public for promotional purposes.
Property and Equipment: Property and equipment is recorded at cost and
depreciated by the straight-line method over the estimated useful life of the
assets. When assets are sold or retired, the costs and related accumulated
depreciation are removed from the accounts and any gain or loss is included in
operations.
Advertising Costs: All advertising costs of the Partnership are expensed as
incurred.
Income Taxes: No provision for income taxes is made in the financial statements
because, as a Partnership, any income or loss is included in the tax returns of
the partners. For income tax purposes, income or loss allocated to the partners
shall consider the effect of the difference in the basis of assets contributed
for income tax purposes and the amounts recorded for financial statement
purposes.
Concentration of Credit: Financial instruments which potentially subject the
Partnership to concentrations of credit risk consist primarily of trade
receivables. Such credit risk is considered by management to be limited due to
the large number of customers comprising the Partnership's customer base.
Generally, the Partnership does not require collateral or other security to
support customer accounts receivable.
74
<PAGE> 76
NOTES TO FINANCIAL STATEMENTS--Continued
CARIBOU COMMUNICATIONS CO.
December 31, 1998
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
Concentration of Credit--continued: The Partnership maintains its cash in bank
deposit accounts which, at times, may exceed federally insured limits. The
Partnership does not believe there is a significant risk of loss to these
deposits.
NOTE B--PROPERTY AND EQUIPMENT
Property and equipment is summarized as follows:
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Land $ 30,000 $ 25,000
Buildings 167,200 17,200
Automobiles 40,806 40,806
Computers and office equipment 162,432 151,643
Furniture and fixtures 342,813 302,075
Leasehold improvements 508,635 497,337
Studio and technical equipment 866,609 739,995
Tower and transmitter equipment 688,410 570,260
---------- ----------
2,806,905 2,344,316
Less accumulated depreciation 1,360,506 965,051
---------- ----------
$1,446,399 $1,379,265
========== ==========
</TABLE>
NOTE C--LONG-TERM DEBT
The following is a summary of long-term debt at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Note payable (A) to Finova Capital Corporation,
payable in monthly installments beginning June 1,
1997, bearing interest at 1% above the prime rate,
secured by all assets of the Partnership $2,430,000 $2,640,000
Note payable (B) to Finova Capital Corporation,
payable in monthly installments beginning June 1,
1997, bearing interest at 1% above the prime rate,
secured by all assets of the Partnership 2,225,000 2,490,000
</TABLE>
75
<PAGE> 77
NOTES TO FINANCIAL STATEMENTS--Continued
CARIBOU COMMUNICATIONS CO.
December 31, 1998
NOTE C--LONG-TERM DEBT--Continued)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Note payable (C) to Finova Capital Corporation,
payable upon closing of the KNTL Purchase (Note
H), bearing interest at 1% above the prime rate,
secured by all assets of the Partnership. Paid
in full in 1998 $ -- $ 500,000
Note payable (D) to Finova Capital Corporation, due
January 31, 2000, bearing interest at 1% above the
prime rate, secured by all assets of the Partnership 2,000,000 --
Note payable (E) to Finova Capital Corporation, due
January 31, 2000, bearing interest at 1% above the
prime rate, secured by all assets of the Partnership 500,000 --
Borrowing against a $1,500,000 revolving line of
credit with Finova Capital Corporation, payable in
monthly installments beginning June 1, 1997, bearing
interest at 1% above the prime rate, secured by all
assets of the Partnership 1,500,000 1,250,000
Accrued and unpaid loan fees, payable to Finova
Capital Corporation, due January 31, 2000, secured
by all assets of the Partnership 749,072 548,168
---------- ----------
9,404,072 7,428,168
Less current maturities 685,000 975,000
---------- ----------
$8,719,072 $6,453,168
========== ==========
</TABLE>
The notes payable and line of credit, except for Notes (D) and (E), are payable
in 31 consecutive monthly installments commencing on June 1, 1997. The debt
matures with a balloon payment due January 31, 2000. Currently, accrued
interest is being paid on a monthly basis. The combined monthly principal
payments on note payable (A) and the line of credit are payable as follows:
<TABLE>
<S> <C>
June 1, 1997 to March 1, 1998 $15,000
April 1, 1998 to February 1, 1999 20,000
March 1, 1999 to January 1, 2000 25,000
January 31, 2000 Full payment of remaining principal
</TABLE>
76
<PAGE> 78
NOTES TO FINANCIAL STATEMENTS--Continued
CARIBOU COMMUNICATIONS CO.
December 31, 1998
NOTE C--LONG-TERM DEBT--Continued
The monthly principal payments on note payable (B) are payable as follows:
June 1, 1997 to March 1, 1998 $20,000
April 1, 1998 to February 1, 1999 25,000
March 1, 1999 to January 1, 2000 30,000
January 31, 2000 Full payment of remaining principal
Loan fees of $950,000 are being accrued at $16,742 per month through December
1, 1999. Full payment is due January 31, 2000.
In addition, the Partnership will pay a "recapture amount" following the end of
each year upon the demand of the lender. The "recapture amount" is equal to 50%
of excess cash flows (as defined in the debt agreement) for the preceding
year, and reduces the principal payments due on the long-term debt. However,
the "recapture amount" will not be made or will be reduced to the extent
necessary so that the Partnership's cash on hand plus the outstanding amount
available on the line of credit will not be less than $300,000. There were no
excess cash flows at December 31, 1998 and 1997 and, therefore, no recapture
amount is due.
The loan agreement, dated December 29, 1994 (as amended), requires the
Partnership to maintain certain financial ratios and other covenants.
Finova Capital Corporation is a related party in that it owns 100% of Desert
Communications III, Inc., which owns a 42% interest in the Partnership.
Long-term debt of $685,000 matures in 1999, with the remaining $8,719,072 due
in 2000.
Interest payments in 1998 and 1997 totaled $716,982 and $634,221, respectively.
NOTE D--INTANGIBLE ASSETS
Goodwill consists of: (1) the difference between the appraised fair market
value of the KATT-FM and KYIS-FM radio stations under a hypothetical scenario
of the stations operating as a duopoly in the Oklahoma City radio market and
the fair market values of the stations' assets at the date of the Partnership
agreement, (2) the excess of the purchase price over the net assets of the
KTNT-FM and KNTL-FM stations, and (3) the entire purchase price of SportsTalk
Communications L.L.C. Goodwill and the FCC License are being amortized over
fifteen years using the straight-line method.
Organization costs of the Partnership have been capitalized and are being
amortized over five years using the straight-line method.
77
<PAGE> 79
NOTES TO FINANCIAL STATEMENTS--Continued
CARIBOU COMMUNICATIONS CO.
December 31, 1998
NOTE D--INTANGIBLE ASSETS--Continued
Intangible assets at December 31, 1998 and 1997 are summarized as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Goodwill $11,943,897 $ 6,332,587
FCC License 4,261,002 4,261,002
Organization costs 309,698 309,698
----------- -----------
16,514,597 10,903,287
Less accumulated amortization 3,085,887 2,066,280
----------- -----------
$13,428,710 $ 8,837,007
=========== ===========
</TABLE>
Total amortization provided for in 1998 and 1997 was $1,019,607 and $766,740,
respectively.
NOTE E--OPERATING LEASES
As of December 31, 1998, the Partnership is leasing office space, certain
equipment, and computer software under various noncancelable operating leases.
Rental expense for the years ended December 31, 1998 and 1997 was approximately
$341,000 and $278,000, respectively.
Approximate future minimum lease payments required under these operating leases
are as follows:
<TABLE>
<S> <C>
1999 $ 266,000
2000 231,000
2001 227,000
2002 231,000
2003 242,000
Thereafter 587,000
----------
$1,784,000
==========
</TABLE>
NOTE F--TRADE TRANSACTIONS
In accordance with accounting practices in the broadcast industry, trade
transactions (the exchange of unsold advertising time for products or services)
are recorded at the Partnership's standard rates for air time at the time the
spot is broadcast, net of expenses of the same amount representing the value of
the products or services received. Such transactions approximated $555,000 and
$487,000 for the years ended December 31, 1998 and 1997, respectively.
78
<PAGE> 80
NOTES TO FINANCIAL STATEMENTS--Continued
CARIBOU COMMUNICATIONS CO.
December 31, 1998
NOTE G--RESERVED NET PROFITS AGREEMENT
On November 28, 1995, the Board of Managers approved a Reserved Net Profits
Agreement for key employees and consultants of the Partnership. The Reserved
Net Profit Amount would equal twenty-five percent of the difference on the
termination date of the Partnership between the value of the Partnership's
business and the capital invested by the Partners, including interest at the
rate of 6.4% per annum on such capital compounded annually from January 1,
1995, up to $8 million plus twelve and one-half percent of any amounts over $8
million. The Board also authorized the President of the Partnership to allocate
the Reserved Net Profits among the key employees and consultants of the
Partnership as he, in his sole discretion, deems appropriate.
The term "value of the business" means the business sales price plus the net
current assets of the Partnership on the termination date less the legal and
brokerage expenses incurred from the sale of the assets and the Partnership's
long-term liabilities and deferred loan fees.
The Agreement also provides a means for calculating the Net Profit Amount if one
of the key employees or consultants dies, becomes permanently disabled, or
ceases to be an employee of the Partnership after December 31, 2004. In these
circumstances, the "value of the business" would be ten times the Partnership's
trailing twelve month's cash flow (as defined) less three percent for cost of
sale.
NOTE H--STATION AND OTHER ACQUISITIONS
On May 4, 1998, the Partnership acquired substantially all of the assets of the
KNTL-FM radio station ("KNTL") from Bott Communications, Inc. ("Bott"). For
financial statement purposes, the acquisition was accounted for as a purchase
and, accordingly, KNTL's results of operations are included in the financial
statements since the date of acquisition. The aggregate purchase price was
approximately $5,890,000, which includes costs of acquisition. The aggregate
purchase price, which was financed primarily through capital contributions from
the partners and note from Finova Capital Corporation (see Note C), has been
allocated to the assets of KNTL, based on their respective estimated fair
market values. The excess of the purchase price over assets acquired
approximated $5,050,000 and is being amortized over fifteen years (see Note D).
On January 14, 1998, the Partnership signed an agreement with SportsTalk
Communications L.L.C. to acquire all of its assets, including its sports talk
format, for $530,000, plus incentives. This format began broadcasting on
KNTL-FM on January 17, 1998 through a time brokerage agreement with Bott. The
transaction closed on May 4, 1998. The total cost of $560,000 is considered
goodwill for financial statement purposes, and is being amortized over fifteen
years (see Note D).
79
<PAGE> 81
NOTES TO FINANCIAL STATEMENTS--Continued
CARIBOU COMMUNICATIONS CO.
December 31, 1998
NOTE I--COMMITMENTS AND CONTINGENCIES
On July 22, 1998, the Partnership agreed to purchase WWLS-AM radio station from
Fox Broadcasting Co., Inc. ("Fox") for $3,500,000. In connection with this
purchase, the Partnership deposited earnest money with an escrow agent in the
amount of $350,000. At December 31, 1998, the purchase was awaiting approval of
the Federal Communications Commission. Approval was subsequently granted and
closing of the purchase occurred on January 7, 1999.
Concurrent with the purchase agreement, the Partnership entered into a time
brokerage agreement with Fox effective July 22, 1998. The agreement provides
that the Partnership will serve as the exclusive sales agent for WWLS-AM. As
compensation, the agreement calls for the Partnership to pay Fox $13,000 per
month. The agreement is effective through July 31, 1999, or until the terms of
the aforementioned purchase are completed.
NOTE J--OTHER RELATED PARTY TRANSACTIONS
Effective January 1, 1997, the Partnership entered into a management agreement
with Caribou Broadcasting L.P. ("Broadcasting") to manage three radio stations
in Honolulu, Hawaii. Under the five year agreement, the Partnership will earn
$100,000 each year. Desert Communications II, Inc. ("Desert II") is a 98.99%
limited partner in Broadcasting, and CAT Communications II, Inc. ("CAT II") is
a 1.01% general partner in Broadcasting. Desert II and CAT II ownership is
primarily the same as that of DCI and CAT.
Effective August 1, 1998, the management agreement discussed above was
reassigned to New Wave Broadcasting, L.P. ("New Wave"). New Wave, also a debtor
of Finova Capital Corporation, operates an otherwise unrelated group of radio
stations.
The Partnership earned $50,000 and $147,225 in management fees for 1998 and
1997, respectively. At December 31, 1998, $41,667 is due from Broadcasting and
is included in prepaid expenses and other current assets on the balance sheet.
The 1997 amount includes $47,225 as a one-time fee for agreeing to act as
manager. These fees are included in other revenue on the statement of
operations. In accordance with the management agreement, the Partnership is to
be reimbursed by Broadcasting for expenses incurred in managing these stations.
At December 31, 1998 and 1997, the Partnership is due approximately $53,000 and
$55,000, respectively, from Broadcasting for unreimbursed expenses, which is
included in prepaid expenses and other current assets on the balance sheet.
The President of the Partnership earns a bonus each year based upon attaining
certain operating results. Bonus expense reflected in the financial statements
is $100,000 for 1998 and $25,000 for 1997.
80
<PAGE> 82
Deloitte Touche LLP Logo
---------------------------------------------
2500 One PPG Place Telephone: (412)
338-7200
Pittsburgh, Pennsylvania 15222-5401
Facsimile: (412)
338-7380
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Tele-Media Broadcasting Company:
We have audited the accompanying consolidated balance sheets of Tele-Media
Broadcasting Company and its partnership interests (collectively, the
"Companies" -- see Note 1) as of December 31, 1995 and 1996, and the related
consolidated statements of operations, deficiency in net assets and cash flows
for each of the three years in the period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Companies as of December
31, 1995 and 1996, and the 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.
As discussed in Note 4 to the consolidated financial statements, at
December 31, 1996, the Companies were not in compliance with the terms of a debt
agreement.
/s/ Deloitte & Touche LLP
March 28, 1997
Deloitte Touche Tohmatsu Logo
81
<PAGE> 83
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 1,904,258 $ 2,343,395
Accounts receivable:
Nonbarter--less allowance for doubtful accounts of
$531,000 and $612,000........................... 4,599,032 5,262,484
Barter--net.......................................... 363,394 304,244
Other current assets................................. 157,998 739,831
------------ ------------
Total current assets.............................. 7,024,682 8,649,954
------------ ------------
Property, plant and equipment:
Land................................................. 1,372,571 1,372,571
Buildings and improvements........................... 2,357,447 2,369,520
Broadcasting equipment............................... 10,653,182 11,169,533
------------ ------------
14,383,200 14,911,624
Less accumulated depreciation........................ 6,916,068 8,259,285
------------ ------------
Property, plant and equipment--net................ 7,467,132 6,652,339
------------ ------------
Intangibles--Net of accumulated amortization........... 29,036,404 26,904,288
------------ ------------
Other noncurrent assets................................ 95,641 16,331
------------ ------------
$ 43,623,859 $ 42,222,912
============ ============
LIABILITIES AND DEFICIENCY IN NET ASSETS
Current liabilities:
Accounts payable and other accrued expenses.......... $ 1,466,387 $ 2,019,269
Accrued interest..................................... 999,880 1,895,889
Accrued sales commissions............................ 330,561 358,513
Amounts due to affiliates--net....................... 2,057,456 2,818,179
Current portion of long-term debt.................... 3,106,208 37,528,396
------------ ------------
Total current liabilities......................... 7,960,492 44,620,246
------------ ------------
Long-term liabilities:
Long-term debt--less current portion................. 64,417,869 32,382,419
Other................................................ 32,772 31,266
------------ ------------
Total long-term liabilities....................... 64,450,641 32,413,685
------------ ------------
Redeemable stock warrants.............................. 750,950 1,644,000
------------ ------------
Deficiency in net assets:
Common stock, voting, $0.01 par value per share;
25,000 shares authorized, 15,000 shares
outstanding....................................... 150 150
Common stock, nonvoting, $0.01 par value per share;
10,000 shares authorized, none outstanding........ -- --
Additional paid-in capital........................... 6,924,445 6,924,445
Deficit.............................................. (36,462,819) (43,379,614)
------------ ------------
Deficiency in net assets.......................... (29,538,224) (36,455,019)
------------ ------------
$ 43,623,859 $ 42,222,912
============ ============
</TABLE>
See notes to consolidated financial statements.
82
<PAGE> 84
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
CONSOLIDATED STATEMENT OF OPERATIONS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Local advertising....................... $17,637,256 $18,539,201 $20,968,055
National advertising.................... 4,867,471 4,957,359 4,618,104
Barter.................................. 3,561,009 3,646,290 3,451,849
Other................................... 576,607 511,827 370,932
----------- ----------- -----------
26,642,343 27,654,677 29,408,940
Less agency commissions................. 2,648,183 2,811,738 2,984,574
----------- ----------- -----------
Net revenues.................... 23,994,160 24,842,939 26,424,366
----------- ----------- -----------
Selling, general and administrative,
programming, barter and technical
expenses:
Selling.............................. 4,719,103 5,154,097 5,001,176
General and administrative........... 3,552,604 4,088,306 4,674,883
Programming.......................... 3,882,737 4,391,676 4,858,386
Barter............................... 3,485,969 3,520,426 3,513,231
Technical............................ 176,459 224,975 245,524
----------- ----------- -----------
15,816,872 17,379,480 18,293,200
----------- ----------- -----------
Operating income before management fees
and depreciation and amortization....... 8,177,288 7,463,459 8,131,166
----------- ----------- -----------
Management fees and depreciation and
amortization:
Management fees--affiliates............. 844,579 741,876 804,410
Depreciation and amortization........... 4,690,730 3,708,809 3,493,509
----------- ----------- -----------
5,535,309 4,450,685 4,297,919
----------- ----------- -----------
Operating income.......................... 2,641,979 3,012,774 3,833,247
Interest expense.......................... 6,093,333 9,132,133 10,750,042
----------- ----------- -----------
Loss before extraordinary item............ (3,451,354) (6,119,359) (6,916,795)
Extraordinary item--Loss on extinguishment
of debt................................. (1,341,348) -- --
----------- ----------- -----------
Net loss........................ $(4,792,702) $(6,119,359) $(6,916,795)
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
83
<PAGE> 85
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
CONSOLIDATED STATEMENT OF DEFICIENCY IN NET ASSETS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
---------------- PAID-IN
SHARES AMOUNT CAPITAL DEFICIT
------ ------ ---------- ------------
<S> <C> <C> <C> <C>
Balance, January 1, 1994................................. 2,000 $ 20 $7,125,383 $(25,550,758)
Stock dividend......................................... 13,000 130 (130) --
Capital contributions--cash............................ -- -- 1,000 --
Distributions.......................................... -- -- (400,000) --
Contribution of management fees--affiliates............ -- -- 198,192 --
Net loss............................................... -- -- -- (4,792,702)
------ ---- ---------- ------------
Balance, December 31, 1994............................... 15,000 150 6,924,445 (30,343,460)
Net loss............................................... -- -- -- (6,119,359)
------ ---- ---------- ------------
Balance, December 31, 1995............................... 15,000 150 6,924,445 (36,462,819)
Net loss............................................... -- -- -- (6,916,795)
------ ---- ---------- ------------
Balance, December 31, 1996............................... 15,000 $150 $6,924,445 $(43,379,614)
====== ==== ========== ============
</TABLE>
See notes to consolidated financial statements.
84
<PAGE> 86
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
1994 1995 1996
------------ ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (4,792,702) $(6,119,359) $(6,916,795)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 4,690,730 3,708,809 3,493,509
Interest deferral...................................... 1,343,351 5,114,170 4,932,565
Amortization of loan origination fees.................. -- 311,916 300,795
Management fees--affiliates............................ 198,192 741,876 804,410
Provision for losses on accounts receivable............ 376,732 367,522 387,291
Loss on write-off of intangible assets................. 159,431 -- --
Net barter transactions................................ (75,040) (125,864) 61,382
Increase in fair value of redeemable stock warrants.... -- -- 893,050
Other.................................................. 90,867 (36,420) (78,760)
Changes in operating assets and liabilities:
Accounts receivable--nonbarter....................... (437,520) (938,846) (1,050,743)
Other current assets................................. (249,489) 233,807 (581,833)
Accounts payable and other accrued expenses.......... (96,561) 281,957 552,882
Affiliates activity--net............................. 1,148,600 (407,409) (43,687)
Accrued interest..................................... 35,113 136,081 896,009
Accrued sales commissions............................ (38,885) (6,891) 27,952
------------ ----------- -----------
Net cash provided by operating activities......... 2,352,819 3,261,349 3,678,027
------------ ----------- -----------
Cash flows from investing activities:
Capital expenditures...................................... (428,423) (520,440) (468,631)
Purchase of radio stations................................ (1,900,000) (5,100,000) (65,000)
Other..................................................... (4,809) 6,124 6,000
------------ ----------- -----------
Net cash used in investing activities............. (2,333,232) (5,614,316) (527,631)
------------ ----------- -----------
Cash flows from financing activities:
Capital contributions..................................... 1,000 -- --
Borrowings................................................ 61,334,446 5,433,347 95,144
Payments of long-term debt................................ (57,323,706) (2,932,546) (2,640,971)
Loan origination fees and other intangible assets......... (2,668,295) (271,271) (163,764)
Sale of redeemable stock warrants......................... 750,950 -- --
Distributions to stockholders............................. (400,000) -- --
Other..................................................... (12,180) (2,178) (1,668)
------------ ----------- -----------
Net cash provided by (used in) financing
activities...................................... 1,682,215 2,227,352 (2,711,259)
------------ ----------- -----------
Net increase (decrease) in cash and cash equivalents........ 1,701,802 (125,615) 439,137
Cash and cash equivalents, beginning of year................ 328,071 2,029,873 1,904,258
------------ ----------- -----------
Cash and cash equivalents, end of year...................... $ 2,029,873 $ 1,904,258 $ 2,343,395
============ =========== ===========
</TABLE>
See notes to consolidated financial statements.
85
<PAGE> 87
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
1. BASIS OF PRESENTATION AND BUSINESS
Tele-Media Broadcasting Company (the "Company" or "TMBC") was incorporated
in 1988 under the name TMZ Broadcasting Company ("TMZ"). In April 1994, TMZ
changed its name to Tele-Media Broadcasting Company. Robert E. Tudek and Everett
I. Mundy each own 50% of the outstanding shares of TMBC. TMBC operates radio
stations principally in midsize markets in the eastern United States and in
Illinois.
In May 1989, TMZ acquired all of the outstanding common stock of Eastern
Broadcasting Company ("Eastern") and its wholly-owned subsidiaries: Lehigh
Valley Broadcasting ("Lehigh"), Penn Broadcasting Corporation ("Hershey"),
Providence Broadcasting Corporation ("Providence"), Quincy Communications
Corporation ("Quincy") and State College Communications Corporation ("State
College"). TMZ retained the assets acquired from State College and contributed
the assets acquired from the remaining subsidiaries of Eastern to limited
partnerships with the same names which TMZ had formed to facilitate the
acquisition. TMZ owned between a 95% and 99% general partnership interest in
each of the limited partnerships. With the exception of Quincy, the limited
partnership interests were owned by the shareholders of TMZ and employees of the
Companies (hereinafter defined). The limited partnership interest in Quincy (1%)
was owned by Tele-Media Holding Corporation ("Holding"), which is owned by
Messrs. Tudek and Mundy.
In April 1993, Messrs. Tudek and Mundy formed Tele-Media Broadcasting
Company of America ("America Corporation"), which purchased substantially all of
the assets of two radio stations in Rhode Island, WPRO(AM) and WPRO-FM, for
approximately $6 million, and in May 1993 formed Tele-Media Broadcasting Company
of Johnstown/Altoona ("Johnstown/Altoona Corporation"), which purchased all of
the common stock of Cambria County Broadcasting Company ("CCBC"). CCBC operated
radio station WIYQ(FM). Simultaneous with the purchase, CCBC was merged into
Johnstown/Altoona Corporation with Johnstown/Altoona Corporation being the
surviving corporation. WIYQ(FM)'s call letters were subsequently changed to
WQKK-FM.
In April 1994, Tele-Media Broadcasting Company of Cambria County ("Cambria
County Corporation") was formed by the shareholders of TMBC. Cambria County
Corporation purchased substantially all of the assets of a radio station,
WGLU(FM), in the Johnstown, PA market for approximately $1.9 million.
In June 1994, the companies were restructured in order to facilitate a
refinancing (see Note 4). In order to accomplish the restructuring, Tele-Media
Broadcasting Operating Company Limited Partnership ("Tele-Media Operating") was
formed by TMBC. Holding distributed its 1% limited partnership interest in
Quincy to the shareholders of TMBC. TMBC contributed its general partnership
interests in Lehigh, Hershey, Providence and Quincy to Tele-Media Operating. The
shareholders of TMBC contributed all of their limited partnership interests in
Lehigh, Hershey and Quincy to TMBC. TMBC contributed all of its limited
partnership interest in Lehigh and all but 1% of its limited partnership
interest in Hershey and Quincy to Tele-Media Operating. These limited
partnership interests were, by
86
<PAGE> 88
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
virtue of an amendment to the respective partnership agreements, converted into
general partnership interests. Tele-Media Broadcasting Company of America
Limited Partnership ("America LP"), Tele-Media Broadcasting Company of
Johnstown/Altoona Limited Partnership ("Johnstown/Altoona LP"), Tele-Media
Broadcasting Company of State College Limited Partnership ("State College LP")
and Tele-Media Broadcasting Company of Cambria County Limited Partnership
("Cambria County LP") were formed by Tele-Media Operating, and America
Corporation, Johnstown/Altoona Corporation and Cambria County Corporation were
merged with and into TMBC and the assets were then contributed to Tele-Media
Operating which in turn conveyed them to the limited partnerships by the same
names. TMBC then transferred all of the assets acquired in the State College
acquisition to Tele-Media Operating which in turn conveyed them to State College
LP.
After the restructuring, TMBC owned a 99% general partnership interest in
Tele-Media Operating, and Tele-Media Operating owned between a 95% and 99%
general partnership interest in the following limited partnerships: Lehigh,
Hershey, Providence, Quincy, State College LP, America LP, Johnstown/Altoona LP
and Cambria County LP (collectively, the "Companies").
In March 1995, Quincy purchased substantially all of the assets of WZLZ-FM
for approximately $367,000 and the call letters were subsequently changed to
WMOS-FM. This acquisition was financed primarily with unsecured seller debt.
During 1994, Tele-Media Operating formed Tele-Media Broadcasting Company of
York Limited Partnership ("York LP"), of which Tele-Media Operating is 99%
general partner and TMBC is 1% limited partner. On May 1, 1995, the Companies
entered into Local Marketing Agreements ("LMAs") to operate WQXA-AM, WQXA-FM and
WIKN-FM. In November 1995, York LP acquired substantially all the assets of
WQXA-AM and WQXA-FM for approximately $5 million. This acquisition was financed
with additional borrowings under the Amended Loan Agreement (see Note 4).
On August 1, 1996, the Companies entered into an LMA to operate WBLF-AM. In
October 1996, State College LP acquired substantially all the assets of WBLF-AM
for approximately $215,000 (including forgiveness of a note receivable from the
seller and cash paid of $65,000).
During 1996, Tele-Media Operating formed Tele-Media Broadcasting Company of
Wilkes Barre/Scranton Limited Partnership ("Wilkes Barre LP") of which
Tele-Media Operating is 99% general partner and TMBC is 1% limited partner. On
August 1, 1996 Wilkes Barre LP entered into an asset purchase agreement to
acquire WAZL-AM and WZMT-FM and entered into an LMA to operate the stations. On
December 1, 1996, TMBC entered into an asset purchase agreement to acquire
WARM-AM and WMGS-FM along with the rights to purchase options for WBHT-FM,
WKQV-FM and WKQV-AM, all of which are located in the Wilkes-Barre market, and
which were being operated under LMAs and Joint Sales Agreements ("JSA's").
Subsequent to December 31, 1996, the Company consummated the acquisition of the
assets of WAZL-AM and WZMT-FM for approximately $3.5 million, which was financed
with borrowings under the Amended Loan Agreement. The Company expects to
consummate the acquisition of the assets of WARM-AM and WMGS-FM in 1997
87
<PAGE> 89
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
for approximately $11 million to be financed through additional borrowings under
the Amended Loan Agreement. The Company has made a nonrefundable escrow deposit
of $550,000 related to this acquisition. The escrow deposit is included in other
current assets and will be a reduction of the purchase price or, in the event
the acquisition is not consummated, paid to the seller.
The accompanying consolidated financial statements include the accounts of
TMBC and its partnership interests, including the acquisition of businesses from
their respective dates of purchase. All of the aforementioned acquisitions were
accounted for under the purchase method, and as such, the purchase price is
allocated among the assets and liabilities purchased based on their relative
fair market values at the date of acquisition. All material intercompany
transactions and balances have been eliminated in the consolidated financial
statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Cash and Cash Equivalents--For purposes of the consolidated statements
of cash flows, the Companies consider highly liquid investments with original
maturities of three months or less to be cash equivalents.
b. Property, Plant and Equipment--Property, plant and equipment, carried at
cost, is depreciated over the estimated useful lives of the related assets,
principally five to ten years. Depreciation is computed on the straight-line
method for financial statement purposes and on accelerated methods for federal
income tax purposes. Depreciation expense totaled $1,446,000, $1,499,000 and
$1,358,000 for the years ended December 31, 1994, 1995 and 1996, respectively.
c. Intangibles--Broadcast licenses are amortized over 20 years. Loan
origination fees and non-compete agreements are amortized over the terms of the
related agreements, and organization costs are amortized over five years. The
Companies write-off these assets and related accumulated amortization when the
assets become fully amortized.
d. Impairment of Long-Lived Assets--Management of the Companies reviews
long-lived assets (including property, plant and equipment and intangibles) for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Management considers the
undiscounted cash flow expected to be generated by the use of the asset and its
eventual disposition to determine when, and if, an impairment has occurred. Any
write-downs due to impairment are charged to operations at the time the
impairment is identified. During the year ended December 31, 1994, the Company
wrote-off loan origination fees with a net carrying value of approximately
$159,000 due to a refinancing of the debt. There were no such write-downs
required in 1995 or 1996.
e. Income Taxes--No provision for income taxes has been made for the
taxable income of the partnerships included in the consolidated financial
statements as income taxes are the responsibility of the partners. TMBC has
Subchapter S status for federal income tax purposes and, therefore, the
shareholders, rather than the Company, have the responsibility for federal
88
<PAGE> 90
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
income taxes and for state income taxes in those states that recognize the
equivalent of Subchapter S status.
f. Revenue Recognition--Revenue is recognized as commercials are broadcast.
The Companies also enter into barter transactions in which advertising time is
traded for merchandise or services used principally for promotional and other
business purposes. Barter revenue is recorded as commercials are broadcast at
the estimated fair value of the air time. If merchandise or services are
received prior to the broadcast of commercials, recognition of the related
revenue is deferred and recognized as the commercials are broadcast.
g. Reclassifications--Certain reclassifications have been made to the 1994
and 1995 consolidated financial statements in order to conform to the 1996
presentation.
h. Use of Estimates in Preparation of the Consolidated Financial
Statements--The preparation of these consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amount of assets and
liabilities as of the date of the consolidated financial statements and the
reported amount of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
i. Local Marketing Agreements and Joint Sales Agreements--The Companies use
property, plant and equipment of the radio stations operated under LMAs and JSAs
in exchange for a fee. Under provisions of the Company's LMAs and JSAs, the
expenses of operating the stations (other than depreciation or amortization of
assets) are the obligations of the Companies, and they are entitled to the
revenues generated by the stations. Revenues and expenses related to these
agreements are reflected in the consolidated statements of operations. The
Companies have recorded fees in respect to these agreements of $63,750 for the
year ended December 31, 1996 within general and administrative expenses on the
consolidated statement of operations. No such costs were incurred in 1994 or
1995.
3. INTANGIBLES
Intangibles consist of the following:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Broadcast licenses...................... $36,389,881 $36,440,231
Non-compete agreements.................. 1,487,500 265,000
Loan origination fees................... 2,854,888 2,937,340
Organization costs...................... 250,387 284,633
----------- -----------
40,982,656 39,927,204
Less accumulated amortization........... 11,946,252 13,022,916
----------- -----------
$29,036,404 $26,904,288
=========== ===========
</TABLE>
89
<PAGE> 91
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. LONG-TERM DEBT AND REDEEMABLE STOCK WARRANTS
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Senior:
Borrowings under Amended Loan
Agreement........................ $36,383,700 $33,935,700
Discount Notes...................... 30,698,371 35,630,986
Other................................. 442,006 344,129
----------- -----------
67,524,077 69,910,815
Less current portion.................. 3,106,208 37,528,396
----------- -----------
$64,417,869 $32,382,419
=========== ===========
</TABLE>
The significant provisions of the Amended and Restated Loan Agreement dated
February 26, 1997 (the "Amended Loan Agreement"), Senior Discount Notes (the
"Notes"), and the Redeemable Stock Warrants (the "Warrants") are discussed
below. The debt arrangements discussed in the preceding sentence were entered
into in connection with a refinancing in June 1994 of substantially all of the
debt then outstanding, resulting in an extraordinary loss on the extinguishment
thereof of approximately $1,341,000 during the year ended December 31, 1994.
AMENDED LOAN AGREEMENT
The Amended Loan Agreement permits borrowings of up to approximately $49
million. The remaining permitted borrowings under the Amended Loan Agreement
($16 million at February 26, 1997) were provided to finance the 1997 planned
acquisitions described in Note 1. The Amended Loan Agreement modified principal
and interest payments, and certain financial covenants and requires the payment
of additional fees to the Lender of $250,000 in 1997 and 1998 in the event of a
failure to meet the leverage covenant in either year. Prior to the amendment on
February 26, 1997, and at December 31, 1996, the Companies were not in
compliance with the provisions of the loan agreement then in effect.
Principal is payable in quarterly installments with any remaining principal
due April 1999. The Lender has the option to require the Companies to make an
additional principal payment of up to approximately $8.9 million in 1997 and
$21.4 million in 1998. Prior to the date of the Amended Loan Agreement, interest
was payable quarterly at the prime rate plus 2%, or at the Companies' option,
LIBOR plus 4.75%. At December 31, 1996, the interest rate was 10.25% (prime plus
2%). The Amended Loan Agreement requires interest payments quarterly. Interest
under the Amended Loan Agreement is charged at the prime rate plus 2%, or at the
Companies' option, LIBOR plus 4.5%, on borrowings up to approximately $44
million; interest on the next $5 million borrowed will be charged at the prime
rate plus 3.75%. The Amended Loan Agreement requires the Companies to enter into
a two year interest hedge contract on or before September 30, 1997 in a notional
amount not less than $25 million, providing protection should the prime rate
exceed the prime rate at the date the
90
<PAGE> 92
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
interest hedge contract is entered into by 2.5%. A penalty of between 2% and 4%
is assessed on any principal prepayment.
Borrowings under the Amended Loan Agreement are collateralized by
substantially all of the assets and partnership interests of Tele-Media
Operating and its partnerships. The Amended Loan Agreement provides for, among
other things, limitations on distributions, indebtedness, mergers, sale and
purchase of assets, capital expenditures, payment of management fees and payment
of interest on the Notes, and requires the achievement of certain minimum cash
flow amounts.
SENIOR DISCOUNT NOTES
The Notes are due June 15, 2004 and were issued with an original issue
discount based on an interest rate of 16%. TMBC did not make interest payments
on the Notes due June 15, 1995, December 15, 1995 and June 15, 1996 and did not
consummate the Exchange Offer by the date as set forth in the original
Registration Rights Agreement (as defined below). Consequently, TMBC and the
Note holders amended the existing agreements to convert the amount of cash
interest payments then due ($2,509,000) plus penalties of approximately
$1,260,000 to notes payable and, in consideration of the conversion, the Note
holders waived TMBC's default. Under the terms of the Note Agreement, as amended
to include the notes issued in 1995 and 1996, interest of approximately $920,000
is payable semi-annually through June 15, 1999, and the remainder of the
interest is deferred and added to principal. After June 15, 1999, semi-annual
interest payments will be made at an annual rate of 16% of the accreted value of
the Notes. The accreted value of the Notes will approximate $47,811,000 at June
15, 1999.
TMBC did not make the required interest payment of $920,585 on the Notes
which was due on December 15, 1996, and consequently it is in default of the
Note Agreement. The holders of the Notes have the right to require immediate
payment of all amounts due under the Note Agreement. The total amount due under
the Note Agreement at December 31, 1996, which is classified as a current
obligation, was $35,630,986. The shareholders of TMBC have negotiated an
agreement to sell their stock in the Company. As part of the transaction, the
holders of the Notes will be paid an amount sufficient to satisfy all
outstanding claims against TMBC, including settlement of claims relating to the
redeemable stock warrants discussed below (see Note 6). In the event the sale is
not consummated, TMBC plans to enter into discussions with the Note holders to
convert the delinquent amount, plus any penalties, into a note payable. If the
Note holders refuse to agree to the conversion or another acceptable
alternative, TMBC intends to search for replacement financing.
Payment under the Notes is restricted by the Amended Loan Agreement.
Redemption of the Notes prior to their scheduled maturity is subject to
prepayment premiums. If a Qualified Public Offering is consummated by June 15,
1999, the Notes may be redeemed at TMBC's option for between 110% to 120% of the
Accreted Value of the Notes. After June 15, 1999, the Notes may be redeemed at
TMBC's option for $47,811,000 plus a premium of up to 8%, which declines ratably
through the date of maturity. In addition, if a Change of Control
91
<PAGE> 93
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
occurs, the Note holders have the option to require TMBC to repurchase the Notes
at 101% of the Accreted Value.
The Notes are unsecured and restrict, among other things, the declaration
or payment of any dividends or any other distributions to shareholders, the
incurrence of additional debt, transactions with affiliates, payment of
management fees, formation of additional subsidiaries, mergers, sales of assets
and capital expenditures. Pursuant to a Registration Rights Agreement between
TMBC and the Purchasers, TMBC filed an Exchange Offer Registration Statement
(the "Registration Statement") with the Securities and Exchange Commission on
September 19, 1994. Under the terms of the Exchange Offer the holders of the
Notes may exchange the Old Notes for New Notes with identical terms, except that
the New Notes may be offered for resale, be resold or otherwise transferred,
under certain conditions by the holders without compliance with the registration
and prospectus delivery provisions of the Securities Act of 1933. Pursuant to
the terms of the Registration Rights Agreement, as amended, if the Registration
Statement does not become effective by May 1, 1997, additional interest of 1%
per annum will be charged from May 1, 1997 through December 1, 1997 and increase
.5% each six months thereafter, not to exceed an aggregate of 5% based on the
Accreted Value of the Notes until the Registration Statement becomes effective.
REDEEMABLE STOCK WARRANTS
The Warrants are exercisable at no additional cost to the Note holders for
between 3,750 and 5,290 shares of non-voting common stock representing 20% to
26% of the equity of TMBC, based on the achievement of certain levels of
Operating Cash Flow. The Warrant agreement provides registration rights to the
holders and restricts, among other things, the incurrence of additional debt,
payment of management fees, formation of additional subsidiaries, mergers, sale
of assets and distributions to stockholders. In addition, the Warrant holders
have put rights during the period from January 1, 2000 through March 31, 2000 or
upon a Change of Control, to require TMBC to redeem the Warrants for cash at
fair value.
The Warrants expire June 9, 2004 and are exercisable at any time on or
after January 1, 2000, or upon the occurrence of any of the following: the
conversion of TMBC to a Subchapter C corporation for federal income tax
purposes; an Initial Public Offering; a merger where TMBC is not the surviving
entity; a sale, lease, transfer or other disposition of all or substantially all
of the assets of TMBC or its subsidiaries; a liquidation or dissolution of TMBC;
or if Messrs. Tudek and Mundy own less than 50% of TMBC or a successor company.
Holders of the non-voting common stock will enter into a Registration
Rights Agreement providing them with unlimited piggy-back registration rights
and the right to participate in any Initial Public Offering. The non-voting
stock is convertible into voting common stock in connection with the sale of
shares in a public offering, in a brokers' transaction pursuant to Rule 144
under the Securities Act of 1933, and if, after conversion, the shareholder
would own 4.9% or less of the common stock. TMBC has reserved 10,000 shares of
non-voting stock and 10,000 shares of voting stock for exercise of the Warrants.
92
<PAGE> 94
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
TMBC estimated the redemption price of the warrants at December 31, 1995
and 1996 as $750,950 and $7,000,000, respectively. Increases in the redemption
price are accounted for prospectively as an adjustment to periodic interest
expense from the date of the increase to January 1, 2000, the earliest date the
put can be exercised. The accreted value of the Warrants at December 31, 1995
and 1996, was $750,950 and $1,644,000, respectively, resulting in a charge to
interest expense for the year ended December 31, 1996 of $893,050. There was no
adjustment to interest expense for the years ended December 31, 1994 and 1995.
Minimum scheduled maturities of long-term debt during the next five years
considering the Amended Loan Agreement and the classification of the Notes as a
current liability resulting from the default are as follows:
<TABLE>
<S> <C>
1997.................................................. $37,528,000
1998.................................................. 2,595,000
1999.................................................. 33,744,000
2000.................................................. 19,000
2001.................................................. 3,000
</TABLE>
Interest paid on all debt in 1994, 1995 and 1996 was approximately
$4,616,000, $3,570,000 and $3,750,000, respectively.
5. OPERATING AGREEMENT WITH AFFILIATE
Under terms of an operating agreement entered into in June 1994, Tele-Media
Corporation of Delaware (an affiliate) ("Tele-Media Delaware") provides certain
management and technical services to the Companies and charges a management fee
of 3.5% of revenues. Payment of the management fee is restricted by the Notes
and the Amended Loan Agreement. The operating agreement expires on June 9, 2004
and continues from year-to-year thereafter unless either party gives written
notice to the other at least 30 days in advance of an expiration date.
Prior to the June 1994 operating agreement discussed above, Tele-Media
Delaware charged a management fee ranging from 3.5% to 7% of revenues. As
required by the provisions of the debt arrangements then outstanding as
discussed in Note 4, Messrs. Tudek and Mundy assumed responsibility for the
payment of certain management fees in 1994. The liabilities assumed by Messrs.
Tudek and Mundy are treated as additional paid-in capital in the consolidated
financial statements.
6. CONTINGENCIES AND COMMITMENTS
In 1995, TMBC and its shareholders entered into a nonbinding letter of
intent to sell the stock of TMBC. TMBC terminated the letter of intent and the
proposed buyer filed suit for damages and specific performance. A motion to
dismiss the suit was heard in early 1996 and the court ruled to dismiss a
majority of the claims, including those for specific performance, as no
definitive agreement had been reached for sale of the stock. On March 28, 1997,
the shareholders of TMBC executed an agreement to sell the stock of the Company
to the plaintiff in this suit. As part of this transaction, the suit was
dismissed with prejudice, and
93
<PAGE> 95
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
upon motion of the parties, the dismissal of the suit was approved by the court.
As a result of the suit's dismissal, this action cannot again be filed by the
plaintiff.
General and administrative expenses for the year ended December 31, 1995
and 1996 include approximately $274,000 and $260,000, respectively, of legal
expenses incurred relating to the defense of the lawsuit and the proposed sale.
The shareholders have agreed to pay 5.5% of the net proceeds from a sale of
their stock to two key members of management.
* * * * * *
94
<PAGE> 96
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 3,708,373
Accounts receivable:
Nonbarter--less allowance for doubtful accounts of
$800,000.............................................. 5,447,842
Barter--net............................................ 303,749
Other current assets...................................... 303,620
------------
Total current assets.............................. 9,763,584
------------
Property, plant and equipment--net.......................... 8,436,165
------------
Intangibles--net............................................ 38,326,412
------------
Other noncurrent assets..................................... 16,331
------------
$ 56,542,492
============
LIABILITIES AND DEFICIENCY IN NET ASSETS
Current liabilities:
Accounts payable and other accrued expenses............... $ 1,514,622
Accrued interest.......................................... 2,969,594
Amounts due to affiliates--net............................ 4,159,152
Current portion of long-term debt......................... 39,491,064
------------
Total current liabilities......................... 48,134,432
------------
Long-term liabilities:
Long-term debt--less current portion...................... 47,306,734
Other..................................................... 31,266
------------
Total long-term liabilities....................... 47,338,000
------------
Redeemable stock warrants................................... 7,000,000
------------
Deficiency in net assets:
Common stock, voting, $0.01 par value per share; 25,000
shares authorized, 15,000 shares outstanding........... 150
Common stock, nonvoting, $0.01 par value per share; 10,000
shares authorized, none outstanding.................... --
Additional paid-in capital................................ 6,924,445
Deficit................................................... (52,854,535)
------------
Deficiency in net assets.......................... (45,929,940)
------------
$ 56,542,492
============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
95
<PAGE> 97
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS AND CHANGES IN DEFICIT
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
------------ ------------
<S> <C> <C>
Revenues:
Local advertising.................................... $ 9,323,963 $ 12,557,493
National advertising................................. 2,052,723 2,710,273
Barter............................................... 1,697,415 2,357,519
Other................................................ 222,507 339,431
------------ ------------
13,296,608 17,964,716
Less agency commissions.............................. 1,346,551 1,723,832
------------ ------------
Net revenues................................. 11,950,057 16,240,884
------------ ------------
Selling, general and administrative, programming,
barter and technical expenses:
Selling.............................................. 2,441,926 3,287,451
General and administrative........................... 2,008,273 3,366,246
Programming.......................................... 2,337,296 3,491,639
Barter............................................... 1,697,415 2,357,519
Technical............................................ 127,977 176,110
------------ ------------
8,612,887 12,678,965
------------ ------------
Operating income before management fees and
depreciation and amortization........................ 3,337,170 3,561,919
------------ ------------
Management fees and depreciation and amortization:
Management fees--affiliates.......................... 358,113 454,258
Depreciation and amortization........................ 2,092,858 2,207,660
------------ ------------
2,450,971 2,661,918
------------ ------------
Operating income....................................... 886,199 900,001
Interest expense....................................... 4,955,734 10,374,922
------------ ------------
Net loss............................................... (4,069,535) (9,474,921)
Deficit, beginning of period........................... (36,462,819) (43,379,614)
------------ ------------
Deficit, end of period................................. $(40,532,354) $(52,854,535)
============ ============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
96
<PAGE> 98
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss.............................................. $(4,069,535) $ (9,474,921)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization...................... 2,092,858 2,207,660
Interest deferral.................................. 3,012,406 1,975,012
Management fees--affiliates........................ 358,113 454,258
Provision for losses on accounts receivable........ 158,144 305,581
Increase in fair value of redeemable stock
warrants......................................... -- 5,356,000
----------- ------------
Other.............................................. 849 335
Changes in operating assets and liabilities:
Accounts receivable--nonbarter................... (6,589) (490,939)
Other current assets............................. (115,852) (114,795)
Accounts payable and other accrued expenses...... (587,980) (863,160)
Affiliates activity--net......................... (135,961) 886,715
Accrued interest................................. 478,336 1,073,705
----------- ------------
Net cash provided by operating activities..... 1,184,789 1,315,451
----------- ------------
Cash flows from investing activities:
Capital expenditures.................................. (255,344) (227,926)
Purchase of radio stations............................ -- (14,170,000)
Other................................................. 2,500 1,500
----------- ------------
Net cash used in investing activities......... (252,844) (14,396,426)
----------- ------------
Cash flows from financing activities:
Borrowings............................................ 79,361 16,000,000
Payments of long-term debt............................ (1,575,046) (1,408,350)
Loan origination fees and other intangible assets..... (25,000) (145,334)
Other................................................. (1,714) (363)
----------- ------------
Net cash provided by (used in) financing
activities.................................. (1,522,399) 14,445,953
----------- ------------
Net increase (decrease) in cash and cash equivalents.... (590,454) 1,364,978
Cash and cash equivalents, beginning of period.......... 1,904,258 2,343,395
----------- ------------
Cash and cash equivalents, end of period................ $ 1,313,804 $ 3,708,373
=========== ============
</TABLE>
See notes to consolidated financial statements.
97
<PAGE> 99
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997
1. BASIS OF PRESENTATION
The condensed consolidated balance sheet as of June 30, 1997 and the
condensed consolidated statements of operations and changes in deficit and cash
flows for the six month periods ended June 30, 1996 and 1997 are unaudited. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation for the periods presented
have been included. These interim unaudited condensed consolidated financial
statements for 1996 and 1997 should be read in conjunction with the audited
consolidated financial statements and notes thereto. The consolidated results of
operations for the six months ended June 30, 1997 are not necessarily indicative
of the results to be expected for the full year.
2. BUSINESS ACQUISITIONS
On February 27, 1997, the Company purchased substantially all of the assets
of two radio stations in the Wilkes-Barre/Scranton, Pennsylvania market for
approximately $3,400,000. The acquisition was accounted for under the purchase
method, with approximately $500,000 allocated to property, plant and equipment
and approximately $2,900,000 allocated to intangibles.
On April 18, 1997, the Company closed the acquisition of two additional
radio stations in the Wilkes-Barre/Scranton, Pennsylvania market for
approximately $11,000,000. The acquisition was financed by $12,000,000 of
additional borrowings under the Amended Loan Agreement. The acquisition was
accounted for under the purchase method, with approximately $1,722,000 allocated
to property, plant and equipment and approximately $9,278,000 allocated to
intangibles.
On May 5, 1997, the Company closed the acquisition of a radio station in
the Quincy, Illinois market for approximately $345,000. The acquisition was
financed primarily by an unsecured seller note and assumption of capital leases.
The acquisition was accounted for under the purchase method, with approximately
$148,000 allocated to property and equipment and approximately $197,000
allocated to intangibles.
3. SUBSEQUENT EVENTS
On July 3, 1997, all of the issued and outstanding stock of the Company was
acquired by Citadel Broadcasting Company, a subsidiary of Citadel Communications
Corporation for approximately $114,400,000. In connection with the acquisition
by Citadel Broadcasting Company, a Change of Control occurred. The Change of
Control has a material effect on the financial statements due to the change in
the earliest put date of the redeemable stock warrants. The Warrant holders have
put rights as of January 1, 2000 or upon a Change of Control. TMBC estimated the
redemption price of the warrants at December 31, 1996 as $7,000,000, and the
accreted value of the warrants at December 31, 1996 was $1,644,000. Previously,
increases in the redemption price were accounted for prospectively as an
adjustment to periodic interest expense from the date of the increase to January
1, 2000, the
98
<PAGE> 100
earliest date the put could be exercised. However, due to the Change of Control
on July 3, 1997, the earliest put date is July 3, 1997 and the warrants must be
accreted to their full value by this time. The accreted value of the warrants at
December 31, 1996 was $1,644,000, thus resulting in a charge to interest expense
of $5,356,000 during the six months ended June 30, 1997 to accrete the warrants
to their $7,000,000 redemption price.
99
<PAGE> 101
CITADEL COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
statements reflect the results of operations and balance sheet of Citadel
Communications Corporation after giving effect to:
(1) the following completed transactions (collectively, the "Completed
Transactions"):
o the March 26, 1998 acquisition of WCTP-FM, WCTD-FM and WKJN-AM serving
the Wilkes-Barre/Scranton market for the purchase price of
approximately $6.0 million (the "Wilkes-Barre/Scranton Acquisition"),
o the February 12, 1998 acquisition of Pacific Northwest Broadcasting
Corporation which owned KQFC-FM, KKGL-FM and KBOI-AM in Boise, Idaho
for the purchase price of approximately $14.4 million and the April 21,
1998 acquisition of KIZN-FM and KZMG-FM in Boise for the purchase price
of approximately $14.5 million (collectively, the "Boise
Acquisitions"),
o the November 17, 1998 acquisition of KAAY-AM in Little Rock, Arkansas
for the purchase price of approximately $5.1 million,
o the February 9, 1999 acquisition of WKQZ-FM, WYLZ-FM, WILZ-FM, WIOG-FM,
WGER-FM and WSGW-AM in Saginaw/Bay City, Michigan for the purchase
price of approximately $35.0 million (the "Saginaw/Bay City
Acquisition"),
o the February 17, 1999 acquisition of WHYL-FM and WHYL-AM in
Harrisburg/Carlisle, Pennsylvania for the purchase price of
approximately $4.5 million (the "Carlisle Acquisition"),
o the March 17, 1999 acquisition of Citywide Communications, Inc., which
owned KQXL-FM, WEMX-FM, WCAC-FM, WXOK-AM and WIBR-AM serving the Baton
Rouge, Louisiana market and KFXZ-FM, KNEK-FM, KRRQ-FM and KNEK-AM
serving the Lafayette, Louisiana market for the purchase price of
approximately $31.5 million (the "Baton Rouge/Lafayette Acquisition"),
o the April 30, 1999 acquisition of KSPZ-FM serving the Colorado Springs,
Colorado market in exchange for KKLI-FM in Colorado Springs, the April
30, 1999 acquisition of KVOR-AM and KTWK-AM serving the Colorado
Springs, Colorado market and KEYF-FM and KEYF-AM serving the Spokane,
Washington market for the purchase price of approximately $10.0 million
and the April 30, 1999 termination of a joint sales agreement under
which Citadel Communications operated certain other radio stations in
Colorado Springs and in Spokane (collectively, the "Capstar
Transactions"),
o the June 30, 1999 acquisition of WSSX-FM, WWWZ-FM, WMGL-FM, WSUY-FM,
WNKT-FM, WTMA-AM, WTMZ-AM and WXTC-AM in Charleston, South Carolina,
WHWK-FM, WYOS-FM, WAAL-FM, WNBF-AM and WKOP-AM in Binghamton, New York,
WMDH-FM and WMDH-AM in Muncie, Indiana and WWKI-FM in Kokomo, Indiana
for the purchase price of approximately $77.0 million (the
"Charleston/Binghamton/Muncie/Kokomo Acquisition"),
o the August 31, 1999 acquisition of Fuller-Jeffrey Broadcasting
Companies, Inc. which owned WOKQ-FM, WPKQ-FM, WXBB-FM and WXBP-FM
serving the Portsmouth/Dover/Rochester, New Hampshire market and
WBLM-FM, WCYI-FM, WCYY-FM, WHOM-FM, WJBQ-FM and WCLZ-FM serving the
Portland, Maine market for the purchase price of approximately $65.3
million, which amount includes the repayment of certain indebtedness of
Fuller-Jeffrey Broadcasting and approximately $1.8 million in
consulting and noncompetition payments payable over a seven-year period
(the "Portsmouth/Dover/Rochester/Portland Acquisition"),
o the November 1, 1999 acquisition of KOOJ-FM in Baton Rouge, Louisiana
for the purchase price of approximately $9.5 million,
o the July 27, 1998 sale of WEST-AM in Allentown/Bethlehem, Pennsylvania
as a portion of the consideration for the 1997 acquisition of WLEV-FM
in Allentown/Bethlehem,
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<PAGE> 102
o the October 7, 1998 sale of WQCY-FM, WTAD-AM, WMOS-FM and WBJR-FM in
Quincy, Illinois for the sale price of approximately $2.3 million (the
"Quincy Sale"),
o the November 9, 1999 disposition of KKTT-FM, KEHK-FM and KUGN-AM in
Eugene, Oregon, KAKT-FM, KBOY-FM, KCMX-FM, KTMT-FM, KCMX-AM and KTMT-AM
in Medford, Oregon, KEYW-FM, KORD-FM, KXRX-FM, KTHT-FM and KFLD-AM in
Tri-Cities, Washington, KCTR-FM, KKBR-FM, KBBB-FM, KMHK-FM and KBUL-AM
in Billings, Montana, WQKK-AM and WGLU-FM in Johnstown, Pennsylvania
and WQWK-FM, WNCL-FM, WRSC-AM and WBLF-AM in State College,
Pennsylvania for the sale price of approximately $26.0 million (the
"Marathon Disposition"),
o the July 1998 initial public offering by Citadel Communications of
shares of its common stock and the use of net proceeds from that
offering,
o the November 1998 sale by Citadel Communications' subsidiary, Citadel
Broadcasting Company, of $115.0 million principal amount of its 9-1/4%
Senior Subordinated Notes due 2008 and the use of net proceeds from
that offering,
o the June 1999 public offering by Citadel Communications of shares of
its common stock and the use of net proceeds from that offering (the
"1999 Offering"),
o the August 1999 redemption of a portion of Citadel Broadcasting's
outstanding 13-1/4% Exchangeable Preferred Stock (the "Preferred
Redemption"), and
(2) the following pending acquisitions (collectively, the "Pending
Acquisitions'):
o the pending acquisition of KATT-FM, KYIS-FM, KCYI-FM, KNTL-FM and
WWLS-AM in Oklahoma City for a purchase price of approximately $60.0
million (the "Oklahoma City Acquisition"),
o the pending acquisition of WGRF-FM, WEDG-FM, WHIT-FM, WMNY-AM and
WHLD-AM in Buffalo, New York, WAQX-FM, WLTI-FM, WNSS-AM, and WNTQ-FM in
Syracuse, New York, WIII-FM and WKRT-AM in Ithaca, New York, WMME-FM,
WEZW-FM, WEBB-FM and WTVL-AM in Augusta-Waterville, Maine, WBPW-FM,
WOZI-FM and WQHR-FM in Presque Isle-Caribou, Maine, WCRQ-FM in
Dennysville-Calais, Maine, KMYY-FM, KYEA-FM, KZRZ-FM and KTJC-FM in
Monroe, Louisiana, KDOK-FM, KTBB-FM, KEES-AM, KYZS-AM and KGLD-AM in
Tyler-Longview, Texas, WFPG-AM, WFPG-FM and WPUR-FM in Atlantic City,
New Jersey, WFHN-FM and WBSM-AM in New Bedford, Massachusetts, WQGN-FM,
WSUB-AM and WVVE-FM in New London, Connecticut and the right to operate
WKOE-FM in Atlantic City under a program service and time brokerage
agreement for the aggregate purchase price of approximately $190.0
million (the "BPH Acquisition"),
o the pending acquisition of KSMB-FM, KDYS-AM, KVOL-FM and KVOL-AM in
Lafayette, Louisiana for the purchase price of approximately $8.5
million (the "Lafayette Acquisition"),
o the pending acquisition of WMMQ-FM, WJIM-FM, WFMK-FM, WITL-FM, WVFN-AM
and WJIM-AM in Lansing, Michigan, WHNN-FM and WTCF-FM in Saginaw,
Michigan and WFBE-FM in Flint, Michigan for the aggregate purchase
price of approximately $120.5 million, of which, subject to certain
conditions, approximately $10.1 million would be paid in shares of
Citadel Communications' common stock valued at $50.375 per share (the
"Michigan" Acquisition"), and
o the pending acquisitions of WXLO-FM and WORC-FM in Worcester,
Massachusetts for the aggregate purchase price of approximately $24.5
million (the "Worcester Acquisition").
The unaudited pro forma condensed consolidated financial statements are
based on Citadel Communications' historical consolidated financial statements,
the financial statements of those entities acquired, or from which assets were
acquired, in connection with the Completed Transactions, and the financial
statements of those entities to be acquired, or from which assets will be
acquired, in connection with the Pending Acquisitions.
In the opinion of management, all adjustments necessary to fairly present
this pro forma information have been made. The interest rate applied to
borrowings under, and repayments of, Citadel Broadcasting's credit facility in
the pro forma consolidated statements of operations was 8.4375%, which
represents the interest rate in effect under the credit facility as of January
1, 1998. Pro forma financial information has been adjusted to reflect the
following, when applicable:
o Prior to the acquisition dates, Citadel Communications operated some of the
acquired stations under a joint sales agreement ("JSA") or local marketing
agreement ("LMA"). Citadel Communications receives or pays fees for such
services accordingly. Net revenue and station operating expenses for
stations operated under JSAs are included to reflect ownership of the
stations as of January 1, 1998. Net revenue and station operating expenses
for stations operated under LMAs are included in Citadel Communications'
historical consolidated financial statements. For those stations operated
under JSAs and LMAs and subsequently acquired, associated fees and
redundant expenses were eliminated and estimated occupancy costs were
included to adjust the results of the operations to reflect ownership of
the stations as of January 1, 1998.
o Elimination of revenue and operating expenses from the entities acquired,
or from which assets were acquired, in connection with the Completed
Transactions, and the entities to be acquired, or from which assets will be
acquired, in connection with the Pending Acquisitions, which would not have
been incurred if the acquisition had occurred on January 1, 1998. The
eliminated items were deemed redundant and therefore are not reflected as
of January 1, 1998.
Depreciation and amortization for the acquisitions are based upon
preliminary allocations of the purchase price to property and equipment and
intangible assets. Actual depreciation and amortization may differ depending on
the final allocation of the purchase price. However, management does not believe
these differences will be material.
For pro forma purposes, Citadel Communications' balance sheet as of
September 30, 1999 has been adjusted to give effect to the following
transactions as if each had occurred on September 30, 1999:
(1) the Marathon Disposition,
(2) the acquisition of KOOJ-FM, and
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<PAGE> 103
(3) the Pending Acquisitions.
The unaudited pro forma information is presented for illustrative purposes
only and does not indicate the operating results or financial position that
would have occurred if the transactions described above had been completed on
the dates indicated, nor is it indicative of future operating results or
financial position if the pending transactions described above are completed.
Citadel Communications cannot predict whether the completion of the Pending
Acquisitions will conform to the assumptions used in the preparation of the
unaudited pro forma condensed consolidated financial statements. Additionally,
consummation of each of the Pending Acquisitions is subject to certain
conditions. Although Citadel Communications believes these closing conditions
are generally customary for transactions of this type, there can be no assurance
that such conditions will be satisfied.
102
<PAGE> 104
CITADEL COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CITADEL
ADJUSTMENTS COMMUNICATIONS
FOR AS ADJUSTED
MARATHON FOR MARATHON ADJUSTMENTS
ACTUAL DISPOSITION DISPOSITION FOR PRO FORMA
CITADEL AND ACQUISITION AND ACQUISITION THE PENDING CITADEL
COMMUNICATIONS OF KOOJ-FM(1) OF KOOJ-FM ACQUISITIONS(2) COMMUNICATIONS
-------------- ---------- ---------- --------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 8,798 $ -- $ 8,798 $ 321 $ 9,119
Restricted cash -- 26,000 26,000 -- 26,000
Accounts and notes receivable, net 48,208 -- 48,208 1,906 50,114
Prepaid expenses 3,808 (110) 3,698 169 3,867
Assets held for sale 25,991 (25,991) -- -- --
-------- -------- -------- -------- ----------
Total current assets 86,805 (101) 86,704 2,396 89,100
Property and equipment, net 68,088 679 68,767 17,668 86,435
Intangible assets, net 480,431 8,572 489,003 387,082 876,085
Other assets 4,205 -- 4,205 -- 4,205
-------- -------- -------- -------- ----------
TOTAL ASSETS $639,529 $ 9,150 $648,679 $407,146 $1,055,825
======== ======== ======== ======== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Accounts payable and accrued liabilities $ 15,021 $ -- $ 15,021 $ 810 $ 15,831
Current maturities of other long-term
Obligations 994 -- 994 250 1,244
-------- -------- -------- -------- ----------
Total current liabilities 16,015 -- 16,015 1,060 17,075
Notes payable, less current maturities 57,500 9,500 67,000 395,011 462,011
10-1/4% Notes 210,401 -- 210,401 -- 210,401
9-1/4% Notes
Other long-term obligations, less current
Maturities 2,685 -- 2,685 1,000 3,685
Deferred tax liability 46,964 -- 46,964 -- 46,964
Exchangeable preferred stock 82,526 -- 82,526 -- 82,526
Common stock and APIC 263,514 -- 263,514 10,075 273,589
Deferred compensation (3,329) -- (3,329) -- (3,329)
Accumulated other comprehensive loss (12) -- (12) -- (12)
Accumulated deficit/retained earnings (36,735) (350) (37,085) -- (37,085)
-------- -------- -------- -------- ----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $639,529 $ 9,150 $648,679 $407,146 $1,055,825
======== ======== ======== ======== ==========
</TABLE>
(1) Represents the net effect of the Marathon Disposition and the acquisition
of KOOJ-FM as if each transaction had taken place on September 30, 1999.
(2) Represents the net effect of the Pending Acquisitions as if each transaction
had taken place on September 30, 1999.
103
<PAGE> 105
CITADEL COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CITADEL
COMMUNICATIONS
AS ADJUSTED ADJUSTMENTS
ACTUAL ADJUSTMENTS FOR FOR FOR PRO FORMA
CITADEL COMPLETED COMPLETED THE PENDING CITADEL
COMMUNICATIONS TRANSACTIONS (1) TRANSACTIONS ACQUISITIONS(2) COMMUNICATIONS
-------------- ---------------- ------------ --------------- --------------
<S> <C> <C> <C> <C> <C>
Net revenue...................... 126,521 12,227 138,748 57,368 196,116
Station operating expenses....... 85,124 5,410 90,534 39,685 130,219
Depreciation and amortization.... 25,589 7,914 33,503 20,700 54,203
Corporate general and
administrative................ 4,921 (131) 4,790 -- 4,790
------- ------- ------- ------- -------
Operating expenses............ 115,634 13,193 128,827 60,385 189,212
------- ------- ------- ------- -------
Operating income (loss).......... 10,887 (966) 9,921 (3,017) 6,904
Interest expense................. 17,502 1,021 18,523 24,996 43,519
Other (income) expense, net...... (1,187) 350 (837) -- (837)
------- ------- ------- ------- -------
Income (loss) before income
taxes......................... (5,428) (2,337) (7,765) (28,013) (35,778)
Income taxes (benefit)........... (1,376) (850) (2,226) -- (2,226)
Dividend requirement for
Exchangeable Preferred Stock.. (11,322) 2,812 (8,510) -- (8,510)
------- ------- ------- ------- -------
Income (loss) from
continuing operations
applicable to common shares... (15,374) 1,325 (14,049) (28,013) (42,062)
======= ======= ======= ======= =======
</TABLE>
(1) Represents the net effect of the Completed Transactions that were
consummated after January 1, 1999 as if each transaction had taken place on
January 1, 1998. Dollars in the table below are shown in thousands.
<TABLE>
<CAPTION>
CARLISLE
ACQUISITION, ADJUSTMENTS
PORTSMOUTH/ CHARLESTON/ CAPSTAR FOR THE
DOVER/ BINGHAMTON TRANSACTIONS, 1999 OFFERING
ROCHESTER/ MUNCIE/ BATON ROUGE/ SAGINAW/ KOOJ ACQUISITION AND THE
PORTLAND KOKOMO LAFAYETTE BAY CITY AND MARATHON PREFERRED THE COMPLETED
ACQUISITION ACQUISITION ACQUISITION ACQUISITION DISPOSITION REDEMPTION TRANSACTIONS
----------- ----------- ----------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue 10,642 9,543 1,371 526 (9,855) -- 12,227
Station operating expenses 6,021 6,711 1,275 486 (9,083) -- 5,410
Depreciation and
amortization 3,628 2,685 628 202 771 -- 7,914
Corporate general and
administrative -- -- -- (131) -- (131)
------ ------ ----- ----- ------ ------ ------
Operating expenses 9,649 9,396 1,903 688 (8,443) -- 13,193
------ ------ ----- ----- ------ ------ ------
Operating income (loss) 993 147 (532) (162) (1,412) -- (966)
Interest expense 3,234 2,531 -- -- (1,044) (3,700) 1,021
Other (income) expenses,
net -- -- -- -- 350 -- 350
------ ------ ----- ----- ------ ------ ------
Income (loss) before
income taxes (2,241) (2,384) (532) (162) (718) 3,700 (2,337)
Income taxes (benefit) (724) -- (126) -- -- -- (850)
Dividend requirement for
Exchangeable Preferred
Stock -- -- -- -- -- 2,812 2,812
------ ------ ----- ----- ------ ------ ------
Income (loss) from
continuing operations (1,517) (2,384) (406) (162) (718) 6,512 1,325
====== ====== ===== ===== ====== ====== ======
</TABLE>
(2) Represents the net effect of the Pending Acquisitions as if each
transaction had taken place on January 1, 1998. Dollars in the table below
are shown in thousands.
<TABLE>
<CAPTION>
OKLAHOMA
CITY BPH LAFAYETTE MICHIGAN WORCESTER PENDING
ACQUISITION ACQUISITION ACQUISITION ACQUISITION ACQUISITION ACQUISITIONS
----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net revenue 7,155 31,231 1,749 14,092 3,141 57,368
Station operating expenses 4,831 23,328 1,331 7,851 2,344 39,685
Depreciation and amortization 3,291 9,649 474 6,039 1,247 20,700
Corporate general and administrative -- --
------ ------- ------ ------- ------ -------
Operating expenses 8,122 32,977 1,805 13,890 3,591 60,385
------ ------- ------ ------- ------ -------
Operating income (loss) (967) (1,746) (56) 202 (450) (3,017)
Interest expense 3,897 12,023 538 6,988 1,550 24,996
Other (income) expense -- --
------ ------- ------ ------- ------ -------
Income (loss) before income taxes (4,864) (13,769) (594) (6,786) (2,000) (28,013)
Income taxes (benefit) -- --
------ ------- ------ ------- ------ -------
Income (loss) from continuing
operations (4,864) (13,769) (594) (6,786) (2,000) (28,013)
====== ======= ====== ======= ====== =======
</TABLE>
104
<PAGE> 106
CITADEL COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CITADEL
COMMUNICATIONS ADJUSTMENTS
ACTUAL ADJUSTMENTS FOR AS ADJUSTED FOR THE PRO FORMA
CITADEL COMPLETED FOR COMPLETED PENDING CITADEL
COMMUNICATIONS TRANSACTIONS (1) TRANSACTIONS ACQUISITIONS(2) COMMUNICATIONS
-------------- ---------------- ------------ --------------- --------------
<S> <C> <C> <C> <C> <C>
Net revenue....................... 135,426 32,887 168,313 69,496 237,809
Station operating expenses........ 93,485 18,816 112,301 48,929 161,230
Depreciation and amortization..... 26,414 17,201 43,615 27,601 71,216
Corporate general and
administrative.................. 4,369 (349) 4,020 -- 4,020
-------- ------ ------- ------- -------
Operating expenses.............. 124,268 35,668 159,936 76,530 236,466
-------- ------ ------- ------- -------
Operating income (loss)........... 11,158 (2,781) 8,377 (7,034) 1,343
Interest expense.................. 18,126 (1,545) 16,581 33,328 49,909
Other (income) expense, net....... (1,651) 350 (1,301) -- (1,301)
-------- ------ ------- ------- -------
Income (loss) before income
taxes........................... (5,317) (1,586) (6,903) (40,362) (47,265)
Income taxes (benefit)............ (1,386) (1,591) (2,977) -- (2,977)
Dividend requirement for --
Exchangeable Preferred Stock.... (14,586) 138 (14,448) -- (14,448)
-------- ------ ------- ------- -------
Income (loss) from continuing
operations applicable to common
shares.......................... (18,517) 143 (18,374) (40,362) (58,736)
======== ====== ======= ======= =======
</TABLE>
(1) Represents the net effect of the Completed Transactions as if each
transaction had taken place on January 1, 1998. Dollars in the table
below are shown in thousands.
<TABLE>
<CAPTION>
ADJUSTMENTS
PORTSMOUTH/ CHARLESTON/ OTHER REPAYMENT FOR THE
DOVER/ BINGHAMTON/ BATON ACQUISITIONS OF THE OFFERING 1999 OFFERING THE
ROCHESTER/ MUNCIE/ ROUGE/ SAGINAW/ AND CREDIT OF THE AND THE COMPLETED
PORTLAND KOKOMO LAFAYETTE BAY CITY DISPOSITIONS FACILITY 9-1/4% PREFERRED TRANS-
ACQUISITION ACQUISITION ACQUISITION ACQUISITION (a) (b) NOTES(c) REDEMPTION(d) ACTIONS
----------- ----------- ----------- ----------- ------------ ------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue 13,642 17,421 7,331 6,981 (12,488) -- -- -- 32,887
Station operating 8,676 12,100 5,170 4,447 (11,577) -- -- -- 18,816
expenses
Depreciation and
amortization 5,441 5,369 2,914 2,421 1,056 -- -- -- 17,201
Corporate general and
administrative -- -- -- -- (349) -- -- -- (349)
------- ------- ------ ------ ------- ------ ------ ------ -------
Operating expenses 14,117 17,469 8,084 6,868 (10,870) -- -- -- 35,668
Operating income (loss) (475) (48) (753) 113 (1,618) -- -- -- (2,781)
Interest expense 4,852 5,063 -- -- (947) (4,487) 1,374 (7,400) (1,545)
Other (income) expense,
net -- -- -- -- 350 -- -- 350
------- ------- ------ ------ ------- ------ ------ ------ -------
Income (loss) before (5,327) (5,111) (753) 113 (1,021) 4,487 (1,374) 7,400 (1,586)
income taxes
Income taxes (benefit) (1,086) -- (505) -- -- -- -- -- (1,591)
Divided requirement for
Exchangeable
Preferred Stock -- -- -- -- -- -- -- 138 138
------- ------- ------ ------ ------- ------ ------ ------ -------
Income (loss) from
continuing
Operations (4,241) (5,111) (248) 113 (1,021) 4,487 (1,374) 7,538 143
======= ======= ====== ====== ======= ====== ====== ====== =======
</TABLE>
(a) Represents the net effect of the Marathon Disposition, the Carlisle
Acquisition, the Capstar Transactions, the Boise Acquisitions, the
Wilkes-Barre/Scranton Acquisition, the acquisition of KOOJ-FM in Baton
Rouge, the disposition of WEST-AM in Allentown/Bethlehem, the acquisition
of KAAY-AM in Little Rock and the Quincy Sale.
(b) Represents the repayment of outstanding borrowings under Citadel
Broadcasting's credit facility with the proceeds from the Citadel
Communications' initial public offering.
(c) Reflects the recording of the net increase in interest expense and the
amortization of deferred financing costs of $3.5 million related to Citadel
Broadcasting's 9-1/4% Senior Subordinated Notes due 2008.
(d) Represents the use of proceeds from the 1999 Offering, including the
redemption of approximately 35% of Citadel Broadcasting's issued and
outstanding Exchangeable Preferred Stock.
105
<PAGE> 107
(2) Represents the net effect of the Pending Acquisitions as if each transaction
had taken place on January 1, 1998. Dollars in the table below are shown in
thousands.
<TABLE>
<CAPTION>
OKLAHOMA
CITY BPH LAFAYETTE MICHIGAN WORCESTER PENDING
ACQUISITION ACQUISITION ACQUISITION ACQUISITION(a) ACQUISITION ACQUISITIONS
----------- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net revenue 8,250 38,627 2,383 16,900 3,336 69,496
Station operating expenses 6,240 28,842 1,984 9,322 2,541 48,929
Depreciation and amortization 4,390 12,865 631 8,052 1,663 27,601
Corporate general and administrative -- -- --
-------- ------- -------- -------- -------- --------
Operating expenses 10,630 41,707 2,615 17,374 4,204 76,530
Operating income (loss) (2,380) (3,080) (232) (474) (868) (7,034)
Interest expense 5,196 16,031 717 9,317 2,067 33,328
Other (income) expense --
-------- ------- -------- -------- -------- --------
Income (loss) before income taxes (7,576) (19,111) (949) (9,791) (2,935) (40,362)
Income taxes (benefit) --
-------- ------- -------- -------- -------- --------
Income (loss) from continuing
operations (7,576) (19,111) (949) (9,791) (2,935) (40,362)
======== ======= ======== ======== ======== ========
</TABLE>
(a) Citadel Communications expects to sell one or more of its stations serving
the Saginaw market to comply with the ownership limits of the
Telecommunications Act of 1996. However, Citadel Communications is unable
to include the effect of the divestiture in this pro forma financial
information until it determines the station or stations required to
be sold.
106
<PAGE> 108
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
CITADEL COMMUNICATIONS
CORPORATION
Date: December 10, 1999 By: /s/ Lawrence R. Wilson
------------------ --------------------------------------
Lawrence R. Wilson
Chairman, Chief Executive Officer and
President
107
<PAGE> 109
EXHIBIT INDEX
2.1 Asset Purchase Agreement dated October 27, 1999 by and between Citadel
Broadcasting Company and Broadcasting Partners Holdings, L.P.
(incorporated by reference to Exhibit 2.1 to Citadel Communications
Corporation's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1999).
2.2 Stock Purchase Agreement dated April 30, 1999 by and between Robert F.
Fuller and Citadel Broadcasting Company (incorporated by reference to
Exhibit 2.1 to Citadel Broadcasting Company's Current Report on Form 8-K,
filed on September 14, 1999).
2.3 Stock Purchase Agreement dated April 30, 1999 by and between Joseph N.
Jeffrey, Jr. and Citadel Broadcasting Company (incorporated by reference
to Exhibit 2.2 to Citadel Broadcasting Company's Current Report on Form
8-K, filed on September 14, 1999).
2.4 Asset Purchase Agreement dated December 3, 1999 by and among Liggett
Broadcast, Inc., Rainbow Radio, LLC, New Tower, Inc., LLJ Realty, LLC,
Robert G. Liggett, Jr., Citadel Communications Corporation, Citadel
Broadcasting Company and Citadel License, Inc.
23.1 Consent of KPMG LLP.
23.2 Consent of Andrews Hooper & Pavlik P.L.C.
23.3 Consent of KPMG LLP.
23.4 Consent of Faulk & Winkler LLC.
23.5 Consent of Cole & Reed P.C.
23.6 Consent of Deloitte & Touche LLP.
108
<PAGE> 1
Exhibit 2.4
ASSET PURCHASE AGREEMENT
AMONG
LIGGETT BROADCAST, INC.,
RAINBOW RADIO, LLC,
NEW TOWER, INC.,
LLJ REALTY, LLC,
ROBERT G. LIGGETT, JR.,
CITADEL COMMUNICATIONS CORPORATION,
CITADEL BROADCASTING COMPANY
AND
CITADEL LICENSE, INC.
DECEMBER 3, 1999
<PAGE> 2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement"), made as of the 3rd day of
December, 1999, by and among (i) LIGGETT BROADCAST, INC., a Michigan corporation
("LBI"); (ii) RAINBOW RADIO, LLC, a Michigan limited liability company
("Rainbow"); (iii) NEW TOWER, INC., a Michigan corporation ("New Tower"); (iv)
LLJ REALTY, LLC, a Michigan limited liability company ("LLJ"); (v) ROBERT G.
LIGGETT, JR. ("Stockholder"); (vi) CITADEL COMMUNICATIONS CORPORATION, a Nevada
corporation ("CCC"); (vii) CITADEL BROADCASTING COMPANY, a Nevada corporation
("Citadel"); and (viii) CITADEL LICENSE, INC., a Nevada corporation ("CLI").
RECITALS:
A. LBI is the licensee of and owns and operates radio stations (a)
WMMQ(FM), WJIM(FM), WFMK(FM), WITL(FM), WVFN(AM) and WJIM(AM), each serving the
Lansing, Michigan market, and (b) WHNN(FM) and WTCF(FM), each serving the
Saginaw, Michigan market, and Rainbow is the licensee of and owns and operates
radio station WFBE(FM), serving the Flint, Michigan market (collectively, the
"Stations"). New Tower owns and/or leases various parcels of real property used
in the operation of the Stations. LLJ owns the real property on which the New
Saginaw Facility (as herein defined) is located. As used in this Agreement,
"Seller" means, collectively, LBI, Rainbow, New Tower and LLJ, or any of them.
B. Stockholder (together with trusts for the benefit of his immediate
family members) owns all of the issued and outstanding shares of capital stock
of LBI. Stockholder owns all of the issued and outstanding shares of capital
stock of New Tower. LBI owns 82% of the equity interests in Rainbow. Stockholder
owns 60% (when Stockholder's interest is aggregated with those of his immediate
family members or trusts for the benefit of his immediate family members) of the
equity interests in LLJ.
C. Citadel is a wholly owned subsidiary of CCC.
D. Sellers desire to sell to Citadel and CLI, and Citadel and CLI
desire to purchase from Sellers, substantially all of the assets of the
Stations, on the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
DEFINITIONS
The following terms when used in this Agreement shall have the meanings
assigned to them below:
"Accounts Receivable" has the meaning specified in Section 9.3.
<PAGE> 3
"Accounts Receivable List" has the meaning specified in Section 9.3.
"Acquisition Expenses" has the meaning specified in Section 10.17.
"Act" means the Communications Act of 1934, as amended.
"Affiliate" of any Person means any other Person (a) that directly or
indirectly controls, is controlled by, or is under direct or indirect common
control with, the first Person, or (b) any interests of which are owned, in
whole or in part, directly or indirectly, by the first Person. For purposes of
this definition, the term "control" (including the correlative meanings of the
terms "controls," "controlled by," and "under direct or indirect control with"),
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management
policies of the Person, whether through the ownership of voting securities or by
contract or otherwise.
"Asset Schedule " has the meaning specified in Section 2.1(a).
"Assigned Contracts" has the meaning specified in Section 2.1(d).
"Assumed Obligations" has the meaning specified in Section 2.3.
"Business" means the business in which Sellers are now engaged.
"CCC Documents" means, collectively, (a) the annual report of CCC on
Form 10-K for the year ended December 31, 1998, (b) the quarterly report of CCC
on Form 10-Q for the quarter ended March 31, 1999, (c) the quarterly report of
CCC on Form 10-Q for the quarter ended June 30, 1999, (d) the quarterly report
of CCC on Form 10-Q for the quarter ended September 30, 1999, (e) the current
report of CCC on Form 8-K filed on July 7, 1999 and (f) the current report of
CCC on Form 8-K filed on September 14, 1999 (as amended on December 3, 1999),
each without exhibits.
"CCC Stock" means common stock, par value $0.001 per share, of CCC.
"Citadel Collection Period" has the meaning specified in Section 9.3.
"Citadel Transaction Documents" has the meaning specified in Section
12.1.
"Citadel's Disclosure Schedule" has the meaning specified in Section
5.3.
"Closing" means the consummation of the transactions contemplated by
this Agreement in accordance with the provisions of Section 11.1.
"Closing Date" has the meaning specified in Section 11.1.
2
<PAGE> 4
"Closing Date Average Price" means the average of the 4:00 p.m. (New
York time) closing sales price per share of CCC Stock, as reported in The Wall
Street Journal (Northeast edition) or any other authoritative source, for the 20
Trading Days immediately prior to the Closing Date.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" has the meaning specified in Section 10.7.
"Contracts" has the meaning specified in Section 4.9.
"Damages" has the meaning specified in Section 14.1.
"Definitive WTRX Agreements" has the meaning specified in Section
10.17.
"DOJ" means the U.S. Department of Justice.
"Draw Condition" has the meaning specified in Section 15.2(a).
"Environmental Claims" means and includes, without limitation: (a)
claims, demands, suits, causes of action for personal injury or lost use of
property, or consequential damages, to the extent any of the foregoing arise
directly or indirectly out of Environmental Conditions; (b) actual or threatened
damages to natural resources; (c) claims for the recovery of response costs, or
administrative or judicial orders directing the performance of investigations,
response or remedial actions under CERCLA, RCRA or other Environmental Laws; (d)
a requirement to implement "corrective action" pursuant to any order or permit
issued pursuant to RCRA; (e) claims for restitution, contribution or equitable
indemnity from third parties or any governmental agency; (f) fines, penalties or
Liens against property; (g) claims for injunctive relief or other orders or
notices of violation from Governmental Authorities; and (h) with regard to any
present or former employees, exposure to or injury from Environmental
Conditions.
"Environmental Conditions" means conditions of the environment,
including the ocean, natural resources (including flora and fauna), soil,
surface water, ground water, any present or potential drinking water supply,
subsurface strata or the ambient air, relating to or arising out of the use,
handling, storage, treatment, recycling, generation, transportation, release,
spilling, leaking, pumping, pouring, emptying, discharging, injecting, escaping,
leaching, disposal, dumping, or threatened release of Hazardous Materials by
Sellers. With respect to claims by employees, Environmental Conditions also
includes the exposure of Persons to Hazardous Materials within work places on
any real estate owned or occupied by Sellers.
"Environmental Laws" has the meaning specified in the definition of
Hazardous Materials.
"Environmental Noncompliance" means, but is not limited to: (a) the
release or threatened release as a result of the activities of Sellers of any
Hazardous Materials into the environment, any storm drain, sewer, septic system
or publicly owned treatment works, in violation of any effluent emission
limitations, standards or other criteria or guidelines established by any
federal, state or local law, regulation, rule, ordinance, plan or order; (b) any
facility operations, procedures, designs,
3
<PAGE> 5
etc. which do not conform to the statutory or regulatory requirements of the
CAA, the CWA, the TSCA, the RCRA or any other Environmental Laws intended to
protect public health, welfare and the environment; and (c) any condition noted
in any environmental site assessments, studies, tests or reports performed or
commissioned for the Real Property or Leaseholds which is concluded therein to
create or cause to exist a recognized environmental condition (or words of
similar import) or to pose an environmental risk.
"Environmental Reports" has the meaning specified in Section 6.14.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Assets" has the meaning specified in Section 2.2.
"FCC" means the Federal Communications Commission.
"FCC Application" has the meaning specified in Section 10.1.
"FCC Approval" has the meaning specified in Section 10.1.
"FCC Licenses" means the main station license for the Stations,
together with each of the other consents, rights, licenses, permits and other
authorizations issued by the FCC and held by Sellers in connection with, or
pertaining to, the conduct of the business and operation of the Stations,
together with any renewals and extensions thereof and any applications therefor
pending on the Closing Date, and any and all applications made by Sellers for
such consents, rights, licenses, permits and other authorizations.
"Final Order" means a written action or order issued by the FCC or its
staff setting forth the FCC Approval (or a denial thereof), (a) which action or
order has not been vacated, reversed, stayed, enjoined, set aside, annulled or
suspended, and (b) with respect to which action or order (i) no requests have
been filed and are pending for administrative or judicial review, rehearing,
reconsideration, appeal or stay, and the time period for filing any such
requests and for the FCC to set aside the action on its own motion under the
provisions of the Act or the rules, regulations and policies of the FCC has
expired, or (ii) in the event of review, reconsideration or appeal, the time for
further review, reconsideration or appeal has expired.
"GAAP" means generally accepted accounting principles in effect in the
United States of America from time to time applied on a consistent basis during
the periods involved.
"Governmental Authority" means any government, whether federal, state
or local, or any other political subdivision thereof, or any agency, tribunal or
instrumentality of any such governmental or political subdivision, or any other
Person exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
4
<PAGE> 6
"Hazardous Materials" means hazardous wastes, hazardous substances,
hazardous constituents, toxic substances or related materials, whether solids,
liquids or gases including but not limited to substances defined as "PCBs,"
"hazardous wastes," "hazardous substances," "toxic substances," "pollutants,"
"contaminants," "radioactive materials," "petroleum," or other similar
designations in, or otherwise subject to regulation under, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986 ("CERCLA"), 42 U.S.C.
Section 9601 et seq.; the Toxic Substance Control Act ("TSCA"), 15 U.S.C.
Section 2601 et seq.; the Resource Conservation and Recovery Act ("RCRA"), 42
U.S.C. Section 9601; the Clean Water Act ("CWA"), 33 U.S.C. Section 1251 et
seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq.; the Clean Air
Act ("CAA"), 42 U.S.C. Section 7401 et seq.; or any similar state law; and in
the plans, rules, regulations or ordinances adopted, or other criteria and
guidelines promulgated pursuant to the preceding laws or other similar laws,
regulations, rules or ordinances now in effect (collectively, the "Environmental
Laws"); and any other substances, constituents or wastes subject to
environmental regulations under any applicable federal, state or local law,
regulation or ordinance.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"HSR Filing" has the meaning specified in Section 10.6.
"Indebtedness for Borrowed Money" means (a) all indebtedness of Sellers
in respect of money borrowed (including, without limitation, indebtedness which
represents the unpaid amount of the purchase price of any property), (b) all
indebtedness of Sellers evidenced by a promissory note, bond or similar written
obligation to pay money, (c) all indebtedness guaranteed by Sellers or for which
Sellers are contingently liable, including, without limitation, guaranties in
the form of an agreement to repurchase or reimburse, and any commitment by which
any such Person assures a creditor against loss, including contingent
reimbursement obligations with respect to letters of credit, and (d) all
monetary obligations of Sellers under any lease or similar arrangement, which
obligations would be classified and accounted for as capital obligations on a
balance sheet of Sellers under GAAP.
"Indemnitee" has the meaning specified in Section 14.3.
"Indemnitor" has the meaning specified in Section 14.3.
"Intellectual Property" has the meaning specified in Section 2.1(e).
"Lansing Property" means the approximately 20-acre parcel of real
property of New Tower located at 3202 Pine Tree Road, Lansing, Michigan.
"Lansing Property Subdivision" has the meaning specified in Section
10.16.
"Leaseholds " has the meaning specified in Section 4.8.
"Letter of Credit" has the meaning specified in Section 3.2.
5
<PAGE> 7
"Lien" means any mortgage, pledge, hypothecation, assignment,
encumbrance, claim, easement, transfer restriction, lien (statutory or
otherwise) or security interest of any kind or nature whatsoever.
"New Saginaw Facility" has the meaning specified in Section 10.14.
"Obligations" means, without duplication, all (a) Indebtedness for
Borrowed Money, (b) accrued taxes, accounts payable, accrued liabilities and all
other liabilities and obligations of the type normally required by GAAP to be
reflected on a balance sheet, (c) commitments by which Sellers assure a creditor
against loss, including the face amount of all letters of credit and, without
duplication, all drafts drawn thereunder, (d) obligations guaranteed in any
manner by Sellers, (e) obligations under capitalized leases in respect of which
obligations Sellers are liable, contingently or otherwise, as obligor, guarantor
or otherwise, or in respect of which obligations such Person assures a creditor
against loss, (f) obligations under acceptance facilities, (g) obligations
secured by a Lien on property of Sellers, (h) obligations under interest rate or
currency exchange or swap agreements, (i) unsatisfied obligations for
"withdrawal liability" to a "multiemployer plan" as such terms are defined under
ERISA, (j) indebtedness issued or obligation incurred in substitution or
exchange for any Obligations, (k) costs or expenses incurred by Sellers of any
nature, whether or not currently payable, and (l) other liabilities or
obligations of Sellers, in each of the foregoing instances whether absolute or
contingent, known or unknown, and whether or not normally required by GAAP to be
reflected on a balance sheet.
"Permits" has the meaning specified in Section 4.17(b).
"Permitted Exceptions" means those certain title exceptions which do
not affect the Real Property in any material respect and which are acceptable to
Citadel in its reasonable discretion, including without limitation (i) the Lien
of all ad valorem real estate taxes and assessments not yet due and payable as
of the Closing Date, subject to adjustment as herein provided; (ii) local, state
and federal laws, ordinances or governmental regulations, including without
limitation building and zoning laws, ordinances and regulations, now or
hereafter in effect relating to the Real Property; and (iii) those items
appearing of record or shown on a survey, provided to Citadel pursuant to
Section 6.15, and, in either case, not objected to by Citadel prior to the
Closing. The inclusion of clause (ii) above in this definition shall have no
effect on Sellers' and Stockholder's representations and warranties regarding
compliance with applicable laws, ordinances, rules and regulations.
"Person" means an individual, corporation, partnership, joint venture,
joint stock company, association, trust, business trust, unincorporated
organization, Governmental Authority, or any other entity of whatever nature.
"Personal Property" has the meaning specified in Section 2.1(a).
"Proposed Acquisition" has the meaning specified in Section 10.17.
"Purchased Assets" has the meaning specified in Section 2.1.
"Purchase Price" has the meaning specified in Section 3.1.
6
<PAGE> 8
"Real Property" has the meaning specified in Section 2.1(b).
"Real Property Leases" has the meaning specified in Section 2.1(c).
"Recipient" has the meaning specified in Section 10.7.
"SEC" means the U.S. Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Sellers" has the meaning specified in the recitals to this Agreement.
"Sellers Transaction Documents" has the meaning specified in Section
13.1.
"Sellers' Disclosure Schedule" has the meaning specified in Section
4.3.
"Signing Date Price" means $50.375, which is the 4:00 p.m. (New York
time) closing sales price per share of CCC Stock on the Trading Day immediately
prior to the date of this Agreement, as reported in The Wall Street Journal
(Northeast edition) or any other authoritative source.
"Stations" has the meaning specified in the recitals to this Agreement.
"Supplemental Financial Statements" has the meaning specified in
Section 6.10
"Taxes" means all taxes, charges, fees, levies, or other assessments,
including income, gross receipts, excise, property, sales, transfer, license,
payroll, and franchise taxes, any taxes required by law to be withheld, and any
taxes payable as a result of the consummation of the transactions contemplated
by this Agreement, which taxes are imposed by any Governmental Authority; and
such term shall include any interest, penalties, or additions to tax
attributable to such assessments.
"Threshold" has the meaning specified in Section 14.5(a).
"Trade Agreements" has the meaning specified in Section 6.9.
"Trade Imbalance" has the meaning specified in Section 6.9.
"Trade Liabilities" has the meaning specified in Section 6.9.
"Trade Receivables" has the meaning specified in Section 6.9.
"Trade Schedule" has the meaning specified in Section 6.9.
"Trading Day" means a day on which one or more shares of CCC Stock is
traded on the Nasdaq National Market.
7
<PAGE> 9
"WTRX" has the meaning specified in Section 10.17.
"WTRX TBA" has the meaning specified in Section 10.17.
"WTRX Owner" has the meaning specified in Section 10.17.
SECTION 2
PURCHASE AND SALE OF ASSETS
2.1 Purchase and Sale of Purchased Assets. Subject to the terms and
conditions of this Agreement, and on the basis of the representations,
warranties, covenants and agreements contained in this Agreement, at the
Closing, Sellers agree to sell, assign and convey to Citadel (and, with respect
to clause (f) below, CLI), and Citadel (and, with respect to clause (f) below,
CLI) agrees to purchase, acquire and accept from Sellers, all of the Purchased
Assets. The "Purchased Assets" consist of:
(a) All the tangible personal property, improvements and
fixtures of every kind or nature used in the operation of the Stations in the
ordinary course of business (the "Personal Property"), including, without
limitation, the personal property described on Schedule 2.1 to this Agreement
(the "Asset Schedule");
(b) All of the right, title and interest of Sellers or any of
their Affiliates in and to any real property used in the operation of the
Stations in the ordinary course of business which are described on the Asset
Schedule (the "Real Property");
(c) The leasehold interests pursuant to the real property
leases described on the Asset Schedule (the "Real Property Leases");
(d) All of the right, title and interest of Sellers or any of
their Affiliates in and to those contracts, leases, licenses, memberships,
agencies, permits and agreements, other than Real Property Leases, to which any
Seller or any Affiliate thereof presently is a party or an assignee of a party
which are described on the Asset Schedule (the "Assigned Contracts");
(e) The call letters of the Stations and all of the
copyrights, trademarks, trade names and other similar rights, including
applications and registrations therefor, used in connection with the past or
present operation of the Stations in which any Seller or any Affiliate thereof
has any right, title or interest, including, without limitation, those items
listed on the Asset Schedule (collectively, the "Intellectual Property");
(f) The FCC Licenses, a complete list of which is included on
the Asset Schedule;
(g) All books, records and accounts relating to the operation
of the Stations, subject to the right of Sellers to make and retain photocopies
thereof for Sellers' personal use and
8
<PAGE> 10
reference and to obtain access to such books, records and accounts in accordance
with the provisions of Section 2.2(a); and
(h) All other assets owned by Sellers as of the date of this
Agreement which are used or useful in connection with the operation of the
Stations as of the date of this Agreement, real and personal, tangible and
intangible.
2.2 Excluded Assets. Notwithstanding anything to the contrary contained
in this Agreement, it is expressly understood and agreed that there shall be
excluded from the assets transferred or assigned to Citadel and CLI the
following (collectively, the "Excluded Assets"):
(a) Except to the extent included in Section 2.1(g), all of
Sellers' corporate books and records and other documents relating to the
internal corporate affairs of Sellers, and all other corporate records or files
of Sellers not relating to the business or operation of the Stations;
(b) All cash, cash equivalents or similar type investments
held by Sellers, such as certificates of deposit, treasury bills and other
marketable securities on hand as of the Closing;
(c) All accounts receivable of Sellers existing as of Closing;
(d) Assets not used or useful in connection with the Stations;
(e) Any and all claims of Sellers with respect to transactions
occurring or arising prior to the Closing Date, including, without limitation,
claims for Tax refunds;
(f) The personal property identified on Schedule 2.2(f) as
Excluded Assets; and
(g) The real property identified on Schedule 2.2(g) as
Excluded Assets.
Notwithstanding the foregoing, any asset which is described above but which is
actually listed on the Asset Schedule shall be a Purchased Asset and not an
Excluded Asset.
2.3 Obligations. Neither Citadel nor CLI shall assume, and they shall
purchase the Purchased Assets free and clear of, any and all Obligations of
Sellers, except that Citadel shall assume those Obligations of Sellers arising
from and after the Closing Date (other than any liability or obligation for
breach or default which occurred prior to the Closing Date) pursuant to each of
(a) the Real Property Leases, (b) the Assigned Contracts, (c) those items
subject to proration pursuant to Section 10.2, (d) the Trade Liabilities and (e)
those additional items expressly set forth on Schedule 2.3 to this Agreement, if
any (collectively, the "Assumed Obligations").
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<PAGE> 11
SECTION 3
PURCHASE PRICE; LETTER OF CREDIT
3.1 Purchase Price. The purchase price for the Purchased Assets shall
be $120,500,000, subject to adjustment as provided in Sections 6.9, 10.2 and
10.17 (the "Purchase Price"). At the Closing, Citadel shall deliver to Sellers
the Purchase Price (allocated amongst Sellers as provided in Section 3.3) as
follows: (a) 200,000 shares of CCC Stock shall be issued to LBI and (b) cash
shall be paid to Sellers, by wire transfer of immediately available funds, in an
amount equal to the difference between (i) the Purchase Price and (ii) 200,000
multiplied by the Signing Date Price; provided, however, that if the Closing
Date Average Price is less than 90% of the Signing Date Price, then no CCC Stock
shall be issued to LBI and the entire Purchase Price shall be paid in cash.
3.2 Letter of Credit. Simultaneously with the execution of this
Agreement, Citadel shall deliver, or cause to be delivered, to LBI an
irrevocable letter of credit in favor of LBI, issued by BankBoston, N.A., in the
amount of $6,000,000, which shall be in the form attached as Exhibit A hereto
(the "Letter of Credit"). The Letter of Credit shall provide that the issuing
bank shall make payment on the Letter of Credit upon such bank's receipt of a
joint certificate from the President of LBI and from the Chief Executive Officer
of Citadel certifying that a Draw Condition has occurred. At the Closing, LBI
shall return the original Letter of Credit to Citadel for cancellation.
3.3 Allocation of the Purchase Price. The parties hereto shall report
the transactions contemplated by this Agreement for federal and state tax
purposes in a manner consistent with the allocation of the Purchase Price
mutually agreed upon by Citadel, CLI and Sellers. Notwithstanding the foregoing,
the parties hereto agree that (a) the Purchase Price shall be allocated amongst
Sellers as follows: (i) $12,000,000 to Rainbow, (ii) $4,750,000 to New Tower,
(iii) $1,300,000 to LLJ and (iv) the remainder to LBI; and (b) only LBI shall
receive CCC Stock if CCC Stock is to be issued as part of the Purchase Price.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF SELLERS AND STOCKHOLDER
In connection with the purchase and sale of the Purchased Assets under
this Agreement and in order to induce CCC, Citadel and CLI to enter into and
consummate the transactions contemplated by this Agreement, Sellers and
Stockholder jointly and severally make the following representations and
warranties to CCC, Citadel and CLI, as of the date of this Agreement and as of
the date of the Closing (except for representations and warranties expressly and
specifically relating to a time or times other than the date hereof or thereof,
which shall be made as of the specified time or times):
4.1 Organization and Qualification.
(a) LBI. LBI is a corporation duly organized, validly existing
and in good standing under the laws of the State of Michigan, and has full
corporate power and authority (a) to
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<PAGE> 12
own its assets and properties and to conduct the Business in which LBI is now
engaged and (b) to enter into this Agreement and to consummate the transactions
contemplated hereby. LBI has full power, authority and legal right and all
necessary approvals, permits, licenses and authorizations to own its properties
and to conduct the Business. LBI's principal place of business is located in the
State of Michigan. LBI does not own, of record or beneficially, or have the
right or obligation to acquire, any capital stock or equity interest or
investment in any Person, except that LBI owns 82% of the equity interests in
Rainbow. Stockholder owns 92.8% of the issued and outstanding shares of capital
stock of LBI, and the remaining shares are owned by trusts for the benefit of
Stockholder's immediate family members.
(b) Rainbow. Rainbow is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Michigan, and has full limited liability company power and authority (a) to own
its assets and properties and to conduct the Business in which Rainbow is now
engaged and (b) to enter into this Agreement and to consummate the transactions
contemplated hereby. Rainbow has full power, authority and legal right and all
necessary approvals, permits, licenses and authorizations to own its properties
and to conduct the Business. Rainbow's principal place of business is located in
the State of Michigan. Rainbow does not own, of record or beneficially, or have
the right or obligation to acquire, any capital stock or equity interest or
investment in any Person. LBI owns 82% of the equity interests in Rainbow.
(c) New Tower. New Tower is a corporation duly organized,
validly existing and in good standing under the laws of the State of Michigan,
and has full corporate power and authority (a) to own its assets and properties
and to conduct the Business in which New Tower is now engaged and (b) to enter
into this Agreement and to consummate the transactions contemplated hereby. New
Tower has full power, authority and legal right and all necessary approvals,
permits, licenses and authorizations to own its properties and to conduct the
Business. New Tower's principal place of business is located in the State of
Michigan. New Tower does not own, of record or beneficially, or have the right
or obligation to acquire, any capital stock or equity interest or investment in
any Person. Stockholder owns all of the issued and outstanding shares of capital
stock of New Tower.
(d) LLJ. LLJ is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Michigan,
and has full limited liability company power and authority (a) to own its assets
and properties and to conduct the Business in which LLJ is now engaged and (b)
to enter into this Agreement and to consummate the transactions contemplated
hereby. LLJ has full power, authority and legal right and all necessary
approvals, permits, licenses and authorizations to own its properties and to
conduct the Business. LLJ's principal place of business is located in the State
of Michigan. LLJ does not own, of record or beneficially, or have the right or
obligation to acquire, any capital stock or equity interest or investment in any
Person. Stockholder owns 60% (when Stockholder's interest is aggregated with
those of his immediate family members or trusts for the benefit of his immediate
family members) of the equity interests in LLJ.
4.2 Authority. The execution and delivery of this Agreement by each
Seller, the performance by each Seller of its covenants and agreements hereunder
and the consummation by each Seller of the transactions contemplated hereby have
been duly authorized by all necessary
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corporate or limited liability company (as applicable) action. This Agreement
constitutes the valid and legally binding agreement of Sellers and Stockholder,
enforceable against each of them in accordance with its terms.
4.3 No Legal Bar; Conflicts. Neither the execution and delivery of this
Agreement by Sellers or Stockholder, nor the consummation of the transactions
contemplated hereby by Sellers or Stockholder, (a) violates or will violate any
provision of the organizational documents of any Seller; (b) violates or will
violate any law, rule, regulation, writ, judgment, injunction, decree,
determination, award or other order of any Governmental Authority; or (c)
violates or will violate, or conflicts with or will conflict with, or will
result in any breach of any of the terms of, or constitutes or will constitute a
default under or results in or will result in the termination of or the creation
or imposition of any Lien pursuant to, the terms of any contract, commitment,
agreement, understanding or arrangement of any kind to which any Seller or
Stockholder is a party or by which any Seller, Stockholder or any of the assets
of any Seller or Stockholder is bound. Except for the FCC Approval, compliance
with the HSR Act and the consents disclosed in Schedule 4.0 to this Agreement
("Sellers' Disclosure Schedule"), no consents, approvals or authorizations of,
or filings with, any Governmental Authority or any other Person are required in
connection with the execution and delivery of this Agreement by Sellers and
Stockholder and the consummation of the transactions contemplated hereby by
Sellers and Stockholder.
4.4 Financial Statements. Sellers have delivered to Citadel financial
statements with respect to the Stations as listed on Sellers' Disclosure
Schedule. Each of such financial statements (including in all cases the notes
thereto, if any) (i) is accurate and complete in all material respects, (ii) is
consistent in all material respects with the books and records of Sellers
(which, in turn, are accurate and complete in all material respects) and (iii)
fairly presents in all material respects the financial condition and results of
operations of Sellers in accordance with GAAP (subject in the case of unaudited
financial statements to the lack of footnote disclosure and changes resulting
from normal year-end audit adjustments), consistently applied, as of the dates
and for the periods set forth therein.
4.5 Absence of Certain Changes. Since December 31, 1998, except as
disclosed in Sellers' Disclosure Schedule, there has not been any (a) material
adverse change in the condition of any of the Stations, financial or otherwise,
or in the results of operations, assets, liabilities or business of any of the
Stations; (b) damage or destruction, whether or not insured, affecting the
business operations of the Stations; (c) labor dispute or threatened labor
dispute involving any of the employees of the Stations; (d) actual or threatened
dispute pertaining to the Stations with any material provider of software,
hardware or services; (e) material change in the customary methods of operations
of the Stations; (f) except in the ordinary course of business or to the extent
not material to the Business or financial condition of the Stations, sale or
transfer of any tangible or intangible asset used or useful in the operation of
the Stations, mortgage, pledge or imposition of any Lien on any such asset,
lease of real property, machinery, equipment or buildings with respect to the
Stations entered into or modification, amendment or cancellation of any of its
existing leases relating to the Stations, or cancellation of any debt or claim;
or (g) liability or obligation (contingent or otherwise) incurred under
agreements or otherwise, except current liabilities entered into or incurred in
the ordinary course of business consistent with past practices.
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4.6 Taxes. Except as disclosed in Sellers' Disclosure Schedule, Sellers
have filed or caused to be filed on a timely basis all federal, state, local and
other tax returns, reports and declarations required to be filed by them with
respect to the Stations and have paid all Taxes (including, but not limited to,
income, franchise, sales, use, unemployment, withholding, social security and
workers' compensation taxes and estimated income and franchise tax payments,
penalties and fines) reflected as due on such returns, reports or declarations
(whether or not shown on such returns, reports or declarations), or pursuant to
any assessment received by any of them in connection with such returns, reports
or declarations. All such returns, reports and declarations filed by or on
behalf of Sellers are true, complete and correct in all material respects. No
deficiency in payment of any Taxes for any period has been asserted against
Sellers by any taxing authority which remains unsettled as of the date hereof,
no written inquiries have been received by Sellers from any taxing authority
with respect to possible claims for taxes or assessments, and there is no basis
for any additional claims or assessments for Taxes. Since December 31, 1998,
Sellers have not incurred any liability for Taxes which materially affect the
operation of the Stations other than in the ordinary course of business. All
Taxes attributable to the Stations or their income, operations or properties
accruing up to and including the Closing have been or will be paid when due
regardless of whether such Taxes are due and payable as of the Closing.
4.7 Asset Schedule. The Asset Schedule includes complete and accurate
(a) listings of all Real Property; (b) listings of all Personal Property; (c)
listings of all Real Property Leases and Assigned Contracts, none of which
requires any consent of third parties in connection with the transactions
contemplated hereby, except otherwise as indicated in Sellers' Disclosure
Schedule; (d) listings of all of the Intellectual Property; and (e) listings of
all of the FCC Licenses, all of the foregoing of which will, as of the Closing,
be owned and held by Sellers as reflected in the Asset Schedule.
4.8 Title to and Condition of Property.
(a) Title. Subject to the Permitted Exceptions, Sellers will
as of the Closing have good, marketable and exclusive title to and undisputed
possession of all of the real, personal and tangible property and improvements
included in the Purchased Assets. Except as set forth on Sellers' Disclosure
Schedule, the Purchased Assets are now free and clear of all Liens. Subject to
the Permitted Exceptions, the Purchased Assets will, as of the Closing, be free
and clear of all Liens.
(b) Condition. The Personal Property is structurally sound, in
good operating condition, ordinary wear and tear excepted, adequate and suitable
for the operation of the Stations as they are currently being operated, and in
proper condition and repair so that the Stations can operate according to their
FCC Licenses, the rules, regulations and policies of the FCC and in all other
respects in compliance with the Act and all other applicable federal and state
laws.
(c) Insurance. The Personal Property included among the
Purchased Assets is and will be insured through the Closing Date in amounts
adequate to replace or repair any casualty or other insurable loss to any of
such property.
(d) Sufficiency of Assets. The Purchased Assets include all of
the assets, of a sufficient nature, condition and quantity, necessary to permit
Citadel and CLI to operate the Stations
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immediately upon the Closing in the ordinary course of business and consistent
with the past practices of Sellers. Sellers have not, since December 31, 1998,
removed any material item of Personal Property from the Stations other than
removals in the ordinary course of business which were not done in contemplation
of the transactions contemplated hereby. None of the Excluded Assets identified
on Schedule 2.2(f), individually or in the aggregate, is material to the
operation of any of the Stations.
(e) Real Property Leases.
(i) The Asset Schedule contains accurate descriptions
of the Real Property Leases and the location of the real estate leased
thereunder (the "Leaseholds") and the type of facility located on the
Leaseholds. Sellers will as of the Closing have a valid leasehold interest in
each of the Leaseholds.
(ii) None of the Leaseholds is subject to any
covenant or restriction preventing or limiting in any respect the consummation
of the transactions contemplated hereby, except for any consent listed on
Sellers' Disclosure Schedule required of the landlords under the Real Property
Leases. Sellers' right, title and interest in and to the Leaseholds will at the
Closing be held by Sellers free and clear of all Liens.
(iii) The use for which the Leaseholds are zoned
permits the use thereof for the business of the Stations consistent with past
practices. The use and occupancy of the Leaseholds by Sellers are permitted
under the Real Property Leases and are in compliance in all material respects
with all regulations, codes, ordinances and statutes applicable to Sellers and
the Business, and Sellers have not received any notice asserting any material
violation of sanitation laws and regulations, occupational safety and health
regulations, or electrical codes.
(iv) There are no facts relating to Sellers, and to
the best of the knowledge of Sellers and Stockholder, no facts relating to any
other party, that would prevent the Leaseholds from being occupied and used by
Citadel and/or any assignee of Citadel after the Closing Date in the same manner
as immediately prior to the Closing.
(v) There is not under any Real Property Lease any
material default by Sellers or any condition that with notice or the passage of
time or both would constitute such a default, and Sellers have not received any
notice asserting the existence of any such default or condition.
(vi) Each Real Property Lease is valid and binding
and in full force and effect as to Sellers and, to the best of the knowledge of
Sellers and Stockholder, as to each other party thereto, and, except as
disclosed on the Asset Schedule, has not been amended or otherwise modified.
(vii) The Leaseholds constitute all of the real
property in which any Seller has a leasehold interest or other interest or right
(whether as lessor or lessee) and which is or will prior to the Closing be used
in the operation of the Stations.
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(f) Real Property.
(i) The Asset Schedule contains an accurate
description of the location of each parcel of the Real Property and the type of
facility located on each such parcel. Sellers will as of the Closing have good
and marketable title to the Real Property, in fee simple, subject only to the
Permitted Exceptions.
(ii) None of the Real Property is subject to any
covenant or restriction preventing or limiting in any respect the consummation
of the transactions contemplated hereby. Sellers' right, title and interest in
and to the Real Property will at the Closing be held by Sellers free and clear
of all Liens except the Permitted Exceptions.
(iii) The use for which the Real Property is zoned
permits the use thereof for the Business consistent with past practices. The use
and occupancy of the Real Property by Sellers are in compliance in all material
respects with all regulations, codes, ordinances and statutes applicable to
Sellers and the Business, and Sellers have not received any notice asserting any
material violation of sanitation laws and regulations, occupational safety and
health regulations, or electrical codes.
(iv) There are no condemnation proceedings or eminent
domain proceedings of any kind pending or, to the best of the knowledge of
Sellers and Stockholder, threatened against the Real Property.
(v) All of the Real Property is occupied under a
valid and current certificate of occupancy or similar permit. There are no facts
that would prevent the Real Property from being occupied and used by Citadel
after the Closing Date in the same manner as immediately prior to the Closing.
(vi) The Real Property constitutes all of the real
property which is owned by any Seller and which is or will prior to Closing be
used in the operation of the Stations.
4.9 Contractual and Other Obligations. Set forth in the Asset Schedule
is a listing of all (a) Real Property Leases; (b) contracts, agreements,
licenses, leases, arrangements and other documents used solely in connection
with the present operation of the Stations to which any Seller is a party or by
which any Seller or any of the assets of any Seller are bound (including, in the
case of loan agreements, a description of the amounts of any outstanding
borrowings thereunder and the collateral, if any, for such borrowings); (c)
uncompleted orders for the purchase by any Seller of materials, supplies,
equipment and services for the requirements of the Stations existing as of the
date hereof and with respect to which the remaining obligation of any Seller is
in excess of $2,500; and (d) contingent contractual obligations and liabilities
of any Seller known to Sellers existing as of the date hereof (all of the
foregoing, collectively, the "Contracts"). Each of the Contracts is designated
in the Asset Schedule either as an Assigned Contract, or as a Contract that will
not be assigned to Citadel. Neither Sellers nor, to the best of the knowledge of
Sellers and Stockholder, any other Person is in material default in the
performance of any covenant or condition under any Contract and no claim of such
a default has been made and no event has occurred which with the giving of
notice or the lapse of time would constitute such a default under any covenant
or condition
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under any Contract. No Seller is a party to any Contract which would terminate
or be materially adversely affected by the consummation of the transactions
contemplated by this Agreement. Originals or true, correct and complete copies
of all of the Assigned Contracts have been provided to Citadel.
4.10 Compensation. Set forth in Sellers' Disclosure Schedule is a list
of (a) all agreements between Sellers and their employees or other Persons
providing services for compensation with regard to the Stations, whether
individually or collectively, and (b) all employees of Sellers or other Persons
providing services for Sellers with respect to the Stations entitled to receive
annual compensation in excess of $5,000 and their respective positions, job
categories and salaries. The transactions contemplated by this Agreement will
not result in any liability for severance pay to any such employee or other
Person. Sellers have not informed any such employee or other Person that such
Person will receive any increase in compensation or benefits or any ownership
interest in any Seller or the Business. Except as disclosed in Sellers'
Disclosure Schedule, all current employees of Sellers are "at will" employees
and may be terminated by Sellers at any time, without liability or obligation,
except the payment of normal compensation accrued up to the time of termination
of employment.
4.11 Employee Benefit Plans.
(a) Sellers do not maintain or sponsor, and is not required to
make contributions to or to pay benefits from, any pension, profit-sharing,
savings, bonus, incentive or deferred compensation, severance pay, medical, life
insurance, welfare or other employee benefit plan which affects the employees
working, or who formerly worked, at any Station, except as set forth in Sellers'
Disclosure Schedule. None of the plans, funds, policies, programs, arrangements
or understandings of any Seller is a "multiemployer plan" (within the meaning of
Section 3(37) of ERISA). Sellers' Disclosure Schedule fully discloses all of the
plans, funds, policies, programs, arrangements or understandings, whether oral
or written, sponsored or maintained by any Seller pursuant to which any employee
or former employee of any Station (or any dependent or beneficiary of any such
employee) might be or become entitled to (1) retirement benefits; (2) severance
or separation from service benefits; (3) incentive, performance, stock, share
appreciation or bonus awards; (4) health care benefits; (5) disability income or
wage continuation benefits; (6) supplemental unemployment benefits; (7) life
insurance, death or survivor's benefits; (8) accrued sick pay or vacation pay;
(9) any type of benefit offered under any arrangement subject to
characterization as an "employee benefit plan" within the meaning of section
3(3) of ERISA; or (10) benefits of any other type offered through any
arrangement that could be characterized as providing for additional compensation
or fringe benefits. As to any such plan, fund, policy, program, arrangement or
understanding, all of the following are true with respect to each Station: (A)
all amounts due as contributions, insurance premiums and benefits to the date
hereof have been fully paid by Sellers; (B) all applicable requirements of law
have been observed with respect to the establishment, operation and, if
applicable, the termination thereof, and all applicable reporting and disclosure
requirements have been timely satisfied; (C) no claim or demand has been made by
any employee (or beneficiary or dependent of any employee) for benefits (other
than routine claims for benefits), or by any taxing authority for taxes or
penalties which has not been satisfied in full or which may be or become subject
to litigation or arbitration; (D) any such plan represented by Sellers to be a
"qualified" retirement plan satisfies, in both form and operation, the
applicable
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requirements of Section 401(a) of the Code; and (E) any such plan may be
terminated at any time without material liability resulting from such action.
LBI will continue to maintain its 401(k) plan after the Closing. LBI's 401(k)
plan is "qualified" under the Code, and LBI has received a favorable
determination letter from the Internal Revenue Service with respect to such
plan.
(b) Sellers have no obligation to provide health or other
welfare benefits to former, retired or terminated employees, except as
specifically required under Section 4980B of the Code. Sellers have complied
with any applicable notice and continuation requirements of Section 4980B of the
Code and the regulations thereunder.
4.12 Labor Relations. There have been no material violations of any
federal, state or local statutes, laws, ordinances, rules, regulations, orders
or directives with respect to the employment of individuals by, or the
employment practices or work conditions of, Sellers, or the terms and conditions
of employment, wages (including overtime compensation) and hours. The Stations
are not engaged in any unfair labor practice or other unlawful employment
practice and there are no charges of unfair labor practices or other
employee-related complaints pending or, to the best of the knowledge of Sellers
and Stockholder, threatened against the Stations before the National Labor
Relations Board, the Equal Employment Opportunity Commission, the Occupational
Safety and Health Review Commission, the Department of Labor or any other
Governmental Authority. There is no strike, picketing, slowdown or work stoppage
or organizational attempt pending against or, to the best of the knowledge of
Sellers and Stockholder, threatened against or involving the Stations. No issue
with respect to union representation is pending or, to the best of the knowledge
of Sellers and Stockholder, threatened with respect to the employees of the
Stations.
4.13 Increases in Compensation or Benefits. Subsequent to December 31,
1998, there have been no increases in the compensation payable or to become
payable to any of the employees of Sellers who work solely at the Stations, nor
have Sellers paid or provided for any awards, bonuses, stock options, loans,
profit-sharing, pension, retirement or welfare plans or similar or other
payments or arrangements for or on behalf of such employees in each case other
than (a) reasonable and customary increases made by Sellers in the ordinary
course of business, (b) pursuant to currently existing plans or arrangements set
forth in Sellers' Disclosure Schedule or (c) as was required from time to time
by governmental legislation affecting wages. The vacation policy of Sellers is
set forth in Sellers' Disclosure Schedule. No employee of any Seller who works
solely at the Stations is entitled to vacation time in excess of three weeks
during the current calendar year and no such employee has any accrued vacation
time with respect to any period prior to the current calendar year, except as
set forth in Sellers' Disclosure Schedule.
4.14 Insurance. Sellers maintain insurance policies covering all of
their properties and assets and the various occurrences which may arise in
connection with the operation of the Stations, each of which policies is
summarized in Sellers' Disclosure Schedule. Such policies are in full force and
effect and all installments of premiums due thereon have been paid in full.
Sellers have complied with the provisions of such policies. There are no notices
of any pending or threatened termination or premium increases with respect to
any of such policies. There has been no casualty loss or occurrence which may
give rise to any claim of any kind not covered by insurance and Sellers are not
aware of any casualty occurrence which may give rise to any claim of any kind
not
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covered by insurance. No third party has filed any claim against any Seller for
personal injury or property damage of a kind for which liability insurance is
generally available which is not fully insured, subject only to the standard
deductible.
4.15 Litigation; Disputes. Except as set forth in Sellers' Disclosure
Schedule, there are no claims, disputes, actions, suits, investigations or
proceedings pending or, to the best of the knowledge of Sellers and Stockholder,
threatened against or affecting any Seller or the Stations, and, to the best of
the knowledge of Sellers and Stockholder, there is no basis for any such claim,
dispute, action, suit, investigation or proceeding. Sellers have no knowledge of
any default under any such action, suit or proceeding. Sellers are not in
default in respect of any judgment, order, writ, injunction or decree of any
Governmental Authority with respect to the operation of the Stations.
4.16 Environmental.
(a) Prior to the execution of this Agreement, Sellers have
provided to Citadel a true and correct copy of all environmental site
assessments, studies, tests, reports and communications relating to the Real
Property and Leaseholds which are known to Sellers and are in the possession of
Sellers or any Affiliate of Sellers.
(b) Except as disclosed on Sellers' Disclosure Schedule or in
the Environmental Reports, (i) there are no conditions, facilities, procedures
or any other facts or circumstances that constitute Environmental Noncompliance
on any of the Real Property or Leaseholds and (ii) there is not constructed,
placed, deposited, stored, disposed of, nor located on any of the Real Property
or Leaseholds any asbestos in any form that has released or, unless disturbed,
threatens to release airborne asbestos fibers in excess of applicable local,
state and federal standards.
(c) Except as disclosed on Sellers' Disclosure Schedule, no
structure, improvements, equipment, fixtures, activities or facilities located
on any of the Real Property or Leaseholds uses Hazardous Materials except those
used in the ordinary course of the Business and in compliance with applicable
Environmental Laws.
(d) Except as specifically described on Sellers' Disclosure
Schedule or in the Environmental Reports, there have been no releases or
threatened releases of Hazardous Materials into the environment, or which
otherwise contribute to Environmental Conditions arising solely from the
activities of Sellers, or to the best of the knowledge of Sellers and
Stockholder arising from any other activities, except to the extent that such
releases or threatened releases do not constitute a condition of Environmental
Noncompliance relating to any of the Real Property or Leaseholds.
(e) Except as disclosed on Sellers' Disclosure Schedule or in
the Environmental Reports, there are no underground storage tanks, or
underground piping associated with tanks, used for the management of Hazardous
Materials at any of the Real Property or Leaseholds and there are no abandoned
underground storage tanks at any of the Real Property or Leaseholds.
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(f) No Seller is subject to any Environmental Claims, no
Environmental Claims have been threatened, nor, to the best of the knowledge of
Sellers and Stockholder, is there any basis for any such Environmental Claims.
4.17 Permits; Compliance with Applicable Law.
(a) General. No Seller is in default under any, and each has
complied with all, statutes, ordinances, regulations, orders, judgments and
decrees of any Governmental Authority applicable to it or to the Business or the
assets and properties of Sellers as to which a default or failure to comply
might result in any material adverse change in the condition, financial or
otherwise, assets or properties of Sellers or the Business. Sellers have no
knowledge of any basis for assertion of any violation of the foregoing or for
any claim for compensation or damages or otherwise arising out of any violation
of the foregoing. Sellers have not received any notification of any asserted
present or past failure to comply with any of the foregoing which has not been
satisfactorily responded to in the time period required thereunder.
(b) Permits. Set forth in the Asset Schedule are complete and
accurate lists of all FCC Licenses applicable to the Stations, and all other
permits, licenses, approvals, franchises, notices and authorizations issued by
any Governmental Authorities (collectively, the "Permits"), held by Sellers and
applicable to the Stations. The Stations are operating in accordance with the
Act and the FCC Licenses and are in compliance with the Act and the rules,
regulations and policies of the FCC. The Permits are all of the permits,
licenses, approvals, franchises, notices and authorizations required for the
conduct of the Business. All of the Permits are in full force and effect, and
Sellers have not engaged in any activity which would cause or permit revocation
or suspension of any such Permit, and no action or proceeding looking to or
contemplating the revocation or suspension of any such Permit is pending or
threatened. There are no existing defaults or events of default or events or
state of facts which with notice or lapse of time or both would constitute a
default by Sellers under any such Permit. There is no default or claimed or
purported or alleged default or state of facts which with notice or lapse of
time or both would constitute a default on the part of any party in the
performance of any obligation to be performed or paid by any party under any
Permit. Except for the FCC Approval and as set forth in Sellers' Disclosure
Schedule, the consummation of the transactions contemplated hereby will in no
way affect the continuation, validity or effectiveness of the Permits, or
require the consent of any Person. Except as set forth in Sellers' Disclosure
Schedule, Sellers are not required to be licensed by, and is not subject to the
regulation of, any Governmental Authority by reason of the Business.
4.18 Intellectual Property. The use of the Intellectual Property in
connection with the operation of the Stations and in a manner consistent with
past practices does not infringe upon the proprietary rights of any other
Person. Citadel and CLI will, upon consummation of the transactions contemplated
by this Agreement, possess adequate rights, licenses and other authority to use
the Intellectual Property used by Sellers in the operation of the Stations
following the Closing in the manner now operated, to the best knowledge of
Sellers and Stockholder, without infringement or unlawful or improper use of any
of the Intellectual Property. No current or former stockholder, director,
officer or employee of any Seller has any interest in any of the Intellectual
Property, all of which will, as of the Closing, be free and clear of all Liens.
Sellers have no knowledge of any infringement by any Person upon the rights of
Sellers with respect to the Intellectual Property.
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Sellers have not granted any outstanding licenses or other rights to any of the
call letters, copyrights, trademarks, trade names or other similar rights with
regard to any of the Intellectual Property.
4.19 Books and Records. The books of account of Sellers fairly and
accurately reflect its income, expenses, assets and liabilities and have been
maintained in accordance with good business practices. All of such books and
records, to the extent included within the Purchased Assets, will be located on
the date of the Closing on the business premises of the Stations.
4.20 Related Party Obligations. Except as set forth on Sellers'
Disclosure Schedule, no officer, director, shareholder or Affiliate of any
Seller, or any individual related by blood or marriage to any such Person, or
any entity in which any such Person owns any beneficial interest, is a party to
any agreement, contract, commitment, promissory note, loan, any other actual or
proposed transaction with any Seller, or has any material interest in any
material property used by any Seller, which is material to the operation of the
Stations.
4.21 Year 2000 Compliance. All hardware and software constituting part
of the Purchased Assets shall be able to accurately process date/time data
(including, but not limited to, calculating, comparing and sequencing) from,
into, and between the twentieth and twenty-first centuries, and the years 1999
and 2000 and leap year calculations to the extent other information technology,
used in combination with the information technology being acquired, properly
exchanges date/time data with it.
4.22 Disclosure. To the best knowledge of Sellers and Stockholder, no
representation or warranty made under this Section 4 and none of the information
furnished by Sellers or Stockholder set forth in this Agreement or in the
schedules or exhibits to this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
in this Agreement or in the schedules or exhibits to this Agreement not
misleading.
SECTION 5
REPRESENTATIONS AND WARRANTIES OF CCC, CITADEL AND CLI
In connection with the purchase and sale of the Purchased Assets under
this Agreement and in order to induce Sellers and Stockholder to enter into and
consummate the transactions contemplated by this Agreement, CCC, Citadel and CLI
jointly and severally make the following representations and warranties to
Sellers and Stockholder, as of the date of this Agreement and as of the date of
the Closing (except for representations and warranties expressly and
specifically relating to a time or times other than the date hereof or thereof,
which shall be made as of the specified time or times):
5.1 Organization and Qualification. Each of CCC, Citadel and CLI is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada, and each has full corporate power and authority (a) to
own its assets and properties and to conduct its business and (b) to enter into
this Agreement and consummate the transactions contemplated hereby. Citadel is
duly qualified to do business as a foreign corporation in, and is in good
standing under the laws
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of, the State of Michigan. Each of CCC, Citadel and CLI has full power,
authority and legal right and all necessary approvals, permits, licenses and
authorizations to own its properties and to conduct its business.
5.2 Authority. The execution and delivery of this Agreement by CCC,
Citadel and CLI, the performance by CCC, Citadel and CLI of their respective
covenants and agreements hereunder and the consummation by CCC, Citadel and CLI
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action. This Agreement constitutes the valid and legally
binding agreement of CCC, Citadel and CLI, enforceable against each of them in
accordance with its terms.
5.3 No Legal Bar; Conflicts. Neither the execution and delivery of this
Agreement by CCC, Citadel or CLI, nor the consummation of the transactions
contemplated hereby by CCC, Citadel or CLI, (a) violates or will violate any
provision of the Articles of Incorporation or Bylaws of CCC, Citadel or CLI; (b)
violates or will violate any law, rule, regulation, writ, judgment, injunction,
decree, determination, award or other order of any Governmental Authority; or
(c) violates or will violate, or conflicts with or will conflict with, or will
result in any breach of any of the terms of, or constitutes or will constitute a
default under or results in or will result in the termination of or the creation
or imposition of any Lien pursuant to the terms of, any contract, commitment,
agreement, understanding or arrangement of any kind to which CCC, Citadel or CLI
is a party or by which CCC, Citadel, CLI or any of the assets of CCC, Citadel or
CLI is bound. Except for the FCC Approval, compliance with the HSR Act and the
consents disclosed in Schedule 5.0 ("Citadel's Disclosure Schedule"), no
consents, approvals or authorizations of, or filings with, any Governmental
Authority or any other Person are required on the part of CCC, Citadel or CLI in
connection with the execution and delivery of this Agreement by CCC, Citadel and
CLI and the consummation of the transactions contemplated hereby by CCC, Citadel
and CLI.
5.4 Issuance of CCC Stock. The issuance of the CCC Stock to LBI has
been duly authorized by all necessary action on the part of CCC. The CCC Stock,
when issued to LBI on the Closing Date, will be validly issued, fully paid and
non-assessable. The CCC Stock, when issued to LBI, will be free and clear of all
Liens and restrictions, other than Liens that might have been created or
suffered solely by the holders thereof, and restrictions on transfer imposed by
the Securities Act or applicable state securities laws or pursuant to this
Agreement.
5.5 Accuracy of the CCC Documents. CCC has provided LBI with copies of
each of the CCC Documents. As of their respective dates and, except to the
extent information contained therein has been revised or superseded by a later
filed CCC Document filed prior to the date of this Agreement, as of the date
hereof none of the CCC Documents contained or contains, and none of the filings
to be made by CCC with the SEC under the Exchange Act between the date hereof
and the Closing Date will contain, any untrue statement of a material fact or
omits or will omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
in which they were made, not misleading.
5.6 Financial Statements. The financial statements of CCC and its
subsidiaries contained in the CCC Documents present fairly in all material
respects the consolidated financial
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position and results of operations of CCC and its subsidiaries as of their
respective dates and for the respective periods then ended, in accordance with
GAAP.
5.7 FCC and HSR Act Qualifications. To the best of the knowledge of
Citadel and CLI, Citadel, including CLI, is qualified as, and is not presently
taking action or contemplating taking action which might disqualify it from
being, under present law (including the Act) and present rules, regulations,
policies and practices of the FCC, the DOJ or the Federal Trade Commission, the
holder of the FCC Licenses or an owner of the Stations; provided, however, that
the possibility exists that the DOJ might take action to challenge the
transactions contemplated hereby as a result of Citadel's current ownership and
operation of radio stations in the Saginaw, Michigan market, in which event,
Citadel shall use its best efforts to resolve any DOJ issues as promptly as is
reasonably practicable.
SECTION 6
AFFIRMATIVE COVENANTS OF SELLERS
From and after the date of this Agreement and until the Closing,
Sellers jointly and severally covenant and agree with CCC, Citadel and CLI to:
6.1 Compliance With Law. Comply with all applicable laws and
regulations required for the valid and effective consummation of the
transactions contemplated hereby.
6.2 Payment of Obligations. Fully discharge all Obligations of Sellers,
except the Assumed Obligations, on a timely basis.
6.3 Access. Afford Citadel and its authorized representatives, upon
reasonable notice to Sellers, reasonable access during normal business hours to
the Stations and the Stations' employees, and permit Citadel and its authorized
representatives to examine all operations, equipment, properties and other
assets, logs, books, relevant records, contracts and documents of Sellers
pertinent to the Stations and WTRX; provided, however, that in each instance
mutually satisfactory arrangements shall be made in advance in order to avoid
interruption and to minimize interference with the normal business and
operations of the Stations and WTRX.
6.4 Preservation of Organization. Exercise all reasonable efforts to
preserve the business organization of the Stations intact, and assist Citadel,
as and when requested by Citadel, to preserve the present relationships of the
Stations with employees, suppliers, advertisers and customers and others having
business relationships with the Stations; provided, however, that nothing
contained in this Agreement shall require Sellers to expend money in fulfillment
of their obligations set forth in this Section 6.4 other than those expenditures
that Sellers would have made in the ordinary course of the business of the
Stations and consistent with past practices.
6.5 Books and Records. Maintain the books and records of Sellers in
accordance with good business practices, on a basis consistent with past
practices, and promptly make available to Citadel the books, records, tax
returns, leases, contracts and other documents or agreements material
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to the Stations as Citadel, its counsel, accountants or other authorized
representatives may from time to time reasonably request.
6.6 Employees. Pay as and when the same shall become due and payable
any amounts owed by Sellers to their employees who have performed services up to
the time of Closing, whether fixed or accrued, for wages, vacation pay, sick
pay, severance pay, employee benefits, damages and otherwise.
6.7 Compliance with FCC Matters. Comply with the FCC Licenses
applicable to the Stations and with the provisions of the Act, the rules,
regulations and policies of the FCC, and with all other laws, ordinances,
regulations, rules and orders of any Governmental Authority applicable to
Sellers or to the Stations.
6.8 Taxes. File all federal, state and municipal tax returns, reports
and declarations required to be filed by Sellers prior to the Closing, and
satisfy all Taxes related thereto, and either pay in full on or before the
Closing or effect a proration pursuant to Section 10.2 for all accrued taxes
attributable to Sellers, or their income, operations or properties, accruing
through the Closing, regardless of whether such Taxes otherwise would have been
then due and payable.
6.9 Trade-Outs. Citadel shall assume as of the Closing the Trade
Agreements existing as of the Closing and that have not yet been performed. To
the extent that the aggregate liability of the Stations as of the Closing for
unperformed time under the Trade Agreements (the "Trade Liabilities") exceeds
the value of the goods and services to be received by the Stations or Citadel
after the Closing under the Trade Agreements (the "Trade Receivables") by more
than $25,000, the Purchase Price payable at the Closing shall be reduced by the
amount by which such excess exceeds $25,000 (the "Trade Imbalance"). Sellers
shall deliver to Citadel at the Closing a schedule of Trade Liabilities and
Trade Receivables existing as of the Closing (the "Trade Schedule"). Sellers
shall exercise reasonable efforts to minimize the amount of additional Trade
Liabilities incurred after execution of this Agreement, and to prevent a Trade
Imbalance. For purposes hereof, the term "Trade Agreements" means and includes
those agreements entered into by any Seller for the sale of advertising time on
the Stations for consideration other than cash. For purposes hereof, the value
of Trade Receivables and the Trade Liabilities as of the Closing shall be the
fair market value thereof, as previously agreed to by Sellers and the applicable
vendor. Citadel shall assume Sellers' remaining obligations under such
contracts.
6.10 Supplemental Financial Statements. Sellers shall provide Citadel
with copies of the monthly unaudited income statements and balance sheets
applicable to the Stations prepared by Sellers in the ordinary course of
business commencing with the month ending November 30, 1999 until Closing
(collectively, the "Supplemental Financial Statements"). Sellers shall provide
such Supplemental Financial Statements to Citadel promptly upon such
Supplemental Financial Statements becoming available to Sellers. The
Supplemental Financial Statements shall be subject to the representations and
warranties as set forth in Section 4.4.
6.11 Consents. Exercise all reasonable efforts to obtain, prior to the
Closing, the consent and approval (in a form reasonably acceptable to Citadel)
of any third parties whose consent or approval is necessary in connection with
the consummation of the transactions contemplated
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hereby, with respect to the Assigned Contracts set forth on Sellers' Disclosure
Schedule and requiring such consent. If any such consent or approval is not
obtained, Sellers will use commercially reasonable efforts (not involving the
payment of money to any Person) to secure an arrangement satisfactory to Citadel
intended to provide for Citadel following the Closing the benefits under each
Assigned Contract for which such consent or approval is not obtained; provided,
however, that Citadel shall have the right to terminate this Agreement or to
seek damages or other remedies from Sellers and Stockholder as a result of any
failure by Sellers to obtain any such consent or approval set forth on Sellers'
Disclosure Schedule, if alternative arrangements are not reasonably satisfactory
to Citadel. Sellers and Stockholder shall also execute a consent, in a form
provided by Citadel, allowing CCC, Citadel and CLI to collaterally assign all of
their rights under this Agreement and any related documents to one or more of
CCC's, Citadel's and CLI's lenders upon default by CCC, Citadel and CLI under
the relevant loan documents.
Nothing in this Agreement will constitute an assignment or transfer or
an attempted assignment or transfer of any Assigned Contract which by its terms
or under applicable law or governmental rules or regulations requires the
consent or approval of a third party (including, without limitation, a
Governmental Authority) unless such consent or approval is obtained.
6.12 Further Information. Furnish to Citadel prior to the Closing such
financial (including tax), legal and other information with respect to Sellers
and the Stations as Citadel or its authorized representatives may from time to
time reasonably request.
6.13 Notice. Promptly notify CCC, Citadel and CLI in writing upon the
occurrence or the nonoccurrence of any event which does then, or which upon the
passing of time or the giving of notice would, constitute a breach of or default
under, or render misleading or untrue in any material respect, any agreement,
covenant, representation or warranty of Sellers or Stockholder set forth in this
Agreement.
6.14 Phase I Site Assessments. Perform or commission Phase I Site
Assessments of the Real Property and such other studies, tests or reports of the
Real Property and Leaseholds as Citadel or its lenders may reasonably require,
and provide copies of the written report for such assessments, studies, tests
and reports to Citadel promptly upon such reports becoming available to Sellers.
Such assessments, studies, tests and reports shall be performed by an
environmental company reasonably acceptable to Citadel and its lenders. The cost
and expense of all such assessments, studies, tests and reports shall be split
equally between Sellers, on the one hand, and Citadel, on the other; provided,
however, that the entire cost and expense of any required Phase II Site
Assessment shall be borne by Sellers. If any of the assessments, studies, tests
or reports (collectively, "Environmental Reports") indicate that any Real
Property contains one or more conditions of Environmental Noncompliance, Sellers
shall promptly commence such remedial action to cure the conditions as may be
required by applicable Environmental Laws and as may be reasonably necessary to
allow for the intended use of the Real Property in a manner that protects the
public health and safety, and Sellers shall, unless otherwise agreed to by
Citadel, complete such remedial action prior to Closing.
6.15 Title Insurance and Surveys. Prior to Closing, Sellers shall cause
each parcel of the Real Property to be surveyed by a registered professional
surveyor (who shall be reasonably acceptable to Citadel) and Sellers shall cause
ALTA surveys (which shall be in form satisfactory to
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remove the standard survey exception from the Owner's and Mortgagee's title
insurance policies) to be delivered to Citadel at least 10 days prior to
Closing. The cost and expense of all such surveys shall be split equally between
Sellers, on the one hand, and Citadel, on the other. In addition, Sellers shall
cooperate with Citadel in obtaining, at or prior to Closing, title insurance on
the Real Property from a nationally recognized title insurance company
acceptable to Citadel and its lenders in their reasonable judgment. Not later
than 30 days prior to Closing, Sellers shall furnish to such title insurance
company such documentation as may be reasonably required by it to issue extended
Owner's and Mortgagee's title insurance policies which shall additionally be
without exception as to the capacity, authority and execution of instruments by
Sellers.
6.16 Transfer Taxes and Expenses. Any and all realty transfer taxes and
documentary stamps payable to the State of Michigan or any other governmental
entity in connection with the transfer of the Real Property shall be shared
equally and paid in equal parts by Sellers, on the one hand, and Citadel, on the
other. Sellers shall be responsible for the cost of (a) deed preparation, (b)
all matters of title clearance and (c) any necessary subdivision or lot-split.
Citadel shall be responsible for the cost of (a) recording the deeds and (b)
title insurance premiums.
SECTION 7
NEGATIVE COVENANTS OF SELLERS
From and after the date of this Agreement and until the Closing,
Sellers jointly and severally covenant and agree not to take, or not to cause to
be taken, any of the following actions without Citadel's prior approval, which
may not be unreasonably withheld:
7.1 Sales, Transfers and Liens. Make any sale, transfer, assignment,
conveyance, mortgage, hypothecation, encumbrance or other placement of any Lien
on any of the Purchased Assets, except in the ordinary course of business, which
do not materially interfere with the operations of the Stations, and which in
the case of a sale, transfer or assignment, is replaced with an asset of equal
or greater value, and, in the case of a conveyance, mortgage, hypothecation,
encumbrance or other Lien, is released at or prior to the Closing.
7.2 Assumed Obligations. Amend, terminate or renew any of the Assumed
Obligations (including any renewal or termination resulting from the failure to
provide, after the date of this Agreement, timely notice of nonrenewal or
termination as required by the terms of any of the Assumed Obligations).
7.3 Breaches, Defaults. Do any act or omit to do any act, or permit any
act or omission to occur, that will cause a breach of any contract, commitment
or obligation of it or them in any respect that would have a material adverse
effect on the Purchased Assets or the business operations of the Stations as
presently conducted.
7.4 Obligations. Incur any Obligations except in the ordinary course of
business in a manner consistent with past practices.
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7.5 Salary Increases. Increase any salary, other payments, disbursement
or distributions in any manner or form to any employees of Sellers except (A) in
the ordinary course of business consistent with past practices or (B) in
accordance with the existing terms of contracts entered into prior to the date
of this Agreement.
7.6 Non-Solicitation. Directly or indirectly solicit or negotiate with
any Person (other than a party hereto) or accept any proposal to acquire
Sellers, the Stations or WTRX in whole or in part, including without limitation
an acquisition of all or substantially all of the assets of any Seller or any
equity in any Seller.
SECTION 8
COVENANTS OF STOCKHOLDER
From and after the date of this Agreement and until the Closing,
Stockholder hereby covenants and agrees with CCC, Citadel and CLI as follows:
8.1 Compliance With Law. Stockholder shall comply with all applicable
laws and regulations required for the valid and effective consummation of the
transactions contemplated by this Agreement.
8.2 Notice. Stockholder shall promptly notify CCC, Citadel and CLI in
writing upon the occurrence or the non-occurrence of any event which does then,
or which upon the passing of time or the giving of notice would, constitute a
breach of or default under, or render misleading or untrue in any material
respect, any agreement, covenant, representation or warranty of Sellers or
Stockholder set forth in this Agreement.
8.3 Non-Solicitation. Stockholder shall not, directly or indirectly,
solicit or negotiate with any Person (other than a party hereto) or accept any
proposal to acquire Sellers, the Stations or WTRX in whole or in part, including
without limitation an acquisition of all or substantially all of the assets of
any Seller or any equity in any Seller.
8.4 Sellers' Covenants. Stockholder shall cause Sellers to comply with
all of its covenants and agreements made in this Agreement, including without
limitation those made in Sections 6 and 7.
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SECTION 9
COVENANTS OF CCC, CITADEL AND CLI
From and after the date of this Agreement and until the Closing (except
with respect to Section 9.3, which shall survive the Closing), CCC, Citadel and
CLI jointly and severally covenant and agree with Sellers and Stockholder as
follows:
9.1 Compliance With Law. CCC, Citadel and CLI shall comply with all
applicable laws and regulations required for the valid and effective
consummation of the transactions contemplated by this Agreement.
9.2 Notice. CCC, Citadel and CLI shall promptly notify Sellers in
writing upon the occurrence or the non-occurrence of any event which does then,
or which upon the passing of time or the giving of notice would, constitute a
breach of or default under, or render misleading or untrue in any material
respect, any agreement, covenant, representation or warranty of CCC, Citadel or
CLI set forth in this Agreement.
9.3 Accounts Receivable. Subject to Citadel's receipt from Sellers at
the Closing of a list (the "Accounts Receivable List") of accounts receivable of
the Stations existing as of the Closing, exclusive of Trade Receivables, if any
(the "Accounts Receivable"), for a period of 120 days commencing with the
Closing Date (the "Citadel Collection Period"), Citadel, as agent for Sellers,
shall collect the Accounts Receivable in accordance with Citadel's normal
collection processes and procedures. In no event shall Citadel be required to
institute litigation or to retain third parties to institute collection
procedures with respect to the Accounts Receivable. All remittances will be
applied first to the oldest Accounts Receivable, unless the client asserts that
a dispute exists with respect to a particular account or the client specifies
the particular invoice to which the payment is to be applied, in which case the
remittances shall be applied to the specific account and Citadel shall promptly
notify Sellers of any dispute. Remittances collected by Citadel on behalf of
Sellers shall be remitted to Sellers without offset of any kind within 10 days
after the end of each calendar month during the Citadel Collection Period, and
within five days after termination of the Citadel Collection Period. During the
Citadel Collection Period, at Sellers' option, Sellers shall be permitted to
collect the Accounts Receivable that remain outstanding after 60 days, or are
disputed in writing by the relevant account debtor. Each remittance by Citadel
to Sellers shall be accompanied by a written report from Citadel setting forth
the aggregate amount of the Accounts Receivable and the aggregate amount of cash
collections of such Accounts Receivable during the period for which payment is
made, along with a breakdown by account debtor and details of any credits or
adjustments taken or asserted by any account debtor. At the end of the Citadel
Collection Period, Citadel shall account for all collected Accounts Receivable
and provide Sellers with all documentation related to uncollected Accounts
Receivable, and Citadel shall have no further responsibilities with respect to
any uncollected Accounts Receivables except to remit promptly to Sellers any
amounts subsequently received by Citadel. Citadel shall have no obligation with
respect to any Accounts Receivable it is unable to collect. After the end of the
Citadel Collection Period, Sellers shall be entitled to collect any Accounts
Receivable that remain uncollected.
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9.4 SEC Filings. CCC shall provide LBI with copies of all documents
filed by CCC with the SEC under the Exchange Act promptly after such filing.
SECTION 10
ADDITIONAL COVENANTS OF THE PARTIES
10.1 Application for Transfer of Control. As promptly as practicable
after the date of this Agreement, and in no event later than 10 business days
after the date of this Agreement, Sellers, Citadel and CLI shall file an
application with the FCC (the "FCC Application") requesting FCC consent to
assignment of the licenses for the Stations from LBI and Rainbow to Citadel or
CLI (the "FCC Approval"). The parties agree that they shall prosecute the FCC
Application (and shall cooperate with each other in the timely prosecution
thereof), in good faith and with due diligence, and within the time allowed
therefor by the rules and regulations of the FCC. Sellers, Citadel and CLI shall
each take all necessary actions on its part to obtain the FCC Approval. Citadel
shall advance the filing fee for the FCC Application, and Sellers shall
reimburse Citadel for one-half of such filing fee at the Closing (or upon the
earlier termination of this Agreement). All other costs and expenses incurred by
each party in connection with the filing and prosecution of the FCC Application
shall be paid by the party incurring the cost or expense.
10.2 Adjustments at Closing. Without duplication, the following items
(in addition to similar items which are customarily prorated) shall be prorated
between Citadel and Sellers through and including the Closing Date, and the
Purchase Price appropriately increased or decreased as a result thereof:
(a) Amounts payable under the Real Property Leases and the
Assigned Contracts;
(b) Power, utility and telephone charges incurred in
connection with the Stations;
(c) Accrued taxes existing as of the Closing; and
(d) FCC and HSR filing fees, as provided in Sections 10.1 and
10.6, respectively.
Proration of real and personal property taxes shall be based upon the most
recent assessments available and shall be prorated based upon the calendar year
method. Each of the parties shall duly cooperate with the other in making the
foregoing prorations, adjustments and payments. If, for any reason beyond the
reasonable control of the parties, information necessary to calculate the
required prorations is unavailable before the Closing Date, such item shall be
prorated after the Closing Date as soon as such information is available, and
Sellers and Citadel shall cooperate with each other in regard thereto and shall
pay, each to the other, any amounts which may be owing as a result of such
subsequent prorations. If, at any time after the Closing Date, errors are
discovered in any prorations made pursuant to this Section 10.2, Sellers and
Citadel shall correct such errors and pay, each to the
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other, any sums owing as a result of such correction. All prorations to the
extent feasible shall be made on the Closing Date.
10.3 Brokerage. Sellers, Stockholder, Citadel and CLI represent and
warrant to each other that no Person has provided services as a broker, agent or
finder in connection with the transactions contemplated by this Agreement.
Sellers, Stockholder, Citadel and CLI shall each indemnify and hold harmless the
other for any and all claims or expenses, including attorneys' fees, asserted by
any Person purporting to act on behalf of the respective indemnitor as a broker,
agent or finder in connection with the transactions contemplated by this
Agreement.
10.4 Risk of Loss. If any loss or damage to any of the Purchased Assets
occurs prior to the Closing (i) which has a material adverse effect on the
Stations and (ii) such loss or damage is not susceptible of repair, replacement
or restoration with sufficient, collectible insurance proceeds available for
such purposes or by Sellers at their sole cost and expense to substantially the
same condition as existed before such loss or damage, then the parties shall
adjust the Purchase Price to reflect the diminution in value of the Stations
attributable to the impairment of such assets.
10.5 Actions With FCC. In the event any investigation, order to show
cause, notice of violation, notice of apparent liability or a forfeiture,
material complaint, petition to deny or informal objection is instituted or
filed against any party hereto (whether in connection with the proceedings to
approve the FCC Application or otherwise), such party shall promptly notify the
other party hereto in writing of such occurrence and shall thereafter
immediately take all reasonable measures to contest the same in good faith and
seek the removal or favorable resolution of such action, order, notice or
complaint.
10.6 HSR Filing. As promptly as practicable after the date of this
Agreement, and in no event later than 10 business days after the date of this
Agreement, the parties hereto shall complete and submit any filing that may be
required pursuant to the HSR Act (the "HSR Filing"). The parties hereto shall
diligently take, or fully cooperate in the taking of, all necessary and proper
steps, and provide any additional information reasonably requested, in order to
comply with the requirements of the HSR Act. The parties hereto shall use their
best efforts to resolve objections, if any, that may be asserted under the HSR
Act or any other antitrust law in connection with the transactions contemplated
hereby. Citadel shall advance the filing fee applicable to any HSR Filing, and
Sellers shall reimburse Citadel for one-half of such filing fee at the Closing
(or upon the earlier termination of this Agreement). All other costs and
expenses incurred by each party in connection with the filing and prosecution of
any HSR Filing shall be paid by the party incurring the cost or expense.
10.7 Confidentiality. Each of the parties hereto will hold in
confidence, and will cause its respective directors, officers, employees,
accountants, counsel, financial advisors and other representatives and
Affiliates to hold in confidence, all non-public information received from
another party hereto (collectively, "Confidential Information "); provided,
however, that the term "Confidential Information" does not include any
information which (a) at the time of disclosure or thereafter is generally
available to and known by the public (other than as a result of a disclosure
directly or indirectly by the party hereto which received such information (the
"Recipient")), (b) was available to the Recipient from a source other than the
other parties hereto
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or (c) has been independently acquired or developed by the Recipient without
violating any of its obligations under this Agreement. The obligation to keep
Confidential Information confidential shall not apply to any information that is
required to be disclosed pursuant to any court action or any proceeding before a
Governmental Authority. In the event this Agreement is terminated for any
reason, each party hereto, upon the request of another party hereto, shall
promptly return to the requesting party all copies of Confidential Information
in its possession and shall destroy all analysis, studies and documents prepared
by it which contain any Confidential Information.
10.8 Cooperation. During the seven-year period immediately following
the Closing, Citadel shall cooperate with Sellers in providing Sellers all
information reasonably requested and permitting Sellers access to all records
relating to the period of ownership of the Stations by Sellers prior to the
Closing. The cost and expense in providing or permitting access to information
hereunder shall be borne by Sellers. Sellers, as a condition to being provided
with access to information hereunder, shall, at the request of Citadel, execute
a confidentiality agreement in form and substance acceptable to Citadel in its
reasonable discretion. Notwithstanding the foregoing, Citadel may discard any
such records during such seven-year period if (i) Citadel notifies Sellers of
Citadel's intent to discard such records and (ii) Sellers do not, within 10 days
after receipt of such notice, retrieve such records from Citadel's premises.
10.9 Public Announcements. CCC, Citadel and CLI, on the one hand, and
Sellers and Stockholder, on the other, will consult with each other before
issuing, and provide each other the opportunity to review, comment upon and
concur with, any press release or other public statement with respect to the
transactions contemplated by this Agreement, and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by applicable law, court process or by obligations pursuant to
any listing agreement with any national securities exchange or the National
Association of Securities Dealers, Inc. The parties agree that the initial press
release to be issued with respect to the transactions contemplated by this
Agreement, if any, shall be in the form heretofore agreed to by the parties.
10.10 No Inconsistent Action. No party hereto shall take any action (a)
inconsistent with its obligations under this Agreement or (b) that would hinder
or delay the consummation of the transactions contemplated by this Agreement.
10.11 Audited Financial Statements. Sellers and Stockholder recognize
that Citadel and CCC are public reporting companies and agree that Citadel shall
be entitled at its expense to cause audited and unaudited financial statements
of the Stations to be prepared for such periods and filed with the SEC, and
included in a prospectus distributed to prospective investors, as required by
laws and regulations applicable to Citadel and CCC as public reporting companies
or registrants. Sellers and Stockholder agree to cooperate with Citadel and the
auditing accountants as reasonably required by Citadel in connection with the
preparation and filing of such financial statements, including providing a
customary management representation letter in the form prescribed by GAAP.
10.12 Election of Stockholder to Boards. On or prior to the Closing
Date, CCC and Citadel shall take all action necessary (a) to cause the Board of
Directors of each of CCC and
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Citadel to be expanded to six members and (b) to elect Stockholder to the Board
of Directors of each of CCC and Citadel, such election to be effective
immediately after the Closing.
10.13 Negotiation with Jensen. Prior to the Closing, Citadel shall
negotiate in good faith with James Jensen regarding his role in assisting
Citadel after the Closing in connection with the consolidation of Citadel's
operations in certain of its markets.
10.14. New Saginaw Facility. Prior to the Closing, Sellers shall
complete, at their sole cost and expense, the construction of the new
studio/office facility located at 1674 Champagne Drive North, Saginaw, Michigan
(the "New Saginaw Facility"), all in a manner so as to be (a) in compliance with
all laws, statutes, regulations, codes, permits and ordinances relating to or
affecting such construction, structure or real property location and (b) in
accordance with all existing plans, specifications, construction contracts and
budgets. The New Saginaw Facility shall constitute, for all purposes, Real
Property hereunder.
10.15 Use of Corporate Office Space. For up to one year after the
Closing, Sellers shall be permitted to use, free of charge, a reasonable amount
of office space (not to exceed the space currently occupied by Sellers for their
administrative offices) within the corporate offices located at 3200 Pine Tree
Drive, Lansing, Michigan and included in the Real Property, so long as (a) such
use by Sellers (i) does not interfere with, disrupt or adversely affect the
operations of Citadel thereat and (ii) complies with all applicable laws; and
(b) Citadel does not incur material out-of-pocket expenses as a result of such
use.
10.16 Lansing Property Subdivision. On or prior to the Closing Date,
the Lansing Property shall be subdivided into two parcels as follows (the
"Lansing Property Subdivision"): (a) the first parcel shall constitute, for all
purposes, Real Property hereunder and shall consist of approximately five acres,
which shall include all portions of the Lansing Property which are currently
used in the operation of the Stations (including without limitation (i) the
parcel on which the approximately 700' tower is located, including the guy wires
and anchors (except that, with respect to one such guy wire and anchor, a
perpetual, royalty-free, transferable easement, in form and substance reasonably
acceptable to Citadel, shall be granted by New Tower to Citadel for the use,
maintenance, repair and replacement of such guy wire and anchor), and (ii) a
perpetual, royalty-free, transferable easement for ingress/egress to the parcel
referenced in clause (i) above); and (b) the second parcel shall constitute, for
all purposes, an Excluded Asset hereunder and shall consist of the remainder of
the Lansing Property. Sellers shall effect the Lansing Property Subdivision at
their sole cost and expenses and in accordance with all applicable laws,
statutes, regulations, codes, permits and ordinances. All actions necessary to
effect the Lansing Property Subdivision, including without limitation
determining the precise size and location of the parcels to be subdivided,
obtaining surveys and making all required filings, shall require the prior
consent of Citadel, which shall not be unreasonably withheld.
10.17 Proposed Acquisition. Rainbow is a party to a Time Brokerage
Agreement dated as of October 2, 1999 (the "WTRX TBA") with David Lee
Communications, Inc. (the "WTRX Owner"), pursuant to which Rainbow is providing
various services to the WTRX Owner relating to radio station WTRX(AM) serving
the Flint, Michigan market ("WTRX"). Rainbow and the WTRX Owner are
contemplating entering into an asset purchase agreement pursuant to which
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Rainbow would agree to buy substantially all of the assets owned by the WTRX
Owner and used in the operation of WTRX, and New Tower and David Lee Schuehrer
are contemplating entering into a real estate purchase agreement pursuant to
which New Tower would agree to buy the real property owned by David Lee
Schuehrer and used in the operation of WTRX (collectively, the "Definitive WTRX
Agreements"). In connection with the acquisitions contemplated by the Definitive
WTRX Agreements (collectively, the "Proposed Acquisition"), Rainbow and New
Tower have made, and will continue to make, expenditures on legal fees, other
transaction expenses and expenses (net of revenue) incurred under the WTRX TBA
(collectively, "Acquisition Expenses"). From and after the date hereof and until
the Closing, Rainbow and New Tower shall use their best efforts to enter into
the Definitive WTRX Agreements and to consummate the Proposed Acquisition in
accordance with terms of the Definitive WTRX Agreements; provided, however, that
all such actions shall be taken by Rainbow and New Tower only with the prior
consent of Citadel or at Citadel's direction.
(a) In the event the Definitive WTRX Agreements have not been
entered into prior to the Closing, (i) the WTRX TBA shall be an Assigned
Contract hereunder and (ii) subject to Citadel's receipt of substantiating
documentation, Citadel shall reimburse Seller for all Acquisition Expenses
incurred by Seller up to the Closing (but in no event shall such reimbursement
exceed $100,000).
(b) In the event the Proposed Acquisition has not been
consummated prior to the Closing, (i) the WTRX TBA and the Definitive WTRX
Agreements shall each be an Assigned Contract hereunder (provided, however, that
Citadel's monetary obligations under the Definitive WTRX Agreements after the
Closing shall not exceed the difference between $600,000 and the aggregate
amount of Citadel's reimbursement pursuant to clause (ii) of this Section
10.17(b)) and (ii) subject to Citadel's receipt of substantiating documentation,
Citadel shall reimburse Rainbow and New Tower for all Acquisition Expenses
incurred by them up to the Closing (but in no event shall such reimbursement
exceed $100,000).
(c) In the event the Proposed Acquisition has been consummated
prior to the Closing, (i) the Definitive WTRX Agreements shall each be an
Assigned Contract hereunder, (ii) the Purchase Price shall be increased by an
amount (which shall in no event exceed $600,000) equal to the sum of (x) the
purchase price paid by Rainbow and New Tower to the WTRX Owner and David
Schuehrer, respectively, under the Definitive WTRX Agreements and (y) subject to
Citadel's receipt of substantiating documentation, the sum of all Acquisition
Expenses incurred by Rainbow and New Tower up to the Closing, and (iii) from and
after the date on which the Proposed Acquisition is consummated, the terms
"Stations" and "Purchased Assets" shall include, respectively, WTRX and all of
the assets relating thereto.
(d) Rainbow and New Tower shall use their best efforts (i) to
consummate the Proposed Acquisition in accordance with and subject to the terms
and conditions of the Definitive WTRX Agreements, without waiving any material
rights or materially increasing any of their obligations thereunder, and (ii) to
take all actions as may be reasonably requested by Citadel after the Closing to
facilitate and assist Citadel in consummating the Proposed Acquisition after the
Closing (if it was not consummated prior to the Closing) and in enforcing
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all of the rights of Citadel, as assignee of Rainbow and New Tower, under the
Definitive WTRX Agreements after the Closing.
10.18 Donald H. Layman. During the 90-day period following the Closing,
Donald H. Layman shall remain an employee of LBI, and LBI shall cause him to
provide to Citadel, on a consulting basis, assistance with the transition to
Citadel of the ownership and operation of the Stations. Citadel shall reimburse
LBI, on a monthly basis during such 90-day period, for one-half of the
reasonable wages paid by LBI to Mr. Layman during such period.
10.19 Stay Bonuses. Sellers have agreed, or will agree, to pay certain
of their employees "stay" bonuses, in an aggregate amount not to exceed
$124,000, if such employees remain employees of Sellers until the Closing.
Citadel shall reimburse Sellers, within 30 days after the Closing, for one-half
of such bonuses actually paid by Sellers (but in no event shall such
reimbursement exceed $62,000 in the aggregate).
SECTION 11
THE CLOSING
11.1 Closing Date. The Closing shall occur on a date mutually selected
by Sellers and Citadel which is within 10 business days following the later of
(i) the date on which the FCC Approval has become a Final Order or (ii) the date
on which all applicable waiting periods under the HSR Act have expired or been
terminated. The Closing shall begin at 10:00 a.m., local time, on the date of
the Closing (the "Closing Date") at the offices of Eckert Seamans Cherin &
Mellott, LLC in Pittsburgh, Pennsylvania, or at such place and time as the
parties may mutually agree.
11.2 Closing Documents. At the Closing:
(a) Sellers and Stockholder shall deliver to CCC, Citadel and
CLI all certificates, consents (including any third party consents required as
to the Assumed Obligations), estoppels and other documents (including bills of
sale, general warranty deeds, assignments and the Letter of Credit) otherwise
required to be delivered by Sellers and Stockholder pursuant to this Agreement
or as a condition precedent to CCC's, Citadel's and CLI's fulfillment of their
obligations hereunder.
(b) Citadel shall deliver to Sellers and Stockholder the
following:
(i) the Purchase Price as required by the provisions
of this Agreement; and
(ii) all certificates and other documents (including
an assumption agreement relating to the Assumed Obligations) required to be
delivered by CCC, Citadel and CLI to Sellers and Stockholder pursuant to this
Agreement or as a condition precedent to Sellers' and Stockholder's fulfillment
of their obligations under this Agreement.
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SECTION 12
CONDITIONS TO SELLERS' AND STOCKHOLDER'S OBLIGATION TO CLOSE
The obligation of Sellers and Stockholder to consummate the
transactions contemplated by this Agreement at the Closing is subject to the
following conditions precedent, any or all of which may be waived by Sellers and
Stockholder in their sole discretion (other than those set forth in Sections
12.7 and 12.8):
12.1 Opinion of CCC's, Citadel's and CLI's Counsel. Sellers and
Stockholder shall have received an opinion of counsel for CCC, Citadel and CLI,
dated the date of the Closing, in form and substance reasonably satisfactory to
Sellers and Stockholder, to the effect that:
(a) Each of CCC, Citadel and CLI is a corporation validly
existing and in good standing under the laws of the State of Nevada.
(b) Citadel is duly qualified to do business as a foreign
corporation in, and is in good standing under the laws, of the State of
Michigan.
(c) Each of CCC, Citadel and CLI has the corporate power and
authority to execute and deliver this Agreement and each of the other documents
and instruments required to be executed or delivered by CCC, Citadel and CLI in
connection with the transactions contemplated hereby (collectively with this
Agreement, the "Citadel Transaction Documents") and to perform its obligations
hereunder and thereunder.
(d) Each of CCC, Citadel and CLI has duly authorized, by all
necessary corporate action, the execution and delivery of the Citadel
Transaction Documents to which it is a party and the performance of its
obligations thereunder.
(e) Each of the Citadel Transaction Documents has been duly
executed and delivered by CCC, Citadel and CLI (to the extent a party thereto),
and constitutes a valid and binding obligation of CCC, Citadel and CLI (to the
extent a party thereto), enforceable against each of them in accordance with the
terms thereof, except as such enforceability may be limited by bankruptcy,
insolvency or other laws affecting generally the enforceability of creditors'
rights and by limitations on the availability of equitable remedies.
(f) Neither the execution and delivery of the Citadel
Transaction Documents by CCC, Citadel or CLI, nor the consummation of the
transactions contemplated thereby by CCC, Citadel or CLI, (i) violates or will
violate any provision of the Articles of Incorporation or Bylaws of CCC, Citadel
or CLI; (ii) violates or will violate any law, rule or regulation or, to the
knowledge of such counsel, any writ, judgment, injunction, decree,
determination, award or other order of any Governmental Authority; or (iii) to
the knowledge of such counsel, violates or will violate, or conflicts with or
will conflict with or will result in any breach of any of the terms of, or
constitutes or will constitute a default under, or results or will result in the
termination of or the creation or imposition of any Lien pursuant to, the terms
of any contract, commitment, agreement,
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understanding or arrangement of any kind to which CCC, Citadel or CLI is a party
or by which CCC, Citadel, CLI or any of the assets of CCC, Citadel or CLI is
bound and which is set forth on Citadel's Disclosure Schedule.
(g) The issuance of CCC Stock as part of the Purchase Price
has been duly authorized by all necessary action on the part of CCC. The CCC
Stock, when issued to LBI as part of the Purchase Price, will be validly issued,
fully paid and non-assessable. The CCC Stock, when issued, will be free and
clear of all Liens and restrictions, other than Liens that might have been
created or suffered solely by the holders thereof, and restrictions on transfer
imposed by the Securities Act or applicable state securities laws or pursuant to
this Agreement.
Nothing contained in this Section 12.1 shall require an opinion by such counsel
with respect to FCC matters.
12.2 Representations, Warranties and Covenants. The representations and
warranties of CCC, Citadel and CLI contained herein shall be true and correct in
all material respects (determined without regard to materiality qualifications
within all such representations and warranties) at and as of the Closing with
the same effect as though all such representations and warranties were made at
and as of the Closing (except for representations and warranties expressly and
specifically relating to a time or times other than the Closing, which shall be
true and correct in all material respects (determined without regard to
materiality qualifications within all such representations and warranties) at
and as of the time or times specified), and CCC, Citadel and CLI shall have
complied with all of their respective covenants and agreements contained herein
which were to be complied with at or prior to the Closing; and CCC, Citadel and
CLI shall have delivered to Sellers and Stockholder a certificate to that
effect, dated the Closing Date, signed by an officer of CCC, Citadel and CLI.
12.3 No Litigation. No injunction relating to any action, suit or
proceeding against any Seller or Stockholder relating to the consummation of any
of the transactions contemplated by this Agreement or any action by any
Governmental Authority shall have been issued.
12.4 Other Certificates. Sellers and Stockholder shall have received
certificates as to the good standing of Citadel in the States of Nevada and
Michigan and of each of CCC and CLI in the State of Nevada, each as of a date
not more than 20 days before the Closing, and such other certificates,
instruments and other documents, in form and substance satisfactory to Sellers
and Stockholder, as Sellers and Stockholder shall have reasonably requested in
connection with the transactions contemplated hereby.
12.5 Corporate Action. All corporate action necessary to authorize the
execution, delivery and performance by CCC, Citadel and CLI of this Agreement
and the transactions contemplated hereby shall have been duly and validly taken
by CCC, Citadel and CLI, and CCC, Citadel and CLI shall have delivered to
Sellers and Stockholder certified copies of the resolutions of CCC's, Citadel's
and CLI's board of directors authorizing the execution and performance of this
Agreement and authorizing or ratifying the acts of its officers and employees in
carrying out the terms and provisions of this Agreement.
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12.6 Acts to be Performed. Each of the covenants, acts and undertakings
of CCC, Citadel and CLI to be performed on or before the Closing Date pursuant
to the terms hereof shall have been duly performed.
12.7 FCC Approval. The FCC Approval shall have been obtained and shall
have become a Final Order.
12.8 HSR Clearance. All applicable waiting periods under the HSR Act
shall have expired or been terminated.
SECTION 13
CONDITIONS TO CCC'S, CITADEL'S AND CLI'S OBLIGATION TO CLOSE
The obligation of CCC, Citadel and CLI to consummate the transactions
contemplated by this Agreement at the Closing is subject to the following
conditions precedent, any or all of which may be waived by CCC, Citadel and CLI
in their sole discretion (other than those set forth in Sections 13.9 and
13.10):
13.1 Opinion of Sellers' and Stockholder's Counsel. CCC, Citadel and
CLI shall have received an opinion of counsel for Sellers and Stockholder, dated
the date of the Closing, in form and substance reasonably satisfactory to CCC,
Citadel and CLI, to the effect that:
(a) Each of LBI and New Tower is a corporation duly organized,
validly existing and in good standing under the laws of the State of Michigan.
(b) Each of Rainbow and LLJ is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Michigan.
`
(c) Each Seller has the corporate or limited liability company
(as applicable) power and authority to own its assets and properties and to
conduct the Business and has all necessary approvals, permits, licenses and
authorizations to own its properties and to conduct the Business in the manner
and in the locations presently owned and conducted.
(d) Each Seller has the corporate or limited liability company
(as applicable) power and authority to execute and deliver this Agreement and
each of the other documents and instruments required to be executed or delivered
by such Seller in connection with the transactions contemplated hereby
(collectively with this Agreement, the "Sellers Transaction Documents") and to
perform its obligations hereunder and thereunder.
(e) Each Seller has duly authorized, by all necessary
corporate or limited liability company (as applicable) action, the execution and
delivery of the Sellers Transaction Documents and the performance of its
obligations thereunder.
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(f) Each of the Sellers Transaction Documents has been duly
executed and delivered by Sellers and Stockholder (to the extent a party
thereto), and constitutes a valid and binding obligation of Sellers and
Stockholder (to the extent a party thereto), enforceable against Sellers and
Stockholder (to the extent a party thereto) in accordance with the terms
thereof, except as such enforceability may be limited by bankruptcy, insolvency
or other laws affecting generally the enforceability of creditors' rights and by
limitations on the availability of equitable remedies.
(g) Neither the execution and delivery of the Sellers
Transaction Documents by Sellers or Stockholder, nor the consummation of the
transactions contemplated thereby by Sellers or Stockholder, (i) violates or
will violate any provision of the organizational documents of any Seller; (ii)
violates or will violate any law, rule or regulation or, to the knowledge of
such counsel, any writ, judgment, injunction, decree, determination, award or
other order of any Governmental Authority; or (iii) to the knowledge of such
counsel, violates or will violate or conflicts with or will conflict with or
will result in any breach of any of the terms of, or constitutes or will
constitute a default under or results in or will result in the termination of or
the creation or imposition of any Lien pursuant to the terms of any contract,
commitment, agreement, understanding or arrangement of any kind to which any
Seller or Stockholder is a party or by which any Seller, Stockholder or any of
the assets of any Seller or Stockholder is bound and which is set forth on
Sellers' Disclosure Schedule. Except for the FCC Approval, compliance with the
HSR Act and the consents disclosed on Sellers' Disclosure Schedule, no consents,
approvals or authorizations of, or filings with, any Governmental Authority or
any other Person are required on the part of Sellers and Stockholder in
connection with the execution and delivery of the Sellers Transaction Documents
and the consummation of the transactions contemplated thereby.
(h) To the knowledge of such counsel, except as disclosed on
Sellers' Disclosure Schedule, there are no claims, disputes, actions, suits or
proceedings pending or threatened against Sellers or the Stations.
Nothing contained in this Section 13.1 shall require an opinion of such counsel
with respect to FCC matters.
13.2 Representations, Warranties and Covenants. The representations and
warranties of Sellers and Stockholder contained herein shall be true and correct
in all material respects (determined without regard to materiality
qualifications within all such representations and warranties) at and as of the
Closing with the same effect as though all such representations and warranties
were made at and as of the Closing (except for representations and warranties
expressly and specifically relating to a time or times other than the Closing,
which shall be true and correct in all material respects (determined without
regard to materiality qualifications within all such representations and
warranties) at and as of the time or times specified), and Sellers and
Stockholder shall have complied with all of their respective covenants and
agreements contained herein which were to be complied with at or prior to the
Closing; and Sellers and Stockholder shall have delivered to CCC, Citadel and
CLI a certificate to that effect, dated the Closing Date, signed by an officer
of each Seller and by Stockholder.
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13.3 No Litigation. No injunction relating to any action, suit or
proceeding against any Seller, Stockholder, CCC, Citadel or CLI relating to the
consummation of any of the transactions contemplated by this Agreement shall
have been issued.
13.4 Other Certificates. CCC, Citadel and CLI shall have received a
certificate as to the good standing of each of LBI and New Tower as a
corporation in the State of Michigan and as to the good standing of each of
Rainbow and LLJ as a limited liability company in the State of Michigan, each as
of a date not more than 20 days before the Closing, and such other certificates,
instruments and other documents customary for transactions of the nature
provided for in this Agreement, in form and substance reasonably satisfactory to
CCC, Citadel and CLI, as CCC, Citadel and CLI shall have reasonably requested in
connection with the transactions contemplated by this Agreement.
13.5 Authorizing Action. All action necessary to authorize the
execution, delivery and performance by each Seller of this Agreement and the
transactions contemplated hereby shall have been duly and validly taken by each
Seller, and Sellers shall have delivered to CCC, Citadel and CLI certified
copies of the resolutions of the stockholders and board of directors of each of
LBI and New Tower, and of the members of each of Rainbow and LLJ, authorizing
the execution and performance of this Agreement and authorizing or ratifying the
acts of their officers and employees in carrying out the terms and provisions of
this Agreement.
13.6 Acts to be Performed. Each of the covenants, acts and undertakings
of Sellers and Stockholder to be performed on or before the Closing Date
pursuant to the terms hereof shall have been duly performed.
13.7 Lien Searches. Sellers shall have delivered to CCC, Citadel and
CLI lien (including UCC and tax) and judgment (including litigation) searches
from the appropriate county and state agencies showing all Liens on the
Purchased Assets, which searches shall be conducted not more than 30 days prior
to the Closing. Such searches shall include the names of each Seller, the call
letters of the Stations, predecessors of any of the foregoing during the past
five years and any other names under which each Seller has done business during
the past five years. Sellers may cause such searches to be prepared by a third
party, in which case Sellers shall not be responsible for any inaccuracies in
such lien searches unless Sellers have actual knowledge of their inaccuracy.
Notwithstanding the foregoing, Sellers and Stockholder shall remain responsible
for satisfying any Lien on the Purchased Assets even if such searches are
inaccurate.
13.8 Filings, Consents, Approvals and Estoppel Certificates. All
filings, consents, approvals and estoppel certificates required by or reasonably
requested by CCC, Citadel and CLI pursuant to this Agreement, or necessary to
consummate the transactions contemplated by this Agreement, shall have been
obtained.
13.9 FCC Approval. The FCC Approval shall have been obtained and shall
have become a Final Order.
13.10 HSR Clearance. All applicable waiting periods under the HSR Act
shall have expired or been terminated.
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SECTION 14
INDEMNIFICATION
14.1 Indemnification by Sellers and Stockholder. Subject to the
limitations and procedures set forth in this Section 14, Sellers and Stockholder
shall jointly and severally indemnify and hold harmless CCC, Citadel and CLI
from and against all losses, claims, demands, damages, liabilities, obligations,
costs and/or expenses, including, without limitation, reasonable fees and
disbursements of counsel (hereinafter referred to collectively as "Damages"),
which are sustained or incurred by CCC, Citadel and CLI, to the extent that such
Damages are sustained or incurred by reason of (a) the breach of any of the
obligations or covenants of Sellers or Stockholder in this Agreement; (b) the
breach of any of the representations or warranties made by Sellers or
Stockholder in this Agreement; or (c) the operation of the Stations prior to the
Closing.
14.2 Indemnification by CCC, Citadel and CLI. Subject to the
limitations and procedures set forth in this Section 14, CCC, Citadel and CLI
shall jointly and severally indemnify and hold harmless Sellers and Stockholder
from and against any and all Damages which are sustained or incurred by Sellers
and Stockholder, to the extent that such Damages are sustained or incurred by
reason of (a) the breach of any of the obligations or covenants of CCC, Citadel
or CLI in this Agreement; (b) the breach of any of the representations or
warranties made by CCC, Citadel or CLI in this Agreement; or (c) the operation
of the Stations by Citadel and CLI following the Closing (except to the extent
such Damages relate to matters covered by Section 14.1).
14.3 Procedure for Indemnification. In the event that any party to this
Agreement shall incur any Damages in respect of which indemnity may be sought by
such party pursuant to this Section 14 or any other provision of this Agreement,
the party indemnified hereunder (the "Indemnitee") shall notify the party
providing indemnification (the "Indemnitor") promptly. In the case of third
party claims, such notice shall in any event be given within 10 days of the
filing or assertion of any claim against the Indemnitee stating the nature and
basis of such claim; provided, however, that any delay or failure to notify any
Indemnitor of any claim shall not relieve it from any liability except to the
extent that the Indemnitor demonstrates that the defense of such action has been
materially prejudiced by such delay or failure to notify. In the case of third
party claims, the Indemnitor shall, within 10 days of receipt of notice of such
claim, notify the Indemnitee of its intention to assume the defense of such
claim. If the Indemnitor assumes the defense of the claim, the Indemnitor shall
have the right and obligation (a) to conduct any proceedings or negotiations in
connection therewith and necessary or appropriate to defend the Indemnitee, (b)
to take all other required steps or proceedings to settle or defend any such
claims, and (c) to employ counsel to contest any such claim or liability in the
name of the Indemnitee or otherwise. If the Indemnitor shall not assume the
defense of any such claim or litigation resulting therefrom, the Indemnitee may
defend against any such claim or litigation in such manner as it may deem
appropriate and the Indemnitee may settle such claim or litigation on such terms
as it may deem appropriate, and assert against the Indemnitor any rights or
claims to which the Indemnitee is entitled. Payment of Damages shall be made
within 10 days of a final determination of a claim.
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A final determination of a disputed claim shall be (a) a judgment of
any court determining the validity of disputed claim, if no appeal is pending
from such judgment or if the time to appeal therefrom has elapsed, (b) an award
of any arbitration determining the validity of such disputed claim, if there is
not pending any motion to set aside such award or if the time within to move to
set such award aside has elapsed, (c) a written termination of the dispute with
respect to such claim signed by all of the parties thereto or their attorneys,
(d) a written acknowledgment of the Indemnitor that it no longer disputes the
validity of such claim, or (e) such other evidence of final determination of a
disputed claim as shall be acceptable to the parties.
14.4 Survival.
(a) Sellers and Stockholder. Each of the representations and
warranties made by Sellers and Stockholder in this Agreement shall survive for a
period of 24 months after the Closing Date, notwithstanding any investigation at
any time made by or on behalf of CCC, Citadel and CLI, and upon the expiration
of such 24-month period such representations and warranties shall expire except
as follows: (i) the representations and warranties contained in Sections 4.6 and
4.11 shall expire at the time the period of limitations expires for the
assessment by the taxing authority of additional Taxes with respect to which the
representations and warranties relate; (ii) the representations and warranties
contained in Sections 4.16 and 4.17 shall expire at the time the latest period
of limitations expires for the enforcement by an applicable Governmental
Authority of any remedy with respect to which the particular representation or
warranty relates; and (iii) the representations and warranties contained in
Sections 4.1, 4.2, 4.3, 4.8(a) and 4.8(f)(ii) shall not expire but shall
continue indefinitely. No claim for the recovery of Damages may be asserted by
CCC, Citadel or CLI against Sellers, Stockholder or their successors in interest
after such representations and warranties shall thus expire; provided, however,
that claims for Damages first asserted in writing within the applicable period
shall not thereafter be barred.
(b) CCC, Citadel and CLI. Each of the representations and
warranties made by CCC, Citadel and CLI in this Agreement shall survive for a
period of 24 months after the Closing Date, notwithstanding any investigation at
any time made by or on behalf of Sellers and Stockholder, and upon the
expiration of such 24-month period such representations and warranties shall
expire, except that the representations and warranties contained in Sections
5.1, 5.2 and 5.3 shall not expire but shall continue indefinitely. No claim for
the recovery of Damages may be asserted by Sellers or Stockholder against CCC,
Citadel, CLI or their successors in interest after such representations and
warranties shall thus expire; provided, however, that claims for Damages first
asserted in writing within the applicable period shall not thereafter be barred.
14.5 Limitation of Sellers' and Stockholder's Liability.
Notwithstanding anything in this Agreement to the contrary, Sellers' and
Stockholder's obligation to indemnify CCC, Citadel and CLI shall be subject to
the following:
(a) Threshold. CCC, Citadel and CLI shall not be entitled to
recover Damages pursuant to clause (b) of Section 14.1 (other than Damages
arising by reason of a breach of the representations and warranties made in
Sections 4.1, 4.2, 4.3, 4.6, 4.8(a) and 4.8(f)(ii)) until the
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aggregate of all such Damages suffered by CCC, Citadel and CLI exceeds $100,000
(the "Threshold"); provided, however, that once such aggregate exceeds the
Threshold, CCC, Citadel and CLI may recover all such Damages suffered since the
Closing Date without regard to the Threshold.
(b) Ceiling. CCC, Citadel and CLI shall not be entitled to
recover Damages pursuant to Section 14.1 in excess of the Purchase Price.
(c) Exclusive Remedy. Except as provided in Section 15 and
except with respect to any claim for Damages relating to any intentional or
fraudulent breach of a representation, warranty or covenant of Sellers or
Stockholder, subsequent to the Closing, indemnification under this Section 14
shall be the exclusive remedy of CCC, Citadel and CLI with respect to any legal,
equitable or other claim for relief based upon this Agreement or arising
hereunder.
(d) Exceptions. The limitations set forth in this Section 14.5
shall not apply with respect to any claim for Damages relating to any
intentional or fraudulent breach of a representation, warranty or covenant of
Sellers and Stockholder, nor shall there be any survival limitation for any such
claim except as provided by applicable law.
14.6 Limitation of CCC's, Citadel's and CLI's Liability.
Notwithstanding anything in this Agreement to the contrary, CCC's, Citadel's and
CLI's obligation to indemnify Sellers and Stockholder shall be subject to the
following:
(a) Threshold. Sellers and Stockholder shall not be entitled
to recover Damages pursuant to clause (b) of Section 14.2 (other than Damages
arising by reason of a breach of the representations and warranties made in
Sections 5.1, 5.2 and 5.3) until the aggregate of all such Damages suffered by
Sellers and Stockholder exceeds the Threshold; provided, however, that once such
aggregate exceeds the Threshold, Sellers and Stockholder may recover all such
Damages suffered since the Closing Date without regard to the Threshold.
(b) Ceiling. Sellers and Stockholder shall not be entitled to
recover Damages pursuant to Section 14.2 in excess of the Purchase Price.
(c) Exclusive Remedy. Except as provided in Section 15 and
except with respect to any claim for Damages relating to any intentional or
fraudulent breach of a representation, warranty or covenant of CCC, Citadel or
CLI, subsequent to the Closing, indemnification under this Section 14 shall be
the exclusive remedy of Sellers and Stockholder with respect to any legal,
equitable or other claim for relief based upon this Agreement or arising
hereunder.
(d) Exceptions. The limitations set forth in this Section 14.6
shall not apply with respect to any claim for Damages relating to any
intentional or fraudulent breach of a representation, warranty or covenant of
CCC, Citadel or CLI, nor shall there be any survival limitation for any such
claim except as provided by applicable law.
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<PAGE> 43
SECTION 15
TERMINATION OF AGREEMENT; ADDITIONAL REMEDIES
15.1 Manner. This Agreement and the transactions contemplated hereby
may be terminated prior to completion of the Closing:
(a) by mutual written consent of Citadel, CLI, Sellers and
Stockholder;
(b) by either Citadel and CLI, on the one hand, or Sellers and
Stockholder, on the other, upon providing written notice to the other party at
any time after the date which is 12 months after the date of this Agreement if
the FCC Approval has not been granted by the FCC, but only if the party
providing such notice is not then in material breach of this Agreement;
(c) by CCC, Citadel and CLI, upon providing written notice to
Sellers and Stockholder, if as of the time set for Closing any of the conditions
in Section 13 (except Sections 13.9 and 13.10) has not been satisfied or waived
by CCC, Citadel and CLI in writing, provided CCC, Citadel and CLI are not then
in material breach of this Agreement;
(d) by Sellers and Stockholder, upon providing written notice
to CCC, Citadel and CLI, if as of the time set for Closing any of the conditions
in Section 12 (except Sections 12.7 and 12.8) has not been satisfied or waived
by Sellers and Stockholder in writing, provided Sellers and Stockholder are not
then in material breach of this Agreement;
(e) by Sellers and Stockholder, upon providing written notice
to CCC, Citadel and CLI, if CCC, Citadel or CLI fails to consummate the
transactions contemplated hereunder after all conditions in Section 13 have been
satisfied, provided Sellers and Stockholder are not then in material breach of
this Agreement;
(f) by CCC, Citadel and CLI, upon providing written notice to
Sellers and Stockholder, if Sellers and Stockholder fail to consummate the
transactions contemplated hereunder after all conditions in Section 12 have been
satisfied, provided CCC, Citadel and CLI are not then in material breach of this
Agreement;
(g) subject to Section 10.1, by either party upon denial by
the FCC of the FCC Application; and
(h) by either party if any court of competent jurisdiction in
the United States or any 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 actions shall have become final and
non-appealable (provided that such party is not then in material breach of this
Agreement).
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15.2 Additional Remedies.
(a) In the event of the termination of this Agreement by
Sellers and Stockholder pursuant to Section 15.1(d) or 15.1(e) (any such event
being a "Draw Condition"), Sellers and Stockholder shall be entitled to draw
upon and receive the proceeds of the Letter of Credit, but shall not retain any
rights to recover any actual damages they suffer as a result of such termination
and the breach relating to such damages. In the event of any other termination
of this Agreement pursuant to any other provision of Section 15.1, Citadel shall
be entitled to a return of, and LBI shall return to Citadel, the original Letter
of Credit.
(b) The parties recognize and agree that CCC, Citadel and CLI
have relied on this Agreement and expended considerable effort and resources
related to the transactions contemplated hereunder, that the rights and benefits
conferred upon CCC, Citadel and CLI herein are unique, and that damages may not
be adequate to compensate CCC, Citadel and CLI in the event any Seller or
Stockholder improperly refuse to consummate the transactions contemplated
hereunder. The parties therefore agree that CCC, Citadel and CLI shall be
entitled, at their option and in lieu of terminating this Agreement pursuant to
Section 15.1, to have this Agreement specifically enforced by a court of
competent jurisdiction; provided, however, that CCC, Citadel and CLI may not
specifically enforce this Agreement if they have previously terminated this
Agreement and received the original Letter of Credit.
SECTION 16
SECURITIES LAW MATTERS
16.1 Investor Representations. In connection with the issuance of
shares of CCC Stock to LBI as a portion of the Purchase Price, LBI makes the
following representations and warranties to CCC, Citadel and CLI, as of the date
of this Agreement and as of the Closing Date:
(a) LBI (i) will acquire and hold the CCC Stock solely for its
own account, as principal, for investment purposes only, and not with a view to
or for resale, distribution or fractionalization of all or any part of the CCC
Stock and (ii) has no present intention, agreement or arrangement to divide its
participation with others or to resell, assign, transfer or otherwise dispose of
all or any part of the CCC Stock.
(b) In making its decision to receive the CCC Stock as a
portion of the Purchase Price, LBI has evaluated the risk of investing in the
CCC Stock and is acquiring the CCC Stock based only upon its independent
examination and judgment as to the prospects of CCC as determined from
information obtained directly by LBI from CCC or Affiliates thereof. LBI
acknowledges receipt of all information requested of CCC and Affiliates thereof.
The CCC Stock was not offered to LBI by means of publicly disseminated
advertisements or sales literature.
(c) LBI has been given the opportunity (i) to ask questions
of, and receive answers from, CCC and its Affiliates concerning the terms and
conditions of the issuance of the
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CCC Stock and other matters pertaining to this investment and all such questions
have been answered to the satisfaction of LBI; and (ii) to obtain such
additional information necessary to verify the accuracy of the information or
materials provided to LBI, except such information which CCC has indicated it
either does not possess and cannot acquire without unreasonable effort or
expense or which is proprietary and confidential.
(d) LBI is an "accredited investor," as that term is defined
in Section 501(a) of Regulation D promulgated under the Securities Act.
(e) The principal place of business of LBI is located in the
State of Michigan, and LBI does not have a present intention of altering the
state of the location of its principal place of business.
16.2 Disposition of Shares. LBI represents and warrants that the CCC
Stock is being acquired and will be acquired for its own account and will not be
sold or otherwise disposed of except pursuant to (i) an exemption or exclusion
from the registration requirements under the Securities Act, which does not
require the filing by CCC with the SEC of any registration statement, offering
circular or other document, in which case LBI shall first supply to CCC an
opinion of counsel (which opinion of counsel shall be satisfactory to CCC) that
such exemption or exclusion is available, or (ii) a registration statement filed
by CCC with the SEC under the Securities Act (which LBI acknowledges CCC is not
obligated to file).
16.3 Legend. The certificate for the CCC Stock received by LBI shall
bear the following legend:
The securities evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act") or qualified under any applicable state securities
laws. They have been acquired for investment and not with a
view to distribution thereof within the meaning of the Act and
regulations thereunder. They may not be sold, offered for
sale, pledged, hypothecated or otherwise transferred unless
(a) there is an effective registration statement under the Act
and applicable state securities laws covering such transaction
involving said securities, (b) this Corporation receives an
opinion of counsel for the holder of these securities
(concurred in by legal counsel for this Corporation) stating
that such transaction is exempt from registration or this
Corporation is otherwise satisfied that such transaction is
exempt from registration, or (c) these securities are sold
pursuant to Rule 144 of the Act.
and CCC may, unless a registration statement covering such shares is in effect,
place stop transfer orders with its transfer agents with respect to such
certificates.
16.4 Registration Rights for CCC Stock. CCC will utilize its reasonable
best efforts either, at CCC's option, (a) to take all action necessary to amend
the Third Amended and Restated Registration Rights Agreement dated June 28,
1996, as amended, among CCC and various of its stockholders to provide to LBI
the rights of a holder of registrable shares
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<PAGE> 46
thereunder, including "piggyback" registration rights as provided therein, or
(b) to cause, no later than 90 days following the Closing Date, a registration
statement to be filed under the Securities Act or an existing registration
statement to be amended for the purpose of registering the CCC Stock for resale
and to have such registration statement become effective as soon as is
reasonably practicable.
SECTION 17
GENERAL
17.1 Survival of Representations and Warranties. Each representation
and warranty herein contained shall survive the Closing as provided in Section
14.4, notwithstanding any investigation at any time made by or on behalf of any
party to this Agreement.
17.2 Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws, and not the laws of conflicts, of the
State of Michigan.
17.3 Notices. Any notices or other communications required or permitted
under this Agreement shall be delivered personally or sent by registered or
certified mail, postage prepaid, delivered by overnight delivery or sent by
facsimile, addressed as follows:
To CCC, Citadel Citadel Broadcasting Company
or CLI: City Center West
7201 West Lake Mead Blvd.
Suite 400
Las Vegas, NV 89128
Attn: Donna L. Heffner
Fax: (702) 804-5936
With a copy to: Eckert Seamans Cherin & Mellott, LLC
600 Grant Street
44th Floor
Pittsburgh, Pennsylvania 15219
Attn: Gregory A. Weingart, Esq.
Fax: (412) 566-6099
To Sellers or Liggett Broadcast, Inc.
Stockholder: 3420 Pine Tree Road
Lansing, MI 48911
Attn: Robert G. Liggett, Jr.
Fax: (313) 640-8615
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<PAGE> 47
With a copy to: Miller, Canfield, Paddock & Stone, P.L.C.
One Michigan Avenue
Suite 900
Lansing, MI 48933-1609
Attn: Michael R. Atkins, Esq.
Fax: (517) 374-6304
or such other addresses as shall be similarly furnished in writing by either
party. Such notices or communications shall be deemed to have been given as of
the date of personal delivery, or if mailed, the date the return receipt is
signed or the date on which delivery is refused, or if delivered by overnight
delivery or facsimile, on the date of receipt.
17.4 Entire Agreement. This instrument supersedes all prior
communications, understandings and agreements of or among the parties with
respect to the subject matter of this Agreement and contains the entire
agreement among the parties with respect to the transactions contemplated in
this Agreement.
17.5 Headings. The headings of this Agreement are inserted for
convenience only and shall not constitute a part of this Agreement.
17.6 Schedules; Exhibits. All schedules and exhibits annexed to this
Agreement are hereby incorporated in this Agreement by this reference.
17.7 Expenses. Each party shall bear its own costs and expenses
incurred by it in connection with the transactions pursuant to this Agreement.
17.8 Amendment. This Agreement may be amended, modified or superseded,
and any of the terms, covenants, representations, warranties or conditions
hereof may be waived, only by a written instrument executed on behalf of all of
the parties or, in the case of a waiver, by the party waiving compliance.
17.9 Waiver. The failure of any party at any time or times to require
performance of any provision of this Agreement shall in no manner affect the
right to enforce that provision or any other provision of this Agreement at any
time thereafter.
17.10 Assignment.
(a) Neither this Agreement nor any of the rights or
obligations under this Agreement may be assigned by Sellers or Stockholder
without the prior written consent, in their sole discretion, of CCC, Citadel and
CLI, or by CCC, Citadel or CLI without the prior written consent, in their sole
discretion, of Sellers and Stockholder; provided, however, that (i) CLI may be
merged with and into Citadel or a wholly owned subsidiary of Citadel without the
consent of Sellers or Stockholder and (ii) Sellers may make an assignment as
provided in Section 17.10(b). Subject to the foregoing, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, and no other Person shall have any right,
benefit or obligation under this Agreement.
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<PAGE> 48
(b) CCC, Citadel and CLI hereby acknowledge and agree that
Sellers may, without the consent of CCC, Citadel or CLI but with written notice
to CCC, Citadel and CLI, assign all or a portion of Sellers' right to receive a
portion of the cash Purchase Price to a third party for the purpose of
facilitating a like-kind exchange as defined in Section 1031 of the Code;
provided that (i) Sellers and Stockholder shall remain fully responsible for the
fulfillment of all representations, warranties, agreements and covenants of
Sellers and Stockholder under this Agreement; (ii) such assignment shall not
result in any delay in consummating the transactions contemplated hereby and
(iii) CCC, Citadel and CLI shall not bear any additional costs or expenses as a
result of such assignment. CCC, Citadel and CLI agree that, in the event of such
an assignment, Citadel will pay, at the Closing, any assigned portion of the
cash Purchase Price to the applicable assignee, as partial consideration for the
transfer of all of the Purchased Assets by Sellers in accordance with the terms
of this Agreement.
17.11 Prior Control. Until the Closing, Sellers shall maintain control
of the Stations.
17.12 Attorneys' Fees. In the event of any action arising out of this
Agreement, the prevailing party shall be entitled to recover its costs, expenses
and reasonable attorney's fees incurred in connection with the dispute from the
other party.
17.13 Counterparts; Fax Signatures. This Agreement may be executed in
one or more counterparts, each of which together shall constitute a single
instrument. Signatures on this Agreement transmitted by facsimile shall be
deemed to be original signatures for all purposes of this Agreement.
[Signatures appear on the following pages]
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<PAGE> 49
IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective as of the date first above written.
LIGGETT BROADCAST, INC.
By: /s/ Robert G. Liggett, Jr.
---------------------------------------------
Robert G. Liggett, Jr., Chairman
RAINBOW RADIO, LLC
By: LIGGETT BROADCAST, INC. SOLE MANAGER
By: /s/ Robert G. Liggett, Jr.
---------------------------------------------
Robert G. Liggett, Jr., Chairman
NEW TOWER, INC.
By: /s/ Robert G. Liggett, Jr.
---------------------------------------------
Robert G. Liggett, Jr., President
LLJ REALTY, LLC
By: /s/ Robert G. Liggett, Jr.
---------------------------------------------
Robert G. Liggett, Jr., Managing Member
/s/ Robert G. Liggett, Jr.
------------------------------------------------
Robert G. Liggett, Jr., Individual
[Signatures continued on the following page]
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[Signatures continued from the previous page]
CITADEL COMMUNICATIONS CORPORATION
By: /s/ Lawrence R. Wilson
-----------------------------------------
Title: Chairman and CEO
--------------------------------------
CITADEL BROADCASTING COMPANY
By: /s/ Lawrence R. Wilson
-----------------------------------------
Its: Chairman and CEO
----------------------------------------
CITADEL LICENSE, INC.
By: /s/ Lawrence R. Wilson
------------------------------------------
Its: Chairman and CEO
----------------------------------------
49
<PAGE> 51
INDEX OF SCHEDULES AND EXHIBITS
Schedule 2.1 - Asset Schedule
Schedule 2.2(f) - Excluded Personal Property
Schedule 2.2(g) Excluded Real Property
Schedule 2.3 - Assumed Obligations
Schedule 4.0 - Sellers' Disclosure Schedule
Schedule 5.0 - Citadel's Disclosure Schedule
Exhibit A - Letter of Credit
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Partners
Broadcasting Partners Holdings, L.P.
We consent to incorporation by reference in the registration statements (Nos.
333-65279, 333-85701 and 333-85703) on Form S-8 of Citadel Communications
Corporation of our report dated March 30, 1999 on the combined balance sheets of
Broadcasting Partners Holdings Radio Group as of December 31, 1997 and 1998 and
the related combined statements of operations, partners' capital and cash flows
for the period from January 9, 1997 (inception) through December 31, 1997 and
the year ended December 31, 1998, which report appears in the Form 8-K of
Citadel Communications Corporation filed December 10, 1999.
/s/ KPMG LLP
McLean, Virginia
December 10, 1999
<PAGE> 1
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to incorporation by reference in the registration statements (Nos.
33-65279, 333-85701 and 333-85703) on Form S-8 of Citadel Communications
Corporation of our report dated December 6, 1999, relating to the combined
balance sheet of Liggett Broadcast, Inc. as of December 31, 1998, and the
related combined statements of operations, shareholder's equity, and cash flows
for the year then ended, which report appears in the Form 8-K of Citadel
Communications Corporation filed December 10, 1999.
/s/ Andrews Hooper & Pavlik P.L.C.
Okemos, Michigan
December 10, 1999
<PAGE> 1
Exhibit 23.3
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Citadel Communications Corporation:
We consent to incorporation by reference in the registration statements (Nos.
333-65279, 333-85701 and 333-85703) on Form S-8 of Citadel Communications
Corporation of our report dated May 17, 1999, relating to the balance sheet of
Wicks Radio Group (a Division of the Wicks Broadcast Group Limited Partnership)
as of December 31, 1998, and the related statements of operations and changes in
division equity, and cash flows for the year then ended, which report appears in
the Form 8-K of Citadel Communications Corporation dated December 10, 1999.
/s/ KPMG LLP
McLean, Virginia
December 10, 1999
<PAGE> 1
Exhibit 23.4
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors
Citadel Communications Corporation
We consent to incorporation by reference in the registration statements (Nos.
333-65279, 333-85701 and 333-85703) on Form S-8 of Citadel Communications
Corporation of our report dated March 12, 1999 (except for Note 13 as to which
the date is March 19, 1999), relating to the consolidated balance sheet of
Citywide Communications, Inc. as of December 31, 1998, and the related
consolidated statements of operations and accumulated deficit, stockholders'
deficit and cash flows for the year then ended, which report appears in the Form
8-K of Citadel Communications Corporation filed December 10, 1999.
/s/ Faulk & Winkler LLC
Certified Public Accountants
Baton Rouge, Louisiana
December 10, 1999
<PAGE> 1
Exhibit 23.5
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Citadel Communications Corporation:
We consent to incorporation by reference in the registration statements (Nos.
333-65279, 333-85701 and 333-85703) on Form S-8 of Citadel Communications
Corporation of our report dated February 12, 1999, relating to the balance
sheets of Caribou Communications Co. as of December 31, 1998 and 1997, and the
related statements of operations, changes in partners' equity, and cash flows
for the years then ended, which report appears in the Form 8-K of Citadel
Communications Corporation filed December 10, 1999.
/s/ Cole & Reed, P.C.
Oklahoma City, Oklahoma
December 10, 1999
<PAGE> 1
Exhibit 23.6
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
333-65279, 333-85701 and 333-85703 of Citadel Communications Corporation on
Form S-8 of our report dated March 28, 1997 relating to the consolidated
financial statements of Tele-Media Broadcasting Company and its partnership
interests as of December 31, 1996 and 1995 and for each of the years in the
three-year period ended December 31, 1996, which report appears in the Form 8-K
of Citadel Communications Corporation filed on December 10, 1999.
/s/ Deloitte & Touche LLP
Pittsburgh, PA
December 10, 1999
