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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
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PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported): January 14, 2000
SPANISH BROADCASTING SYSTEM, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 000-27823 13-3827791
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
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3191 CORAL WAY, MIAMI, FLORIDA 33145
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 441-6901
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(Former name or former address, if changed since last report.)
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Item 1. Changes in Control of the Company.
Not applicable.
Item 2. Acquisition or Disposition of Assets.
On September 22, 1999, Spanish Broadcasting System of Puerto Rico,
Inc., a Delaware corporation ("SBS") and a wholly-owned Subsidiary of Spanish
Broadcasting System, Inc., a Delaware Corporation, entered into a stock purchase
agreement (the "Stock Purchase Agreement") to purchase all of the outstanding
capital stock of the following nine subsidiaries of AMFM Operating, Inc., a
Delaware corporation (formerly known as Chancellor Media Corporation of Los
Angeles)("AMFM"): Primedia Broadcast Group, Inc., WIO, Inc., Cadena
Estereotempo, Inc., Portorican American Broadcasting, Inc., WLDI, Inc., WRPC,
Inc., WOYE, Inc., WZNT, Inc., WOQI, Inc. (the "Subsidiaries"). The Subsidiaries
own and operate eight radio stations in Puerto Rico: WIOA-FM, WIOB-FM, WIOC-FM,
WCOM-FM, WZMT-FM, WZNT-FM, WOYE-FM, and WCTA-FM.
On January 14, 2000, SBS completed the Purchase of all of the
outstanding capital stock of the Subsidiaries; in consideration for which SBS
paid to AMFM $90,300,000 in cash. The consideration paid on the sale was
determined through arms-length negotiations between SBS and AMFM. The company
financed the purchase of these companies with cash on hand.
Item 3. Bankruptcy or Receivership.
Not Applicable.
Item 4. Changes in Company's Certifying Accountant.
Not Applicable.
Item 5. Other Events.
Not Applicable
Item 6. Resignation of Company's Directors.
Not Applicable.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
a. Financial Statements
The financial statements of the Subsidiaries shall be filed as
an amendment to this initial report on Form 8-K within 60 days
of the filing of this initial report.
b. Pro Forma Financial Information
The pro forma financial information relating to SBS's purchase
of the Subsidiaries shall be filed as an amendment to this
initial report on Form 8-K within 60 days of the filing of
this report.
c. Exhibits
1. Stock Purchase Agreement, dated as of September 22,
1999 among Chancellor Media Corporation of Los
Angeles, Primedia Broadcast Group, Inc., WIO, Inc.,
Cadena Estereotempo, Inc., Portorican American
Broadcasting, Inc., WLDI, Inc., WRPC, Inc., WOYE,
Inc., WZNT, Inc., WOQI, Inc., and Spanish
Broadcasting System of Puerto Rico, Inc. (the
"Stock Purchase Agreement").
2. Amendment to the Stock Purchase Agreement, dated as
of January 3, 2000.
3. Amendment to the Stock Purchase Agreement, dated as
of January 14, 2000.
Item 8. Change in Fiscal Year.
Not Applicable.
Item 9. Sales of Equity Securities Pursuant to Regulation S.
Not Applicable.
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SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SPANISH BROADCASTING SYSTEM, INC.
(Registrant)
January 28, 2000 /s/ Joseph A. Garcia
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Joseph A. Garcia
Chief Financial Officer
Executive Vice President and
Secretary
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STOCK PURCHASE AGREEMENT
AMONG
"SELLER,"
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES,
THE "COMPANIES,"
PRIMEDIA BROADCAST GROUP, INC.
WIO, INC.
CADENA ESTEREOTEMPO, INC.
PORTORICAN AMERICAN BROADCASTING, INC.
WLDI, INC.
WRPC, INC.
WOYE, INC.
WZNT, INC.
WOQI, INC.
AND
"BUYER,"
SPANISH BROADCASTING SYSTEM OF PUERTO RICO, INC.
SEPTEMBER 22, 1999
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ARTICLE I. DEFINITIONS.............................................................. 1
1.1 Definitions....................................................... 1
ARTICLE II. BASIC TERMS AND CONDITIONS.............................................. 6
2.1 Basic Transaction................................................. 6
2.2 Purchase Price.................................................... 7
2.3 The Closing....................................................... 7
2.4 Deliveries at Closing............................................. 7
2.5 Allocation of Purchase Price...................................... 8
2.6 Working Capital Payment........................................... 8
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANIES............. 10
3.1 Organization, Standing and Authority.............................. 10
3.2 Authorization and Binding Obligation.............................. 10
3.3 Absence of Conflicting Agreements or Consents..................... 10
3.4 Licenses and FCC Licenses......................................... 11
3.5 Real Property..................................................... 11
3.6 Personal Property Leases.......................................... 12
3.7 Title to and Condition of Personal Property....................... 12
3.8 Contracts......................................................... 12
3.9 Consents.......................................................... 13
3.10 Trademarks, Trade Names and Copyrights............................ 13
3.11 Financial Statements.............................................. 13
3.12 Employees and Employee Benefit Plans.............................. 13
3.13 Labor Relations................................................... 15
3.14 Taxes............................................................. 15
3.15 Claims; Legal Actions............................................. 16
3.16 Laws.............................................................. 16
3.17 Environmental Matters............................................. 16
3.18 Target and Subsidiary Shares...................................... 16
3.19 Capitalization.................................................... 16
3.20 Subsidiaries...................................................... 17
3.21 Brokers' Fees..................................................... 17
3.22 Certain Business Relationships with Seller and the Companies...... 17
3.23 Trade Deals....................................................... 17
3.24 No Undisclosed Liabilities........................................ 17
3.25 Books and Records................................................. 17
3.26 Disclosure........................................................ 18
3.27 Disclaimer of Other Representations and Warranties................ 18
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER................................. 18
4.1 Organization, Standing and Authority.............................. 18
4.2 Authorization and Binding Obligation.............................. 18
4.3 Absence of Conflicting Agreements or Consents..................... 18
4.4 Qualification..................................................... 19
4.5 Investment Purpose................................................ 19
ARTICLE V. PRE-CLOSING COVENANTS.................................................... 19
5.1 General........................................................... 19
5.2 FCC Consent....................................................... 19
5.3 Hart-Scott-Rodino and Other Filings............................... 20
5.4 Operation of Business............................................. 20
5.5 Preservation of Business.......................................... 20
5.6 Inspections....................................................... 20
5.7 Control of Station................................................ 21
5.8 Prorations/Trade Deals............................................ 22
5.9 Buyer Financing................................................... 22
5.10 TBA............................................................... 22
ARTICLE VI. POST-CLOSING COVENANTS.................................................. 22
6.1 General........................................................... 23
6.2 Litigation Support................................................ 23
6.3 Transition........................................................ 23
ARTICLE VII. CONDITIONS TO OBLIGATION TO CLOSE...................................... 23
7.1 Conditions to Obligations of Seller and the Companies............. 23
7.2 Conditions to Obligation of Buyer................................. 23
ARTICLE VIII. REMEDIES FOR BREACH OF THIS AGREEMENT................................. 24
8.1 Survival of Representations and Warranties........................ 24
8.2 Exclusive Remedy.................................................. 24
8.3 Buyer's Right to Indemnification.................................. 24
8.4 Seller's Right to Indemnification................................. 24
8.5 Conduct of Proceedings............................................ 25
8.6 Limits on and Conditions of Indemnification; Threshold and Cap.... 25
8.7 Tax Treatment of Indemnity Payments............................... 25
8.8 Buyer's Right of Specific Performance............................. 25
ARTICLE IX. TAX MATTERS............................................................. 26
9.1 Preparation of Tax Returns........................................ 26
9.2 Refunds........................................................... 26
9.3 Cooperation on Tax Matters........................................ 27
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9.4 Post-Closing Access............................................... 27
9.5 Tax Sharing Agreements............................................ 27
ARTICLE X. TERMINATION.............................................................. 27
10.1 Termination of Agreement.......................................... 27
10.2 Effect of Termination............................................. 28
ARTICLE XI. MISCELLANEOUS........................................................... 28
11.1 Press Releases and Public Announcements........................... 28
11.2 No Third-Party Beneficiaries...................................... 28
11.3 Entire Agreement.................................................. 29
11.4 Succession and Assignment......................................... 29
11.5 Counterparts...................................................... 29
11.6 Headings.......................................................... 29
11.7 Notices........................................................... 29
11.8 Governing Law..................................................... 30
11.9 Amendments and Waivers............................................ 30
11.10 Severability...................................................... 30
11.11 Expenses.......................................................... 30
11.12 Construction...................................................... 30
11.13 Incorporation of Exhibits, Annexes, and Schedules................. 31
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LIST OF SCHEDULES AND EXHIBITS
Schedule 2.5 .......................................Allocation of Purchase Price
Schedule 3.1 .......................................Jurisdiction of Organization
Schedule 3.3 ..................................................Seller's Consents
Schedule 3.4 ...........................................FCC Licenses and Matters
Schedule 3.5 ..............................Real Property and Leasehold Interests
Schedule 3.6 ...........................................Personal Property Leases
Schedule 3.7 ..................................................Personal Property
Schedule 3.8 ..........................................................Contracts
Schedule 3.9 ...........................................................Consents
Schedule 3.10 .............................................Intellectual Property
Schedule 3.11 ..............................................Financial Statements
Schedule 3.12 ...............................Employees and Employee Benefit Plan
Schedule 3.13 ...................................................Labor Relations
Schedule 3.14 .............................................................Taxes
Schedule 3.15 ..........................................Claims and Legal Actions
Schedule 3.17 .............................................Environmental Matters
Schedule 3.19 ....................................................Capitalization
Schedule 3.20 ......................................................Subsidiaries
Schedule 3.23 .......................................................Trade Deals
Schedule 4.3 ...................................................Buyer's Consents
Exhibit A ..............................................Escrow Deposit Agreement
Exhibit B ..............................................Time Brokerage Agreement
Exhibit C ..........................................Opinion of Counsel to Seller
Exhibit D ...........................................Opinion of Counsel to Buyer
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into as of
September 22, 1999, by and between SPANISH BROADCASTING SYSTEM OF PUERTO RICO,
INC., a Delaware corporation ("Buyer"), and CHANCELLOR MEDIA CORPORATION OF LOS
ANGELES, a Delaware corporation, ("Seller") and PRIMEDIA BROADCAST GROUP, INC.,
WIO, INC., WLDI, INC., WRPC, INC., WOYE, INC., WZNT, INC., WOQI, INC., CADENA
ESTEREOTEMPO, INC. AND PORTORICAN AMERICAN BROADCASTING, INC., all of which are
organized under the laws of the Commonwealth of Puerto Rico (collectively, the
"Companies"). The Buyer, Seller and the Companies are referred to collectively
herein as the "Parties."
The Seller owns all of the issued and outstanding capital stock of the
Companies, except for Portorican American Broadcasting, Inc., a wholly owned
subsidiary of WOQI, Inc. and Cadena Estereotempo, Inc., a wholly owned
subsidiary of WIO, Inc. (the capital stock of all of the Companies, except for
the capital stock of Portorican American Broadcasting, Inc. and Cadena
Estereotempo, Inc., is collectively referred to herein as the "Target Shares,"
and the capital stock of Cadena Estereotempo, Inc. and Portorican American
Broadcasting, Inc. is collectively referred to herein as the "Subsidiary
Shares").
The Companies own and operate radio stations WIOA(FM), San Juan, Puerto
Rico, WIOB(FM), Mayaguez, Puerto Rico, WIOC(FM), Ponce, Puerto Rico, WCOM(FM),
Bayamon, Puerto Rico, WZMT(FM), Ponce, Puerto Rico, WOYE-FM, Mayaguez, Puerto
Rico, WCTA-FM, San German, Puerto Rico, and WZNT(FM), San Juan, Puerto Rico (all
of the above enumerated radio stations being hereinafter referred collectively
to as the "Stations" or individually as "Station") pursuant to licenses issued
by the Federal Communications Commission (the "FCC").
Seller desires to sell and Buyer desires to purchase all of the issued
and outstanding Target Shares and Subsidiary Shares and by so doing acquires the
radio broadcasting business currently conducted by the Stations, upon the terms
and conditions hereinafter set forth.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
ARTICLE I.
DEFINITIONS.
1.1 Definitions. The following terms shall have the following meanings
in this Agreement:
"Accounting Firm" has the meaning set forth in Section 2.6.
"Adequate Financing" has the meaning set forth in Section 5.9.
"Aged Receivables" has the meaning set forth in Section 2.6.
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"Assets" means all of the tangible and intangible assets owned, leased
or licensed by the Companies, including the FCC Licenses, and used or useful in
connection with the conduct of the business and operations of the Companies.
"Base Amount" has the meaning set forth in Section 2.6.
"Buyer" has the meaning set forth in the preface above.
"Buyer Indemnitees" has the meaning set forth in Section 8 below.
"Closing" has the meaning set forth in Section 2.4.
"Closing Date" has the meaning set forth in Section 2.4.
"Closing Working Capital" has the meaning set forth in Section 2.6.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commencement Date" shall have the meaning set forth in the TBA.
"Communications Act" has the meaning set forth in Section 3.4.
"Companies" has the meaning set forth in the preface.
"Confidential Information" means any information concerning the
businesses and affairs of the Seller and the Companies that is not already
generally available to the public.
"Consents" means the consents set forth in Schedule 3.9, the FCC
Consent, and the expiration or termination of the applicable waiting period
under the Hart-Scott-Rodino Act, all of which are necessary to transfer the
Target Shares and the Subsidiary Shares to Buyer or otherwise to consummate the
transactions contemplated hereby.
"Contract" means any agreement, written or oral (including any
amendments and other modifications thereto), to which any of the Companies is a
party or which affects or relates to the Assets or the business or operations of
the Companies.
"DOJ" has the meaning set forth in Section 5.3.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
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"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and Recovery
Act of 1976, and the Occupational Safety and Health Act of 1970, each as
amended, together with all other laws (including rules, regulations, codes,
injunctions, judgments, orders, decrees, and rulings thereunder) of federal,
state, local, foreign and Puerto Rico governments (and all agencies thereof
including the rules and regulations of the Environmental Protection Agency and
the Environmental Quality Board of Puerto Rico) concerning pollution or
protection of the environment, public health and safety, or employee health and
safety, including laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes into ambient air, surface water, ground
water, or lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" has the meaning set forth in the Escrow Deposit
Agreement.
"Escrow Deposit" has the meaning set forth in Section 2.2.
"Escrow Deposit Agreement" means the agreement set forth in Exhibit A.
"Estimated Closing Working Capital" has the meaning set forth in
Section 2.6.
"FCC" has the meaning set forth in the preface.
"FCC Applications" has the meaning set forth in Section 5.2.
"FCC Consent" means actions by the FCC granting its consent to the
transfer of control of the Companies to Buyer as contemplated by this Agreement,
which is not reversed, stayed, enjoined, set aside, or suspended, and with
respect to which no timely request for stay, rehearing, or review is pending.
"FCC Licenses" means all of the licenses, permits and other
authorizations issued by the FCC to the Companies and applications to the FCC
relating to or used in the business or operation of the Stations, including
those listed on Schedule 3.4 hereto, together with any renewals, modifications
or additions thereto between the date hereof and the Closing Date.
"Final WC Statement" has the meaning set forth in Section 2.6.
"Financial Statements" has the meaning set forth in Section 3.11.
"Financing Date" has the meaning set forth in Section 5.9.
"FTC" has the meaning set forth in Section 5.3.
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"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended together will all rules and regulations
promulgated thereunder.
"Indemnified Party" has the meaning set forth in Section 8.5.
"Indemnitor" has the meaning set forth in Section 8.5.
"Initial WC Statement" has the meaning set forth in Section 2.6.
"Inspection Period" has the meaning set forth in Section 5.6.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, call
letters, logos, trade names, franchise corporate names and Internet domain names
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (d) all mask works and all applications, registrations,
and renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(f) all computer software (including data and related documentation), (g) all
other proprietary rights, and (h) all copies and tangible embodiments thereof
(in whatever form or medium).
"IPO" has the meaning set forth in Section 5.9.
"Knowledge" means actual knowledge.
"Licenses" means all licenses, permits and other authorizations issued
by any federal, state, local, municipal, Puerto Rico or foreign government
agency, department, commission or otherwise to the Companies and necessary for
the lawful operation of the Stations, other than FCC Licenses or licenses,
permits, and other authorizations required under Environmental Laws.
"Lien" has the meaning set forth in Section 3.5.
"Material Contract" has the meaning set forth in Section 3.8.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Net Negative Trade Balance" has the meaning set forth in Section 5.8.
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"Notice of Disagreement" has the meaning set forth in Section 2.6.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Outside Date" has the meaning set forth in Section 10.1.
"Party" has the meaning set forth in the preface.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Lien" has the meaning set forth in Section 3.5.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Personal Property" means all of the Companies' owned, leased or
licensed machinery, equipment (including the transmitter and studio equipment),
computer programs, computer software, tools, motor vehicles, furniture,
leasehold improvement, office equipment, supplies, plant, spare parts and other
tangible or intangible personal property, including, without limitation, the
personal property which is listed on Schedule 3.7 hereto, together with any
additions or deletions thereto between the date hereof and the Closing Date.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"Purchase Price" has the meaning set forth in Section 2.2.
"Real Property" means the owned or leased property used or useful in
the operations of the Stations, including the interests listed on Schedule 3.5.
"Receivables" has the meaning set forth in Section 2.6.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Seller" has the meaning set forth in the preface above.
"Seller Indemnitees" has the meaning set forth in Section 8.4.
"Stations" has the meaning set forth in the preface above.
"Stub Financials" has the meaning set forth in Section 3.11 below.
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"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Subsidiary Shares" has the meaning set forth in the preface.
"Target Shares" has the meaning set forth in the preface.
"Tax" and "Taxes" means all federal, state, local, municipal, foreign
or Puerto Rico taxes, assessments, duties, levies or similar charges of any kind
including, without limitation, all income, payroll, withholding, unemployment
insurance, social security, sales, use, service, service use, leasing, leasing
use, excise, franchise, gross receipts, value added, alternative or add-on
minimum estimated, occupation, real and personal property, stamp, duty,
transfer, worker's compensation, severance, windfall profits, environmental
(including taxes under Section 59A of the Code), other tax, charge, fee, levy or
assessment of the same or of a similar nature, including any interest, penalty,
or addition thereto whether disputed or not.
"Tax Return" means all return, declarations, reports, claims for
refund, estimates, information returns, statements or other similar documents
relating to or required to be filed with any government agency, department,
commission or otherwise with respect to Taxes, including any schedule or
attachment thereto, and including and amendment thereof.
"TBA" means the Time Brokerage Agreement among the Parties as set forth
in Exhibit B hereto and entered on even date herewith.
"Threshold Amount" has the meaning set forth in Section 8.6.
"Trade Deals" means the exchanges by the Stations of their advertising
time for good, services or other non-cash consideration, other than in
connection with the licensing of programs and programming material.
"Working Capital" has the meaning set forth in Section 2.6.
"1996 Financials" has the meaning set forth in Section 3.11.
"1997 Financials" has the meaning set forth in Section 3.11.
"1998 Financials" has the meaning set forth in Section 3.11.
ARTICLE II.
BASIC TERMS AND CONDITIONS
2.1 Basic Transaction. Subject to the terms and conditions of this
Agreement, on the Closing Date, Buyer shall purchase from Seller, and Seller
shall transfer and deliver to Buyer the Target Shares and Subsidiary Shares in
exchange for the consideration specified below in Section 2.2.
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2.2 Purchase Price. The Buyer agrees to pay to the Seller at the
Closing NINETY MILLION DOLLARS ($90,000,000) (the "Purchase Price"), which
amount is to be paid as follows:
(a) A payment of TEN MILLION DOLLARS ($10,000,000) shall be
deposited by Buyer with the Escrow Agent (the "Escrow Deposit"), in accordance
with the Escrow Deposit Agreement, with such payment being made via wire
transfer or other delivery of immediately available funds, concurrently with the
execution of this Agreement. The Escrow Deposit shall be credited toward payment
of the Purchase Price at the Closing.
(b) The remaining EIGHTY MILLION DOLLARS ($80,000,000) of the
Purchase Price shall be paid to Seller or its designees at Closing by wire
transfer or other delivery of immediately available funds.
2.3 The Closing. Subject to the terms and conditions of this Agreement,
the sale and purchase of the Target Shares and Subsidiary Shares contemplated
hereby shall take place at a closing (the "Closing") to be held at 10:00 A.M.
(Washington, D.C. time) on the tenth (10th) business day following the later to
occur of (i) the expiration or termination of the applicable waiting periods
under the Hart-Scott-Rodino Act and (ii) the satisfaction or waiver of the other
conditions to the obligations of the parties set forth in Article VII, at the
offices of Seller's counsel, Latham & Watkins, 1001 Pennsylvania Avenue, N.W.,
Suite 1300, Washington, D.C. 20004, or at such other time or on such other date
or at such other place as Seller and Purchaser may mutually agree upon in
writing (the day on which the Closing takes place being the "Closing Date"). The
Closing shall be effective as of 11:59 p.m. on the Closing Date.
2.4 Deliveries at Closing.
(a) Seller's and the Companies' Deliveries. Seller and the
Companies, as appropriate, shall deliver or cause to be delivered to Buyer the
following at the Closing:
(i) the stock certificates representing all of the
Target Shares and the Subsidiary Shares, endorsed in blank or
accompanied by duly executed assignment documents;
(ii) a certificate to the effect that each of the
conditions specified in Section 7.2(a) and (b) of this
Agreement has been satisfied in all respects; and
(iii) an opinion of counsel to Seller in form and
substance as set forth in Exhibit C attached hereto, addressed
to Buyer, and dated as of the Closing Date.
(b) Buyer's Deliveries. Buyer shall deliver or cause to be
delivered to Seller the following at the Closing:
(i) the Purchase Price, as specified in Section 2.2,
above;
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(ii) a certificate to the effect that each of the
conditions specified in Section 7.1(a) and (b) of this
Agreement has been satisfied in all respects; and
(iii) an opinion of counsel to Buyer in form and
substance as set forth in Exhibit D attached hereto, addressed
to Seller, and dated as of the Closing Date.
(c) Other Acts. In addition to the above, the parties will
execute such other documents and perform such other acts, before and after the
Closing Date, as may be reasonably necessary for the complete implementation and
consummation of this Agreement; provided that in no event shall the execution of
such other documents or performance of such other acts impose any liabilities on
either party not contemplated in this Agreement.
2.5 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Target Shares and the Subsidiary Shares as mutually agreed to by Buyer
and Seller and as set forth on Schedule 2.5 attached hereto, and such allocation
shall be used by Buyer and Seller for all relevant purposes, including the
preparation of all applicable Tax Returns.
2.6 Working Capital Payment. Working Capital (as defined below) shall
be fully accounted for in accordance with the provisions set forth below:
(a) No less than twenty (20) days prior to the Closing Date,
Seller shall deliver a notice to Buyer that sets forth Seller's good faith
estimate of Working Capital as of the close of business on the day immediately
preceding the Closing Date ("Estimated Closing Working Capital"). "Working
Capital" means, for all Stations, on a combined basis, as of any date of
determination, (a) the sum of (i) cash, (ii) Receivables (as defined below);
(iii) 75% of the value of the Aged Receivables (as defined below), provided
however that if Buyer decides to return the Aged Receivables to Seller as
provided in Section 2.6 (b)(2), then the Initial WC Statement and (as defined
below) shall not include 75% of the value of the Aged Receivables as part of
working capital and (iv) prepaid expenses minus (b) the sum of (i) accounts
payable and (ii) accrued expenses, in each case as of such date, calculated in
the same manner and using the same methods, as such line items on the Financial
Statements. For purposes of this section only, "Receivables" shall mean those
accounts receivable less than 120 days old and "Aged Receivables" shall mean
those accounts receivables more than 120 days old. Within two (2) business days
after the Closing Date, Buyer shall prepare and deliver to Seller a statement
setting forth Working Capital as of the close of business on the day immediately
preceding the Closing Date (the "Initial WC Statement"). During the fifteen (15)
days immediately following Seller's receipt of the Initial WC Statement, Seller
will be permitted to review Buyer's working papers relating to the Initial WC
Statement, all of Buyer's and each of the Companies' books and records with
respect thereto and such other books and records of Buyer and each Company as
Seller may reasonably request in connection with such review. The Initial WC
Statement shall become final and binding upon the Parties (and shall thereupon
become the "Final WC Statement," reflecting "Closing Working Capital") on the
30th day following receipt thereof by Seller, unless Seller shall provide a
written notice (the "Notice of Disagreement") of its disagreement with the
Initial WC Statement to Buyer prior to such date. Any Notice of Disagreement
shall specify in reasonable detail the nature of any disagreement so asserted.
If a timely Notice of Disagreement is received by Buyer, then the Initial WC
Statement
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(as revised in accordance with clause (x) or (y) below) shall become final and
binding upon the Parties, and become the Final WC Statement, on the earlier of
(x) the date on which the Parties resolve in writing any differences they have
with respect to any matter specified in the Notice of Disagreement, and agree
upon a Final WC Statement, or (y) the date on which a recognized accounting firm
agreed to by Buyer and Seller (the "Accounting Firm") finally resolves in
writing any matter specified in the Notice of Disagreement that are properly in
dispute by providing each of Buyer and Seller with a Final WC Statement. During
the thirty (30) days immediately following delivery to Buyer of a Notice of
Disagreement, Buyer and Seller shall seek in good faith to resolve in writing
(and thereby agree on a Final WC Statement) any differences that they may have
with respect to any matter specified in the Notice of Disagreement. At the end
of such 30-adjustment day period, Buyer and Seller shall submit to the
Accounting Firm for review and resolution all matters that remain in dispute and
that were properly included in the Notice of Disagreement, and, within thirty
(30) days of its receipt of such submission, the Accounting Firm shall make a
final determination, binding on the Parties, of Working Capital as of the close
of business on the day immediately preceding the Closing Date. Buyer and Seller
shall share equally the cost of the Accounting Firm's review and determination.
(b) At the Closing, the following shall occur:
(i) If the Estimated Closing Working Capital exceeds the Base Amount (as
defined below), then Seller shall retain the amount of Estimated Closing
Working Capital in excess of the Base Amount, with no change in Purchase Price.
If the Estimated Closing Working Capital is less than the Base Amount, then the
Purchase Price shall decreased by the excess of the Base Amount over the amount
of Estimated Closing Working Capital. The "Base Amount" shall equal $0.00.
(ii) With respect to the Aged Receivables, Buyer shall determine and notify
Seller in writing no later than five (5) days prior to the Closing Date if it
shall (a) return the Aged Receivables to Seller for purposes of collection; or
(b) retain the Aged Receivables, such Aged Receivables to be determined as of
the Closing Date, and pay to Seller 75% of the value of such Aged Receivables.
If Buyer elects to retain the Aged Receivables and pay the amount indicated
above, such payment shall be made to Seller on the Closing Date via a wire
transfer or other delivery of immediately available funds.
(c) In addition to the foregoing: if Estimated Closing Working
Capital exceeds Closing Working Capital by more than $50,000, then Seller shall
pay to Buyer an amount equal to the excess over $50,000, within ten (10)
business days after the Final WC Statement becomes final and binding on the
Parties, together with interest thereon from the Closing Date to the date of
payment at the prime rate of interest as published in the Money Rates column of
the Eastern Edition of the Wall Street Journal (or the average of such rates if
more than one rate is indicated) as of the Closing Date. If Closing Working
Capital is equal to Estimated Closing Working Capital, then neither Buyer nor
Seller shall owe any amount to the other Party pursuant to this section.
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(d) Buyer agrees that following the Closing through the date
that payment, if any, is made pursuant to this section, it will not, and will
cause the Companies not to, take any actions with respect to the accounting
books, records, policy, or procedure on which the Initial WC Statement is to be
based that are inconsistent with past practices of the Seller or that would make
it impossible or impractical to calculate Working Capital in the manner
utilizing the methods required hereby. Without limiting the generality of the
foregoing, no changes shall be made in any reserve or other account existing as
of the date of the most recent Financial Statements, except as a result of
events occurring after the date of the most recent Financial Statements and, in
such event, only in a manner consistent with the past practices of Seller.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
OF SELLER AND THE COMPANIES
The Seller and each of the Companies, jointly and severally, represent
and warrant to the Buyer the following:
3.1 Organization, Standing and Authority. Each of Seller and the
Companies is a corporation, duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its organization. Each of the
Companies is duly qualified to conduct business and is in good standing in
Puerto Rico. Schedule 3.1 sets forth a list of the jurisdictions of organization
of each of Seller and the Companies. Each of the Companies has the requisite
power and authority (a) to own, lease, and use its assets as presently owned,
leased, and used, and (b) to conduct its business and operations as presently
conducted.
3.2 Authorization and Binding Obligation. Each of the Companies and the
Seller has the requisite power and authority to execute, deliver, and perform
this Agreement and all other agreements to be executed and delivered by it
hereunder or in connection herewith and all necessary corporate action on the
part of each of the Seller and the Companies has been duly and validly taken to
authorize the execution, delivery and performance of this Agreement and such
other agreements and instruments to be executed and delivered by each of the
Seller and the Companies. This Agreement has been duly executed by each of the
Seller and the Companies and constitutes the legal, valid, and binding
obligation of each of the Seller and the Companies, enforceable against each of
the Seller and the Companies in accordance with its terms except as that
enforceability may be (a) limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and (b) subject to general principles of equity
(regardless of whether that enforceability is considered in a proceeding in
equity or at law).
3.3 Absence of Conflicting Agreements or Consents. Except as set forth
on Schedule 3.3, no consent, authorization, approval, order, license,
certificate or permit of or from or declaration or filing with any federal,
state, local, municipal, Puerto Rico or other governmental entity or other
tribunal is required for the execution, delivery and performance of this
Agreement or any of the agreements or instruments contemplated hereby. Except as
set forth on Schedule 3.3, neither the execution, delivery and performance of
this Agreement and such other agreements and instruments
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(with or without the giving of notice, the lapse of time, or both) nor the
consummation of the transactions contemplated hereby (i) conflicts with any
Certificate of Incorporation or Bylaws of the Seller or the Companies; (ii)
conflicts with, results in a breach of, or constitutes a default under any
applicable law, judgment, order, injunction, decree, rule, regulation or ruling
of any governmental entity or (iii) conflicts with, results in a breach of,
constitutes a default under, permits any party to terminate, modify, accelerate
the performance of or cancel the terms of, any agreement, lease, instrument of
indebtedness, license or other obligations to which any of the Seller or the
Companies is a party, or by which any of the Seller or the Companies may be
bound, such that Seller, WIO, Inc. or WOQI, Inc. could not convey the Target
Shares or the Subsidiary Shares, as applicable.
3.4 Licenses and FCC Licenses.
(a) Schedule 3.4 hereto contains a true and complete list of
the material FCC Licenses. The FCC Licenses are not subject to any conditions
outside of the ordinary course except for those conditions which would not have
a material adverse effect on the business or operations of the Stations, taken
as a whole. None of the FCC Licenses is subject to any restriction or condition
which would limit the full operation of the Stations as presently operated,
except for those restrictions which would not have a material adverse effect on
the business or operations of the Stations, taken as a whole. There are no
applications, proceedings, or complaints pending or, to the Knowledge of Seller,
threatened which may have a material adverse effect on the business or
operations of the Stations, taken as a whole (other than rulemaking proceedings
that apply to the radio broadcasting industry generally). The Companies are
qualified under the Communications Act (defined below) and the existing rules of
the FCC, to assign or transfer the FCC Licenses and consummate the transaction.
(b) Except as set forth on Schedule 3.4, the FCC Licenses
comprise all of the material licenses, permits and other authorizations
necessary to conduct the business and operations of the Companies in the manner
as they are now being conducted. Except as set forth on Schedule 3.4, each of
the FCC Licenses is in full force and effect, and are free and clear of any
restrictions which might limit the full operation of the Stations in the manner
and to the extent currently operated, except for those restrictions which would
not have a material adverse effect on the business or operation of the Stations,
taken as a whole. The Companies, including the Stations, have been and now are
operating, in all material respects, in accordance with the FCC Licenses and in
material compliance with the Communications Act of 1934, as amended (the
"Communications Act") and the rules, regulations and policies of the FCC and all
other applicable laws. The Stations are in material compliance with the FCC's
policy on exposure to radio frequency radiation. No renewal of any FCC License
would constitute a major environmental action under the rules of the FCC. Unless
otherwise validly authorized by the FCC, the Stations are operated at maximum
authorized power on assigned frequencies at the powers and heights authorized by
the FCC.
(c) The Companies have obtained, or by Closing will have, all
material Licenses.
3.5 Real Property. At Closing, Seller shall, or shall cause the
Companies to, convey to Buyer good and marketable title to the Assets free and
clear of all debts, liens, charges, security
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interests, mortgages, deeds of trust, pledges, judgments, trusts, adverse
claims, liabilities, collateral assignments, leases, easements, covenants,
restrictions, encumbrances and other impairments of title ("Liens"), other than
(i) Liens granted by, and reflecting the interests of, the owners of title to
the Assets and Real Property in the case of Assets and Real Property leased by
any of the Companies as lessee; and (ii) Permitted Liens. "Permitted Liens"
means (i) with respect to the Real Property, easements, restrictions, rights,
limitations or encumbrances of record which will not materially interfere with
the continued use of the Real Property as currently used after the Closing and
(ii) with respect to the Assets, materialmans' or similar Liens for ongoing or
recently completed work on the Assets, Liens for taxes not yet due and payable,
Liens expressly arising under any Contract, and Liens that do not materially
impair the value or functionality of any of the Assets or the operation of the
Stations. Except for leases to the Real Property, no leases have been
subordinated. The only Liens arising with respect to leases are those arising as
a result of another party's ownership of the leased property as applied to the
leasehold interest.
(b) Schedule 3.5 lists all of the material Real Property now
used in the operation of the Stations. To the Knowledge of Seller and the
Companies, there is no pending condemnation or similar proceeding affecting the
Real Property or any portion thereof. Except as otherwise disclosed on Schedule
3.5, the Companies are not in material default under any leases described on
Schedule 3.5. Subject to obtaining applicable Consents, the Companies have the
full legal power and authority to assign their rights under the leases described
on Schedule 3.5 to Buyer. All leasehold interests (including the improvements
thereon) described on Schedule 3.5 are available for immediate use in the
conduct of the business and operations of the Stations, subject to the consent
of the Companies' Landlords.
3.6 Personal Property Leases. Schedule 3.6 lists all of the material
Personal Property leases now used in the operation of the Stations. Except as
otherwise disclosed on Schedule 3.6, the Companies are not in material default
under any leases described on Schedule 3.6. Subject to obtaining applicable
Consents, the Companies have the full legal power and authority to assign their
rights under the leases described on Schedule 3.6 to Buyer.
3.7 Title to and Condition of Personal Property. Schedule 3.7 contains
a description of all items of Personal Property owned by the Companies with a
value of more than TEN THOUSAND DOLLARS ($10,000). Except for Permitted Liens or
Liens that will be released at Closing, the Companies own and will have on the
Closing Date, good and marketable title to all Personal Property they purport to
own, including such Personal Property as is reflected on the Stub Financials
plus such additions and less such disposals since the date of the Stub
Financials as are in the Ordinary Course of Business, and none of such Personal
Property is, or at the Closing will be, subject to any Liens other than
Permitted Liens. The tangible Personal Property and fixtures owned or used by
the Companies are sufficient to operate the Stations in all material respects in
accordance with the terms of their FCC Licenses and the rules and regulations of
the FCC.
3.8 Contracts. Schedule 3.8 hereto contains a list of all Contracts in
effect on the date hereof relating to the Companies other than Contracts (a)
where the obligations thereunder are solely for the payment of money and not for
the performance of services and (i) will not be more than FIFTY THOUSAND DOLLARS
($50,000) in respect of any particular Station, or (ii) TWO
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HUNDRED FIFTY THOUSAND DOLLARS ($250,000) in the aggregate for all of the
Stations, and (b) for the sale of advertising time of the Stations for cash
consideration (such Contracts as are listed in Schedule 3.8, the "Material
Contracts"). All of the Contracts listed on Schedule 3.8 are in full force and
effect in all material respects, and are valid, binding and enforceable in
accordance with their terms. There is not under any Contract listed on Schedule
3.8 any material default or breach by the Companies, or to Seller's and the
Companies' Knowledge, any other party. The Contracts listed on Schedule 3.8,
together with the Contracts not required to be listed on such Schedule 3.8, are
the only contractual agreements necessary to carry out the business and
operations of the Companies and the Stations as currently conducted.
3.9 Consents. Schedule 3.9 sets forth those Material Contracts which
require Consent to consummate the transactions contemplated by this Agreement.
Except for the FCC Consent, the Hart-Scott-Rodino Act approval and the Consents
described in Schedule 3.9 hereto, no consent, approval, permit or authorization
of, or declaration to or filing with any governmental or regulatory authority,
or any other third party is required to consummate the transactions contemplated
by this Agreement, and to permit Seller and the Companies to assign or transfer
the Target Shares or the Subsidiary Shares to Buyer.
3.10 Trademarks, Trade Names and Copyrights. Schedule 3.10 hereto is a
true and complete list of all material Intellectual Property owned or used by
the Companies. To the Knowledge of Seller or the Companies, the operation of
their businesses do not and have not infringed, misappropriated or otherwise
conflicted with any proprietary rights or intellectual property rights of any
third parties. To the Knowledge of Seller or the Companies, there have been no
notices of any claimed conflict, violation or infringement of such Intellectual
Property rights, and to Seller's and the Companies' Knowledge, none of such
Intellectual Property rights are being infringed by any third party.
3.11 Financial Statements. Schedule 3.11 hereto contains true and
complete copies of (a) the financial statements of the Companies, which
financial statements contain balance sheets and profit and loss statements as of
and for fiscal years ended December 31, 1996 (the "1996 Financials"), December
31, 1997 (the "1997 Financials"), and December 31, 1998 (the "1998 Financials"),
and (b) an unaudited balance sheet and profit and loss statement of the
Companies as of and for the six months ended June 30, 1998 and 1999 (the "Stub
Financials") (the 1996 Financials, the 1997 Financials, the 1998 Financials and
the Stub Financials are collectively referred to herein as the "Financial
Statements"). The 1996 Financials, 1997 Financials, and 1998 Financials are
audited. The Financial Statements (together with the notes related thereto) were
prepared in accordance with GAAP and present fairly, in all material respects,
the operating income and financial condition of the Companies as of their
respective dates and the results of operations for the periods then ended,
subject, with respect to the Stub Financials, to the absence of footnotes and to
normal, recurring year-end adjustments.
3.12 Employees and Employee Benefit Plans.
(a) A complete list of all employees of each Company, as of
June 30, 1999, is set forth on Schedule 3.12.
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(b) Schedule 3.12 lists each Employee Benefit Plan that the
Companies maintain or to which the Companies contribute.
(c) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation in all respects
with the applicable requirements of ERISA and the Code, except where the failure
to comply would not have a material adverse effect on the financial condition of
the Seller and the Companies taken as a whole.
(d) All contributions (including all employer contributions
and employee salary reduction contributions) which are due have been paid to
each such Employee Benefit Plan which is an Employee Pension Benefit Plan.
(e) Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan has received a determination letter from the Internal
Revenue Service to the effect that it meets the requirements of Code Section
401(a).
(f) As of the last day of the most recent prior plan year, the
market value of assets under each such Employee Benefit Plan which is an
Employee Pension Benefit Plan (other than any Multiemployer Plan) equaled or
exceeded the present value of liabilities thereunder (determined in accordance
with then current funding assumptions).
(g) The Seller and the Companies have made available to the
Buyer copies of the plan documents and summary plan descriptions, the most
recent determination letter received from the Internal Revenue Service, the most
recent Form 5500 Annual Report, and all related trust agreements, insurance
contracts, and other funding agreements which implement each such Employee
Benefit Plan.
(h) With respect to each Employee Benefit Plan that any of the
Companies maintains or ever has maintained or to which any of them contributes,
ever has contributed, or ever has been required to contribute:
(i) No such Employee Benefit Plan which is an
Employee Pension Benefit Plan (other than any Multiemployer
Plan) has been completely or partially terminated or been the
subject of a Reportable Event as to which notices would be
required to be filed with the PBGC. No proceeding by the PBGC
to terminate any such Employee Pension Benefit Plan (other
than any Multiemployer Plan) has been instituted.
(ii) No action, suit, proceeding, hearing, or
investigation with respect to the administration or the
investment of the assets of any such Employee Benefit Plan
(other than routine claims for benefits) is pending.
(iii) None of the Companies has incurred any
liability to the PBGC (other than PBGC premium payments) or
otherwise under Title IV of ERISA (including any withdrawal
liability) with respect to any such Employee Benefit Plan
which is an Employee Pension Benefit Plan.
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3.13 Labor Relations. None of the Companies is a party to, or has
agreed to recognize any union or any collective bargaining agreement, nor has
any union or collective bargaining unit been certified as representing any of
their employees. As of the date hereof, the Companies have complied in all
material respects with all applicable laws, rules and regulations relating to
the employment of labor, are not engaged in any unfair labor practices and as of
the date hereof the Companies have not received any written notice alleging that
they have failed to comply with any such laws, rules or regulations. No
controversies, charges, grievances, disputes or proceedings are pending or, to
the Knowledge of the Companies or Seller, threatened, against any of the
Companies before any court, federal, state, local or Puerto Rico governmental
agency, commission, department or other entity, including, without limitation,
the National Labor Relations Board or the Equal Employment Opportunity
Commission, the FCC, any state or local agency or otherwise, except as disclosed
in Schedule 3.13 hereto. There is no labor strike, slowdown, work stoppage or
lockout actually pending or, to the Knowledge of Seller or the Companies,
threatened against or affecting any of the Companies. To the Knowledge of Seller
and the Companies, no union organizational campaign or representation petition
is currently pending with respect to the employees of any of the Companies.
3.14 Taxes. Except as set forth on Schedule 3.14:
(i) All Tax Returns of the Companies that are
required to be filed on or before the Closing Date have been
or will be duly filed on a timely basis (taking into account
any applicable extensions) under the statutes, rules and
regulations of each jurisdiction in which such Tax Returns are
required to be filed. All such Tax Returns are complete and
accurate in all material respects. All Taxes, with respect to
the Companies whether or not reflected on the Tax Returns, for
all periods, or portions thereof, ending on or before the
Closing Date have been or will be timely paid on or before the
Closing Date, or provisions for the payment thereof have been
or will be made on or before the Closing Date, by or on behalf
of the Companies.
(ii) No claim for assessment or collection of Taxes
has been asserted against the Companies. None of the Companies
is a party to any pending audit, action, proceeding or
investigation by any governmental entity for the assessment or
collection of Taxes.
(iii) The Companies have not waived or extended the
statute of limitations for the assessment or collection of
Taxes. There are no liens or encumbrances related to Taxes on
any of the Assets of the Companies (other than for current
Taxes not yet due and payable).
(iv) The charges, accrual and reserves with respect
to Taxes on the Final WC Statement will be adequate and at
least equal to the Companies outstanding liability for Taxes
with respect to all periods, or portions thereof, ending on or
before the Closing Date.
(v) Since October 23, 1998 through the date hereof,
none of the Companies have generated any subpart F income, as
defined in section 952 of the
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Code. Seller makes no representation concerning whether or to
what extent the Companies will generate subpart F income, as
defined in section 952 of the Code, after the Closing Date.
3.15 Claims; Legal Actions. Except as set forth on Schedule 3.15,
and except with respect to environmental matters, there is no legal action,
counterclaim, suit, inquiry, judicial or administrative proceeding,
investigation, arbitration, governmental investigation or other legal,
administrative or Tax proceeding, nor any order, decree or injunctions,
judgment, in progress or pending, or to Seller's or the Companies' Knowledge,
threatened against the Companies or any of their respective properties or
assets, other than those that would not have a material adverse effect on the
financial condition or business operations of the Companies or the Stations,
taken as a whole.
3.16 Laws. Except with respect to environmental matters, to the
Knowledge of Seller and the Companies, the Companies have complied in all
respects with all applicable federal, state, local, municipal, Puerto Rico and
foreign laws, rules, regulations, ordinances, judgments, orders and decrees,
except for any noncompliance which would not have a material adverse effect on
the financial condition or business operations of the Companies or the Stations
taken as a whole.
3.17 Environmental Matters. Except as set forth on Schedule 3.17 or
as permitted by or consistent with applicable Environmental Laws, and anything
in this Agreement notwithstanding, (i) the Companies' use of the Assets and Real
Property is in compliance in all respects with Environmental Laws except for
noncompliance which would not have a material adverse effect on the business or
operations of the Companies or the Stations, taken as a whole; (ii) there are no
actions, suits, claims or proceedings based on Environmental Laws pending or, to
the Knowledge of Seller, threatened against the Company relating to the
ownership or operation of the Stations except for those actions, suits, claims
or proceedings that would not have a material adverse effect on the business or
operations of the Companies or the Stations, taken as a whole; and (iii) to the
Knowledge of Seller, the Stations are owned and operated in compliance in with
Environmental Laws except for noncompliance which would not have a material
adverse effect on the business or operations of the Companies or the Stations,
taken as a whole.
3.18 Target and Subsidiary Shares. Each of the Seller, WOQI, Inc.,
and WIO, Inc. holds of record and owns beneficially all of the issued and
outstanding Target Shares or Subsidiary Shares, as applicable, free and clear of
any restrictions on transfer (other than restrictions under the Securities Act
and state securities laws), taxes, Liens, options, warrants, purchase rights,
contracts, commitments, equities, claims, and demands. None of the Seller, WOQI,
Inc. or WIO, Inc. is a party to any option, warrant, purchase right, or other
contract or commitment that could require any of them to sell, transfer, or
otherwise dispose of any capital stock of the Companies (other than this
Agreement). None of the Seller, WOQI, Inc. or WIO, Inc. is a party to any voting
trust, proxy, or other agreement or understanding with respect to the voting of
any capital stock of the Companies.
3.19 Capitalization. The entire authorized capital stock of each of
the Companies is set forth on Schedule 3.19, including the number of Target
Shares held in treasury. All of the issued and outstanding Target Shares have
been duly authorized, are validly issued, fully paid, and
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nonassessable, and are held of record by the Seller. There are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
the Companies to issue, sell, or otherwise cause to become outstanding any of
their capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to the
Companies.
3.20 Subsidiaries. Except as set forth on Schedule 3.20, the Companies
do not have any Subsidiaries. Set forth for each Subsidiary of the Companies on
Schedule 3.20 is (a) the number of shares of authorized capital stock of each
class of its capital stock, (b) the number of issued and outstanding shares of
each class of its capital stock, the names of the holders thereof, and the
number of shares held by each such holder, and (c) the number of shares of its
capital stock held in treasury. All of the issued and outstanding shares of
capital stock of each Subsidiary of the Companies have been duly authorized and
are validly issued, fully paid, and nonassessable.
3.21 Brokers' Fees. Neither the Seller nor any of the Companies has any
liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement.
3.22 Certain Business Relationships with Seller and the Companies. The
Seller has not been involved in any material business arrangement or
relationship with any of the Companies within the past 12 months and does not
own any material Asset, tangible or intangible, which is used in the business of
any of the Companies.
3.23 Trade Deals. Schedule 3.23 contains a list of all of the Trade
Deals as of the date listed thereon involving the Stations and correctly sets
forth the balance of the Companies' obligations under the caption "Air Time Due
Client" under each such Trade Deal at such time.
3.24 No Undisclosed Liabilities. None of the Companies has any
liabilities or obligations of any nature (whether known or unknown and whether
absolute, accrued, contingent, or otherwise) except for liabilities or
obligations reflected or reserved against in the Financial Statements and
current liabilities incurred in the Ordinary Course of Business since the date
of the Stub Financials.
3.25 Books and Records. The books of account, minute books, stock
record books, and other records of the Companies, all of which have been made
available to Buyer, are complete and correct in all material respects and have
been maintained in accordance with sound business practices. In all material
respects, the minute books of the Companies contain accurate and complete
records of all meetings held of, and corporate action taken by, the
stockholders, the Boards of Directors, and committees of the Boards of Directors
of the Companies, and, to the Companies' Knowledge, no meeting of any such
stockholders, Board of Directors, or committee has been held for which minutes
have not been prepared and are not contained in such minute books. As of the
Closing, all of those books and records will be in the possession of the
respective Companies to which they apply.
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3.26 Disclosure. No representation or warranty of Seller or the
Companies in this Agreement omits to state a material fact necessary to make the
statements herein or therein, in light of the circumstances in which they were
made, not misleading.
3.27 Disclaimer of Other Representations and Warranties. EXCEPT AS
EXPRESSLY SET FORTH IN THIS ARTICLE III, THE SELLER AND COMPANIES MAKE NO
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, IN RESPECT
OF THE ASSETS, LIABILITIES OR OPERATIONS OF THE COMPANIES, INCLUDING, WITHOUT
LIMITATION, WITH RESPECT TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE, AND ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY
DISCLAIMED. BUYER HEREBY ACKNOWLEDGES AND AGREES THAT, EXCEPT TO THE EXTENT
SPECIFICALLY SET FORTH IN THIS ARTICLE III, THE BUYER IS PURCHASING THE TARGET
SHARES AND SUBSIDIARY SHARES ON AN "AS-IS, WHERE-IS" BASIS.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller and the Companies as follows:
4.1 Organization, Standing and Authority. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware. Buyer is duly qualified to conduct business and is in good standing in
each jurisdiction where it is required to be so qualified, except where a
failure to so qualify could not reasonably be expected to have a material
adverse effect on the business or operations of Buyer.
4.2 Authorization and Binding Obligation. Buyer has the requisite power
and authority to execute, deliver, and perform this Agreement and all other
agreements to be executed and delivered by it hereunder or in connection
herewith and all necessary corporate action on the part of Buyer has been duly
and validly taken to authorize the execution, delivery and performance of this
Agreement and such other agreements and instruments to be executed and delivered
by Buyer. This Agreement has been duly executed by Buyer and constitutes the
legal, valid, and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms except as that enforceability may be (a) limited by
any applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and (b) subject to
general principles of equity (regardless of whether that enforceability is
considered in a proceeding in equity or at law).
4.3 Absence of Conflicting Agreements or Consents. Except as set forth
on Schedule 4.3, no consent, authorization, approval, order, license,
certificate or permit of or from or declaration or filing with any federal,
state, local, municipal, Puerto Rico or other governmental entity or other
tribunal is required for the execution, delivery and performance of this
Agreement or any of the agreements or instruments contemplated hereby. Except as
set forth on Schedule 4.3, neither the execution, delivery and performance of
this Agreement and such other agreements and instruments (with or without the
giving of notice, the lapse of time, or both) nor the consummation of the
transactions contemplated hereby (i) conflicts with the Certificate of
Incorporation or Bylaws of
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Buyer; (ii) conflicts with, results in a breach of, or constitutes a default
under any applicable law, judgment, order, injunction, decree, rule, regulation
or ruling of any governmental entity or (iii) conflicts with, results in a
breach of, constitutes a default under, permits any party to terminate, modify,
accelerate the performance of or cancel the terms of, any agreement, lease,
instrument of indebtedness, license or other obligations to which Buyer is a
party, or by which Buyer may be bound, such that Buyer could not acquire the
Target Shares or the Subsidiary Shares.
4.4 Qualification. Buyer is legally, technically, and by the Financing
Date will be financially, and otherwise qualified under the Communications Act
and all rules, regulations and policies of the FCC to acquire the FCC Licenses
and own and operate the Stations without condition or waiver of any FCC rules or
regulations. There are no proceedings pending or, to the Knowledge of Buyer,
threatened in writing, or facts, which could reasonably be expected to
disqualify Buyer under the Communications Act or otherwise from acquiring the
FCC Licenses or owning and operating the Stations or would cause the FCC not to
approve the assignment or transfer of the FCC Licenses to Buyer. There is no
fact or circumstance relating to Buyer or any of its affiliates that could (i)
cause the FCC to deny the FCC Applications or (ii) delay processing of the FCC
Applications because the FCC is considering whether acts or omissions of Buyer
or any of its affiliates warrant admonishing Buyer or any of its affiliates, or
imposing a fine, forfeiture, or other penalty against Buyer or any of its
affiliates. Buyer is legally and, by the Financing Date will be financially,
qualified to purchase the Target Shares and the Subsidiary Shares and Buyer's
obligations hereunder are not contingent on obtaining financing.
4.5 Investment Purpose. Buyer is acquiring the Target Shares and the
Subsidiary Shares for investment purposes and not with a view toward or for sale
in connection with any distribution thereof, except in compliance with the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, and other applicable securities laws.
ARTICLE V.
PRE-CLOSING COVENANTS
The Parties agree as follows with respect to certain periods following
the execution of this Agreement:
5.1 General. Each of the Parties will use its reasonable best efforts
to take all action and to do all things necessary, proper, or advisable in order
to consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the Closing conditions set forth in
Article VII).
5.2 FCC Consent. Within seven (7) business days after the execution of
this Agreement, Buyer and Seller will file with the FCC appropriate applications
for the FCC Consent (the "FCC Applications"). The Parties shall prosecute the
FCC Applications with all reasonable diligence and otherwise use their
commercially reasonable efforts to obtain the FCC Consent as expeditiously as
practicable, provided, however, except as provided in the following sentence,
neither Buyer nor Seller shall be required to pay consideration to any third
party to obtain the FCC Consent. Buyer and Seller shall share equally the cost
of all FCC filing fees relating to this transaction.
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5.3 Hart-Scott-Rodino and Other Filings. Buyer and Seller shall
proceed, as expeditiously as possible following the execution of this Agreement,
to file proper applications and notices that may be required under the
Hart-Scott-Rodino Act in order to advise the Federal Trade Commission (the
"FTC") and the United States Department of Justice (the "DOJ") of the
transactions described herein. Buyer and Seller shall share equally all filing
fees associated with Hart-Scott-Rodino Act filings. To the extent required by
law, all of the parties shall proceed to obtain any other regulatory or
government consent or waiver and to effect any registrations or filings as may
be necessary to consummate the transactions contemplated hereby.
5.4 Operation of Business. Between the date hereof and the Commencement
Date of the TBA, the Seller shall not cause or permit any of the Companies to
engage in any practice, take any action, or enter into any transaction outside
the Ordinary Course of Business. Without limiting the generality of the
foregoing, between the date hereof and the Commencement Date of the TBA, the
Seller shall not cause or permit any of the Companies to engage in any practice,
take any action, or enter into any transaction the primary purpose or effect of
which will be to generate or preserve cash or cash equivalents.
5.5 Preservation of Business. Between the date hereof and the
Commencement Date of the TBA, unless otherwise set forth in the TBA, the Seller
will cause each of the Companies to keep its business and properties
substantially intact, including its present operations, physical facilities,
working conditions, and relationships with lessors, licensors, suppliers,
customers, and employees.
5.6 Inspections.
(a) Seller agrees that for a period of thirty (30) days after
the date hereof, Buyer shall have the right to inspect the facilities of the
Stations (the "Inspection Period"), at Buyer's sole cost and expense, to
conduct, among other things, an engineering inspection of the Stations'
facilities to determine compliance with the FCC's rules and regulations
pertaining to radio broadcast facilities, and a Phase I environmental assessment
(as that term is defined in ASTM Standard E-1527-97) of the Real Property and
the Stations' facilities. If at the end of the Inspection Period, it has been
determined (x) by a certified engineer that the facilities of the Stations are
not in material compliance with FCC rules and regulations; or (y) by a
recognized environmental consultant that the Stations' facilities or Real
Property are in material violation of Environmental Laws, Seller agrees to take
actions to remediate such noncompliance or violations, provided, however, that
Seller shall not be required to remediate if the total cost of such remediation
exceeds FIVE HUNDRED THOUSAND DOLLARS ($500,000), and Seller shall not be
required to remediate if Buyer has not provided notice of noncompliance or
violation, which notice shall include a copy of all relevant engineers' and/or
consultants' reports, a detailed description of the noncompliance or violation,
and detailed estimates of the cost of remediation, within 10 business days after
the Inspection Period. If the cost of the remediation exceeds FIVE HUNDRED
THOUSAND DOLLARS ($500,000), Seller has the right to (a) agree to perform the
remediation or (b) decline to perform the remediation. Seller shall notify Buyer
of its decision within fifteen (15) business days of receiving the notice of
noncompliance or violation. If Seller declines, then Buyer shall have the right
to terminate this Agreement, without penalty or costs, immediately upon
receiving such notice from Seller. If Seller agrees, Seller shall proceed with
reasonable diligence to
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take such actions and complete such actions prior to the Closing Date. Seller
and Buyer agree that if such actions reasonably cannot be remedied by the
Closing Date, Seller shall have the right to access the Real Property and the
Stations' facilities after the Closing Date in order to complete the
remediation. Notwithstanding the foregoing, Buyer acknowledges that Seller's
obligation to provide access to its Real Property and facilities of the Stations
for purpose of the inspections is limited to Seller's or the Companies'
reasonable efforts to obtain Landlord consents and cooperation with respect to
such access.
(b) In the event that the Phase I environmental assessment
provided for in the preceding section reasonably demonstrates the need for
sampling, then Buyer may undertake such sampling, at its expense, provided, that
in the event such sampling cannot be completed and the results reported to
Seller within the 30-day period provided for above, and that Buyer provides
written notice of and justification for such sampling (including the report of
the Phase I assessment) prior to the end of the 30-day period, then the time
allowed for completing such sampling and reporting same to Seller will be
extended for up to twenty (20) days. Upon a further request by Buyer, Seller
may, in its sole discretion, grant additional time to Buyer beyond such 20-day
extension to complete sampling.
(c) Seller's remediation obligations shall be deemed completed
when the condition or conditions remediated are no longer in material violation
of Environmental Laws or FCC rules and regulations. Seller shall have no further
obligations respecting any matters or conditions addressed in any Phase I
environmental assessments or engineering reports prepared pursuant to this
Section 5.6 and Seller shall be deemed to have fully complied with the
representations and warranties set forth in Section 3.4(b) and Section 3.17 (and
such representations and warranties shall automatically terminate) once the
condition or conditions, if any, have been remediated or if no conditions were
identified during the Inspection Period. In addition, after the Inspection
Period, Buyer is prohibited from making any claims against Seller for breaches
pursuant to Section 3.4(b) and Section 3.17.
(d) Notwithstanding the above, after the expiration of the
Inspection Period and prior to the Commencement Date of the TBA, unless
otherwise set forth in the TBA, Seller shall permit, and Seller shall cause each
of the Companies to permit, representatives of Buyer to have full access at all
reasonable times, and in a manner so as not to interfere with the normal
business operations of the Companies, to all premises, properties, personnel,
books, records (including tax records), contracts, and documents of or
pertaining to each of the Companies. Buyer will treat and hold as such any
Confidential Information it receives from any of Seller and the Companies, in
the course of the reviews contemplated by this section, will not use any of the
Confidential Information except in connection with this Agreement, and, if this
Agreement is terminated for any reason whatsoever, will return to the Seller all
tangible embodiments (and all copies) of the Confidential Information which are
in its possession.
5.7 Control of Station. This Agreement shall not be consummated until
after the FCC has given its written consent thereto, and notwithstanding
anything herein to the contrary, between the date of this Agreement and the
Closing Date, Buyer shall not directly or indirectly control, supervise or
direct, or attempt to control, supervise or direct the operation of the
Stations.
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5.8 Prorations/Trade Deals. On the Commencement Date of the TBA, or, in
the event the Parties do not consummate the TBA, on the Closing Date, all
expenses and income arising under the Contracts and Trade Deals shall be
prorated as set forth in the TBA. With respect to Trade Deals, the TBA shall
provide that such proration shall include an adjustment for the Trade Deals only
to the extent of any Net Negative Trade Balance (as defined below) and only to
the extent that the Net Negative Trade Balance exceeds Two Hundred Ninety-Eight
Thousand Six Hundred Twenty-Six Dollars ($298,626). "Net Negative Trade Balance"
means the extent, if any, to which the value (at current rates for time on the
Station in question as of the Commencement Date) of unfulfilled obligations of a
Station under Trade Deals exceeds the reasonable fair market value of any
consideration yet to be received by the Station pursuant to such Trade Deals.
Any necessary payments on account of such prorations shall be paid at the
Closing as an adjustment to the Purchase Price.
5.9 Buyer Financing. Buyer acknowledges that it is required to obtain
financing in order to purchase the Target Shares and the Subsidiary Shares.
Buyer agrees that if it has not obtained Adequate Financing (as defined below)
by December 15, 1999 (the "Financing Date"), then Seller shall have the right to
terminate this Agreement and to receive the Escrow Deposit as provided in the
Escrow Deposit Agreement. "Adequate Financing" shall mean if Buyer (i) completes
an Initial Public Offering ("IPO"), receives sufficient proceeds from the IPO to
cover the entire Purchase Price and certifies in writing that it has earmarked
or set aside such proceeds to purchase the Target Shares and the Subsidiary
Shares; or (ii) whether or not it has completed an IPO, has secured other
financing, the proceeds from which are sufficient to cover the entire Purchase
Price, has a firm written commitment from a reputable lender which explicitly
states that the funds will be set aside for the purchase of the Target Shares
and the Subsidiary Shares and not available for any other purposes, and has
certified in writing that these funds are sufficient to cover the entire
Purchase Price and will, in fact, be used to purchase the Target Shares and the
Subsidiary Shares.
5.10 TBA. On the date hereof, the Parties shall enter into the TBA.
After the Commencement Date of the TBA, neither Seller nor a Company shall be
deemed to have breached this Agreement with respect to any representation,
warranty, or covenant if such representation or warranty was true and correct or
such covenant had been performed to the extent required as of the Commencement
Date and such representation or warranty became not true and correct or such
covenant was not performed as a result of any acts or omissions by Buyer during
the period of the TBA or as a result of Buyer's performance or failure to
perform under the TBA. Notwithstanding the preceding sentence, Seller and the
Companies shall not be bound by the representations or warranties set forth in
the following sections in respect of periods following the Commencement Date:
3.8 (with respect to Contracts to be assigned to Buyer pursuant to the TBA), 3.9
(with respect to Contracts to be assigned to Buyer pursuant to the TBA), 3.12,
3.13, 3.24. All other representations and warranties of Seller and the
Companies, unless otherwise set forth therein, shall be true and correct as of
the date hereof and as of the Closing Date.
ARTICLE VI.
POST-CLOSING COVENANTS
The Parties agree as follows with respect to the period following the
Closing.
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6.1 General. In case at any time after the Closing any further action
is necessary to carry out the purposes of this Agreement, each of the Parties
will take such further action (including the execution and delivery of such
further instruments and documents) as any other Party reasonably may request,
all at the sole cost and expense of the requesting Party (unless the requesting
Party is entitled to indemnification therefor under Article VIII below).
6.2 Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(a) any transaction contemplated under this Agreement or (b) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving any of the Companies, each of the other Parties
will cooperate with him or it and his or its counsel in the contest or defense,
make available their personnel, and provide such testimony and access to their
books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Article VIII below).
6.3 Transition. The Seller will not take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of any of them from maintaining the same
business relationships with the Companies after the Closing as it maintained
with the prior to the Closing.
ARTICLE VII.
CONDITIONS TO OBLIGATION TO CLOSE
7.1 Conditions to Obligations of Seller and the Companies. The
obligations of Seller and the Companies to consummate the transactions to be
performed by it in connection with the Closing is subject to satisfaction of the
following conditions:
(a) The FCC Consent shall have been granted by the FCC. Any
applicable waiting period under the Hart-Scott-Rodino Act shall have expired or
been earlier terminated.
(b) As of the Closing Date, no action, claim, suit or
proceeding seeking to enjoin, restrain, or prohibit the consummation of the
transaction shall be pending before any court, the FCC, or any other
governmental authority; provided, however, that this condition may not be
invoked by a Party if any such action, suit, or proceeding was solicited or
encouraged by, or instituted as a result of any act or omission of, such Party;
and
(c) The delivery of the Purchase Price as set forth in Section
2.2.
7.2 Conditions to Obligation of Buyer. The obligation of Buyer to
consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
(a) The FCC Consent shall have been granted by the FCC. Any
applicable waiting period under the Hart-Scott-Rodino Act shall have expired or
been earlier terminated;
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(b) As of the Closing Date, no action, claim, suit or
proceeding seeking to enjoin, restrain, or prohibit the consummation of the
transaction shall be pending before any court, the FCC, or any other
governmental authority; provided, however, that this condition may not be
invoked by a Party if any such action, suit, or proceeding was solicited or
encouraged by, or instituted as a result of any act or omission of, such Party;
and
(c) The delivery by Seller of the Target Shares and the
Subsidiary Shares free and clear of all liens and encumbrances except as
otherwise provided herein.
ARTICLE VIII.
REMEDIES FOR BREACH OF THIS AGREEMENT
8.1 Survival of Representations and Warranties. Subject to Section 5.10
and except as provided in the succeeding sentence, the representations and
warranties of the parties contained in Articles III and IV above shall survive
the Closing hereunder and continue in full force and effect for a period of one
year thereafter, provided, however, that the representations and warranties
contained in Section 3.14 shall survive for the applicable statute of
limitations and the representations and warranties contained in Sections 3.5 and
3.7 with respect to good and marketable title to the Assets, owned Real
Property, and Personal Property shall survive for three years after the Closing.
8.2 Exclusive Remedy. Other than the right of Buyer to terminate this
Agreement as specified in Article X and the right of Buyer to specific
performance as specified in Section 8.8, the right to indemnification hereunder
shall be the exclusive remedy of Buyer in connection with any breach by Seller
or the Companies of any representation, warranty, or covenant hereunder.
8.3 Buyer's Right to Indemnification. Seller undertakes and agrees
that, if the Closing occurs, Seller shall indemnify, defend by counsel
reasonably acceptable to Buyer, and hold harmless Buyer, its affiliates,
successors and assigns and its respective directors, officers, employees,
shareholders, representatives and agents (hereinafter referred to collectively
as "Buyer Indemnitees") from and against and in respect of any and all losses,
costs, liabilities, claims, obligations, diminution in value and expenses,
including reasonable attorneys' fees, incurred or suffered by a Buyer Indemnitee
arising from a breach, misrepresentation, or other violation of any of Seller's
covenants, warranties or representations contained in this Agreement. The
foregoing indemnity is intended by Seller to cover all acts, suits, proceedings,
claims, demands, assessments, adjustments, diminution in value, costs, and
expenses with respect to any and all of the specific matters in this indemnity
set forth.
8.4 Seller's Right to Indemnification. Buyer undertakes and agrees
that, if the Closing occurs, Buyer shall indemnify, defend by counsel reasonably
acceptable to Seller, and hold harmless Seller, its affiliates, successors and
assigns and its respective directors, officers, employees, shareholders,
representatives and agents (hereinafter referred to collectively as "Seller
Indemnitees") from and against and in respect of any and all losses, costs,
liabilities, claims, obligations, diminution in value and expenses, including
reasonable attorneys' fees, incurred or suffered by a Seller Indemnitee arising
from a breach, misrepresentation, or other violation of any of Buyer's
covenants, warranties and representations contained in this Agreement. The
foregoing
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indemnity is intended by Buyer to cover all acts, suits, proceedings, claims,
demands, assessments, adjustments, costs, and expenses with respect to any and
all of the specific matters in this indemnity set forth.
8.5 Conduct of Proceedings. If any claim or proceeding covered by the
foregoing agreements to indemnify and hold harmless shall arise, the party who
seeks indemnification (the "Indemnified Party") shall give written notice
thereof to the other party (the "Indemnitor") promptly after the Indemnified
Party learns of the existence of such claim or proceeding; provided, however,
that the Indemnified Party's failure to give the Indemnitor prompt notice shall
not bar the Indemnified Party's right to indemnification unless such failure has
materially prejudiced the Indemnitor's ability to defend the claim or
proceeding. The Indemnitor shall have the right to employ counsel reasonably
acceptable to the Indemnified Party to defend against any such claim or
proceeding, or to compromise, settle or otherwise dispose of the same, if the
Indemnitor deems it advisable to do so (but only if such compromise, settlement
or other disposition does not in the reasonable judgment of the Indemnified
Party adversely affect the Indemnified Party), all at the expense of the
Indemnitor; provided that the Indemnitor shall not have the right to control the
defense of any such claim or proceeding unless it has acknowledged in writing
its obligation to indemnify the Indemnified Party fully from all liabilities
incurred as a result of such claim or proceeding and then and periodically
thereafter provides the Indemnified Party with reasonably sufficient evidence of
the ability of the Indemnitor to satisfy any such liabilities. The parties will
fully cooperate in any such action, and shall make available to each other any
books or records useful for the defense of any such claim or proceeding. If the
Indemnitor fails to acknowledge in writing its obligation to defend against or
settle such claim or proceeding within twenty (20) days after receiving notice
thereof from the Indemnified Party (or such shorter time specified in the notice
as the circumstances of the matter may dictate), the Indemnified Party shall be
free to dispose of the matter, at the expense of the Indemnitor (but only if
indemnification is adjudged to be proper), in any way in which the Indemnified
Party deems to be in its best interest.
8.6 Limits on and Conditions of Indemnification; Threshold and Cap.
Notwithstanding any other provision hereof, no Indemnified Party shall be
entitled to make a claim against an Indemnitor in respect of any breach of this
Agreement except to the extent that the aggregate amount of such damages exceeds
the amount of FOUR HUNDRED FIFTY THOUSAND DOLLARS ($450,000) (the "Threshold
Amount"); provided, however, that once such aggregate has been exceeded, such
Indemnitor shall only be liable for the amount that such damages exceed the
Threshold Amount. Notwithstanding any other provision of the Agreement, neither
the indemnity obligation of Seller nor the indemnity obligation of Buyer will
exceed NINE MILLION DOLLARS ($9,000,000). Amounts paid by Seller for remediation
pursuant to Section 5.6 will not be considered in determining whether the
Threshold Amount has been exceeded.
8.7 Tax Treatment of Indemnity Payments. The parties hereto agree that
any indemnity payments or other payments made under this Agreement shall be
considered to be an adjustment to the Purchase Price.
8.8 Buyer's Right of Specific Performance. The Parties recognize that
if, prior to Closing, Seller breaches this Agreement and refuses to close the
sale of the Target Shares and the Subsidiary
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Shares to Buyer under the provisions of this Agreement, monetary damages alone
would not be adequate to compensate Buyer for its injury. In such case,
therefore, Buyer shall be entitled, in addition to any other remedies available
(including but not limited to indemnification), to obtain Seller's specific
performance of the terms of this Agreement prior to Closing. If any action is
brought by Buyer to enforce this Agreement prior to Closing, Seller shall waive
the defense that there is an adequate remedy at law.
ARTICLE IX.
TAX MATTERS
The following provisions shall govern the allocation of responsibility
as between Buyer and Seller for certain tax matters following the Closing Date:
9.1 Preparation of Tax Returns. Seller shall prepare or cause to be
prepared, in a manner consistent with past practices, and file or cause to be
filed on a timely basis, taking into account any applicable extensions, all Tax
Returns for the Companies for all periods ending on or prior to the Closing Date
which are due to be filed after the Closing Date. Seller shall cause to be
timely paid all Taxes of the Companies required to be paid for the periods
covered by such Tax Returns. Buyer shall prepare or cause to be prepared, in a
manner consistent with past practices, and file or cause to be filed on a timely
basis, taking into account any applicable extensions, any Tax Returns for the
Companies for any Tax periods which begin before the Closing Date and end after
the Closing Date. Buyer shall cause to be timely paid all Taxes of the Companies
required to be paid for the periods covered by such Tax Returns.
9.2 Refunds. Any Tax refunds that are received by Buyer or the
Companies, and any amounts credited against Tax to which Buyer or the Companies
become entitled and receive an actual reduction in Taxes from such Credit, that
relate to periods, or portions thereof that end on or before the Closing Date
shall be for the account of Seller, and Buyer shall pay over to Seller any such
refund or the amount of any such credit within fifteen (15) days after receipt
or entitlement thereto provided, however that Buyer shall not be obligated to
pay over to Seller the amount of any such credit if Buyer or the Companies do
not receive an actual reduction in Taxes as a result of the credit within five
years of becoming entitled to such credit. Buyer agrees that if it or any of the
Companies have the option to elect to receive a Tax refund or credit for or on
behalf of any of the Companies with respect to periods, or portions thereof,
that end on or before the Closing Date, that Buyer or any of the Companies, as
the case may be, shall elect to receive a Tax refund. In addition, Buyer shall,
if Seller so requests and at Seller's expense, cause the Companies to file for
and obtain any refund to which Seller is entitled to under this Section 9.2.
Buyer shall permit Seller to control (at the Seller's expense) the prosecution
of such refund claim, and shall cause powers of attorney authorizing Seller to
represent the Companies before the relevant taxing authority with respect to
such refund to be executed, provided that Seller (i) shall keep Buyer informed
regarding the progress and substantive aspect of any such refund and (ii) shall
not compromise or settle any such refund without obtaining Buyer's consent,
which consent shall not be unreasonably withheld, if such compromise or
settlement would have the effect of increasing any Tax liability of a Company
for any taxable period ending after the Closing Date. In the event that any
refund or credit of Taxes for which a payment has been made pursuant to this
Section 9.2 is subsequently reduced or
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disallowed, the Seller shall indemnify and hold Buyer harmless for any Taxes
assessed against Buyer or the Companies by reason of the reduction or
disallowance.
9.3 Cooperation on Tax Matters. Buyer, the Companies and Seller shall
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the filing of Tax Returns pursuant to this Article and any
audit, litigation or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon the other party's request) the provision
of records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder.
9.4 Post-Closing Access. Buyer, for a period of six (6) years following
the Closing Date, shall make available during normal business hours, for audit,
inspection and copying by Seller, the Companies and their representatives,
solely for purposes related to Tax matters of Seller, the Companies and their
affiliates and upon reasonable notice, all records, files, documents and
correspondence transferred to it hereunder, provided, that Buyer's business
operations will not thereby be unreasonably interfered with.
9.5 Tax Sharing Agreements. All tax sharing agreements or similar
agreements with respect to or involving the Companies shall be terminated as of
the Closing Date and, after the Closing Date, the Companies shall not be bound
thereby or have any liability thereunder.
9.6 Transfer Taxes. Seller shall pay any and all excise, transfer,
stamp, documentary or other similar Taxes and fees (including any penalties and
interest) incurred as a result of Buyer's acquisition of the Companies pursuant
to this Agreement. Seller shall file all necessary Tax Returns with respect to
such Taxes and fees at its own expense.
9.7 Allocation of Taxes.
For purposes of this Agreement, in the case of Taxes that are payable
with respect to periods that begin before and end after the Closing Date, the
portion of such Taxes payable for the period ending on the Closing Date shall be
(i) in the case of Taxes based upon or measured by income, and in the case of
any sale or use tax, the amount which would be payable if the taxable year ended
as of the Closing Date and (ii) in the case of any other Tax, such as property,
the amount of such tax for the entire period multiplied by a fraction, the
numerator of which is the number of days in the period ending on the Closing
date and the denominator of which is the number of days in the entire period.
ARTICLE X.
TERMINATION
10.1 Termination of Agreement. The Parties may terminate this
Agreement only as provided below.
(a) Buyer and Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing.
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(b) Seller may terminate this Agreement, and shall be entitled
to the Escrow Deposit, in the event that (i) Buyer is unable to obtain Adequate
Financing, as set forth in Section 5.9; (ii) Buyer fails to close the
transaction contemplated hereby by the Outside Date for any reason other than
the reasons for termination by Buyer set forth in Section 10.1(c); (iii) any
condition to Seller's or the Companies' obligations to Close as set forth in
Section 7.1 remains unsatisfied as of the Outside Date, as defined below, for
any reason related to Buyer, provided, that Seller cannot exercise such right to
terminate if the failure of such condition to be satisfied is also due to any
reason related to Seller or the Companies.
(c) Buyer may terminate this Agreement, and shall be entitled
to return of the Escrow Deposit, in the event that (i) any condition to Buyer's
obligation to close as set forth in Section 7.2 remains unsatisfied as of the
Outside Date for any reason related to Seller or the Companies; provided, that
Buyer cannot exercise such right to terminate if the failure of such condition
to be satisfied is also due to any reason related to Buyer; or (ii) if any of
the Companies or their subsidiaries, as appropriate, do not validly hold
material FCC Licenses as of the Outside Date. In the event of any breach by
Seller or any of the Companies of any representation, warranty, or covenant
hereunder, other than as specifically enumerated in the preceding sentence,
Buyer shall remain obligated to Close the transaction contemplated hereby, and
Buyer's sole remedy will be indemnification as provided in Article VIII.
(d) Unless otherwise terminated pursuant to the provisions of
this Article, or unless terminable pursuant to Sections 10.1(b) or 10.1(c), any
Party may terminate this Agreement if the Closing has not occurred by June 30,
2000 (the "Outside Date"). In the case of termination for reasons other than as
set forth in Sections 10.1(b), Buyer shall be entitled to return of the Escrow
Deposit.
10.2 Effect of Termination. Unless otherwise set forth herein or
above, if any Party terminates this Agreement pursuant to Section 10.1 above,
all rights and obligations of the Parties hereunder shall terminate without any
liability of any Party to any other Party (except for any liability of any Party
then in breach), provided, however, that the confidentiality provisions
contained herein shall survive termination.
ARTICLE XI.
MISCELLANEOUS
11.1 Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the subject matter
of this Agreement without the prior written approval of the Buyer and the
Seller; provided, however, that any Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its reasonable best efforts to advise the other
Parties prior to making the disclosure).
11.2 No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
28
<PAGE> 34
11.3 Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
11.4 Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of the Buyer and the Seller; provided, however, that the Buyer
may (i) assign any or all of its rights and interests hereunder to one or more
of its affiliates and (ii) designate one or more of its affiliates to perform
its obligations hereunder (in any or all of which cases the Buyer nonetheless
shall remain responsible for the performance of all of its obligations
hereunder).
11.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
11.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.7 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to Seller:
Chancellor Media Corporation of Los Angeles
c/o AMFM Inc.
1845 Woodall Rodgers Freeway
Suite 1300
Dallas, Texas 75201
Attention: William Banowsky, Esq.
Telecopier: (512) 340-7890
with copy to:
Latham & Watkins
Suite 1300
1001 Pennsylvania Avenue., N.W.
Washington, D.C. 20004
Attention: Eric Bernthal, Esq.
Telecopier: (202) 637-2201
If to Buyer:
29
<PAGE> 35
Spanish Broadcasting System of Puerto Rico, Inc.
3191 Coral Way, #805
Miami, Florida 33145
Attention: Raul Alarcon, Jr., President
Telecopier: (305) 444-2179
With a copy to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
901 Fifteenth Street, N.W.
Washington, D.C. 20005-2327
Attention: Jason L. Shrinsky, Esq.
Telecopier: (202) 682-3580
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
11.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of New York without giving
effect to any choice or conflict of law provision or rule (whether of the State
of New York or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of New York.
11.9 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
11.10 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
11.11 Expenses. Each of the Parties will bear his or its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby, unless otherwise set forth
herein.
11.12 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this
30
<PAGE> 36
Agreement shall be construed as if drafted jointly by the Parties and no
presumption or burden of proof shall arise favoring or disfavoring any Party by
virtue of the authorship of any of the provisions of this Agreement. Any
reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. The word "including" shall mean including
without limitation.
11.13 Incorporation of Exhibits, Annexes, and Schedules. The Exhibits
and Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
31
<PAGE> 37
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
SPANISH BROADCASTING SYSTEM OF PUERTO RICO, INC.
By: /s/ Joseph A. Garcia
--------------------------------------------
Name: Joseph A. Garcia
------------------------------------------
Title: CFO
-----------------------------------------
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
By: /s/ William S. Banowsky
--------------------------------------------
Name: William S. Banowsky
------------------------------------------
Title: Executive Vice President
-----------------------------------------
PRIMEDIA BROADCAST GROUP, INC.
By: /s/ William S. Banowsky
--------------------------------------------
Name: William S. Banowsky
------------------------------------------
Title: Executive Vice President
-----------------------------------------
WIO, INC.
By: /s/ William S. Banowsky
--------------------------------------------
Name: William S. Banowsky
------------------------------------------
Title: Executive Vice President
-----------------------------------------
CADENA ESTEREOTEMPO, INC.
By: /s/ William S. Banowsky
--------------------------------------------
Name: William S. Banowsky
------------------------------------------
Title: Executive Vice President
-----------------------------------------
32
<PAGE> 38
PORTORICAN AMERICAN BROADCASTING, INC.
By: /s/ William S. Banowsky
--------------------------------------------
Name: William S. Banowsky
------------------------------------------
Title: Executive Vice President
-----------------------------------------
WLDI, Inc.
By: /s/ William S. Banowsky
--------------------------------------------
Name: William S. Banowsky
------------------------------------------
Title: Executive Vice President
-----------------------------------------
WPRC, INC.
By: /s/ William S. Banowsky
--------------------------------------------
Name: William S. Banowsky
------------------------------------------
Title: Executive Vice President
-----------------------------------------
WOYE, iNC.
By: /s/ William S. Banowsky
--------------------------------------------
Name: William S. Banowsky
------------------------------------------
Title: Executive Vice President
-----------------------------------------
WZNT, iNC.
By: /s/ William S. Banowsky
--------------------------------------------
Name: William S. Banowsky
------------------------------------------
Title: Executive Vice President
-----------------------------------------
WOQI, INC.
By: /s/ William S. Banowsky
--------------------------------------------
Name: William S. Banowsky
------------------------------------------
Title: Executive Vice President
-----------------------------------------
33
<PAGE> 39
SCHEDULE 2.5
ALLOCATION OF PURCHASE PRICE
<TABLE>
<S> <C>
Primedia Broadcast Group, Inc. $ 0
WZNT, Inc. $23,508,000
WOYE, Inc. $ 8,496,000
WLDI, Inc. $16,920,000
WRPC, Inc. $ 4,005,000
WOQI, Inc. $ 3,510,000
WIO, Inc. $33,561,000
</TABLE>
<PAGE> 40
SCHEDULE 3.1
JURISDICTION OF ORGANIZATION
<TABLE>
<CAPTION>
Entity Jurisdiction
------ ------------
<S> <C>
Chancellor Media Corporation of Delaware
Los Angeles
Primedia Broadcast Group, Inc. Puerto Rico
WIO, Inc. Puerto Rico
WLDI, Inc. Puerto Rico
WOQI, Inc. Puerto Rico
WPRC, Inc. Puerto Rico
WOYE, Inc. Puerto Rico
WZNT, Inc. Puerto Rico
Cadena Estereotempo, Inc. Puerto Rico
Portorican American Broadcasting, Inc. Puerto Rico
</TABLE>
<PAGE> 41
SCHEDULE 3.3
SELLER'S CONSENTS
1. FCC Consent
2. Expiration or termination of the applicable waiting period under the
Hart-Scott Rodino Act
3. Consents described on Schedule 3.9
<PAGE> 42
SCHEDULE 3.4
FCC LICENSES AND MATTERS
A. LICENSEE: CADENA ESTEREOTEMPO, INC.
MAIN STATION LICENSES
<TABLE>
<CAPTION>
Call Sign Frequency Community of License License File Number Expiration Date
- --------- --------- -------------------- ------------------- ---------------
<S> <C> <C> <C> <C>
WIOA(FM) 99.9 MHz San Juan, PR BLH-980911KC 02/01/04
WIOB(FM) 97.5 MHz Mayaguez, PR BLH-951020KC 02/01/04
WIOC(FM) 105.1 MHz Ponce, PR BLH-990225KF 02/01/04
</TABLE>
BOOSTER LICENSE
<TABLE>
<CAPTION>
Call Sign Associated Main Station Service Area License File Number Expiration Date
- --------- ----------------------- ------------ ------------------- ---------------
<S> <C> <C> <C> <C>
W291AC WIOA(FM) Juana Diaz, PR BLFTB-961003TC 02/01/04
WIOB-FM1 WIOB(FM) San German, PR BLFTB-861003TG 02/01/04
</TABLE>
<PAGE> 43
A. LICENSEE: CADENA ESTEREOTEMPO, INC.
AUXILIARY LICENSES
<TABLE>
<CAPTION>
Call Sign Associated Main Station Service License File Number Expiration Date
- --------- ----------------------- ------- ------------------- ---------------
<S> <C> <C> <C> <C>
WLO256 WIOA(FM) Aural STL BPLST-870914MD 02/01/04
KUQ48 WIOB(FM) Aural STL 502960 02/01/04
WAW453 WIOB(FM) Aural Intercity Relay 500433 02/01/04
WHN214 WIOB(FM) Aural Intercity Relay 502961 02/01/04
WPNI500 WIOB(FM) Aural Intercity Relay 502959 02/01/04
WAW481 WIOC(FM) Aural Intercity Relay 500434 02/01/04
</TABLE>
CONSTRUCTION PERMIT
<TABLE>
<CAPTION>
Call Sign Frequency Community of License Permit File Number Expiration Date
- --------- --------- -------------------- ------------------ ---------------
<S> <C> <C> <C> <C>
WIOB(FM) 97.5 MHz Mayaguez, PR BPH-961213IC 08/20/00
</TABLE>
2
<PAGE> 44
B. LICENSEE: WLDI, INC.
MAIN STATION LICENSE
<TABLE>
<CAPTION>
Call Sign Frequency Community of License License File Number Expiration Date
- --------- --------- -------------------- ------------------- ---------------
<S> <C> <C> <C> <C>
WCOM(FM) 94.7 MHz Bayamon, PR BLH-850603KZ 02/01/04
</TABLE>
AUXILIARY LICENSE
<TABLE>
<CAPTION>
Call Sign Associated Main Station Service License File Number Expiration Date
- --------- ----------------------- ------- ------------------- ---------------
<S> <C> <C> <C> <C>
KKT92 WCOM(FM) Aural STL 501913 02/01/04
</TABLE>
3
<PAGE> 45
C. LICENSE: PORTORICAN AMERICAN BROADCASTING, INC.
MAIN STATION LICENSE
<TABLE>
<CAPTION>
Call Sign(1) Frequency Community of License License File Number Expiration Date
- ---------- --------- -------------------- ------------------- ---------------
<S> <C> <C> <C> <C>
WZMT((FM) 93.3 MHz Ponce, PR BLH-4398 02/01/04
</TABLE>
AUXILIARY LICENSES
<TABLE>
<CAPTION>
Call Sign Associated Main Station Service License File Number Expiration Date
- --------- ----------------------- ------- ------------------- ---------------
<S> <C> <C> <C> <C>
KPM574 WZMT(FM) RP Auxiliary Remote 9401480659 02/01/04
Pickup
KQT856 WZMT(FM) RP Auxiliary Remote 9401480660 02/01/04
Pickup
KQT857 WZMT(FM) RP Auxiliary Remote 9401480663 02/01/04
Pickup
KK7946 WZMT(FM) RP Auxiliary Remote 922545 02/01/04
Pickup
KSK902 WZMT(FM) RP Auxiliary Remote 911597 02/01/04
Pickup
WPMH794 WZMT(FM) RP Auxiliary Remote 9806D110763 02/01/04
Pickup
</TABLE>
- ----------
(1) The FCC granted a call sign change request, filed on 6/14/99, from WOQI to
WZMT.
4
<PAGE> 46
D. LICENSEE: WOYE, INC.
MAIN STATION LICENSE
<TABLE>
<CAPTION>
Call Sign Frequency Community of License License File Number Expiration Date
- --------- --------- -------------------- ------------------- ---------------
<S> <C> <C> <C> <C>
WOYE-FM 94.1 MHz Mayaguez, PR BLH-781219AD 02/01/04
</TABLE>
TRANSLATOR LICENSE
<TABLE>
<CAPTION>
Call Sign Associated Main Station Service Area License File Number Expiration Date
- --------- ----------------------- ------------ ------------------- ---------------
<S> <C> <C> <C> <C>
W276AI WOYE-FM Ponce, PR BLFT-860609TH 02/01/04
</TABLE>
AUXILIARY LICENSES
<TABLE>
<CAPTION>
Call Sign Associated Main Station Service License File Number Expiration Date
- --------- ----------------------- ------- ------------------- ---------------
<S> <C> <C> <C> <C>
WCD959 WOYE-FM Aural STL BMLST-850725MQ 02/01/04
WPNA849 WOYE-FM Aural Intercity Relay 501859 02/01/04
WPNH659 WOYE-FM Aural Intercity Relay 502962 02/01/04
KY7776 WOYE-FM Remote Pickup BRRE7810020N 02/01/04
WFW654 WOYE-FM Aural Intercity Relay BPLIC-790321 02/01/04
</TABLE>
- ----------
WOYE-FM is currently operating under Special Temporary Authority
("STA") while the station constructs a new antenna tower. The STA was
granted July 9, 1999 and expires on October 9, 1999.
5
<PAGE> 47
D. LICENSEE: WOYE, INC.
APPLICATIONS
<TABLE>
<CAPTION>
Call Sign FCC File Number Explanation
- --------- --------------- -----------
<S> <C> <C>
WOYE-FM BMLH-990720KA Modify Main Station License for installation of a new antenna.
</TABLE>
6
<PAGE> 48
E. LICENSEE: WRPC, INC.
MAIN STATION LICENSE
<TABLE>
<CAPTION>
Call Sign Frequency Community of License License File Number Expiration Date
- --------- --------- -------------------- ------------------- ---------------
<S> <C> <C> <C> <C>
WCTA-FM 95.1 MHz San German, PR BLH-6720 02/01/04
</TABLE>
AUXILIARY LICENSES
<TABLE>
<CAPTION>
Call Sign Associated Main Station Service License File Number Expiration Date
- --------- ----------------------- ------- ------------------- ---------------
<S> <C> <C> <C> <C>
BLP-00544 WCTA-FM LP Auxiliary Low Power 830407MM 02/01/04
</TABLE>
APPLICATIONS
<TABLE>
<CAPTION>
Call Sign FCC File Number Explanation
- --------- --------------- -----------
<S> <C> <C>
WCTA-FM BMLH-990720KB Modify Main Station License for installation of a new antenna.
</TABLE>
- --------
WCTA-FM is currently operating under Special Temporary Authority
("STA") while the station constructs a new antenna tower. The STA was
granted July 9, 1999 and expires on October 9, 1999.
7
<PAGE> 49
F. LICENSEE: WZNT, INC.
MAIN STATION LICENSE
<TABLE>
<CAPTION>
Call Sign Frequency Community of License License File Number Expiration Date
- --------- --------- -------------------- ------------------- ---------------
<S> <C> <C> <C> <C>
WZNT(FM) 93.7 MHz San Juan, PR BLH-6968 02/01/04
</TABLE>
BOOSTER LICENSE
<TABLE>
<CAPTION>
Call Sign Associated Main Station Service Area License File Number Expiration Date
- --------- ----------------------- ------------ ------------------- ---------------
<S> <C> <C> <C> <C>
WZNT-FM1 WZNT(FM) Cagus, PR BLFTB-861210TB 02/01/04
</TABLE>
APPLICATIONS
<TABLE>
<CAPTION>
Call Sign FCC File Number Explanation
- --------- --------------- -----------
<S> <C> <C>
WZNT(FM) BLH-980805KG Application to cover a construction permit to relocate the station.
</TABLE>
8
<PAGE> 50
SCHEDULE 3.5
REAL PROPERTY AND LEASEHOLD INTERESTS
OWNED REAL PROPERTY
<TABLE>
<CAPTION>
LOCATION DESCRIPTION
-------- -----------
<S> <C>
San Juan - Radio Aeropuerto Empty - For Sale
Cond. Radio A Int. 41 & 4
Mayaguez 74 Hato Rey
Canavanas - Cubuy Transmitter Site - WZNT, WIOA, & WCOM
Mayaguez - Cond. Radio Centro 10th Floor - Apt. #801
10th Floor - Apt. #811
Ponce - Canas Ward Parcel
</TABLE>
LEASED PROPERTY (LESSEE)
<TABLE>
<CAPTION>
LOCATION DESCRIPTION LESSOR
-------- ----------- ------
<S> <C> <C>
Guaynabo - Acueducto Road 833 Main Building Facilities Rosario de Toro Vda. de
Zeta, Cosmos & Estereotempo Studios Hernandez and Rosario
Administrative and Sales Offices Hernandez del Toro
Mayaguez - Edificio Radio Centro 10th Floor - Apt. #802 Cosme Velazquez
Mayaguez - Edificio Radio Centro 10th Floor - Apt. #807 Edwin Martinez
Maricao - Monte Del Estado WOYE Transmitter Site Recursos Naturales
Maricao - Monte Del Estado WCTA Transmitter Site Recursos Naturales
Aguada - Atalaya WIOB Transmitter Site Ara International Corp.
Ponce - Pampanos Ward, Playa De Ponce WOQI Main Offices WPAB, Inc.
</TABLE>
<PAGE> 51
SCHEDULE 3.5 (CONT.)
LEASED PROPERTY (LESSOR)
<TABLE>
<CAPTION>
LOCATION DESCRIPTION LESSEE
-------- ----------- ------
<S> <C> <C>
Guaynabo - Acueducto Road 833 Cellular Telecommunications Centennial Cellular Corp.
Mayaguez - Radio Centro Cellular Telecommunications Centennial Cellular Corp.
Guaynabo - Acueducto Road 833 Cellular Telecommunications Cellular Communications
of Puerto Rico, Inc.
Guaynabo - Acueducto Road 833 Beepers Ardis Company
Maricao - Monte Del Estado Antenna WNJX-TV, Inc.
</TABLE>
2
<PAGE> 52
SCHEDULE 3.6
PERSONAL PROPERTY LEASES
<TABLE>
<CAPTION>
LOCATION DESCRIPTION LESSOR
-------- ----------- ------
<S> <C> <C>
Guaynabo - Acueducto Road 833 Copier Xerox Corporation
Mayaguez - Radio Centro Copier Xerox Corporation
Ponce - Pampanos Ward, Playa De Ponce Copier Xerox Corporation
Guaynabo - Acueducto Road 833 Fax Xerox Corporation
</TABLE>
<PAGE> 53
Schedule 3.7
PERSONAL PROPERTY
(20) Modular Desks
(1) Voltage Regulator
(1) Ponce Electric Plant
Time Keeping/Attendance Equipment
<PAGE> 54
PERSONAL PROPERTY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
LOCATION QTY DESCRIPTION
- ----------------------------------------------------------------------------------------------------------
SITES AND LOCATIONS
<S> <C> <C>
Page 1-4 MAIN OFFICES AND CENTRAL STUDIOS - GUAYNABO
Page 5-6 WZNT, WCOM, WIOA TRANSMITTER SITE - CUBUY
Page 7-8 RADIO CENTRO BLDG., MAYAGUEZ OFFICES AND STUDIOS
Page 9 WOYE TRANSMITTER SITE - MARICAO
Page 10 WCTA TRANSMITTER SITE- MARICAO
Page 11 WIOB TRANSMITTER SITE - ATALAYA
Page 12 WIOC STUDIO, OFFICES AND TRANSMITTER SITE- BY PASS P
Page 13 WOQI MAIN OFFICES AND TRANSMITTER SITE - PONCE
Page 14 VEHICLES
- ----------------------------------------------------------------------------------------------------------
MAIN OFFICES AND CENTRAL STUDIOS - GUAYNABO
Control Z-93 1 Eventide Harmonizer
1 Custom built furniture
1 TFT EAS
1 Belar Rf Amplifier
1 Belar Modulation Monitor
1 Belar Stereo Monitor
1 Tascam DAT DA-30 MKII
1 3 Deck BE Cart Machine
2 Denon 950F CD Players
1 Vox Pro Digital Audio Editor
1 ADAS Terminal (PC)
1 R-18 Radio Systems Console
1 Telos 16 Phone system
3 Sennheiser 420 Mics
1 JBL Monitors and Crown Power amp.
3 DBX 160 Compressors
Production room Zeta 1 Ramsa 16 Chnl. Console
1 Custom Built furniture
1 ADAS Terminal (PC)
1 Orban DSE 7000
2 Ultra Harmonizer
1 Tascam DAT DA-30 MKII
1 Denon Dual CD 2500F
1 Cassette Player/Rec Denon
1 Sony MiniDisk MDS-B4P Rec/Play
1 BE Phase Trak Cart Rec/Ptay
1 Monitors and Power Amp.
1 Technics Turntable
1 Yamaha Effects Processor
Production room Cosmos 1 Vox Pro Digital Audio Editor
1 ADAS Terminal (PC)
</TABLE>
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<PAGE> 55
PERSONAL PROPERTY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
LOCATION QTY DESCRIPTION
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 Orban DSE 7000 System
1 Eventide Delay unit
1 Eventide Ultra Harmonizer
1 Sony MiniDisk MDS-B4P
1 Deno 950F CD Player
1 Tascam DAT DA-30 MKII
1 Tascam Cassette Rec/Plat
1 BE Cart
1 Monitors and Power amp.
1 Custom Built furniture
Control Cosmos 3 DBX 160 Compressors
3 Sennheiser Mics
1 Vox Pro Digital Audio Editor
1 ADAS Terminal (PC)
2 Denon 950f CD Players
2 Tascam DAT DA-30 MKII
1 Radio Systems R-18 Console
1 Belar Modulation Monitor
1 Belar Stereo Monitor
1 Belar RF Amplifier
1 Telos 16 phone system
1 Sony MiniDisk MDS-B4P
Rack Room 2 Premia 166Mhz 64Ram Servers ADAS
2 Hewlett Packard 100VG ANY LAN 14 Hub
4 DPT Towers
12 Seagate 4.3Gb Drives
4 Seagate 9 Gb Drives
1 Toshiba 1400 SE UPS
3 Telos Zypher with T-1 V.31 Terminal Adapters.
2 CDQ Prima Codecs with ISDN Terminal Adapters
1 Micorn Marathon
1 FTP Rack with 5 FTP-100 Terminal Cards
Transmitter Room 1 Harris FM1 H3 93.7Mhz
1 Moseley 6010 STL Transmitter
1 Moseley 4 Chnl Digital Exciter
1 Burk ARC-16 Remote Control
1 Orban 8200 Stereo Generator
1 Moseley SCA Generator
1 BE FX-30 Exciter
1 Moseley PCL 505 STL Tx.
1 Moseley PCL 606 STL Tx.
1 Dielectric Coax Transfer switch 50000
1 Martl RP Receiver
</TABLE>
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<PAGE> 56
PERSONAL PROPERTY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
LOCATION QTY DESCRIPTION
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 Onan Transfer Panel
1 Modulation Sciences Stereo Enhancer
Generators 1 Onan 125Kva Generator
1 Onan 55Kw Generator
1 600 Gal. Diesel Tank With dique
1 250 Gal LPG Tank
Engineering 1 Sony MiniDisk MDS-84P Deck
2 Denon 950F CD Players
2 CDQ Prima
1 Potomac Distortion Gen / 1 Audio Generator
1 50 Mhz Oscilloscope
Control room Estereotempo 1 Custom built furniture
1 BE Air Track 16 Chanl Console
1 ADAS Terminal (PC)
1 Vox Pro Digital Audio Editor Digital Audio Editor
1 Getner Telephone Hybrid
2 Denon 950F CD Player
1 TFT Modulation Monitor
1 TFT EAS
1 Tascam DAT DA-30 MKII DA-30MKII
4 DBX 160A Compressor
4 Senheisser 420 Mics
Estereotempo Production room 1 ADAS Terminal (PC)
1 Orban DSE 7000 Editor
1 Mackie 32 Chnl Console
1 Sony MiniDisk MDS-84P Player
2 Tascam DAT DA30-MKII
1 Denon CD DN-2500F Dual CD Player
1 Yamaha SPX1000 Processor
1 Telephone Interface
1 Monitors and Power Amp
1 Custom Built furniture
Dubb Room 1 ADAS Terminal (PC)
1 Mackie Audio Mixer SR24.4
1 Akai DR4D Digital Recorder
1 Yamaha SPX900 Processor
1 Otari MX5050 Reel
1 Monitors and Amplifier
</TABLE>
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<PAGE> 57
PERSONAL PROPERTY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
LOCATION QTY DESCRIPTION
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
A/C Units Guay. 1 5 Ton Unit
4 3 Ton Unit
1 2 Ton
Sales Office 1 EMT Voltage Regulator Stabiline 125 Kva
1 Onan Transfer Panel
1 Xerox Model 7042 Fax
1 Xerox Model 5028 Photocopier
Admin Office 1 Meridian Telephone System (51 Telephones)
10 Complete PC's
1 Xerox Photocopier Model 5818
1 Xerox Fax Pro 735
Server Room 14 CPU's
1 Marathon 2R
PC (individual offi.) 19 Personal Computers
Tower Guaynabo 1 140 Ft Tower (Guyed)
</TABLE>
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<PAGE> 58
PERSONAL PROPERTY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
LOCATION QTY DESCRIPTION
- ----------------------------------------------------------------------------------------------------------
WZNT, WCOM, WIOA TRANSMITTER SITE - CUBUY
<S> <C> <C>
Cubuy- Building 1 1 Harris FM 10K Transmitter @ 94.7Mhz.
1 Harris FM 10H Transmitter @ 94.7Mhz.
1 Harris FM 10H3 Transmitter @ 93.7Mhz.
1 Jampro Combiner for 94.7Mhz and 93.7Mhz
1 Rigid transmission line 3 1/8" Andrews (15 elbows) l00ft line
1 Andrew 3 1/8 HJ8-50 Transmission line 80'
2 Moseley STL 6020 Receivers with 4Chnl digital Decoder.
1 Andrew LDF-4-50 1/2" Transmission line 60'
1 Marti STL Receiver auto transfer switch.
1 Scala PR-450 STL antenna
1 Bird Thruline wattmeter 3 1/8"
1 Coaxial Dynamics Thruline wattmeter 3 1/8"
1 Bird Thruline wattmeter 1 5/8"
1 Dielectric Coax Transfer Switch 50000
2 Harris Digit One Exciters
1 Harris MX-15 Exciter
2 10Kw Dummy Loads
1 Andrew Dehydrator
1 Onan Transfer Switch
Cubuy- Tower 1 Mark 6' STL Antenna
1 Burke ARC-16 Remote Control System
1 JBPC-6 CP Jampro antenna (94.7 / 93.7) Mhz
1 Shivley 6 Bay CP antenna
Cubuy-Building 2 1 Broadcast Electronics FM20B Transmitter
with FX50 Exciter.
1 CCA 10Kw Transmitter
1 Harris MX-15 Exciter
1 Moseley PC:L 505 STL receiver
3 Stabiline Voltage Regulators
1 Onan 60Kw Generator
1 60Kw Generator
1 Transfer Panel
1 Transfer Panel for Generator Switching
1 Dielectric Coax Transfer Switch 50000
1 Altronics 30Kw Dummy Load
1 Andrew Rigid 3 1/8 Tx line (6 elbows)
1 Andrew Dehydrator
Cubuy Site 1 Cyclone Fence Heavy Gauge Fence 8" 500'
1 1000 Gal Diesel Tank double wall
1 500 Gal Diesel Tank (not in use)
1 Electrical Substation 225KVA
1 Jampro 6 Bay antenna 94.7hz (not in use)
1 100ft Andrew 1 5/8 Transmission Line (4 connectors)
</TABLE>
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<PAGE> 59
PERSONAL PROPERTY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
LOCATION QTY DESCRIPTION
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
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<PAGE> 60
PERSONAL PROPERTY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
LOCATION QTY DESCRIPTION
- ----------------------------------------------------------------------------------------------------------
RADIO CENTRO BLDG., MAYAGUEZ OFFICES AND STUDIOS
WOYE
<S> <C> <C>
Radio Centro, Top Roof 50 ft Steel Tower, Surplus, Cross Sectional Steel
Monte del Estado (WOYE) 1 RPU Receiver VHF, Marti Electronics, R-150
Monte del Estado (WOYE) 1 RPU Receiver VHF, Marti Electronics, R-150
Radio Centro Building 1 AC Generator, Honda, EXS-6000
Radio Centro, Apollo Studio 1 Audio Console Sony
1 DAT - Machine - TEAG
1 Reel to Reel, Otari Corporation, MX-5050BE 2 ch.
1 Reel to Reel, Otari Corporation, MX 5050B- 4 ch.
1 Cartridge Machine, ITC - Record Day, Delta 99B
1 Harmonizer Eventide
1 Harmonizer Yahama, SPX-1026
1 CD Library
1 Studio Furnite, Custom made
1 Air Conditioner Carrier, 24,000 BTU Split
1 Compact Disk Technics SLP-1200
Radio Centro, Control Room 2 900 Mhz Transmitter, Marti Electronics, STL-10
1 900 Mhz Receiver, Moseley, PCL-6020
1 Audio Processor, Orban, 8.100st Studio Unit
1 Digital Audio ISDN, Telos, Zephyr
1 EAS Encedir Decodir, TFT, EAS-911R
1 Remote Control, Marti Electronics, RMS, RMT,151,S
1 FM Mod Monitor, TFT, 944A
1 FM SEA Med. Monitor, MC Martin
1 Air Conditioner, Carrier, 36,000 BTU - Split
1 Cartridge Machine, ITC, Delta 9913
1 Data Multiplexer Motorola, Marathon
Radio Centro, Master Control 2 RPU Receiver UHF, Marti Electronics, CR-10
1 RPU Receiver VHF, Marti Electronics, CR-10
1 Audio System, ADAS
2 RPU -Receiver UHF, Marti Electronics, CR-10
1 RPU Receiver VHF, Marti Electronics, CR-10
Radio Centro, Pacific StudIo 1 Audio Console, Pacific Recording, AMX-l0
1 Cartridge Machine Place Rkid, International Tapetronics, Delta 99B
2 Otari Corporation, MX-5050B
1 Harmonizer, Eventide
1 Audio Processor, Orban, Limiter / Compressor
1 Telephone interphase, Symetrix
</TABLE>
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<PAGE> 61
PERSONAL PROPERTY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
LOCATION QTY DESCRIPTION
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 Air Conditioner, Carrier, 24,000 BTU, split
1 Studio Furniture, Custom
Radio Centro, Pacific Studio 1 Cartridge Machine, Broadcast Electronics, 5600 B
1 Compact Disk Technics SP-1260
1 Audio System, ADAS
Radio Centro, Reception Off. 2 Computer clone 486-DX
Radio Centro, Sales and Traffic Off 3 Computer clone 486-DX
1 Printer Epson DFX 500
1 Photocopier Gestener
Radio Centro, Sales Office 1 Computer clone 486-DX
Radio Centro, Shop 1 RPU Transmitter UHF, Marti Electronics, RPT-15
1 RPU Transmitter VHF, Marti Electronics, RPT-40
2 Cartridge Machine, ITC, 99B playback
1 RPU Transmitter UHF, Marti Electronics, RPT-15
1 RPU Transmitter VHF, Marl Electronics, RPT-40
Radio Centro, Top Roof 1 900 Mhz Antenna, Anixter Mark, PE0- 6FT dia
1 900 Mhz Antenna, Mark Antenna, PE- 6FT dia
1 AC Generator LP Gas, General, 6059 MKW
1 900 Mhz Antenna (spare), Anixter-Mark PLE-
Radio Centro, Warehouse 1 Audio Console, Broadcast Electronic, S-150
1 Audio Console, Broadcast Electronics, S-100
1 Audio Console, Collins Rockwell, 1C-10
1 Compact Disk Technics SLP-1200
2 Reel to Reel, Otari Corporation, MX-5050B
1 Audio Console, Studio Master, Diamond 16-4-2
2 Cartridge Machine, Broadcast Electronics, 5300B
1 Cartridge Machine, Beaucort
1 Audio Console, Broadcast Electronics, S-150
1 Audio Console, Broadcast Electronics, S-100
Radio Centro, WOYE (Offices) 1 Telephone Switch board, Meridian S-22
WIOB
Radio Centro, WIOB Off 1 Photocopier Xerox
Radio Centro, Warehouse 1 Stereo Mod Monitor, Mac Martin
Radio Centro, Top Roof 1 900 Mhz Antenna, Mark Antenna, PC-
Radio Centro, Master Control 2 900 Mhz Receiver, Marti Electronics, R-10
2 900 Mhz Transmitter, Marti Electronics, STL-10
</TABLE>
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<PAGE> 62
PERSONAL PROPERTY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
LOCATION QTY DESCRIPTION
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 Audio System, Audisk
1 UPS System
</TABLE>
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<PAGE> 63
PERSONAL PROPERTY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
LOCATION QTY DESCRIPTION
- ----------------------------------------------------------------------------------------------------------
WCTA
<S> <C> <C>
Radio Centro, Top Roof 1 900 mhz Antenna, Anixter Mark, PEL - 6ft dia
Radio Centro, Apollo Studio 1 Studio Microphone, Newman, TLM170
Radio Centro, Master Control 1 900 mhz Transmitter, Moseley, PCL-6010
1 Audio Console, Pacific Recording, BMX-10
1 Digital Audio System, ADAS
1 Telephone Interphase, Gentner
1 FM Mod Monitor, TFT, 744
1 Digital Guides ISDN, Telos, Zephyr
1 Studio Furniture, Custom Made
1 Digital Audio System, Vox Pro-Computer
Radio Centro, Pacific Studio 1 Digital Audio System, ADAS
</TABLE>
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<PAGE> 64
PERSONAL PROPERTY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
LOCATION QTY DESCRIPTION
- ----------------------------------------------------------------------------------------------------------
WOYE TRANSMITTER SITE - MARICAO
<S> <C> <C>
Monte del Estado 1 FM Transmitter 10 kw, Harris, FM-10K
1 FM Transmitter 10 kw, Harris, FM-10K
1 FM Transmitter 50w, Gates, FMA-4A H
1 Steel Tower, Surplus, Cross-Sectional
1 Microwave Antenna, Anixter Mark, PG-
1 Audio Processor, Orban, 8,100 XTI
1 Audio Processor, ARE-Orban, 8,200
1 FM Exciter, Mc Martin
1 FM Exciter, Harris, MX-10
1 FM Exciter, Harris, Digital One
1 Audio Processor, MSP-103
2 900 mhz Receiver, Marti Electronics, CR-10
1 FM Mod. Monitor, TFT-710
1 FM Mod Monitor, Mc Martin
</TABLE>
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<PAGE> 65
PERSONAL PROPERTY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
LOCATION QTY DESCRIPTION
- ----------------------------------------------------------------------------------------------------------
WCTA TRANSMITTER SITE - MARICAO
<S> <C> <C>
Monte del Estado 1 FM Antenna Comalk, 6 Bays
1 Microwave Antenna, Anixter Mark, 6 FT. PLG
1 Microwave Antenna, Mark Antenna, 6 FT. PLG
80 FT RF Coaxial Line Andrew, 3 in diameter with connector
100 FT Steel Tower
1 FM Transmitter 10kw, Visual Sistronix FM 10K
1 FM Transmitter 10kw, Broadcast Electronics FM-l0T
1 FM Exciter, Broadcast Electronics, FX-50
1 Audio Processor AKE-Orban 8200
3 Audio Processor Set, CRL
2 900 mhz Receiver, Marti Electronics R-950
1 900 mhz Receiver, Moseley PCL-6020
1 Remote Control, Broadcast Electronics WMC-16
1 RF T8 Transfer Switch, Comark
1 RF Dummy Load, Altronics Corp., 25 KW
1 Automatic Transfer Switch, Lake Shore
120/208 30 450 225 Amp
1 Search Protector, Lighting Eliminator
1 Twaiwan Register 100w, E.F. Johnson, CR-1000
1 Air Conditioner, Carrier, 36,000 BTU 120 / 240
1 AC Generator, DMT, 30 kw 120/208, 30, 4 w
1 Diesel Tank, Steel, 650 Gallons
1 900 mhz Transmitter, Moseley, FCL-6010
1 Transmitter Spare Parts
2 900 mhz Transmitter, Marti Electronics, STL-10
1 Diesel Tank, Steel, 650 gallons
1 Concrete Building, 2 Floors 20' x 20'
1 lot TX Spare Parts
1 RF Power Metro, Bird Electronic, Watchdea
1 Automatic Transfer Switch, Lake Shore 120/208 30 4w 225 amp
1 Search Protector, Lighting Eliminator
1 Two-way Repeater 10w, E.F. Johnson, CR-1000
1 Air Conditioner, Carrier, 36,000 BTU 120/240
1 AC Generator, DMT, 30 kw 120/208, 30, 4w
1 Diesel Tank, Steel, 650 Gallons
1 900 mhz Transmitter, Moseley, PCL-6010
1 Transmitter Spare Parts
1 900 mhz Transmitter, Marti Electronics, STL-10
1 Concrete Building, Custom made, 20' x 20' x 10'
</TABLE>
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<PAGE> 66
PERSONAL PROPERTY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
LOCATION QTY DESCRIPTION
- ----------------------------------------------------------------------------------------------------------
WIOB TRANSMITTER SITE - ATALAYA
<S> <C> <C>
1 FM Antenna, Shevely, 6810-sp 10 bays
80FT RF Gooxial Line, Andrew, 3in. Dia with connectors
1 900mhz antenna, Seala, paraflector
1 900mhz antenna, Anixter Mark, PGL
1 FM Transmitter 20kw, Broadcast Electronics, FM-20B
1 FM Transmitter 10kw, CCA, FM-10
1 FM Exciter, Broadcast Electronics, FX-30
1 FM Exciter, Harris, Mx-10
1 Media Processor, Orban, 8,l00xtz
1 Remote Control, Burk Technology, ARC-16
2 900mhz Receiver, Marti Electronics, CR-10
2 900mhz Receiver, Marti Electronics, R-950
1 Dummy Load, Altronics, 10kw
1 RF Coaxial Transfer Switch, Comark
1 Air Conditioner, 36000BTU
1 Automatic Transfer Switch, Lake-Share, 120/208, 3, 4ss, 2250mp
1 AC Generator 30KW, DMT, DMT-30 120/209,30
1 Diesel Tank, Steel, 1000 Gallons
1 Search Protector, Lightning Eliminator
1 Spare Parts Bin
1 FM Antenna, Comark, 6Bays
</TABLE>
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<PAGE> 67
PERSONAL PROPERTY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
LOCATION QTY DESCRIPTION
- ----------------------------------------------------------------------------------------------------------
WIOC STUDIO, OFFICES AND TRANSMITTER SITE - BY PASS PONCE
<S> <C> <C>
WIOC, Auxiliary Tower 1 900 mhz Antenna, Mark Antenna, PLE - GFT Dia.
WIOC, Conference Room 1 Air Conditioner, Carrier, Floor mount - 24,000 BTU
WIOC, Control Room 1 Audio Console, Studio Master, Diamond 16,4,2
1 EAS Equipment, TFT, 911-R
1 Digital Audio System, Audisk
1 UPS (Power Supply)
1 FM Modulation Mon., TFT, 944A
1 FM Modulation Mon., Mc Martin
1 Air Conditioner, Carrier, 24,000 BTU
WIOC, Facilities 1 Automatic Transfer Switch, Onan, 120/208, 30, 4w 200amp
WIOC, Lobby Area 1 Air Conditioner, Carrier, Wallmount 12,000 BTU
WIOC, Manager Room 1 Air Conditioner, Carrier, Wallmount 12,000 BTU
WIOC, Microwave Room 2 900 mhz Receiver, Marti Electronics, R-950
WIOC, Microwave Room 1 Switch Board, Panasonic, Telephone
WIOC, Reception Room 1 Computer, Clone, 488 DX
WIOC, Sales Room 1 Air Conditioner, Carrier, Floor mount - 24,000 BTU
WIOC, Sales Room 1 Computer, Clone, 486DX-4
WIOC, Secretary Room 1 Air Conditioner, Carrier, Wallmount 12,000 BTU
WIOC, Shop 4 900 mhz Transmitter, Marti Electronics, STL-8
WIOC, Traffic Room 1 Computer, Clone, 486DX4
WIOC, Traffic Room 1 Data Multiplexer, Multitech
WPRP Antenna Tower 1 FM Antenna, Shively 6810-SP-L 10 bays
WPRP Antenna Tower 1 FM Antenna RCA, 1 bay
WPRP Antenna Tower 200 FT RF Coaxial Line 3 in., Andrew, LF50, 3 in EIA
WPRP Antenna Tower 180 FT RF Coaxial Line, Andrew, Rigid, 3 in. EIA
WPRP Bin Warehouse 1 900 mhz Antenna, Anixter Mark, PIE-GFT
WPRP Transmitter Room 1 FM Transmitter 10kw, Harris, FM-10k
WPRP Transmitter Room 1 FM Transmitter 10 kw, RCA, FM-10
WPRP Transmitter Room 1 Audio Processor, Orban 8.100 XT1
</TABLE>
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<PAGE> 68
PERSONAL PROPERTY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
LOCATION QTY DESCRIPTION
- ----------------------------------------------------------------------------------------------------------
WOQI MAIN OFFICES AND TRANSMITTER SITE - PONCE
<S> <C> <C>
WOQI 1 FM Antenna Collins, 6 Bays
150 FT Steel Tower, Rohn, Self Support
100 FT RF Coaxial Line 1 5/8 inches, Andrew LDF-50A
WOQI, Control Room 1 FM Modulation Monitor, TFT, 944 A
1 Audio Console, Broadcast Electronics, 105-250A
1 Digital Audio System, Telos, Zephyr
1 Cartridge Machine, Broadcast Electronics, 5300 B
2 Cartridge Machine, Broadcast Electronics, Duratrack
WOQI, Shop 1 FM Exciter, Collins, TX20
WOQI, Transmitter Room 1 FM Transmitter, Collins, 830
1 FM Exciter, Broadcast Electronics, FX-30
1 FM Power Amplifier, Broadcast Electronics, IPA-250
1 Audio Processor, Orban, 810 DXT
</TABLE>
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<PAGE> 69
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
LOCATION QTY DESCRIPTION
- ----------------------------------------------------------------------------------------------------------
VEHICLES
<S> <C> <C>
Guaynabo 1 Mitsubishi Montero 1991, BEN-778
1 KIA Sportage 198, CZX-695
1 KIA Sportage 1998, DAT-624
1 Honda Accord 1995, BZX-701
1 Acura RL 1997, CXJ-425
1 Acura AL 1997, CVR-956
1 Jeep Grand Cherokee 1998, DAT-949
1 Dodge Pickup Ram 1996, 563-874
1 Chevrolet Lumina 1996, BRT-894
Mayaguez 1 Isuzu Pickup 1986, 527-893
1 Mitsubishi Pickup 1995, 523-037
Ponce 1 Mazda B-2000 1986, 310-478
1 Suzuki Jeep 1985, ANG-610
Mobile Equipment 1 Remote studio boom box with trailer - Coloso
1 Money Machine with trailer
1 Remote walkman radio with trailer
</TABLE>
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<PAGE> 70
SCHEDULE 3.8
CONTRACTS
Arbitron Company - Station License Agreement to Receive and Use Arbitron Radio
Listening Estimates dated June 28, 1999(1)
Talent Agreement with Balaju Entertainment
Talent Agreement with Angela Meyer
Engineering Agreement with Rey Moreira
Music License Agreement with ASCAP
Music License Agreement with Broadcast Music, Inc.
Talent Agreement with Junior Abrams
Employment Agreement with Hillary Hattler, Vice President and General Manager
Employment Agreement with Raymond Totti, Vice President, Sales and Marketing
Employment Agreement with Hector Rossy, Vice President, Programming and
Promotions
Employment Agreement with Felix Bonnet, Senior Vice President
Employment Agreement with Luis Gonzalez, Vice President, Finance
- --------
(1) Three contracts between Arbitron and Primedia as follows: 1) WIOA-FM,
WIOB-FM, and WIOC-FM; 2) WZNT-FM, WCTA-FM, and WZMT-FM; and 3) WCOM-FM and
WOYE-FM.
<PAGE> 71
SCHEDULE 3.9
CONSENTS
None
<PAGE> 72
SCHEDULE 3.10
INTELLECTUAL PROPERTY
TRADEMARKS
<TABLE>
<CAPTION>
Station Servicemark Registration Number Filing Date Expiration Date
- ------- ----------- ------------------- ----------- ---------------
<S> <C> <C> <C> <C>
PRIMEDIA
PRIMEDIA BROADCAST GROUP 550 09/19/95 09/12/2005
PRIMEDIA BROADCAST GROUP 37119 09/19/95 09/19/2005
PRIMEDIA BROADCAST GROUP 38824 08/30/96 08/30/2006
ZETA NW
LA Z SONIDO NACIONAL 37083 09/19/95 09/19/2005
LA Z SONIDO NACIONAL 37112 09/19/95 09/19/2005
LA Z 552 09/19/95 09/19/2005
CLASICOS DEL SALON DE LA FAMA 34854 11/15/94 11/15/2004
COSMOS NW
COSMOS 94 TU EMISORA RADIOAC 37113 09/19/95 09/19/2005
COSMOS 94 TU EMISORA RADIOAC 37116 09/19/95 09/19/2005
HRX (HITS ROTATION X) 37115 09/19/95 09/19/2005
HRX (HITS ROTATION X) 37114 09/19/95 09/19/2005
VACILON DE LA MANANA 37117 09/19/95 09/19/2005
VACILON DE LA MANANA 37118 09/19/95 09/19/2005
HITS ROTATION FOR GEN X 37110 09/19/95 09/19/2005
HITS ROTATION FOR GEN X 37111 09/19/95 09/19/2005
COSMOS 94 881 09/19/98 09/19/03
ESTEREOTEMPO NW
LA NUEVA ESTEREOTEMPO 39702
LA NUEVA ESTEREOTEMPO 37901
CADENA ESTEREOTEMPO, CALIDAD DE
MUSICA, CALIDAD DE VIDA 36,854 02/21/97
ENCUENTRO DE LOS GRANDES 36,849 02/21/97
LA NUEVA ESTEREOTEMPO 807 07/22/97 07/22/07
</TABLE>
<TABLE>
<CAPTION>
Station Servicemark International Class Date of first use
- ------- ----------- ------------------- -----------------
<S> <C> <C> <C>
PRIMEDIA
PRIMEDIA BROADCAST GROUP 08/23/95
PRIMEDIA BROADCAST GROUP 38 08/23/95
PRIMEDIA BROADCAST GROUP 41 08/23/95
ZETA NW
LA Z SONIDO NACIONAL 41 08/23/95
LA Z SONIDO NACIONAL 38 08/23/95
LA Z 08/23/95
CLASICOS DEL SALON DE LA FAMA 9 NONE
COSMOS NW
COSMOS 94 TU EMISORA RADIOAC 41 08/23/95
COSMOS 94 TU EMISORA RADIOAC 38 08/23/95
HRX (HITS ROTATION X) 41 08/23/95
HRX (HITS ROTATION X) 38 08/23/95
VACILON DE LA MANANA 41 08/23/95
VACILON DE LA MANANA 38 08/23/95
HITS ROTATION FOR GEN X 41 08/23/95
HITS ROTATION FOR GEN X 38
COSMOS 94
ESTEREOTEMPO NW
LA NUEVA ESTEREOTEMPO 38
LA NUEVA ESTEREOTEMPO 41
CADENA ESTEREOTEMPO, CALIDAD DE
MUSICA, CALIDAD DE VIDA
ENCUENTRO DE LOS GRANDES
LA NUEVA ESTEREOTEMPO 16
</TABLE>
1
<PAGE> 73
The following trademarks are also registered in the United States as indicated
below:
<TABLE>
<CAPTION>
Serial No. Reg. No.
---------- --------
<S> <C> <C>
COSMOS 94 TU EMISORA RADIACTIVA 75/048,080
HRX 2,084,892
VACILON DE LA MANANA 2,084,891
LA NUEVA ESTEROTEMPO 75/304,422
</TABLE>
The following phrases are in the process of being registered in Puerto Rico for
Cosmos:
DONDE TU MUSICA MANDA
EL GRAN MARATON PARA GENIOS
DOMINGOS DE MUSICA LIBRE
THE COSMOS MUSIC CHALLENGE
DICTADORES DE LA MUSICA
2
<PAGE> 74
Schedule 3.11
FINANCIAL STATEMENTS
<PAGE> 75
Primedia Broadcast Group
Date: 8/16/99 Time: 4:54p Operator: MARIA DEL CARMEN Page: 1
BALANCE SHEET
DETAIL - CONSOLIDATED PRIMEDIA
Accounting Period: June 1999
Warning! Jun99 and prior periods are not yet closed.
<TABLE>
<CAPTION>
Balance Balance
end of end of
June June
1998 1999
------- -------
<S> <C> <C>
*** ASSETS ***
CURRENT ASSETS:
Cash in Bank & On Hand
Bank balance 775,632 246,649
Petty Cash 3,513 2,300
Total Cash in Bank & On Hand 779,145 248,949
Accounts Receivable
A/R Trade 3,039,647 2,863,980
Allow for Doubtful Accts (170,455) (375,770)
Other A/R 25,492 155,911
A/R Barter 0 991,101
Total Accounts Receivable 2,894,684 3,635,222
Total A/R From/To Station (0) 0
Intercompany Bal. - Chancellor 0 (71,182,443)
Prepaid Expenses
Prepaid Property Taxes 141,655 129,869
Prepaid Sales Taxes 83,128 93,481
Prepaid Insurance 5,290 3,247
Prepaid Other 2,844 53,819
Deposits 260 4,460
Deferred Tax Asset 18,923 151,510
Total Prepaid Expenses 252,100 436,386
TOTAL CURRENT ASSETS 3,925,928 (66,861,886)
INVESTMENTS:
Investment in Subidiary 3,084,626 0
TOTAL INVESTMENTS 3,084,626 0
PROPERTY AND EQUIPMENT:
Property & Equipment
Land 136,774 136,774
Building 598,151 544,962
Building Improvements 378,184 296,753
Tower and Antenna 1,080,262 766,376
Transmitter Equipment 2,483,680 1,302,290
Studio Technical Equipment 796,071 523,453
Production Equipment 215,309 164,017
Mobile Studio Equipment 168,675 126,482
Recording Equipment 289 289
Furniture & Fixtures 466,769 207,736
Computer Hardware 313,619 142,981
Computer Software 122,628 61,596
Vehicles 386,042 295,362
Total Property & Equipment 7,146,452 4,569,070
Total Accumulated Depreciation (2,737,885) (537,548)
TOTAL PROPERTY AND EQUIPMENT 4,408,566 4,031,522
OTHER ASSETS:
Intangible Assets
Pre-Sold Commercial Adv.Contr 2,973,073 0
Tower Space Income Agreement 150,295 0
Favorable Studio & Office Lea 185,832 0
</TABLE>
<PAGE> 76
Primedia Broadcast Group
Date: 8/16/99 Time: 4:54p Operator: MARIA DEL CARMEN Page: 2
BALANCE SHEET
DETAIL - CONSOLIDATED PRIMEDIA
Accounting Period: June 1999
<TABLE>
<CAPTION>
Balance Balance
end of end of
June June
1998 1999
------- -------
<S> <C> <C>
FCC License 20,101,962 69,152,751
Other Unidentified Intang.Ass 9,758,262 0
Start Up Cost 109,183 (0)
Total Intangible Assets 33,278,607 69,152,751
Accumulated Amort. - Intangibles
Pre-Sold Adv.Contr-Accum Amor (586,356) 16,517
Tower Space Inc.Ag-Accum Amor (150,295) 0
Fav. Studio Lease-Accum Amort (61,084) 1,723
FCC License - Accum Amort (3,439,735) (2,990,012)
Other Intangibles-Accum Amort (1,165,457) 54,215
Total Accumulated Amortization (5,402,927) (2,917,556)
Other Deferred Costs
Deferred Financing Cost 722,590 (0)
Acquisition Cost 725,855 (0)
New Product Cost 198,541 0
Total Other Deferred Costs 1,646,986 0
Accum. Amort.-Other Defer.Cost
Def.Financing Cost-Accum.Amor (483,054) 0
Acquisition Cost - Accum.Amor (98,341) 4,633
New Product Cost - Accum.Amor (132,204) 707
Total Accum. Amort.-Other Def (713,600) 5,340
TOTAL OTHER ASSETS 28,809,066 66,240,535
*** TOTAL ASSETS *** 40,228,186 3,410,170
*** LIABILITIES ***
CURRENT LIABILITIES
Accounts Payable
Accounts Payable - Trade 182,965 66,960
A/P Barter 93,674 991,101
A/P Collection of Old A/R (5,039) 0
Total Accounts Payable 271,600 1,058,061
Accrued Expenses
Accrued Bonus 75,948 98,575
Accrued Vacation 101,659 126,195
Accrued Workmen Comp 19,438 23,440
Sales Comm Payable 118,254 130,584
Accrued Agency Commission 75,773 96,187
Income Tax Withheld 26,696 701
Income Tax Withtheld-Prof Ser 9,088 5,735
FICA Payable 78,725 10,587
State Unemployment Payab 9,356 13,345
Federal Unemployment Payable 5,654 (11,762)
Disability Insurance Payable 1,433 3,359
Allimony Withheld 809 622
Accrued Driver's Ins 156 693
Accrued Volume Disc. - 1997 204,175 0
Accrued Volume Disc. - 1998 645,214 200,470
Accrued Volume Disc. - 1999 0 653,387
Accrued Corporate Income Tax (43,332) (36,569)
Accrued Royalties - ASCAP (3,335) 9,350
Accrued Royalties - BMI 28,131 (485)
Accrued SESAC 0 223
Accrued Light & Power 17,675 18,415
Accrued Telephone 12,770 15,473
</TABLE>
<PAGE> 77
Primedia Broadcast Group
Date: 8/16/99 Time: 4:55p Operator: MARIA DEL CARMEN Page: 3
BALANCE SHEET
DETAIL - CONSOLIDATED PRIMEDIA
Accounting Period: June 1999
<TABLE>
<CAPTION>
Balance Balance
end of end of
June June
1998 1999
------- -------
<S> <C> <C>
Accrued Audit Fees 22,061 34,052
Accrued Other 96,250 190,732
Accrued Interest 502,154 0
Deferred Income Tax Liability 234,948 193,938
Total Accrued Expenses 2,239,699 1,777,248
TOTAL CURRENT LIABILITIES 2,511,299 2,835,309
DEBT
Loan Payable - Citibank 17,529,375 0
Loan Payable-Radio Aereop.WCO 600,000 0
Loan Payable-American Nat WRP 1,305,828 0
Note Payable-Portorrican WOQI 2,000,000 0
Oller's Consulting Agreement 0 0
Note Payable-Ramirez de Arell 1,175,000 0
TOTAL DEBT 22,610,204 0
*** TOTAL LIABILITIES *** 25,121,503 2,835,309
*** STOCKHOLDER'S EQUITY ***
Total Common Stock 1,657,138 0
Total Preferred Stock 13,739 0
Total Additional paid-in capit 17,262,322 0
Total Common Stock Warrants 100,000 0
Total Retained Earnings (3,527,947) 889,612
*** TOTAL STOCKHOLDER'S EQUITY 15,505,252 889,612
Net Income (398,569) (314,751)
</TABLE>
<PAGE> 78
Primedia Broadcast Group
Date: 8/16/99 Time: 4:58p Operator: MARIA DEL CARMEN Page: 1
PROFIT/LOSS STATEMENT
Altered DETAIL:PY, ACTUAL VS BUD:CM-YTD
Accounting Period: June 1999
Warning! Jun99 and prior periods are not yet closed.
<TABLE>
<CAPTION>
Budget Percent
Budget minus use of YTD thru
Net Change for Net Change Actual Budget: end of
June June June June June June
1998 1999 1999 1999 1999 1998
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES & EXPENSES
BROADCAST REVENUES
Direct
Local 112,736 96,229 86,464 9,765 89.05% 465,139
Network 505 26,891 56,337 (29,446) 209.50% 149,478
Combo 39,411 44,285 31,904 12,381 72.04% 205,604
Tricombo Network 33,085 37,715 11,476 26,239 30.43% 130,247
Total Direct 185,736 205,120 186,191 18,939 90.77% 958,468
Agency
Regional 145,738 167,598 130,206 37,392 77.69% 748,294
Network 378,106 441,410 441,870 (460) 100.10% 1,867,557
Combo 303,572 367,323 329,424 37,899 89.68% 1,450,546
Tricombo Network 471,382 577,445 271,506 305,939 47.02% 1,635,982
Total Agency 1,298,798 1,553,776 1,173,006 380,770 75.49% 5,702,379
Total Political 0 0 0 0 -.- % 0
Special Events
Concerts 15,400 0 (2,500) 2,500 -.- % 260,778
Coloso 4,766 5,000 4,300 700 86.00% 8,467
Panita 6,600 1,500 2,000 (500) 133.33% 7,450
Money Machine 5,536 2,100 0 2,100 0.00% 8,236
Special Programs 21,757 20,000 17,145 2,855 85.73% 115,033
Ticket Sales 0 0 0 0 -.- % 236,561
Sales Events 0 60,000 0 60,000 0.00% 20,000
Total Special Events 54,059 88,600 20,945 67,655 23.64% 656,524
TOTAL GROSS BROADCAST REVENUE 1,538,593 1,847,496 1,380,132 467,364 74.70% 7,317,372
Discounts
Agency Commission 277,489 326,880 214,045 112,835 65.48% 1,220,553
Cash Discount 13,401 17,091 10,712 6,379 62.67% 60,011
Volume Discount 146,420 155,184 119,598 35,586 77.07% 645,214
Total Discounts 437,310 499,155 344,354 154,801 68.99% 1,925,778
TOTAL NET BROADCAST REVENUE 1,101,284 1,348,341 1,035,778 312,564 76.82% 5,391,594
Total Other Income 24,660 21,200 17,350 3,850 81.84% 206,365
TOTAL CASH REVENUE 1,125,944 1,369,541 1,053,128 316,414 76.90% 5,597,959
Total Trade Revenue 0 161,270 170,128 (8,859) 105.49% 0
TOTAL NET REVENUE 1,125,944 1,530,811 1,223,256 307,555 79.91% 5,597,959
EXPENSES
TECHNICAL
Salary - Wages 3,400 3,363 3,400 (37) 101.13% 20,401
Bonus 121 100 100 0 100.00% 726
T & E 1,624 500 500 0 100.00% 4,419
<CAPTION>
YTD Budget
Budget YTD thru YTD Percent
through end of minus use of
June June Actual YTD
1999 1999 YTD Budget
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES & EXPENSES
BROADCAST REVENUES
Direct
Local 514,426 490,693 23,733 95.39%
Network 157,885 272,679 (114,794) 172.71%
Combo 225,427 170,946 46,181 79.38%
Tricombo Network 164,786 142,261 22,525 86.33%
Total Direct 1,062,524 1,O84,579 (22,055) 102.08%
Agency
Regional 860,067 720,627 139,440 83.79%
Network 2,180,931 2,173,936 6,995 99.68%
Combo 1,760,165 1,579,062 181,103 89.71%
Tricombo Network 2,004,081 1,652,373 351,708 82.45%
Total Agency 6,805,244 6,125,497 679,747 90.01%
Total Political 0 4,040 (4,040) -.- %
Special Events
Concerts 230,000 254,265 (24,265) 110.55%
Coloso 18,600 28,260 (9,660) 151.94%
Panita 4,600 7,000 (2,400) 152.17%
Money Machine 9,350 3,000 6,350 32.09%
Special Programs 101,200 118,698 (17,498) 117.29%
Ticket Sales 100,000 154,810 (54,810) 154.81%
Sales Events 159,000 0 159,000 0.00%
Total Special Events 622,750 566,033 56,717 90.89%
TOTAL GROSS BROADCAST REVENUE 8,490,518 7,780,148 710,370 91.63%
Discounts
Agency Commission 1,456,187 1,261,311 194,876 86.62%
Cash Discount 77,088 75,304 1,784 97.69%
Volume Discount 699,744 653,387 46,357 93.38%
Total Discounts 2,233,019 1,990,002 243,017 89.12%
TOTAL NET BROADCAST REVENUE 6,257,499 5,790,147 467,353 92.53%
Total Other Income 180,262 137,110 43,152 76.06%
TOTAL CASH REVENUE 6,437,761 5,927,257 510,504 92.07%
Total Trade Revenue 967,617 776,046 191,571 80.20%
TOTAL NET REVENUE 7,405,378 6,703,303 702,075 90.52%
EXPENSES
TECHNICAL
Salary - Wages 20,289 20,401 (112) 100.55%
Bonus 600 600 0 100.00%
T & E 3,000 6,126 (3,126) 204.20%
</TABLE>
<PAGE> 79
Primedia Broadcast Group
Date: 8/16/99 Time: 4:59p Operator: MARIA DEL CARMEN Page: 2
PROFIT/LOSS STATEMENT
Altered DETAIL:PY, ACTUAL VS BUD:CM-YTD
Accounting Period: June 1999
<TABLE>
<CAPTION>
Budget Percent
Budget minus use of YTD thru
Net Change for Net Change Actual Budget: end of
June June June June June June
1998 1999 1999 1999 1999 1998
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Auto Expense 0 164 0 164 0.00% 223
Tel & Tel 0 35 104 (69) 297.14% 0
Maintenance & Repair 2,857 3,500 6,712 (3,212) 191.78% 21,490
Light & Power 15,543 18,390 12,000 6,390 65.25% 112,783
Tower Rent 1,750 1,850 2,100 (250) 113.51% 9,430
Eng Consultant 9,500 8,500 9,616 (1,116) 113.13% 52,942
Service Contract 730 1,100 529 572 48.05% 6,776
Total Technical 35,526 37,502 35,061 2,441 93.49% 229,190
PROGRAMMING
Salary - Wages 69,295 75,858 80,454 (4,596) 106.06% 399,652
Overtime 2,551 1,534 3,852 (2,318) 251.11% 19,527
Bonus 4,187 5,091 5,103 (12) 100.24% 25,122
Salary - Talent 4,365 3,200 3,825 (625) 119.53% 25,240
Prof Fees - Talent 38,874 45,666 40,866 4,800 89.49% 224,071
Salary - Promotions 3,173 3,826 4,664 (838) 121.91% 23,834
Prof Fees - Promotions 1,300 2,261 1,995 266 88.24% 18,825
T&E 8,229 6,275 7,625 (1,350) 121.51% 54,115
Auto 2,476 1,450 4,660 (3,210) 321.36% 7,534
Tel & Tel 7,347 5,964 5,700 264 95.57% 41,916
Supplies 0 300 56 244 18.67% 1,941
Records - Tapes 990 1,379 278 1,101 20.16% 6,178
Audience Research 0 6,750 0 6,750 0.00% 0
ASCAP 20,827 24,231 19,192 5,039 79.20% 95,087
BMI 19,995 24,081 18,424 5,657 76.51% 91,251
SESAC 318 469 475 (6) 101.30% 2,268
FCC User Fee 0 0 0 0 -.- % 1,640
Computer Programs 1,405 805 1,602 (797) 199.01% 5,325
Consultant 1,024 3,500 4,892 (1,392) 139.77% 6,744
Advertising 75 3,283 340 2,943 10.36% 9,226
Promotions 2,821 9,961 (1,074) 11,035 -10.78% 22,083
Special Events 31,530 0 8,181 (8,181) -.- % 327,765
Alloc To/Fr Stations (0) 0 (0) 0 -.- % 1
Total Programming 220,783 225,884 211,111 14,773 93.46% 1,409,347
SALES
Salary - Wages 16,368 26,816 23,248 3,568 86.69% 115,689
Bonus 3,023 3,948 3,948 0 100.00% 18,138
Commissions 60,963 76,522 61,681 14,841 80.61% 316,388
Salary - Sales Events 0 1,500 2,930 (1,430) 195.33% 0
Prof Fees - Sales Events 0 3,500 1,380 2,120 39.43% 0
T&E 9,841 11,900 10,799 1,101 90.75% 59,665
Auto Expense 428 100 163 (63) 163.25% 508
Telephone 2,500 6,735 6,401 334 95.04% 14,819
Office Supplies 595 267 2,684 (2,417) 1005.25% 2,636
Dues & Subscriptions 625 392 1,087 (695) 277.30% 3,962
Professional Fees 0 0 0 0 -.- % 0
Sales Promotions 8,214 2,595 (330) 2,925 -12.72% 33,534
Special Events - Sales 1,625 6,480 6,406 74 98.86% 6,875
<CAPTION>
YTD Budget
Budget YTD thru YTD Percent
through end of minus use of
June June Actual YTD
1999 1999 YTD Budget
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Auto Expense 1,304 119 1,185 9.16%
Tel & Tel 210 523 (313) 248.84%
Maintenance & Repair 21,000 31,161 (10,161) 148.38%
Light & Power 110,340 67,523 42,817 61.20%
Tower Rent 13,100 11,968 1,132 91.36%
Eng Consultant 51,000 51,865 (865) 101.70%
Service Contract 6,600 4,679 1,922 70.89%
Total Technical 227,443 194,964 32,479 85.72%
PROGRAMMING
Salary - Wages 463,465 462,910 555 99.08%
Overtime 9,205 22,272 (13,067) 241.95%
Bonus 30,546 31,388 (842) 102.76%
Salary - Talent 32,175 30,529 1,646 94.08%
Prof Fees - Talent 252,946 227,698 25,248 90.02%
Salary - Promotions 22,956 24,878 (1,922) 108.37%
Prof Fees - Promotions 13,565 12,774 791 94.17%
T&E 37,650 51,988 (14,338) 138.08%
Auto 8,700 11,316 (2,616) 130.07%
Tel & Tel 36,009 36,676 (667) 101.85%
Supplies 1,800 1,245 555 69.19%
Records - Tapes 7,763 5,234 2,529 67.43%
Audience Research 40,500 20,000 20,500 49.38%
ASCAP 112,008 105,504 6,584 94.13%
BMI 111,395 101,286 10,109 90.93%
SESAC 2,814 2,773 41 98.55%
FCC User Fee 0 150 (150) -.- %
Computer Programs 4,830 6,196 (1,366) 120.28%
Consultant 21,000 21,438 (438) 102.09%
Advertising 21,700 35,537 (13,829) 163.71%
Promotions 19,923 7,037 12,086 35.32%
Special Events 208,000 285,111 (77,111) 137.07%
Alloc To/Fr Stations 0 (0) 0 -.- %
Total Programming 1,459,039 1,504,494 (45,455) 103.12%
SALES
Salary - Wages 160,895 129,072 31,023 80.22%
Bonus 23,680 23,687 0 100.00%
Commissions 366,706 373,445 (6,739) 101.84%
Salary - Sales Events 3,975 7,795 (3,820) 196.10%
Prof Fees - Sales Event 9,275 7,527 1,748 81.15%
T&R 72,650 70,995 1,655 97.72%
Auto Expense 600 274 326 45,70%
Telephone 41,190 40,569 621 98.49%
Office Supplies 1,602 5,233 (3,631) 326.65%
Dues & Subscriptions 1,517 2,077 (1,360) 189.65%
Professional Fees 0 3,757 (3,757) -.- %
Sales Promotions 16,922 18,005 (1,083) 106.40%
Special Events - Sales 23,005 12,811 10,194 55.69%
</TABLE>
<PAGE> 80
Primedia Broadcast Group
Date: 8/16/99 Time: 5:00p Operator: MARIA DEL CARMEN Page: 3
PROFIT/LOSS STATEMENT
Altered DETAIL:PY, ACTUAL VS BUD:CM-YTD
Accounting Period: June 1999
<TABLE>
<CAPTION>
Budget Percent
Budget minus use of YTD thru
Net Change for Net Change Actual Budget: end of
June June June June June June
1999 1999 1999 1999 1999 1998
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ratings Survey 7,500 11,000 15,003 (4,003) 136.39% 46,520
Alloc To/Fr Stations 0 0 0 0 -.- % 0
Total Sales 111,681 151,755 135,400 16,356 89.22% 619,950
GENERAL & ADMINISTRATIVE
Salary - Wages 55,820 58,806 61,990 (3,184) 105.41% 289,757
Bonus 1,545 4,838 4,838 (0) 100.00% 9,270
FICA 16,802 20,189 17,075 3,114 84.58% 101,669
Federal UI Tax 601 750 686 64 91.52% 5,393
State UI Tax 2,900 4,900 3,775 1,125 77.05% 28,616
Disability 175 600 189 411 31.50% 3,972
Chauffer Insurance 0 67 0 67 0.00% 215
Workmen's Comp 2,934 3,563 2,934 629 82.35% 19,438
Group Insurance (2,688) 18,350 18,877 (527) 102.87% (6,120)
T&E 4,182 9,460 13,259 (3,799) 140.16% 26,142
General Insurance 7,640 5,471 6,415 (944) 117.25% 36,460
Auto Expense 792 1,063 740 323 69.61% 7,114
Telephone 10,173 4,037 4,262 (225) 105.56% 51,485
Office Expense 3,708 2,325 2,966 (641) 127.55% 25,140
Postage 605 697 (556) 1,253 -79.70% 5,171
Express Delivery 1,540 1,250 1,023 227 81.87% 7,625
Dues & Subscriptions 561 585 475 110 81.20% 3,643
Maintenance & Repairs 2,125 5,114 5,084 30 99.41% 13,031
Water 295 150 256 (106) 170.86% 892
Property Tax 15,640 12,232 11,909 323 97.36% 93,840
Licenses 5,479 6,240 6,242 (2) 100.03% 32,874
Rent 7,837 4,497 6,045 (1,548) 134.41% 46,658
Audit 4,167 4,167 4,167 (0) 100.01% 25,002
Legal Expenses 9,463 5,000 501 4,499 10.01% 51,550
Computer Fees 5,908 3,250 2,508 742 77.16% 19,574
Professional Fees (1,000) 0 0 0 -.- % (760)
Security 175 325 0 325 0.00% 1,252
Bad Debt Expense 19,186 20,225 17,643 2,582 87.23% 87,822
Bank Charges 3 1,000 211 789 21.11% 2
Donations 875 500 700 (200) 140.00% 2,022
LMA-JSA Fees 0 0 0 0 -.- % 6,920
Alloc To/Fr Stations (0) 0 0 0 -.- % (0)
Total General & Administrative 117,444 199,650 194,214 5,437 97.28% 995,670
CORPORATE
Salary 10,853 0 0 0 -.- % 61,370
Bonus 333 0 0 0 -.- % 60,498
T & E 12,778 0 0 0 -.- % 93,418
Auto Expense 0 0 0 0 -.- % 1,277
Tel & Tel 0 0 0 0 -.- % 333
Chancellor Overhead 0 15,000 (1,955) 16,955 -13.03% 0
Total Corporate 23,965 15,000 (1,955) 16,955 -13.03% 216,896
TOTAL CASH EXPENSES 569,398 629,792 573,831 55,961 91.11% 3,471,052
Total Trade Expense 0 161,270 170,128 (8,859) 105.49% 0
<CAPTION>
YTD Budget
Budget YTD thru YTD Percent
through end of minus use of
June June Actual YTD
1999 1999 YTD Budget
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Ratings Survey 66,000 58,523 7,477 88.67%
Alloc To/Fr Stations 0 0 0 -.- %
Total Sales 788,024 754,571 33,453 95.75%
GENERAL & ADMINISTRATIVE
Salary - Wages 353,858 367,520 (13,662) 103.86%
Bonus 29,028 29,029 (1) 100.00%
FICA 115,776 116,368 (592) 100.51%
Federal UI Tax 5,775 4,193 1,582 72.60%
State UI Tax 37,731 25,104 12,627 66.53%
Disability 4,620 1,940 2,680 41.99%
Chauffer Insurance 400 326 74 81.56%
Workmen's Comp 20,431 17,604 2,827 86.16%
Group Insurance 110,100 109,725 375 99.66%
T&E 56,760 61,497 (4,737) 108.35%
General Insurance 32,826 36,254 (3,428) 110.44%
Auto Expense 6,378 5,306 1,072 83.20%
Telephone 24,402 38,728 (14,326) 158.71%
Office Expense 13,950 26,918 (12,968) 192.96%
Postage 4,182 4,247 (65) 101.55%
Express Delivery 7,500 7,934 (434) 105.79%
Dues & Subscriptions 5,745 4,929 816 85.79%
Maintenance & Repairs 30,684 26,246 4,430 85.54%
Water 792 1,609 (817) 203.14%
Property Tax 73,392 71,453 1,939 97.36%
Licenses 37,440 38,545 (1,105) 102.95%
Rent 27,597 31,607 (4,010) 114.53%
Audit 25,000 25,002 (2) 100.01%
Legal Expenses 30,000 17,746 12,254 59.15%
Computer Fees 19,500 12,117 7,383 62.14%
Professional Fees 0 2,076 (2,076) -.- %
Security 1,950 0 1,950 0.00%
Bad Debt Expense 93,862 96,298 (2,436) 102.59%
Bank Charges 6,000 509 5,491 8.49%
Donations 3,000 9,360 (6,360) 312.00%
LMA-JSA Fees 0 0 0 -.- %
Alloc To/Fr Stations 0 0 0 -.- %
Total General & Administrative 1,178,679 1,190,189 (11,510) 100.98%
CORPORATE
Salary 0 0 0 -.- %
Bonus 0 0 0 -.- %
T & E 0 0 0 -.- %
Auto Expense 0 0 0 -.- %
Tel & Tel 0 0 0 -.- %
Chancellor Overhead 90,000 73,074 16,926 81.19%
Total Corporate 90,000 73,074 16,926 81.19%
TOTAL CASH EXPENSES 3,743,185 3,717,293 25,892 99.31%
Total Trade Expense 967,617 776,046 191,571 80.20%
</TABLE>
<PAGE> 81
Primedia Broadcast Group
Date: 8/16/99 Time: 5:00p Operator: MARIA DEL CARMEN Page: 4
PROFIT/LOSS STATEMENT
Altered DETAIL:PY, ACTUAL VS BUD:CM-YTD
Accounting Period: June 1999
<TABLE>
<CAPTION>
Budget Percent
Budget minus use of YTD thru
Net Change for Net Change Actual Budget: end of
June June June June June June
1998 1999 1999 1999 1999 1998
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
TOTAL EXPENSES 569,398 791,061 743,959 47,102 94.05% 3,471,052
OPERATING PROFIT (LOSS) 556,546 739,749 479,297 260,453 64.79% 2,126,907
NON-OPERATING EXPENSES
Total Depreciation 57,607 65,703 65,703 0 100.00% 345,082
Amortization Expense
Amortization - Tax deductible 33,415 388,887 (0) 388,887 0.00% 137,061
Amortization - Non deductible 149,521 0 388,887 (388,887) -.- % 897,128
Total Amortization Expense 182,936 388,887 388,887 0 100.00% 1,034,188
Interest Expense
Interest Expense - Citibank 150,547 0 0 0 -.- % 911,322
Interest Expense - WLDI Note 4,242 0 0 0 -.- % 25,452
Interest Expense - WRPC Note 9,902 0 0 0 -.- % 60,057
Interest Expense - WOQI Note 15,000 0 0 0 -.- % 78,782
Interest Expense - Estereotemp 7,073 0 0 0 -.- % 43,095
Total Interest Expenses 186,764 0 0 0 -.- % 1,118,708
Total Other Financing Charges 3,333 0 0 0 -.- % 27,498
Total Interest Income 0 0 0 0 -.- % 0
Gain (Loss) on sale of Asset 0 0 0 0 -.- % 0
TOTAL NON-OPERATING EXPENSES 430,640 454,590 454,590 0 100.00% 2,525,476
NET PROFIT (LOSS) 125,906 285,159 24,707 260,452 8.66% (398,569)
Net Income 125,906 285,159 24,707 260,452 8.66% (398,569)
<CAPTION>
YTD Budget
Budget YTD thru YTD Percent
through end of minus use of
June June Actual YTD
1999 1999 YTD Budget
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
TOTAL EXPENSES 4,710,802 4,493,339 217,463 95.38%
OPERATING PROFIT (LOSS) 2,694,576 2,209,964 484,612 82.02%
NON-OPERATING EXPENSES
Total Depreciation 394,219 394,219 0 100.00%
Amortization Expense
Amortization - Tax deductible 2,333,322 (23,578) 2,356,900 -1.01%
Amortization - Non deductible 0 2,167,433 (2,167,433) -.- %
Total Amortization Expense 2,333,322 2,143,855 189,467 91.98%
Interest Expense
Interest Expense - Citibank 0 0 0 -.- %
Interest Expense - WLDI Note 0 0 0 -.- %
Interest Expense - WRPC Note 0 0 0 -.- %
Interest Expense - WOQI Note 0 0 0 -.- %
Interest Expense - Estereotemp 0 0 0 -.- %
Total Interest Expenses 0 0 0 -.- %
Total Other Financing Charges 0 0 0 -.- %
Total Interest Income 0 11,770 (11,770) -.- %
Gain (Loss) on sale of Asset 0 1,590 (1,590) -.- %
TOTAL NON-OPERATING EXPENSES 2,727,541 2,524,714 202,827 92.56%
NET PROFIT (LOSS) (32,965) (314,751) 281,785 954.79%
Net Income (32,965) (314,751) 281,785 954.79%
</TABLE>
<PAGE> 82
DELOITTE & TOUCHE
- -----------------
[LOGO]
------------------------------------
PRIMEDIA BROADCAST GROUP,
INC. AND ITS AFFILIATES
Combined Financial Statements and
Additional Combining Information for the
Year Ended December 31, 1998, and
Independent Auditors' Report
- ---------------
Deloitte Touche
Tohmatsu
- ---------------
<PAGE> 83
PRIMEDIA BROADCAST GROUP, INC.
AND ITS AFFILIATES
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
INDEPENDENT AUDITORS' REPORT ON COMBINED
FINANCIAL STATEMENTS 1
COMBINED FINANCIAL STATEMENTS AS OF AND
FOR THE YEAR ENDED DECEMBER 31, 1998:
Combined Balance Sheet 2
Combined Statement of Loss and Deficit 3
Combined Statement of Cash Flows 4
Notes to Combined Financial Statements 5 - 9
INDEPENDENT AUDITORS' REPORT ON
ADDITIONAL COMBINING INFORMATION 10
ADDITIONAL COMBINING INFORMATION AS OF AND
FOR THE YEAR ENDED DECEMBER 31, 1998:
Combining Balance Sheet Information 11
Combining Statement of Loss and Deficit Information 12
<PAGE> 84
[LETTERHEAD OF DELOITTE & TOUCHE]
INDEPENDENT AUDITORS' REPORT
To the Stockholder of
Primedia Broadcast Group, Inc.,
WZNT, Inc., WOYE, Inc.,
WLDI, Inc., WRPC, Inc.,
WOQI, Inc., WIO, Inc. and
Cadena Estereotempo, Inc.
We have audited the accompanying combined balance sheet of Primedia Broadcast
Group, Inc. and its affiliates as of December 31, 1998, and the related combined
statements of loss and deficit and of cash flows for the year then ended. The
combined financial statements include the accounts of Primedia Broadcast Group,
Inc. and seven related companies, WZNT, Inc., WOYE, Inc., WLDI, Inc., WRPC,
Inc., WOQI, Inc., WIO, Inc. and Cadena Estereotempo, Inc. These companies are
under common ownership and common management. These financial statements are the
responsibility of the Companies' 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, such financial statements present fairly, in all material
respects, the combined financial position of Primedia Broadcast Group, Inc. and
its affiliates at December 31, 1998, and the combined results of their
operations and their combined cash flows for the year then ended, in conformity
with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
April 9, 1999
Stamp No. 1600676
affixed to original.
<PAGE> 85
PRIMEDIA BROADCAST GROUP, INC.
AND ITS AFFILIATES
COMBINED BALANCE SHEET
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,672,483
Accounts receivable (Note 4) 3,714,785
Prepaid expenses 155,084
Deferred tax asset (Note 9) 68,686
------------
Total current assets 5,611,038
PROPERTY AND EQUIPMENT - Net (Note 5) 4,414,664
INTANGIBLE AND OTHER ASSETS - Net (Note 6) 27,382,547
------------
TOTAL $ 37,408,249
============
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 132,758
Accrued expenses 2,433,287
Income taxes payable 85,236
------------
Total current liabilities 2,651,281
DUE TO PARENT (Note 3) 26,492,984
DEFERRED INCOME TAX (Note 9) 193,938
------------
Total liabilities 29,338,203
------------
STOCKHOLDER'S EQUITY (Note 7):
Common stock 7,138
Preferred stock 13,739
Additional paid-in capital 13,368,408
Deficit (5,319,239)
------------
Total stockholder's equity 8,070,046
------------
TOTAL $ 37,408,249
============
</TABLE>
See notes to combined financial statements.
-2-
<PAGE> 86
PRIMEDIA BROADCAST GROUP, INC.
AND ITS AFFILIATES
COMBINED STATEMENT OF LOSS AND DEFICIT
YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
REVENUES:
Broadcast revenues (Note 8) $ 18,390,547
Less agency commissions and discounts 4,372,704
------------
Net broadcast revenues 14,017,843
Other revenues 530,015
------------
Total revenues 14,547,858
------------
COSTS AND EXPENSES:
Technical operations 460,727
Programming 2,755,826
Selling 1,410,941
General and administrative (Notes 8 and 10) 6,322,727
------------
Total costs and expenses 10,950,221
------------
INCOME BEFORE OTHER EXPENSES 3,597,637
------------
OTHER EXPENSES (INCOME):
Depreciation and amortization 3,211,054
Interest expense 1,995,410
Other income (3,694)
------------
Total other expenses 5,202,770
------------
LOSS BEFORE INCOME TAX PROVISION 1,605,133
------------
INCOME TAX PROVISION (Note 9):
Current 95,129
Deferred 814
------------
Total income tax provision 95,943
------------
NET LOSS 1,701,076
DEFICIT, BEGINNING OF YEAR 3,618,163
------------
DEFICIT, END OF YEAR $ 5,319,239
============
</TABLE>
See notes to combined financial statements.
-3-
<PAGE> 87
PRIMEDIA BROADCAST GROUP, INC.
AND ITS AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Primedia Broadcast Group, Inc. ("Primedia") was
incorporated on December 12, 1994 under the laws of the Commonwealth of
Puerto Rico. Primedia commenced its operations on January 1, 1995 as a
management company for a group of radio stations acquired or under local
marketing or joint sale agreements.
Combined Financial Statements - The accompanying combined financial
statements include the accounts of Primedia and its affiliated companies
WZNT, Inc., WOYE, Inc., WLDI, Inc., WRPC, Inc., WOQI, Inc., WIO, Inc. and
Cadena Estereotempo, Inc. (the "Group"). Primedia and its affiliates are
under common ownership and management. The affiliated companies were
incorporated for the purpose of acquiring existing radio stations in
Puerto Rico. These companies commenced operations upon the acquisition of
the radio stations.
All significant intercompany balances and transactions have been
eliminated in the preparation of the combined financial statements.
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.
Revenue and Expense Recognition - Revenues are recognized when commercials
are broadcasted. Salaries and other operating costs are charged to expense
when incurred.
Cash and Cash Equivalents - All highly liquid investments purchased with
original maturities of three months or less are considered as cash
equivalents.
Allowance for Doubtful Accounts - The allowance for doubtful accounts is
an amount that management believes will be adequate to absorb possible
losses on existing accounts receivable that may become uncollectible based
on evaluations of collectibility of accounts receivable and prior credit
experience. Because of uncertainties inherent in the estimation process,
management's estimate of credit losses inherent in the existing accounts
receivable and the related allowance may change in the near term.
Property and Equipment - Property and equipment are stated at cost.
Depreciation and amortization are provided on a straight-line basis over
the estimated useful lives of the assets as follows: building and
leasehold improvements, 40 years; broadcasting equipment, 5 to 15 years;
other equipment and furniture and fixtures, 3 to 7 years.
Expenditures for maintenance and repairs are charged to costs and expenses
as incurred; expenditures for renewals and betterments are capitalized.
Cost and accumulated depreciation for property sold, retired or abandoned
are removed from the accounts and any resulting gain or loss is included
in income or expense.
-5-
<PAGE> 88
Intangible and Other Assets - Intangible and other assets consist
principally of the excess of cost over net assets acquired from
predecessor companies. Such excess cost was assigned to the Federal
Communications Commission ("FCC") licenses, customer list, goodwill,
leasehold rights and tower space income agreements based on independent
appraisals. These assets are amortized on a straight-line basis over
their estimated useful lives as follows: FCC licenses, customer list and
goodwill, 15 years; leasehold rights, 4 years; tower space income
agreement, 1-1/2 years.
Impairment of Long-Lived Assets - Long-lived assets, certain identifiable
intangibles and goodwill, are periodically reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. No indications of impairment
are evident as a result of such review.
Barter Transactions - Barter and trade-out revenue is recognized when
commercials are broadcasted. Goods or services are recorded at their
estimated fair value when received or used. If goods or services are
received prior to the broadcast of the commercial, a liability is
recorded; if the commercial is broadcasted first, a receivable is
recorded.
Deferred Income Taxes - Deferred income taxes are provided for temporary
differences in the financial statements and tax bases of assets and
liabilities using current tax rates in effect in accordance with Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes.
Principal temporary differences giving rise to deferred income taxes are
depreciation and the allowance for bad debts. Deferred tax assets,
including the benefit for net operating loss carryforward, if any, are
evaluated based on the guidelines of SFAS 109 for realization and may be
reduced by a valuation allowance.
2. SIGNIFICANT EVENTS
Change in ownership of the Group
Effective October 23, 1998, and pursuant to a stock purchase agreement,
Chancellor Media Corporation (the "Parent") acquired all of the issued and
outstanding shares of the Group from the existing shareholders, and became
the sole shareholder of the Group. Following is a summary of the most
significant transactions affecting the Group, resulting from the change in
ownership:
o All of the outstanding debt of the Group, including amounts due to
financial institutions, stockholders and former owners of radio
stations amounting to $22,389,744, including accrued interest of
$331,242, were paid by the Parent on behalf of the Group.
o 229 warrants to purchase shares of common stock, issued and
outstanding, with a carrying value of $100,000, were redeemed for
$663,268 and paid by the Parent on behalf of the Group. The excess
of the redemption price over the carrying value of the stock
warrants was recorded as a reduction of additional paid-in capital
in the accompanying combined balance sheet.
o Preferred dividends in arrears including accrued interest, amounting
to $2,097,172 at October 23, 1998 were paid by the Parent on behalf
of the Group and recorded as a reduction of additional paid-in
capital in the accompanying combined balance sheet.
o Other expenses amounting to $1,972,800 and charged to operations
were paid by the Parent on behalf of the Group, resulting in an
increase in the amount due to Parent.
-6-
<PAGE> 89
Acquisitions
On January 16, 1998, WOQI, Inc. acquired the net assets of Portorican
American Broadcasting, Co., Inc. ("PAB"), for a total purchase price of
$3,000,000. On the same date, WOQI, Inc. sold one of the two stations
owned by PAB for $50,000. This acquisition was accounted for using the
purchase method of accounting at the acquisition date, and accordingly,
the purchase price was allocated to assets acquired and liabilities
assumed based upon their related market values at the acquisition date.
The excess of the total purchase price over the fair values of the net
assets acquired of approximately $1,684,000 was recorded as goodwill.
3. RELATED PARTY TRANSACTIONS
The companies included in the combined financial statements share
technical and operating personnel and certain facilities and other
services. The individual financial statements for each company have been
prepared from separate records maintained in a central accounting
location. Portions of certain revenues and expenses represent allocations
made by management for items applicable to each company based on operating
statistics and other pertinent criteria. In addition, the Group had
significant transactions with its Parent at terms and conditions arranged
by the parties.
Due to Parent at December 31, 1998 amounting to $26,492,984, consists of
payments made by the Parent on behalf of the Group (see Note 2). The
Company is presently negotiating the terms of this debt.
4. ACCOUNTS RECEIVABLE
Accounts receivable at December 31, 1998 consisted of:
<TABLE>
<S> <C>
Customers $3,890,700
Other 19,193
----------
Total 3,909,893
Less allowance for doubtful accounts 195,108
----------
Accounts receivable - net $3,714,785
==========
</TABLE>
5. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1998 consisted of:
<TABLE>
<S> <C>
Land, building and leasehold improvements $1,143,259
Broadcasting equipment 4,080,608
Other equipment, furniture and fixtures 1,113,052
----------
Total 6,336,919
Less accumulated depreciation and amortization 1,922,255
----------
Property and equipment - net $4,414,664
==========
</TABLE>
-7-
<PAGE> 90
6. INTANGIBLE AND OTHER ASSETS
Intangible and other assets at December 31, 1998 consisted of:
<TABLE>
<S> <C>
FCC licenses $18,162,742
Goodwill 12,061,557
Tower space income agreement 150,295
Customer list 2,973,073
Leasehold rights 185,832
Other 203,641
-----------
Total 33,737,140
Less accumulated amortization 6,354,593
-----------
Intangible and other assets - net $27,382,547
===========
</TABLE>
7. STOCKHOLDER'S EQUITY
Common stock at December 31, 1998 consisted of:
<TABLE>
<CAPTION>
Shares
Shares Par Issued and
Authorized Value Outstanding Amount
<S> <C> <C> <C> <C>
WZNT, Inc. 1,000,000 $1.00 1,782 $ 1,782
WOYE, Inc. 1,000,000 1.00 716 716
WLDI, Inc. 1,000,000 1.00 719 719
WOQI, Inc. 1,000,000 1.00 1,000 1,000
WRPC, Inc. 1,000,000 1.00 1,095 1,095
Primedia Broadcast Group, Inc. 1,000,000 1.00 4 4
WIO, Inc. 1,000,000 1.00 1,822 1,822
-------
Total $ 7,138
=======
</TABLE>
Preferred stock at December 31, 1998 consisted of:
<TABLE>
<CAPTION>
Preferred Shares
Stock Shares Par Issued and
Class A Authorized Value Outstanding Amount
<S> <C> <C> <C> <C>
WZNT, Inc. 6,000 $ 1.00 3,988 $ 3,988
WOYE, Inc. 3,000 1.00 1,602 1,602
WLDI, Inc. 3,000 1.00 1,610 1,610
WRPC, Inc. 4,500 1.00 2,452 2,452
Primedia Broadcast Group, Inc. 50 1.00 8 8
WIO, Inc. 8,000 1.00 4,079 4,079
-------
Total $13,739
=======
</TABLE>
Preferred shares are cumulative at an annual rate of $50.00 per share,
calculated on a basis of 360-day year; unpaid dividends accrue interest on
a daily basis at a rate of 5% per annum. Total dividends in arrears
amounted to approximately $113,000 as of December 31, 1998. The preferred
shares entitle the holder to vote, and to receive, in the event of
liquidation and prior to any distribution of assets to the holders of the
common stock, an amount equal to (a) $1,000 per share, plus (b) an amount
equal to all accrued and unpaid dividends, plus (c) an amount equal to all
accrued and unpaid interest to the date of such payment.
-8-
<PAGE> 91
8. BARTER TRANSACTIONS
Broadcast revenues and expenses related to trade-out agreements amounted
to approximately $1,959,000 and $1,726,000, respectively, during the year
ended December 31, 1998.
9. INCOME TAXES
The companies within the Group are subject to Puerto Rico income taxes at
statutory rates that range from 20% to 39%. The provision for income tax
is computed on an individual company basis, therefore losses of one
company cannot be offset against the taxable income of another.
At December 31, 1997, certain companies had net operating loss
carryforwards of approximately $199,000 and $301,000 for regular tax and
alternative minimum tax purposes, respectively, that were used to offset
their corresponding taxable income for the year ended December 31, 1998.
The components of deferred income tax at December 31, 1998 are as follows:
<TABLE>
<S> <C>
Deferred tax liability -
Property and equipment $193,938
--------
Deferred tax asset -
Allowance for bad debts $ 68,686
--------
</TABLE>
10. LEASE AGREEMENTS
WZNT, Inc. leases its office space in Guaynabo, Puerto Rico under an
operating lease agreement expiring on August 31, 2000. The lease specifies
a monthly rental payment of $2,100. Rent expense for the year ended
December 31, 1998 amounted to approximately $25,000.
WZNT, Inc. leases tower and building space at its transmitter site to two
cellular communication companies under operating leases expiring in
various dates through August 31, 2000. These agreements require the
lessees to pay WZNT, Inc. monthly rental payments of $2,800 and $3,000,
respectively, during the corresponding lease periods.
11. SUPPLEMENTAL CASH FLOW INFORMATION
Interest and income tax paid during the year ended December 31, 1998
amounted to approximately $1,980,000 and $18,000, respectively.
During 1998, the Group financed $2,000,000, for the acquisition of radio
stations. This noncash transaction was excluded from the accompanying
statement of cash flows.
As described in Note 2, all of the Group's outstanding debt, accrued
interest and preferred dividends in arrears as of October 23, 1998
amounting to approximately S24,487,000 were paid by the Parent on behalf
of the Group. In addition, the Parent paid approximately $663,000 for the
redemption of stock warrants, also on behalf of the Group. These noncash
financing transactions were excluded from the accompanying statement of
cash flows.
* * * * * *
-9-
<PAGE> 92
[LETTERHEAD OF DELOITTE & TOUCHE]
INDEPENDENT AUDITORS' REPORT ON
ADDITIONAL COMBINING INFORMATION
To the Stockholder of
Primedia Broadcast Group, Inc.,
WZNT, Inc., WOYE, Inc.,
WLDI, Inc., WRPC, Inc.,
WOQI, Inc., WIO, Inc. and
Cadena Estereotempo, Inc.
Our audit was conducted for the purpose of forming an opinion on the basic
combined financial statements for the year ended December 31, 1998, taken as a
whole. The additional combining information listed in. the table of contents is
presented for the purpose of additional analysis of the basic combined financial
statements rather than to present the financial position and results of
operations of the individual companies, and is not a required part of the basic
combined financial statements. This additional information is the responsibility
of the Companies' management. Such information has been subjected to the
auditing procedures applied in our audit of the basic combined financial
statements and, in our opinion, is fairly stated in all material respects when
considered in relation to the basic combined financial statements taken as a
whole.
/s/ Deloitte & Touche LLP
April 9, 1999
Stamp No. 1600677
affixed to original.
-10-
<PAGE> 93
PRIMEDIA BROADCAST GROUP, INC. AND ITS AFFILIATES
COMBINING BALANCE SHEET INFORMATION
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS PRIMEDIA WZNT WOYE WLDI WRPC
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ -- $ 529,941 $ 358,912 $ 644,073 $ 239,583
Accounts receivable 153 825,973 316,080 724,564 159,439
Prepaid expenses 11,029 92,798 8,626 1,515 6,061
Investment in subsidiary
Deferred tax asset 18,303 16,860 8,408 7,185
------------ ------------ ------------ ------------ ------------
Total current assets 11,182 1,467,015 700,478 1,378,560 412,268
PROPERTY AND EQUIPMENT - Net 32,321 1,623,992 717,790 625,221 463,078
INTANGIBLES AND OTHER ASSETS - Net 1,666 7,675,583 2,687,284 2,348,702 2,312,931
------------ ------------ ------------ ------------ ------------
TOTAL $ 45,169 $ 10,766,590 $ 4,105,552 $ 4,352,483 $ 3,188,277
============ ============ ============ ============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,607,929 $ 96,013 $ -- $ -- $ --
Accrued expenses 585,621 487,111 134,678 363,446 69,609
Income tax payable 4,439 6,487 12,451 16,329 6,390
------------ ------------ ------------ ------------ ------------
Total current liabilities 2,197,989 589,611 147,129 379,775 75,999
DUE TO PARENT (2,149,381) 7,795,551 2,912,908 3,004,579 1,386,169
DEFERRED INCOME TAX
------------ ------------ ------------ ------------ ------------
Total liabilities 48,608 8,385,162 3,060,037 3,384,354 1,462,168
------------ ------------ ------------ ------------ ------------
STOCKHOLDER'S EQUITY (DEFICIENCY):
Common Stock 4 1,782 716 719 1,095
Preferred Stock 8 3,988 1,602 1,610 2,452
Additional paid-in capital 988 3,982,869 1,599,828 1,534,313 2,172,114
Deficit (4,439) (1,607,211) (556,631) (568,513) (449,552)
------------ ------------ ------------ ------------ ------------
Total Stockholder's equity (deficiency) (3,439) 2,381,428 1,045,515 968,129 1,726,109
------------ ------------ ------------ ------------ ------------
Less treasury stock at cost
------------ ------------ ------------ ------------ ------------
TOTAL $ 45,169 $ 10,766,590 $ 4,105,552 $ 4,352,483 $ 3,188,277
============ ============ ============ ============ ============
<CAPTION>
ASSETS WOQI WIO Estereotempo Eliminations Combined
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 192,881 $ -- $ 1,278,069 $ (1,570,976) $ 1,672,483
Accounts receivable 149,200 1,539,376 3,714,785
Prepaid expenses (2,030) 829 36,256 155,084
Investment in subsidiary 2,390,226 (2,390,226)
Deferred tax asset 1,575 16,355 68,686
------------ ------------ ------------ ------------ ------------
Total current assets 341,626 2,391,055 2,870,056 (3,961,202) 5,611,038
PROPERTY AND EQUIPMENT - Net 14,983 408,274 529,005 4,414,664
INTANGIBLES AND OTHER ASSETS - Net 2,891,974 6,942,653 2,521,754 27,382,547
------------ ------------ ------------ ------------ ------------
TOTAL $ 3,248,583 $ 9,741,982 $ 5,920,815 $(3,961,202) $ 37,408,249
============ ============ ============ =========== ============
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ -- $ -- $ (208) $ (1,570,976) $ 132,758
Accrued expenses 90,020 702,802 2,433,287
Income tax payable 6,012 16,502 16,626 85,236
------------ ------------ ------------ ------------ ------------
Total current liabilities 96,032 16,502 719,220 (1,570,976) 2,651,281
DUE TO PARENT 3,244,735 7,487,054 2,811,369 26,492,984
DEFERRED INCOME TAX 193,938 193,938
------------ ------------ ------------ ------------ ------------
Total liabilities 3,340,767 7,697,494 3,530,589 (1,570,976) 29,338,203
------------ ------------ ------------ ------------ ------------
STOCKHOLDER'S EQUITY (DEFICIENCY):
Common Stock 1,000 1,822 2,001,000 (2,001,000) 7,138
Preferred Stock 4,079 13,739
Additional paid-in capital 4,078,296 1,291,199 (1,291,199) 13,368,408
Deficit (93,184) (2,039,709) (550,973) 550,973 (5,319,239)
------------ ------------ ------------ ------------ ------------
Total Stockholder's equity (deficiency) (92,184) 2,044,488 2,741,226 (2,741,226) 8,070,046
------------ ------------ ------------ ------------ ------------
Less treasury stock at cost (351,000) 351,000
------------ ------------ ------------ ------------ ------------
TOTAL $ 3,248,583 $ 9,741,982 $ 5,920,815 $ (3,961,202) $ 37,408,249
============ ============ ============ ============ ============
</TABLE>
<PAGE> 94
PRIMEDIA BROADCAST GROUP, INC. AND ITS AFFILIATES
COMBINING STATEMENT OF LOSS AND DEFICIT INFORMATION
YEAR ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRIMEDIA WZNT WOYE WLDI WRPC
<S> <C> <C> <C> <C> <C>
REVENUES;
Broadcast revenues $ -- $ 3,724,218 $ 1,660,305 $ 3,981,551 $ 881,588
Less agency commission and discounts 833,287 378,189 969,226 230,736
------- ------------ ------------ ------------ ------------
Net broadcast revenues 2,890,931 1,282,116 3,012,325 650,852
Other revenues 524,815 1,200 4,000
------- ------------ ------------ ------------ ------------
Total revenues 3,415,746 1,283,316 2,016,325 650,852
------- ------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Technical operations 105,966 46,073 92,145 18,430
Programming 633,839 275,583 551,166 110,235
Selling 331,279 139,228 277,777 63,124
General and administrative 1,206,949 385,359 1,560,715 94,791
------- ------------ ------------ ------------ ------------
Total costs and expenses 2,278,033 846,243 2,481,803 286,580
------- ------------ ------------ ------------ ------------
INCOME BEFORE OTHER EXPENSES 1,137,713 437,073 534,522 364,272
------- ------------ ------------ ------------ ------------
OTHER EXPENSES (INCOME):
Depreciation and amortization 996,030 303,428 283,059 248,578
Interest expense 582,364 222,361 263,086 117,413
Interest income (3,694)
------- ------------ ------------ ------------ ------------
Total other expenses 1,574,700 525,789 548,145 365,991
------- ------------ ------------ ------------ ------------
OPERATING LOSS (436,987) (88,716) (13,623) (1,719)
EQUITY IN LOSS OF SUBSIDIARY
------- ------------ ------------ ------------ ------------
LOSS BEFORE INCOME TAX PROVISION
(BENEFIT) (436,987) (88,716) (13,623) (1,719)
------- ------------ ------------ ------------ ------------
INCOME TAX PROVISION (BENEFIT):
Current 18,319 14,951 16,329 6,390
Deferred 8,012 8,534 6,244 (7,185)
------- ------------ ------------ ------------ ------------
Total income tax provision (benefit) 26,331 23,485 22,573 (795)
------- ------------ ------------ ------------ ------------
NET LOSS (463,318) (112,201) (36,196) (924)
DEFICIT, BEGINNING OF YEAR (4,439) (1,143,893) (444,430) (532,317) (448,628)
------- ------------ ------------ ------------ ------------
DEFICIT, END OF YEAR $(4,439) $ (1,607,211) $ (556,631) $ (568,513) $ (449,552)
======= ============ ============ ============ ============
<CAPTION>
WOQI WIO Estereotempo Eliminations Combined
<S> <C> <C> <C> <C> <C>
REVENUES;
Broadcast revenues $ 753,514 $ -- $ 7,389,371 $ -- $ 18,390,547
Less agency commission and discounts 191,836 1,769,430 4,372,704
------------ ------------ ------------ -------- ------------
Net broadcast revenues 561,678 5,619,941 14,017,843
Other revenues 96,000 (96,000) 530,015
------------ ------------ ------------ -------- ------------
Total revenues 561,678 96,000 5,619,941 (96,000) 14,547,858
------------ ------------ ------------ -------- ------------
COSTS AND EXPENSES:
Technical operations 18,429 179,684 460,727
Programming 110,233 1,074,770 2,755,826
Selling 54,476 545,057 1,410,941
General and administrative 197,528 2,973,385 (96,000) 6,322,727
------------ ------------ ------------ -------- ------------
Total costs and expenses 380,666 4,772,896 (96,000) 10,950,221
------------ ------------ ------------ -------- ------------
INCOME BEFORE OTHER EXPENSES 181,012 96,000 847,045 3,597,637
------------ ------------ ------------ -------- ------------
OTHER EXPENSES (INCOME):
Depreciation and amortization 108,657 706,801 564,501 3,211,054
Interest expense 138,083 670,103 1,995,410
Interest income (3,694)
------------ ------------ ------------ -------- ------------
Total other expenses 246,740 706,801 1,234,604 5,202,770
------------ ------------ ------------ -------- ------------
OPERATING LOSS (65,728) (610,801) (387,559) (1,605,113)
EQUITY IN LOSS OF SUBSIDIARY (411,474) 411,474
------------ ------------ ------------ -------- ------------
LOSS BEFORE INCOME TAX PROVISION
(BENEFIT) (65,728) (1,022,275) (387,559) 411,474 (1,605,133)
------------ ------------ ------------ -------- ------------
INCOME TAX PROVISION (BENEFIT):
Current 6,012 16,502 16,626 95,129
Deferred (1,575) (20,505) 7,289 814
------------ ------------ ------------ -------- ------------
Total income tax provision (benefit) 4,437 (4,003) 23,915 95,943
------------ ------------ ------------ -------- ------------
NET LOSS (70,165) (1,018,272) (411,474) 411,474 (1,701,076)
DEFICIT, BEGINNING OF YEAR (23,019) (1,021,437) (139,499) 139,499 (3,618,163)
------------ ------------ ------------ -------- ------------
DEFICIT, END OF YEAR $ (93,184) $ (2,039,709) $ (550,973) $550,973 $ (5,319,239)
============ ============ ============ ======== ============
</TABLE>
<PAGE> 95
Deloitte & Touche LLP
- ---------------------
[LOGO]
--------------------------------------------------
PRIMEDIA BROADCAST
GROUP, INC.
AND ITS AFFILIATES
Combined Financial Statements for the
Years Ended December 31, 1997 and 1996,
Additional Combining Information for the
Year Ended December 31, 1997 and
Independent Auditors' Report
- ---------------
Deloitte Touche
Tohmatsu
International
<PAGE> 96
PRIMEDIA BROADCAST GROUP, INC.
AND ITS AFFILIATES
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
INDEPENDENT AUDITORS' REPORT ON
COMBINED FINANCIAL STATEMENTS 1
COMBINED FINANCIAL STATEMENTS AS OF AND
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996:
Combined Balance Sheet 2
Combined Statement of Loss and Deficit 3
Combined Statement of Cash Flows 4
Notes to Combined Financial Statements 5 - 12
INDEPENDENT AUDITORS' REPORT ON
ADDITIONAL COMBINING INFORMATION 13
ADDITIONAL COMBINING INFORMATION AS OF
AND FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996:
Combining Balance Sheet Information 14
Combining Statement of Loss and Deficit Information 15
<PAGE> 97
[LETTERHEAD OF DELOITTE & TOUCHE]
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Primedia Broadcast Group, Inc.
WZNT, Inc. WOYE, Inc.
WLDI, Inc. WRPC, Inc.
WOQI, Inc. WIO, Inc.
Cadena Estereotempo, Inc.
We have audited the accompanying combined balance sheets of Primedia Broadcast
Group. Inc. and its affiliates as of December 31, 1997 and 1996, and the related
combined statements of loss and deficit and of cash flows for the years then
ended. The combined financial statements include the accounts of Primedia
Broadcast Group, Inc. and seven related companies. WZNT, Inc., WOYE, Inc., WLDI,
Inc., WRPC, Inc., WOQI, Inc., WIO, Inc. and Cadena Estereotempo, Inc.. These
companies are under common ownership and common management. These financial
statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the combined financial position of Primedia Broadcast Group, Inc. and
its affiliates at December 31, 1997 and 1996, and the combined results of their
operations and their combined cash flows for the years then ended, in conformity
with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
February 28, l998
Stamp No. 1483982
affixed to original.
<PAGE> 98
PRIMEDIA BROADCAST GROUP, INC.
AND ITS AFFILIATES
COMBINED BALANCE SHEETS
DECEMBER 31, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,170,258 $ 1,508,330
Accounts receivable (Note 2) 2,920,261 2,237,861
Prepaid expenses 436,866 406,163
Deferred tax asset (Note 9) 90,005 18,923
------------ ------------
Total current assets 4,617,390 4,171,277
PROPERTY AND EQUIPMENT - Net (Note 3) 4,495,322 4,551,045
INTANGIBLE AND OTHER ASSETS - Net (Note 4) 26,669,512 28,789,551
------------ ------------
TOTAL $ 35,782,224 $ 37,511,873
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 127,349 $ 510,353
Accrued expenses 2,322,760 1,750,212
Income taxes payable 5,783 77,566
Current portion of long-term debt (Note 5) 1,635,800 1,514,532
------------ ------------
Total current liabilities 4,091,692 3,852,663
LONG-TERM DEBT (Note 5) 19,002,252 20,208,082
DEFERRED INCOME TAX (Note 9) 214,443 234,948
------------ ------------
Total liabilities 23,308,387 24,295,693
------------ ------------
STOCKHOLDERS' EQUITY (Note 6):
Common stock 7,138 7,138
Preferred stock 13,739 13,739
Additional paid-in capital 15,971,123 15,971,123
Common stock warrants 100,000 100,000
Deficit (3,618,163) (2,875,820)
------------ ------------
Total stockholders' equity 12,473,837 13,216,180
------------ ------------
TOTAL $ 35,782,224 $ 37,511,873
============ ============
</TABLE>
See notes to combined financial statements.
<PAGE> 99
PRIMEDIA BROADCAST GROUP, INC.
AND ITS AFFILIATES
COMBINED STATEMENTS OF LOSS AND DEFICIT
YEARS ENDED DECEMBER 31, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
REVENUES:
Broadcast revenues (Note 8) $ 14,648,625 $ 8,382,256
Less agency commissions and discounts 3,481,829 2,190,591
------------ ------------
Net broadcast revenues 11,166,796 6,191,663
Other revenues 1,083,005 1,249,569
------------ ------------
Total revenues 12,249,801 7,441,234
------------ ------------
COSTS AND EXPENSES:
Technical operations 448,614 228,492
Programming 2,354,402 1,738,340
Selling 1,276,818 841,497
General and administrative (Notes 8 and 10) 3,906,222 2,623,202
------------ ------------
Total costs and expenses 7,986,056 5,431,531
------------ ------------
INCOME BEFORE OTHER EXPENSES 4,263,745 2,009,703
------------ ------------
OTHER EXPENSES (INCOME):
Depreciation and amortization 2,916,466 2,133,392
Interest expense 2,102,207 1,426,622
Loss on sale of property and equipment 65,965
Interest income (25,339) (32,948)
------------ ------------
Total other expenses 5,059,299 3,527,066
------------ ------------
LOSS BEFORE INCOME TAX 795,554 1,517,363
------------ ------------
INCOME TAX PROVISION (BENEFIT) (Note 9):
Current 38,376
Deferred (91,587) (37,625)
------------ ------------
Total (53,211) (37,625)
------------ ------------
NET LOSS 742,343 1,479,738
DEFICIT, BEGINNING OF THE YEAR 2,875,820 1,396,082
------------ ------------
DEFICIT, END OF THE YEAR $ 3,618,163 $ 2,875,820
============ ============
</TABLE>
See notes to combined financial statements.
-3-
<PAGE> 100
PRIMEDIA BROADCAST GROUP, INC.
AND ITS AFFILIATES
COMBINED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (742,343) $ (1,479,738)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 2,916,466 2,133,392
Bad debt expense 153,732 99,658
Financed interest expense 114,279
Loss on sale of fixed assets 65,965
Deferred income tax benefit (91,587) (37,625)
Changes in operating assets and liabilities, net of
effect of assets acquired and liabilities assumed:
Increase in:
Accounts receivable (836,132) (709,192)
Prepaid expenses (30,703) (10,479)
Increase (decrease) in:
Accounts payable 36,133 259,025
Income tax payable (71,783) (68,525)
Accrued expenses 572,548 453,420
Net cash provided by operating activities 1,972,296 756,215
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Disbursement for acquisition of radio stations, net
of cash acquired of $88,949 (12,986,560)
Capital expenditures (717,295) (415,857)
Proceeds from sale of:
Radio station 639,800
Property and equipment 38,500
Net increase in other assets (127,874) (384,898)
------------ ------------
Net cash used in investing activities (806,669) (13,147,515)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of:
Long-term debt 429,969 6,950,000
Shares of common and preferred stock 7,289,000
Payment of long-term debt (1,514,531) (747,959)
Due to stockholders (419,137) (752,037)
------------ ------------
Net cash (used in) provided by financing activities (1,503,699) 12,739,004
------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (338,072) 347,704
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,508,330 1,160,626
------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 1,170,258 $ 1,508,330
============ ============
</TABLE>
See notes to combined financial statements.
<PAGE> 101
PRIMEDIA BROADCAST GROUP, INC.
AND ITS AFFILIATES
NOTES TO THE COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Primedia Broadcast Group, Inc. ("Primedia") was
incorporated on December 12, 1994 under the laws of the Commonwealth of
Puerto Rico. Primedia commenced its operations effective January 1, 1995
as a management company for a group of radio stations acquired or under
local marketing or joint sale agreements.
Combined Financial Statements - The accompanying combined financial
statements include the accounts of Primedia and its affiliated companies
WZNT, Inc., WOYE, Inc., WLDI, Inc., WRPC, Inc., WOQI, Inc., WIO, Inc. and
Cadena Estereotempo, Inc. (the "Group"). Primedia and its affiliates are
under common ownership and common management The affiliated companies were
incorporated for the purpose of acquiring existing radio stations in
Puerto Rico. These companies commenced operations upon the acquisition of
the radio stations.
All significant intercompany balances and transactions have been
eliminated in the preparation of the combined financial statements.
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.
Revenue and Expense Recognition - Revenues are recognized when commercials
are broadcasted, salaries and other operating costs are charged to expense
when incurred.
Property and Equipment - Property and equipment are stated at cost.
Depreciation and amortization are provided on a straight-line basis over
the estimated useful lives of the assets as follows: building and
leasehold improvements, 40 years; broadcasting equipment, 5 to 15 years;
other equipment and furniture and fixtures, 3 to 7 years.
Expenditures for maintenance and repairs are charged to costs and expenses
as incurred: expenditures for renewals and betterments are capitalized.
Cost and accumulated depreciation for property sold, retired or abandoned
are removed from the accounts and any resulting gain or loss is included
in income or expense.
Barter Transactions - Barter and trade-out revenue is recognized when
commercials are broadcasted. Goods or services are recorded at their
estimated fair value when received or used. If goods or services are
received prior to the broadcast of the commercial, a liability is
recorded; if the commercial is broadcasted first, a receivable is
recorded.
-5-
<PAGE> 102
Intangible and Other Assets - Intangible and other assets consist
principally of the excess of cost over net assets acquired from
predecessor companies. Such excess cost was assigned to the Federal
Communications Commission ("FCC") licenses, customer list, goodwill,
leasehold rights and tower space income agreements based on independent
appraisals. These assets are amortized on a straight-line basis over their
estimated useful lives as follows: FCC licenses, customer list and
goodwill, 15 years; leasehold rights, 4 year; tower space income
agreement, 1-1/2 years. Deferred financing costs are amortized over the
life of the related debt which is approximately 7 years.
Deferred Income Taxes - Deferred income taxes are provided for temporary
differences in the financial statements and tax bases of assets and
liabilities using current tax rates in effect in accordance with Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes.
Principal temporary differences giving rise to deferred income taxes are
depreciation and the allowance for bad debts. Deferred tax assets,
including the benefit for net operating loss carryforward, are evaluated
based on the guidelines of SFAS 109 for realization and may be reduced by
a valuation allowance.
Cash and Cash Equivalents - All highly liquid investments purchased with
original maturities of three months or less are considered as cash
equivalents.
Allowance for Doubtful Accounts - The allowance for doubtful accounts is
an amount that management believes will be adequate to absorb possible
losses on existing accounts receivables that may become uncollectible
based on evaluations of collectibility of accounts receivables and prior
credit experience. Because on uncertainties inherent in the estimation
process, management's estimate of credit losses inherent in the existing
accounts receivables and related allowance may change in the near term.
Impairment of Long-Lived Assets - The carrying value of intangible and
other assets and of property and equipment is evaluated periodically for
recoverability when considered in relation to the expected future
undiscounted cash flows of the underlying business over the estimated
remaining useful life of the asset.
2. ACCOUNTS RECEIVABLE
Accounts receivable at December 31, 1997 and 1996 consisted of:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Customers $3,095,585 $2,203,178
Other 125,166 217,386
---------- ----------
Total 3,220,751 2,420,564
Less allowance for doubtful accounts 300,490 182,703
---------- ----------
Accounts receivable, net $2,920,261 $2,237,861
========== ==========
</TABLE>
<PAGE> 103
3. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1997 and 1996 consisted of:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Land, building and leasehold improvements $1,002,717 $ 805,739
Broadcasting equipment 3,834,461 3,572,149
Other equipment, furniture and fixtures 842,629 711,369
---------- ----------
Total 5,679,807 5,089,257
Less accumulated depreciation and amortization 1,184,485 538,212
---------- ----------
Property and equipment - net $4,495,322 $4,551,045
========== ==========
</TABLE>
4. INTANGIBLE AND OTHER ASSETS
Intangible and other assets at December 31, 1997 and 1996 consisted of:
<TABLE>
1997 1996
<S> <C> <C>
FCC licenses $16,896,742 $16,896,742
Goodwill 10,165,716 10,232,200
Tower space income agreement 150,295 150,295
Customer list 2,973,073 2,973,073
Leasehold rights 185,832 185,832
Deferred financing cost 722,590 714,877
Other 186,641
----------- -----------
Total 31,280,889 31,153,019
Less accumulated amortization 4,611,377 2,363,468
----------- -----------
Intangible and other assets - net $26,669,512 $28,789,551
=========== ===========
</TABLE>
-7-
<PAGE> 104
5. LONG-TERM DEBT
Long-term debt at December 31, 1997 and 1996 consisted of:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Note payable to a financial institution bearing interest at the prime
rate plus 1.75% (10.25% and 10% at December 31, 1997 and 1996,
respectively), due in quarterly installments ranging from $275,000 to
$476,500 from January 1997 through October 2004 $17,175,000 $17,850,000
Noninterest bearing note payable to stockholder due
in quarterly installments of $83,333 from October 1995
to July 1998 250,000 583,333
Notes payable due on July 2000 beating interest at 8.75% 600,000 600,000
Note payable in quarterly installments ranging from $26,466 to $57,664
from April 1997 through January 2006, beating interest at 9% 1,363,052 1,439,281
Note payable in annual installments ranging from
$168,750 to $356,250 from January 1998
through 2001 bearing interest at 7% 750,000 750,000
Note payable due on October 31, 2001 bearing
interest at 7% 500,000 500,000
----------- -----------
Total 20,638,052 21,722,614
Less current portion 1,635,800 1,514,532
----------- -----------
Long-term debt $19,002,252 $20,208,082
=========== ===========
</TABLE>
Maturities of long-term debt (including current portion) are as follows:
<TABLE>
<CAPTION>
Year Amount
<S> <C>
1998 $ 1,635,800
1999 2,261,695
2000 3,703,605
2001 3,629,123
2002 3,402,103
Thereafter 6,005,726
-----------
Total $20,638,052
===========
</TABLE>
-8-
<PAGE> 105
WZNT, Inc., WOYE, Inc., WLDI, Inc. and WIO, Inc. entered into a credit
agreement with a financing institution which provides for term loan and
non-revolving advances up to $20,000,000. Borrowings under this agreement
have been used principally to finance the acquisitions of radio stations
made by such companies, for working capital and other corporate purposes.
These advances are collateralized by substantially all of the above
mentioned companies' assets. In addition, the stockholders have also
pledged their shares of common and preferred stocks as collateral.
The loan covenants of the credit agreement stipulate, among other things.
that the above mentioned companies may not, without the lender's previous
written consent, pay dividends in excess of a predetermined amount, enter
into any contingent liability or encumber its assets, sell, lease or
transfer any asset, merge or permit any of the companies to merge into or
consolidate with any person or make any material change in the nature of
the business, and disburse cash for capital expenditures in excess of
established amounts per year. In addition, the companies are required to
maintain certain minimum capital requirements and financial ratios.
Noncompliance with such covenants gives the financial institution the
right to declare the debt due and payable.
6. STOCKHOLDERS' EQUITY
Common stock at December 31. 1997 and 1996 consisted of:
<TABLE>
<CAPTION>
Shares
Shares Par Issued and
Authorized Value Outstanding Amount
<S> <C> <C> <C> <C>
WZNT, Inc. 1,000,000 $ 1.00 1,782 $ 1,782
WOYE, Inc. 1,000,000 1.00 716 716
WLDI, Inc. 1,000,000 1.00 719 719
WOQI, Inc. 1,000,000 1.00 1,000 1,000
WRPC, Inc. 1,000,000 1.00 1,095 1,095
Primedia Broadcast Group, Inc. 1,000,000 1.00 4 4
WIO, Inc. 1,000,000 1.00 1,822 1,822
----------
Total $ 7,138
==========
</TABLE>
Preferred stock at December 31, 1997 and 1996 consisted of:
<TABLE>
<CAPTION>
Preferred Shares
Stock Shares Par issued and
Class A Authorized Value Outstanding Amount
<S> <C> <C> <C> <C>
WZNT, Inc. 6,000 $ 1.00 3,988 $ 3,988
WOYE, Inc. 3,000 1.00 1,602 1,602
WLDI, Inc. 3,000 1.00 1,610 1,610
WRPC, Inc. 4,500 1.00 2,452 2,452
Primedia Broadcast Group, Inc. 50 1.00 8 8
WIO, Inc. 8,000 1.00 4,079 4,079
-------
Total $13,739
=======
</TABLE>
<PAGE> 106
Preferred shares are cumulative at an annual rate of $50.00 per share,
calculated on a basis of 360 day year; unpaid dividends accrue interest on a
daily basis at a rate of 5% per annum. Total dividends in arrears amounted to
approximately $l,365,000 and $678,000 as of December 31, 1997 and 1996
respectively. The preferred shares entitle the holder to vote, and to receive,
in the event of liquidation and prior to any distribution of assets to the
holders of the common stock, an amount equal to (a) $1.000 per share, plus (b)
an amount equal to all accrued and unpaid dividends, plus (c) an amount equal to
all accrued and unpaid interest to the date of such payment.
The additional paid-in capital at December 31, 1997 and 1996, represents the
excess of the amount contributed over the par value of the shares issued as
follows:
<TABLE>
<CAPTION>
Common Preferred
Company Shares Shares Total
<S> <C> <C> <C>
WZNT, Inc. $ 829,218 $ 3,984,012 $ 4,813,230
WOYE, Inc. 333,284 1,600,398 1,933,682
WLDI, Inc. 334,281 1,608,390 1,942,671
WRPC, Inc. 86,505 2,449,948 2,536,453
WIO, Inc. 669,178 4,074,921 4,744,099
Primedia Broadcast Group, Inc. 988 988
-----------
Total $15,971,123
===========
</TABLE>
In connection with the credit agreement, WZNT, Inc., WOYE, Inc., WLDI, Inc. and
WIO, Inc. issued to the financial institution which provided the loan, 229
warrants to purchase shares of common stock. Warrants issued represent 1.40% of
the preferred and common shares issued by such companies. Assigned value of
warrants at December 31, 1997 and 1996 amounted to $100,000 as follows:
<TABLE>
<CAPTION>
Warrants Value
Issued Assigned
<S> <C> <C>
WZNT, Inc. 81 $ 35,400
WOYE, Inc. 32 14,000
WLDI, Inc. 33 14,400
WIO, Inc. 83 36,200
--------
Total $100,000
========
</TABLE>
Each warrant entities the financial institution to purchase one share of common
stock at the exercise price of $1.00 per share on or before the 90th day after
the date on which all the obligations under the credit agreement are paid. The
warrants have a put option that can be exercised (a) on or after July 1998 (b)
after the occurrence of a liquidity event, as defined in the credit agreement or
(c) after the payment in full of the obligation under the credit agreement. The
put price will be based on an independent appraisal.
<PAGE> 107
7. RELATED PARTY TRANSACTIONS
The companies included in the combined financial statements have common
ownership and management and also share technical and operating personnel
and certain facilities and other services. The individual financial
statements for each company have been prepared from separate records
maintained in a central accounting location for the Group. Portions of
certain revenues and expenses represent allocations made by management for
items applicable to each company based on operating statistics and other
pertinent criteria.
8. BARTER TRANSACTIONS
Broadcasting revenues and expenses related to trade-out agreements
amounted to approximately $1,411,000 and $1,505,000 respectively during
the year ended December 31, 1997 and $815,000 and $615,000 respectively
during the year ended December 31, 1996.
9. INCOME TAXES
The Group is subject to Puerto Rico income taxes at statutory rates that
range from 20% to 39%. The provision for income tax is computed on an
individual company basis, therefore losses of one company cannot be offset
against the taxable income of another.
At December 31, 1997 and 1996, certain companies in the Group have net
operating loss carryforwards available to offset future taxable income of
approximately $200,000 and $1,524,000, respectively, for regular tax
purposes; and $301,000 and $1,471,000, respectively, for alternative
minimum tax purposes, expiring at various dates through 2004.
The components of deferred income taxes at December 31, 1997 and 1996 are
as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Deferred tax liability -
Property and equipment $214,443 $234,948
======== ========
Deferred tax asset:
Net operating loss carryforwards $ 78,984 $594,360
Allowance for bad debts 101,958 48,406
Other 13,681 --
-------- --------
Total 194,623 642,766
Less valuation allowance 104,618 623,843
-------- --------
Net deferred tax asset $ 90,005 $ 18,923
======== ========
</TABLE>
10. LEASE AGREEMENTS
WZNT, Inc. leases its office space in Guaynabo, Puerto Rico under an
operating lease agreement expiring on August 31, 2000. The lease specifies
a monthly rental payment of $2,100. Rent expense for the years ended
December 31, 1997 and 1996 amounted to approximately $25,000.
<PAGE> 108
WZNT, Inc. leases tower and building space at its transmitter site to two
cellular communication companies under operating leases expiring in
various dates through August 31, 2000. These agreements require the
lessees to pay WZNT, Inc. monthly rental payments of $2,800 and $3,000,
respectively, during corresponding lease periods.
11. SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid during the years ended December 31, 1997 and 1996 amounted
to approximately $1,892,000 and $1,419,000, respectively. Income tax paid
amounted to approximately $99,000 and $35,000, during the years ended
December 31, 1997 and 1996, respectively.
12. SUBSEQUENT EVENT
Effective January 16, 1998, WOQI, Inc. acquired certain assets of a radio
station from Portorican American Broadcasting Co., Inc., for a total
purchase price of $3,000,000.
* * * * * *
<PAGE> 109
[LETTERHEAD OF DELOITTE & TOUCHE LLP]
INDEPENDENT AUDITORS' REPORT ON
ADDITIONAL COMBINING INFORMATION
To the Stockholders of
Primedia Broadcast Group, Inc.
WZNT, Inc. WOYE, Inc.
WLDI, Inc. WRPC, Inc.
WOQI, Inc. WIO, Inc.
Cadena Estereotempo, Inc.
Our audits were conducted for the purpose of forming an opinion on the basic
combined financial statements for the years ended December 31, 1997 and 1996,
taken as a whole. The additional combining information as of and for the year
ended December 31, 1997 is presented for the purpose of additional analysis of
the basic combined financial statements rather than to present the financial
position and results of operations of the individual companies, and is not a
required part of the basic combined financial statements. This additional
information is the responsibility of the Companies' management. Such information
has been subjected to the auditing procedures applied in our audit of the 1997
basic combined financial statements and, in our opinion, is fairly stated in all
material respects when considered in relation to the 1997 basic combined
financial statements taken as a whole.
/s/ Deloitte & Touche LLP
February 28, 1998
Stamp No. 1483983
affixed to original.
<PAGE> 110
PRIMEDIA BROADCAST GROUP, INC. AND ITS AFFILIATES
COMBINING BALANCE SHEET INFORMATION
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS PRIMEDIA WZNT WOYE WLDI WRPC
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $1,170,258 $ $ $ $
Accounts receivable (685,893) 131,887 249,694 1,430,802 527,051
Prepaid expenses 33,841 189,687 23,772 15,596 15,845
Investment in subsidiary
Deferred tax asset 26,315 25,394 14,652
---------- ----------- ---------- ---------- ----------
Total current assets 518,206 347,889 298,860 1,461,050 542,896
PROPERTY AND EQUIPMENT - Net 32,321 1,517,805 747,856 639,127 480,320
INTANGIBLES AND OTHER ASSETS - Net 1,676 8,220,985 2,907,685 2,540,360 2,553,557
---------- ----------- ---------- ---------- ----------
TOTAL $ 552,203 $10,086,679 $3,954,401 $4,640,537 $3,576,773
========== =========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 33,675 $ 93,674 $ $ $
Accrued expenses 521,967 346,663 162,383 318,754 122,349
Income tax payable 3,035 2,748
Current portion of long-term debt 859,180 244,860 245,960 117,050
---------- ----------- ---------- ---------- ----------
Total current liabilities 555,642 1,302,552 409,991 564,714 239,399
LONG-TERM DEBT 5,073,620 2,038,840 2,648,740 1,246,002
DEFERRED INCOME TAX
---------- ----------- ---------- ---------- ----------
Total liabilities 555,642 6,376,172 2,448,831 3,213,454 1,485,401
---------- ----------- ---------- ---------- ----------
STOCKHOLDERS' EQUITY:
Common stock 4 1,782 716 719 1,095
Preferred stock 8 3,988 1,602 1,610 2,452
Additional paid-in capital 988 4,813,230 1,933,682 1,942,671 2,536,453
Common stock warrants 35,400 14,000 14,400
Deficit (4,439) (1,143,893) (444,430) (532,317) (448,628)
---------- ----------- ---------- ---------- ----------
Total stockholders' equity 3,439 3,710,507 1,505,570 1,427,083 2,091,372
---------- ----------- ---------- ---------- ----------
Less: treasury stock at cost
---------- ----------- ---------- ---------- ----------
TOTAL $ 552,203 $10,086,679 $3,954,401 $4,640,537 $3,576,773
========== =========== ========== ========== ==========
<CAPTION>
ASSETS WOQL WIO Estereotempo Eliminations Combined
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ $ $ $ $ 1,170,258
Accounts receivable (61,589) 1,265,376 62,933 2,920,261
Prepaid expenses 95,732 18,004 44,389 436,866
Investment in subsidiary 2,801,700 (2,801,700)
Deferred tax asset 23,644 90,005
-------- ----------- ---------- ----------- -----------
Total current assets 34,143 4,085,080 130,966 (2,801,700) 4,617,390
PROPERTY AND EQUIPMENT - Net 454,232 623,661 4,495,322
INTANGIBLES AND OTHER ASSETS - Net 28,821 7,603,694 2,812,734 26,669,512
-------- ----------- ---------- ----------- -----------
TOTAL $ 62,964 $12,143,006 $3,567,361 $(2,801,700) $35,782,224
======== =========== ========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ $ $ $ $ 127,349
Accrued expenses 84,983 765,661 2,322,760
Income tax payable 5,783
Current portion of long-term debt 168,750 1,635,800
-------- ----------- ---------- ----------- -----------
Total current liabilities 84,983 168,750 765,661 4,091,692
LONG-TERM DEBT 7,995,050 19,002,252
DEFERRED INCOME TAX 214,443 214,443
-------- ----------- ---------- ----------- -----------
Total liabilities 84,983 8,378,243 765,661 23,308,387
-------- ----------- ---------- ----------- -----------
STOCKHOLDERS' EQUITY:
Common stock 1,000 1,822 2,001,000 2,001,000 7,138
Preferred stock 4,079 13,739
Additional paid-in capital 4,744,099 1,291,199 1,291,199 15,971,123
Common stock warrants 36,200 100,000
Deficit (23,019) (1,021,437) (139,499) 139,499 (3,618,163)
-------- ----------- ---------- ----------- -----------
Total stockholders' equity (22,019) 3,764,763 3,152,700 (3,152,700) 12,473,837
-------- ----------- ---------- ----------- -----------
Less: treasury stock at cost (351,000) 351,000
-------- ----------- ---------- ----------- -----------
TOTAL $ 62,964 $12,143,006 $3,567,361 $(2,801,700) $35,782,224
======== =========== ========== =========== ===========
</TABLE>
<PAGE> 111
PRIMEDIA BROADCAST GROUP, INC. AND ITS AFFILIATES
COMBINING STATEMENT OF LOSS AND DEFICIT INFORMATION
YEARS ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Primedia WZNT WOYE WLDI WRPC WOQI
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Broadcast revenues $ $ 2,531,646 $1,861,819 $2,217,011 $ 995,902 $ 854,794
Less agency commissions and discounts 620,245 384,973 620,581 252,124 200,434
------- ----------- ---------- ---------- --------- ---------
Net broadcast revenues 1,911,401 1,476,846 1,596,430 743,778 654,360
Other revenues 681,726 2,850 227,217
------- ----------- ---------- ---------- --------- ---------
Total revenues 2,593,127 1,479,696 1,823,647 743,778 654,360
------- ----------- ---------- ---------- --------- ---------
COST AND EXPENSES:
Technical operations 55,615 64,758 66,968 4,836 24,798
Programming 440,021 334,809 299,364 17,337 118,136
Selling 227,601 169,030 197,488 80,933 74,130
General and administrative 794,353 384,246 554,348 79,199 163,012
------- ----------- ---------- ---------- --------- ---------
Total costs and expenses 1,517,590 952,843 1,118,168 182,305 380,076
------- ----------- ---------- ---------- --------- ---------
INCOME BEFORE OTHER EXPENSES 1,075,537 526,853 705,479 561,473 274,284
------- ----------- ---------- ---------- --------- ---------
OTHER EXPENSES (INCOME):
Depreciation and amortization 935,283 324,368 266,239 254,935 1,476
Interest expense 641,807 242,401 294,589 126,214
(Gain) loss on sale of property and equipment (8,874)
Interest Income (1,408) (19,776)
------- ----------- ---------- ---------- --------- ---------
Total other expenses 1,566,808 566,769 541,052 381,149 1,476
------- ----------- ---------- ---------- --------- ---------
OPERATING INCOME (LOSS) (491,271) (39,916) 164,427 180,324 272,808
EQUITY IN LOSS OF SUBSIDIARY
------- ----------- ---------- ---------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAX BENEFIT (491,271) (39,916) 164,427 180,324 272,808
INCOME TAX EXPENSE (BENEFIT) 4,439 6,701 (22,646) (14,652)
------- ----------- ---------- ---------- --------- ---------
NET INCOME (LOSS) (4,439) (497,972) (17,270) 179,079 180,324 272,808
DEFICIT, BEGINNING OF YEAR (645,921) (427,160) (711,396) (628,952) (295,827)
------- ----------- ---------- ---------- --------- ---------
DEFICIT, END OF YEAR $(4,439) $(1,143,893) $ (444,430) $ (532,317) $(448,628) $ (23,019)
======= =========== ========== ========== ========= =========
<CAPTION>
WIO Estereotempo Eliminations Combined
<S> <C> <C> <C> <C>
REVENUES:
Broadcast revenues $ $6,187,453 $ $14,648,635
Less agency commissions and discounts 1,403,472 3,481,829
----------- ---------- --------- -----------
Net broadcast revenues 4,783,981 11,166,796
Other revenues 171,212 1,083,005
----------- ---------- --------- -----------
Total revenues 4,955,193 12,249,801
----------- ---------- --------- -----------
COST AND EXPENSES:
Technical operations 231,639 448,614
Programming 1,144,735 2,354,402
Selling 527,636 1,276,818
General and administrative 1,931,064 3,906,222
----------- ---------- --------- -----------
Total costs and expenses 3,835,074 7,986,056
----------- ---------- --------- -----------
INCOME BEFORE OTHER EXPENSES 1,120,119 4,263,745
----------- ---------- --------- -----------
OTHER EXPENSES (INCOME):
Depreciation and amortization 593,931 540,234 2,916,466
Interest expense 797,196 2,102,207
(Gain) loss on sale of property and equipment 74,839 65,965
Interest Income (1,480) (2,675) (23,339)
----------- ---------- --------- -----------
Total other expenses 592,451 1,409,594 5,059,299
----------- ---------- --------- -----------
OPERATING INCOME (LOSS) (592,451) (289,475) (795,554)
EQUITY IN LOSS OF SUBSIDIARY (282,927) 282,927
----------- ---------- --------- -----------
INCOME (LOSS) BEFORE INCOME TAX BENEFIT (875,378) (289,475) 282,927 (795,554)
INCOME TAX EXPENSE (BENEFIT) (20,505) (6,548) (53,211)
----------- ---------- --------- -----------
NET INCOME (LOSS) (854,873) (282,927) 282,927 (742,343)
DEFICIT, BEGINNING OF YEAR (166,564) 143,428 (143,428) (2,875,820)
----------- ---------- --------- -----------
DEFICIT, END OF YEAR $(1,021,437) $ (139,499) $ 139,499 $(3,618,163)
=========== ========== ========= ===========
</TABLE>
<PAGE> 112
DELOITTE & TOUCHE LLP
- ---------------------
[LOGO]
-------------------------------------------
CADENA ESTEREOTEMPO, INC.
(A Wholly-Owned Subsidiary
of WIO, Inc.)
Financial Statements for the Year
Ended December 31, 1996 and
Independent Auditors' Report
- ---------------------
Deloitte & Touche
Tohmatsu
International
- ---------------------
<PAGE> 113
[LETTERHEAD OF DELOITTE & TOUCHE LLP]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Cadena Estereotempo, Inc.:
We have audited the accompanying balance sheet of Cadena Estereotempo, Inc. (a
wholly-owned subsidiary of WIO, Inc.) as of December 31, 1996, and the related
statements of income and retained earnings and of 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, such financial statements present fairly, in all material
respects, the financial position of Cadena Estereotempo, Inc. at December 31,
1996, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
July 3, 1997
Stamp No. 1467144
affixed to original.
<PAGE> 114
CADENA ESTEREOTEMPO, INC.
(A Wholly-Owned Subsidiary of WIO, Inc.)
BALANCE SHEET
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash $ 84,932
Accounts receivable (Note 3) 598,505
Prepaid expenses and other current assets 1,715
-----------
Total current assets 685,152
PROPERTY AND EQUIPMENT - Net (Note 4) 819,921
INTANGIBLE AND OTHER ASSETS - Net (Note 5) 3,020,522
-----------
TOTAL $ 4,525,595
===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 851,628
Accrued expenses 511,774
Income tax payable (Note 6) 77,566
-----------
Total current liabilities 1,440,968
-----------
COMMITMENTS (Note 8)
SHAREHOLDER'S EQUITY:
Common stock, $1 par value; authorized 10,000,000 shares;
issued, 2,001,000 shares, including 351,000 shares in treasury 2,001,000
Additional paid-in capital 1,291,199
Retained earnings 143,428
-----------
Total 3,435,627
Less treasury stock, at cost (351,000)
-----------
Total stockholder's equity 3,084,627
TOTAL $ 4,525,595
===========
</TABLE>
See notes to financial statements.
<PAGE> 115
CADENA ESTEREOTEMPO, INC.
(A Wholly-Owned Subsidiary of WIO, Inc.)
STATEMENT OF INCOME AND RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
REVENUES:
Broadcast revenues (Note 7) $ 4,969,895
Less agency commissions and discounts 797,773
-----------
Net broadcast revenues 4,172,122
-----------
COSTS AND EXPENSES:
Technical operations 196,098
Programming 751,578
Selling 652,014
General and administrative (Notes 7 and 8) 1,719,036
-----------
Total costs and expenses 3,318,726
-----------
INCOME BEFORE OTHER EXPENSES 853,396
-----------
OTHER EXPENSES:
Depreciation and amortization 307,560
Interest expense 275,178
-----------
Total other expenses 582,738
-----------
INCOME BEFORE INCOME TAX 270,658
INCOME TAX (Note 6) 135,184
-----------
NET INCOME 135,474
RETAINED EARNINGS, BEGINNING OF THE YEAR 507,954
DIVIDENDS DECLARED (500,000)
-----------
RETAINED EARNINGS, END OF THE YEAR $ 143,428
===========
</TABLE>
<PAGE> 116
CADENA ESTEREOTEMPO, INC.
(A Wholly-Owned Subsidiary of WIO, Inc.)
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash $ 135,474
provided by operating activities:
Depreciation and amortization 307,560
Changes in assets and liabilities:
Decrease in:
Accounts receivable 474,762
Prepaid expenses and other assets 27,236
Increase (decrease) in:
Accounts payable 430,598
Accrued expenses (165,360)
Income tax payable 24,948
-----------
Net cash provided by operating activities 1,235,218
-----------
CASH FLOWS USED IN INVESTING ACTIVITIES -
Capital expenditures (127,054)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contribution from parent company 1,291,199
Dividends paid (500,000)
Disbursements for deferred acquisition costs (139,029)
Repayment of long term debt (1,745,043)
-----------
Net cash used in financing activities (1,092,873)
-----------
NET INCREASE IN CASH 15,291
CASH, BEGINNING OF YEAR 69,641
-----------
CASH, END OF YEAR $ 84,932
===========
</TABLE>
See notes to financial statements.
<PAGE> 117
CADENA ESTEREOTEMPO, INC.
(A Wholly-Owned Subsidiary of WIO, Inc.)
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Cadena Estereotempo, Inc. (the "Company") was incorporated
under the laws of the Commonwealth of Puerto Rico in 1984. The Company
operates the FM radio network known as Cadena Estereotempo, which consist
of WIOA-FM San Juan, WIOB-FM Mayaguez, and WIOC-FM Ponce. Effective
October 31, 1996, WIO, Inc. (the "Parent Company"), a member of Primedia
Broadcast Group, Inc., acquired the net assets of the Company for a total
purchase price of approximately $11,862,000 including expenses.
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.
Revenue and Expense Recognition - Revenues are recognized when commercials
are broadcasted, salaries and other operating costs are charged to expense
when incurred.
Property and Equipment - Property and equipment are stated at cost.
Depreciation and amortization are provided on a straight-line basis over
the estimated useful lives of the assets as follows: building and
leasehold improvements, 40 years; broadcasting equipment, 5 to 15 years;
other equipment and furniture and fixtures, 3 to 7 years.
Barter Transactions - Barter and trade-out revenue is recognized when
commercials are broadcasted. Goods or services are recorded at their
estimated fair value when received or used. If goods or services are
received prior to the broadcast of the commercial, a liability is
recorded; if the commercial is broadcasted first, a receivable is
recorded.
Intangible and Other Assets - Intangible and other assets consist
principally of the Federal Communications Commission ("FCC") licenses and
deferred acquisition costs. These assets are amortized on a straight-line
basis over their estimated useful lives as follows: FCC licenses, 40
years; deferred acquisition costs, 7 years.
Accounting for Income Taxes - The Company accounts for income taxes under
the provisions of Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes. This Statement establishes financial
accounting and reporting standards for the effects of income taxes that
result from the Company's activities during the current and preceding
years. This Statement also requires an asset and liability approach for
financial accounting and reporting for income taxes and permits the
recognition of the future tax benefit of net operating losses in certain
circumstances.
<PAGE> 118
2. TRANSACTIONS WITH AFFILIATES
The Parent Company is a member of a group of companies affiliated through
common ownership and management. The Company has significant transactions
with its Parent and its affiliates at terms and conditions arranged by the
management of Primedia Broadcast Group, Inc.. The individual financial
statements for each company have been prepared from separate records
maintained in a central accounting location for the Group. Portions of
certain revenues and expenses represent allocations made by management for
items applicable to each company based on operating statistics and other
pertinent criteria.
3. ACCOUNTS RECEIVABLE
Accounts receivable at December 31, 1996 consisted of:
<TABLE>
<S> <C>
Customers $ 582,402
Other 21,037
----------
Total 603,439
Less allowance for doubtful accounts 4,934
----------
Accounts receivable - net $ 598,505
==========
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 consisted of:
<TABLE>
<S> <C>
Building and leasehold improvements $ 101,203
Broadcasting equipment 1,330,664
Other equipment, furniture and fixtures 617,641
----------
Total 2,049,508
Less accumulated depreciation and amortization 1,229,587
----------
Property and equipment - net $ 819,921
==========
</TABLE>
5. INTANGIBLE AND OTHER ASSETS
Intangible and other assets at December 31, 1996 consisted of:
<TABLE>
<S> <C>
FCC licenses
Deferred acquisition costs $3,374,059
139,028
----------
Total 3,513,087
Less accumulated amortization 492,565
----------
Intangible and other assets - net $3,020,522
==========
</TABLE>
<PAGE> 119
6. INCOME TAX
The Company is subject to Puerto Rico income taxes at statutory rates that
range from 20% to 39%. Income tax provision for the year ended December
31, 1996 does not bears a normal relationship to income before income tax
mainly because of certain expenses which are not deductible for income tax
purposes.
7. BARTER TRANSACTIONS
Broadcasting revenues and corresponding expenses related to trade-out
agreements amounted to approximately $110,000 and $33,000, respectively,
during the year ended December 31, 1996, and they are included as revenues
and general and administrative expenses in the accompanying financial
statements.
8. COMMITMENTS
The Company leases its office facilities under an operating lease
agreement expiring on January 1998. Annual lease payments amount to
approximately $79,000.
9. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest and income taxes during the year ended December 31,
1996, amounted to approximately $215,000 and $115,000, respectively.
Prior to October 31, 1996, the Company transferred land with a carrying
value of $350,000 to a related entity owned by the Ramirez de Arellano
family, in exchange for 350,000 shares of common stock of the Company.
Acquired shares are presented as treasury stock at December 31, 1996. This
noncash transaction is excluded from the accompanying statement of cash
flows.
* * * * * *
<PAGE> 120
Schedule 3.12
EMPLOYEES AND EMPLOYEE BENEFIT PLANS
<TABLE>
<CAPTION>
NAME POSITION SALARY RATE START DATE
---- -------- ----------- ----------
<S> <C> <C> <C>
RAYNALDO AGOSTO-DELGADO DJ 7.25 3/1/97
VICTOR R. ALDWEN-SANABRIA TECH. PRODUCER, DJ 6.24 2/24/89
CARLOS L. ALVAREZ-RIVERA RADIO SPECIALIST - AGENCY (A) 1/12/98
FRANCISCO J. ALVARADO-RIVERA CONTROL OPERATOR 5.15 3/1/99
PEDRO A. ARROYO-TORRES MUSIC DIRECTOR 10.19 8/20/79
JUDITH BAEZ-ORTIZ ACCOUNTS PAYABLE 7.75 8/10/88
EDWIN BERRIOS STATION MANAGER 7.19 8/1/95
KAREN BERRIOS-VAZQUEZ CONTROL OPERATOR 5.15 6/11/99
EDWIN BERRIOS-VAZQUEZ CONTROL OPERATOR 5.15 1/18/97
WANDA BERRIOS-RODRIQUEZ RECEPTIONIST 6.75 11/30/98
JUDITH J. BEZAREZ-VELEZ DJ 5.25 11/1/96
FELIX A. BONNET-ALVAREZ SENIOR V.P. (B) 7/16/95
HECTOR BRAVO-GONZALEZ DJ (B) 9/27/98
MILAGROS CANDELARIA-VILLAFANE OFFICE MANAGER - PROMOTIONS 12.01 4/20/99
CARLOS H. CARLO-FAJARDO CONTROL OPERATOR 5.15 4/21/99
NYDIA I. CASANOVA-MARQUEZ A/R - BILLING 6.5 5/5/99
ARMANDO CENTENO-LOPEZ DJ 6 6/11/99
RAMON CINTRON-RIVERA MESSENGER 9 9/8/77
MARIANNA COLON-ORTIZ TRAFFIC 8.5 5/4/99
NELSON D. COLLAZO-MARCUCCI DJ 6.25 6/2/99
EDUARDO CONESA-MUNOZ CONTROL OPERATOR 5.15 12/17/97
ALAN CORALES-VALLE PROGRAM DIRECTOR 12 11/8/96
CARMEN E. CORDOVA-ALVAREZ PROMOTIONS DIRECTOR 24.03 3/1/95
IVELISSE M. CORTES-KERCADO DIRECT SALES MANAGER (A) 2/1/96
JAVIER CORDERO-RAMOS DJ (B) 8/7/95
MARIA V. CORDOVA-ALVAREZ PROMOTIONS 9 1/30/96
FELIX E. COSME-CABALLERO DJ 6 2/13/99
AXEL CRUZ-SANCHEZ TECHNICAL PRODUCER 11 9/8/97
JESSICA B. CURBELO-CONDE RADIO SPECIALIST - DIRECT (A) 3/16/98
ODALIE M. DAVID-FRASQUERI RADIO SPECIALIST - DIRECT (A) 3/15/99
WALFREDO DAVILA-ORTIZ MORNING SHOW PRODUCER (B) 1/16/98
FERNANDO DE HOSTOS DJ 8.9 1/20/97
DELIA M. DEL VALLE-CUEVAS TRAFFIC 6.25 4/28/68
BIANCA DIAZ-MARTINEZ RADIO SPECIALIST - DIRECT (A) 3/1/93
JORGE L. DIAZ-ALVAREZ DJ 6 3/15/99
LUIS E. ECHEVARRIA-GUAD DJ 6 1/24/99
ELBA I. ESMURRIA-DE LA CRUZ SALES MANAGER - AGENCY (A) 3/2/98
VILMA M. FABREGAS-RAMIREZ RADIO SPECIALIST - DIRECT (A) 2/2/98
JOEL FELICIANO-FANTAUZZI CONTROL OPERATOR 5.15 1/18/99
CARLOS A. FERNANDEZ-BARBOSA TECHNICAL PRODUCER 8.35 2/2/98
MARNIE FERRER-MERCADO RADIO SPECIALIST - DIRECT (A) 4/19/95
RIGOBERTO J. FERNANDEZ-GINORIO CONTROL OPERATOR 5.15 3/1/99
PEDRO J. FIGUEROA-ORTEGA DJ (B) 5/4/98
JORGE GARCIA-HERNADEZ CONTROL OPERATOR 5.15 9/1/95
JOSE M. GARCIA-DIAZ CONTROL OPERATOR 5.45 12/16/97
WILLIAM GARCIA-DIAZ DJ 5.5 11/5/97
ADAGILSA GUAD-NEGRON NEW BUSINESS 20.38 1/14/97
NORMA GINORIO-PALERMO TRAFFIC 5.7 3/14/69
LUIS GONZALEZ-PEREZ VP FINANCE (B) 4/24/95
MIRIAM J. GONZALEZ-GONZALEZ A/R - BILLING 7 10/1/85
RAMON E. GONZALEZ-JUARBE MAINTENANCE 5.15 2/17/97
</TABLE>
<PAGE> 121
<TABLE>
<CAPTION>
<S> <C> <C> <C>
JAVIER GRANELL-VEGA DJ 6.75 9/1/95
RENE GUZMAN-FLORES CHIEF OPERATOR WIOC-WOQI 8.4 1/23/84
HILARY HATTLER-McCARTHY GENERAL MANAGER (B) 1/1/98
JOEL F. HERNANDEZ-COLON MAINTENANCE 5.15 11/20/98
ISRAEL IRIZARRY-LUCIANO DJ 6.15 3/16/98
JOSE F. IRIZARRY-LUGO CONTROL OPERATOR 5.15 3/27/99
ANGEL L. JUSTINIANO-VELEZ MAINTENANCE 5.4 10/28/91
MIGUEL A. LEBRON-SANCHEZ MAINTENANCE 5.15 3/17/99
CAROLINA LIBERAL-CUCURELLA SALES ASSISTANCE 8.5 6/1/99
VANESSA LIBOY-MALDONADO JR. PROJECT MANAGER 7.69 6/22/98
ANA E. LOPEZ-CORTES RADIO SPECIALIST - DIRECT (A) 8/1/91
ENRIQUE LOPEZ-SANTOS CHIEF OPERATOR 11.54 2/10/97
MARTIN E. LOPEZ-RIVERA DJ 6 1/31/99
HENRRY LUGO-BORDOX CONTROL OPERATOR 5.25 4/16/98
MAGALI MALDONADO-BUDET ADMINISTRATIVE ASSISTANCE 10.17 3/22/82
SAUL MALDONADO-CATALA TRAFFIC 12.51 2/15/71
JULIA MARTINEZ-VENEGAS OFFICE MANAGER 11 8/10/95
MICHELLE J. MARANGES RADIO SPECIALIST (A) 6/22/98
GILBERT MERLE-RUIZ DJ 8.08 6/30/96
JUAN A. MIRANDA-HERNANDEZ MAINTENANCE 6.25 2/11/91
EDIEL MONTALVO-RAMOS CONTROL OPERATOR 6 8/1/96
RONALDO S. MORALES DJ 6.4 9/16/97
MADELINE MUNIZ-AQUINO RADIO SPECIALIST - DIRECT (A) 7/1/98
WARREN MUNIZ-CANDELARIO DJ 6.5 9/1/95
BASILIO NIEVES-PACHECO DJ 6.25 1/13/96
YOLANDA NIEVES-RIVERA RADIO SPECIALIST - AGENCY (A) 3/23/99
JESSICA NUNEZ-HERRARA ADMINISTRATIVE ASSISTANCE 7.25 8/1/95
MIGDALIA OJEDA-PADILLA RADIO SPECIALIST - DIRECT (A) 3/3/84
NANCY A. ORTIZ-PUIG RADIO SPECIALIST - DIRECT (A) 9/17/98
ROSA M. ORTIZ TRAFFIC DIRECTOR 13 11/22/95
JORGE A. PABON-OCASIO DJ 6 3/12/99
ONEYDA PACHECO-TOSADO PROMOTIONS MANAGER 6.75 6/17/88
LOURDES PAGAN-MARIN REGIONAL SALES MANAGER SOUTH (A) 5/2/94
EMILIA PARRILLA-FIGUEROA PAYROLL 9.75 11/13/95
DAVID J. PEREZ-CRUZADO TECHNICAL PRODUCER 8.37 2/1/90
ISRAEL PRIETO-MARTINEZ DJ 6.24 4/12/98
ROSA M. QUINTANA-SANTIAGO ACCOUNTANT 7.5 6/11/86
JUAN A. REYES-HERNANDEZ DJ 6 4/16/97
PROVIDENCIA RIOS-MORENO SECRETARY 8 1/25/93
WILBERTO RIOS-SEPULVEDA CONTROL OPERATOR 5.15 1/16/99
MARIA DEL C. RIVERA-LANDRON CONTROLLER 16.58 6/17/97
ANGEL RODRIGUEZ-LOPEZ MORNING SHOW PRODUCER 9.62 12/7/98
DELFIN RODRIGUEZ-FRANCO DJ 6 8/31/93
HECTOR L. RODRIGUEZ-COSME CONTROL OPERATOR 5.15 6/1/97
NESTOR J. RODRIGUEZ-BUONOMO DJ 10 3/2/83
OMAR RODRIGUEZ-VAZQUEZ DJ 6 6/29/99
RAMON M. RODRIGUEZ-VALENTIN DJ (B) 8/31/95
SANDRA RODRIGUEZ-RODRIGUEZ SECRETARY GEN. MANAGER 11.25 1/1/90
YASMINE RODRIGUEZ-ALICEA OFFICE CLERK 6 6/15/98
JUAN FCO. ROMAN-GARCIA CONTROL OPERATOR 5.15 10/23/72
HECTOR ROSSY VP OF PROGRAMMING (B) 3/1/95
LAURA E. ROSAS-VALDESPINO REGIONAL SALES MANAGER WEST (A) 5/21/87
</TABLE>
2
<PAGE> 122
<TABLE>
<CAPTION>
<S> <C> <C> <C>
MIGUEL ROSARIO-VELAZQUEZ TECHNICAL PRODUCER 6 6/10/99
UZZIEL RUIZ-PARDO MUSIC DIRECTOR 15.38 1/20/98
FERNANDO SANTIAGO-CABRERA TECHNICAL PRODUCER 6.75 2/23/98
JOEL SANTIAGO-PEREIRA DJ (B) 2/1/97
NELSON SANCHEZ-CORTINA TRAFFIC N8.00 10/6/80
ERIC J. TORO-OCASIO PROMOTIONS MANAGER 12.01 2/12/97
JACQUELINE TORRES-BLANCO RADIO SPECIALIST - AGENCY (A) 1/21/91
MARIAM TORRES-LEBRON RECEPTIONIST 5.4 3/17/97
RAYMOND TOTTI SR VP SALES & MARKETING (B) 12/18/89
CARMEN M. VALLE-PADILLA RADIO SPECIALIST - DIRECT (A) 8/26/94
MARIA C. VARELA-ALFONSO RADIO SPECIALIST - DIRECT (A) 8/1/91
ANIBAL VAZQUEZ-ALMODOVAR DJ 5.25 9/1/95
ELI R VAZQUEZ-VAZQUEZ DJ 5.15 12/12/97
SANTIN VAZQUEZ-ARROYO CONTROL OPERATOR 5.25 6/5/93
JUAN VEGA-ORTIZ DJ 12.25 9/7/98
ROSA M. VEGA A/R - CREDIT 11.02 2/16/76
HECTOR L VELAZQUEZ-RODRIGUEZ MORNING SHOW PRODUCER 9 10/29/98
MIGUEL A. VELEZ-ORTIZ TECHNICAL PRODUCER 6.5 4/22/98
ANA M. VIALIZ-GONZALEZ RADIO SPECIALIST - DIRECT (A) 9/1/94
MARIA D. VILLABELLA-SOLIS RADIO SPECIALIST - DIRECT (A) 5/11/92
FERNANDO J. ZEGRI-PRIETO RADIO SPECIALIST - AGENCY (A) 1/20/97
</TABLE>
(A) Commissions based on sales
(B) Employment Agreement
EMPLOYEE BENEFIT PLANS
Group Health Insurance Plan
Group Life Insurance Plan
Vacation and Sick Leave (in accordance with applicable statutes, rules or
regulations)
Bonus - By law 2% of annual salary (Oct. 1 - Sept. 30) up to a maximum of $200.
Discretionary bonuses awarded beyond $200 based on individual performance during
the year.
Various arrangements with certain employees regarding auto allowances,
commissions, bonuses, holiday, sick leave and vacation pay. All such
arrangements are contained in applicable employees' employment agreements.
3
<PAGE> 123
SCHEDULE 3.13
LABOR RELATIONS
None
<PAGE> 124
SCHEDULE 3.14
TAXES
None
<PAGE> 125
SCHEDULE 3.15
CLAIMS AND LEGAL ACTIONS
MARINA J. BOZA CARABALLO
On April 17, 1999, during a concert produced by Primedia, it is alleged that one
of our sponsors was throwing promotional items from the stage. Marina Boza
claims one of the items caused damage to her eye. She is claiming that Primedia
is responsible for the damage and is asking to negotiate. Our insurance company
believes that the sponsor is the one responsible and not Primedia. If required,
this case is covered by our insurance policy.
IVELISSE CANCEL ARCE, LIDIA E. ARCE VS. PRIMEDIA
On June 24, 1998, the Company received a notification of a claim against
Primedia and its stations from Ivelisse Cancel and Lidia Arce. According to the
complaint, on April 13, 1997, Ivelelisse was at a concert produced by Primedia
(Justas 1997) and a person from the public jumped from the stage falling on top
of her causing damage to her left shoulder. This case was transferred to the
insurance company for investigation. If required, this case is covered by our
insurance policy.
FERNANDO LOPEZ, ESTRELLAS PARA EL FIRMAMENTO VS. PRIMEDIA
On August 17, 1999, the Company received a notification of claim against
Primedia from Fernando Lopez, Estrellas para el Firmamento. According to the
complaint, Primedia failed to provide the promotion for the promoter activity in
February 1999 causing losses to the promoter. This case is being transferred to
our lawyers.
<PAGE> 126
SCHEDULE 3.17
ENVIRONMENTAL MATTERS
On June 23, 1999, Primedia received a copy of a letter
submitted to the Department of Natural Resources by WUKQ-FM ("WUKQ") protesting
the establishment of two structures for reinforcing the tower of WOYE-FM
("WOYE"). The structures are located adjacent to the towers and area controlled
by WUKQ.
WUKQ states that WOYE and the Department of Natural Resources
are responsible for any damage to WUKQ's tower and land due to the construction
by WOYE. WUKQ demands that the excavated land be filled with concrete or
compacted dirt so as not to disrupt the structures of WUKQ's tower.
<PAGE> 127
SCHEDULE 3.19
CAPITALIZATION
<TABLE>
<CAPTION>
Shares Held
Company Shares Authorized In Treasury
------- ----------------- -----------
<S> <C> <C>
Primedia Broadcast Group, Inc. 1,000,000 Common None
50 Series A Preferred
WIO, Inc. 1,000,000 Common None
8,000 Series A Preferred
WLDI, Inc. 1,000,000 Common None
3,000 Series A Preferred
WPRC, Inc. 1,000,000 Common None
4,500 Series A Preferred
WOYE, Inc. 1,000,000 Common None
3,000 Series A Preferred
WZNT, Inc. 1,000,000 Common None
6,000 Series A Preferred
WOQI, Inc. 1,000,000 Common None
1,000 Series A Preferred
Cadena Estereotempo, Inc. 10,000,000 Common None
Portorican American 2,000 Common None
Broadcasting, Inc.
</TABLE>
<PAGE> 128
SCHEDULE 3.20
SUBSIDIARIES
<TABLE>
<CAPTION>
SHARES ISSUES PARENT COMPANY SHARES HELD
SUBSIDIARY SHARES AUTHORIZED AND OUTSTANDING AND SOLE SHAREHOLDER IN TREASURY
<S> <C> <C> <C> <C>
Cadena 10,000,000 Common 1,733,200 Common WIO, Inc. None
Estereotempo, Inc.
Portorican 2,000 Common 952 Common WOQI, Inc. None
American
Broadcasting, Inc.
</TABLE>
<PAGE> 129
Schedule 3.23
TRADE DEALS
BALANCE AS OF JULY 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ORIGINAL CONTRACT TERM
CONTRACT ------------- AIR TIME
ADVERTISER AMOUNT FROM TO DUE CLIENT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A FINE AWARD (JOSE MOLINA) 1,660 9902 9912 1,660
- --------------------------------------------------------------------------------
A LA ORDEN DISCOUNT 20,000 1198 9910 517
- --------------------------------------------------------------------------------
AKM 12,270 9902 9912 3,799
- --------------------------------------------------------------------------------
AMERICAN PRINTING 1,000 9802 9812 1,000
- --------------------------------------------------------------------------------
AQUARIUM SPECIALTIES 5,000 9903 9912 3,755
- --------------------------------------------------------------------------------
ASESORES 15,000 9701 9712 9,438
- --------------------------------------------------------------------------------
ASESORES 27,000 9801 9812 27,000
- --------------------------------------------------------------------------------
ASI SHOES 3,000 9903 9912 3,000
- --------------------------------------------------------------------------------
AUTO EXTRAS DE CUPEY 9,532 9808 9907 9,532
- --------------------------------------------------------------------------------
BALLON FOR EVER 1,500 9902 9912 483
- --------------------------------------------------------------------------------
BANQUETES Y ALGO MAS 5,584 9901 9912 5,584
- --------------------------------------------------------------------------------
BEAUTY CAR DESIGN 250 9905 9912 250
- --------------------------------------------------------------------------------
BELLA INT. 20,736 9904 0003 (16,019)
- --------------------------------------------------------------------------------
BONANZA - MAYAGUEZ 1,800 9907 9912 1,514
- --------------------------------------------------------------------------------
CABLE TV 150,000 9901 0001 91,399
- --------------------------------------------------------------------------------
CABRERA HNOS 15,000 9907 9912 9,640
- --------------------------------------------------------------------------------
CANDAS REST 1,500 9906 9912 1,500
- --------------------------------------------------------------------------------
CASA DE LOS TAPES 50,000 9801 9812 (5,004)
- --------------------------------------------------------------------------------
CASA DE LOS TAPES 60,000 9905 9912 60,000
- --------------------------------------------------------------------------------
CASABLANCA MOTORS (TITO MATOS) 75,200 9803 0004 1,505
- --------------------------------------------------------------------------------
CASIANO COMMUNICATIONS 100,000 9902 0002 92,545
- --------------------------------------------------------------------------------
CHECKER BOUTIQUE 300 9812 9912 300
- --------------------------------------------------------------------------------
CONVENCION CAMARA DE COMERCIO 40,000 9803 0 5,008
- --------------------------------------------------------------------------------
COOK NO MORE 6,000 9903 9912 6,000
- --------------------------------------------------------------------------------
CORTELCO DE PUERTO RICO 98,000 9812 9912 (17,653)
- --------------------------------------------------------------------------------
CP CONTRACTOR PAINT 3,000 9812 9912 3,000
- --------------------------------------------------------------------------------
DR. MANUEL I. MORELL (CLINICA 2,400 9907 9912 2,400
OPT)
- --------------------------------------------------------------------------------
EL NUEVA DIA 300,000 9901 9912 110,108
- --------------------------------------------------------------------------------
ELEGANCE SECURITY 4,515 9806 9905 2,451
- --------------------------------------------------------------------------------
EXECUTIVE CAR CARE 350 9805 9912 350
- --------------------------------------------------------------------------------
FIORI DI CLASSE 3,718 9901 9912 3,718
- --------------------------------------------------------------------------------
FIORI DI CLASSE 5,000 9908 0007 5,000
- --------------------------------------------------------------------------------
FROILAN PRODUCTIONS 1,300 9811 9910 1,300
- --------------------------------------------------------------------------------
G.M. AIR CONTIONING SERV. 2,250 9903 0002 2,250
- --------------------------------------------------------------------------------
GEOMAR TRAVEL 1,092 9809 9908 1,092
- --------------------------------------------------------------------------------
GUARINA BAKERY 500 9901 9912 450
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 130
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ORIGINAL CONTRACT TERM
CONTRACT ------------- AIR TIME
ADVERTISER AMOUNT FROM TO DUE CLIENT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOTEL AMBASSADOR 30,000 9810 9909 7,068
- --------------------------------------------------------------------------------
HOTEL CIELO MAR 654 9903 9912 654
- --------------------------------------------------------------------------------
HOTEL COLONIAL 4,000 9907 0004 4,000
- --------------------------------------------------------------------------------
HOTEL EL CONVENTO 49,747 9812 2012 49,747
- --------------------------------------------------------------------------------
HOTEL PONCE HILTO 30,000 9906 0005 29,312
- --------------------------------------------------------------------------------
HYATT 60,000 9712 9812 (43,124)
- --------------------------------------------------------------------------------
IBERCARIBE 3,000 9907 9912 3,000
- --------------------------------------------------------------------------------
IDEAS PUBLISHING GROUP 12,000 9903 9912 964
- --------------------------------------------------------------------------------
INTER OFFICE 3,000 9905 9912 1,080
- --------------------------------------------------------------------------------
INTERFAX 1,990 9903 9903 1,030
- --------------------------------------------------------------------------------
INTERNET SOLUTIONS 3,750 9810 9909 (344)
- --------------------------------------------------------------------------------
JOSE GONZALEZ (SANDERS) 800 9902 9905 600
- --------------------------------------------------------------------------------
LA ESTRELLA DE PR 14,782 9805 9912 5,290
- --------------------------------------------------------------------------------
LA MINA SOUND CENTER 3,000 9902 9912 3,000
- --------------------------------------------------------------------------------
LA PICCOLA CENTER 4,500 9806 9905 1,900
- --------------------------------------------------------------------------------
MA ESTEVES 15,000 9806 9906 5,025
- --------------------------------------------------------------------------------
MADERAS 3C/DECO CENTRO 40,000 9704 9803 52,723
- --------------------------------------------------------------------------------
MAEKO AIR CONDITIONING 1,300 9907 9912 1,300
- --------------------------------------------------------------------------------
MANHATTAN LADIES TOTAL FITNESS 6,000 9903 9912 4,770
- --------------------------------------------------------------------------------
MIRNA HAU 1,605 9905 0005 266
- --------------------------------------------------------------------------------
MODULINE, INC. 32,045 9901 0012 23,651
- --------------------------------------------------------------------------------
MODULINE, INC. 1,154 9906 0012 1,154
- --------------------------------------------------------------------------------
MOTOR SPORT 6,000 9903 0002 6,000
- --------------------------------------------------------------------------------
MUEBLERIA LA UNICA 7,500 9804 9812 1,071
- --------------------------------------------------------------------------------
MUEBLERIA LA UNICA 7,500 9902 9912 3,215
- --------------------------------------------------------------------------------
NATIONAL PRINTERS 2,000 9811 910 2,000
- --------------------------------------------------------------------------------
NAYOR JOYEROS 10,000 9905 0005 5,940
- --------------------------------------------------------------------------------
ONLY YOU PROFESSIONAL SALON 2,000 9902 9912 1,830
- --------------------------------------------------------------------------------
PANADERIA Y REP. LA ESMERALDA 15,000 9810 9910 305
- --------------------------------------------------------------------------------
PATIO TROPICAL 500 9904 9912 500
- --------------------------------------------------------------------------------
PD AIR CONDITIONING 10,940 9906 9912 3,724
- --------------------------------------------------------------------------------
PEGASUS CABLE TELEVISION OF PR 67,260 9907 0006 67,260
- --------------------------------------------------------------------------------
PEGASUS CABLE TELEVISION OF PR 55,200 9802 9901 (21,249)
- --------------------------------------------------------------------------------
PERFECT CLEANERS 200 9811 9910 200
- --------------------------------------------------------------------------------
PERIODICO DIALOGO 16,302 9803 9902 30
- --------------------------------------------------------------------------------
PERIODICO LA OPINION DEL SUR 5,000 9804 9904 5,000
- --------------------------------------------------------------------------------
PERIODICO NOTI SUR 13,200 9808 9812 (3,426)
- --------------------------------------------------------------------------------
PICHIS CONVENTION CENTER 2,000 9805 9812 310
- --------------------------------------------------------------------------------
PLAZA MOTOR CORP (MAZDA-MAY) 80,000 9905 0012 80,000
- --------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 131
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ORIGINAL CONTRACT TERM
CONTRACT ------------- AIR TIME
ADVERTISER AMOUNT FROM TO DUE CLIENT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PLAZA MOTOR CORP (MAZDA) 144,000 9804 9912 17,714
- --------------------------------------------------------------------------------
PLAZA MOTORS CORP 104,000 9901 9912 104,000
- --------------------------------------------------------------------------------
PONCE LIMOSINE SERVICES 975 9904 9912 975
- --------------------------------------------------------------------------------
POST AUDIO GROUP 3,000 9902 9912 3,000
- --------------------------------------------------------------------------------
POWERHOUSE GYM 7,500 9805 9904 3,020
- --------------------------------------------------------------------------------
PROFESSIONAL SERVICE GROUP 389 9808 9912 389
- --------------------------------------------------------------------------------
Q-LUBE 4,000 9906 9912 4,000
- --------------------------------------------------------------------------------
R.C. CUISINE 650 9904 9912 650
- --------------------------------------------------------------------------------
RADAMES PENA INC 22,500 9810 9912 20,092
- --------------------------------------------------------------------------------
REST AJILIMOJILI 5,000 9906 9912 3,059
- --------------------------------------------------------------------------------
REST FRIDAS 3,000 9909 9912 3,000
- --------------------------------------------------------------------------------
REST MANDALAY 4,500 9901 9912 2,400
- --------------------------------------------------------------------------------
REST MANGERE 3,000 9910 9906 3,000
- --------------------------------------------------------------------------------
REST MANGERE 3,000 9910 9912 3,000
- --------------------------------------------------------------------------------
REST. COACHES 3,000 9908 9912 3,000
- --------------------------------------------------------------------------------
REST. PAPA LUIS 700 9907 9912 700
- --------------------------------------------------------------------------------
REST. PITO'S SEA FOOD 3,600 9804 9912 1,640
- --------------------------------------------------------------------------------
REVISTA VEA (KIKO FEBO) 90,515 9903 9912 43,775
- --------------------------------------------------------------------------------
REVISTA COMERCIO Y PRODUCCION 9,550 9804 9812 9,550
- --------------------------------------------------------------------------------
REVISTA TV GUIA (SHEPPERD CO.) 55,000 9811 9910 (78,673)
- --------------------------------------------------------------------------------
ROCA BRUJA 250 9901 9912 250
- --------------------------------------------------------------------------------
SEPTIX 390 9906 9912 390
- --------------------------------------------------------------------------------
SEPTIX 550 9904 9912 550
- --------------------------------------------------------------------------------
SEPTIX 315 9907 9912 315
- --------------------------------------------------------------------------------
SET FLOORS CORPORATION 6,435 9902 9912 5,523
- --------------------------------------------------------------------------------
TACOLANDIA RANCHO TAXCO 2,500 9810 9912 2,050
- --------------------------------------------------------------------------------
TALLER DE MODELOS VILY RENTA 500 9905 9912 500
- --------------------------------------------------------------------------------
TALLER DE MODELOS VILY RENTA 350 9905 9912 350
- --------------------------------------------------------------------------------
TECHNOLOGY WAREHOUSE 3,284 9901 9912 3,284
- --------------------------------------------------------------------------------
TELE PONCE CABLE T.V 5,000 9907 0006 5,000
- --------------------------------------------------------------------------------
TELEMUNDO (CANAL 2) 30,000 9905 9912 26,608
- --------------------------------------------------------------------------------
TELEMUNDO (CANAL 2) 25,000 9802 9902 25,000
- --------------------------------------------------------------------------------
TELEONCE (YOUNG & RUBICAM) 200,000 9801 9812 (31,343)
- --------------------------------------------------------------------------------
TELEORO 50,000 9907 9912 47,956
- --------------------------------------------------------------------------------
TELEVINCENTRO 90,000 9903 9912 68,704
- --------------------------------------------------------------------------------
TONY ALFOMBRAS 30,000 9802 9901 (1,900)
- --------------------------------------------------------------------------------
TOP QUALITY 10,000 9904 0003 9,426
- --------------------------------------------------------------------------------
TORO'S CYCLE 18,000 9907 0012 18,000
- --------------------------------------------------------------------------------
TORO'S CYCLE 5,000 9901 9912 5,000
- --------------------------------------------------------------------------------
TROPICAL INTERNET SOLUTION, 57,750 9806 9905 57,750
- --------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 132
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ORIGINAL CONTRACT TERM
CONTRACT ------------- AIR TIME
ADVERTISER AMOUNT FROM TO DUE CLIENT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INC.
- --------------------------------------------------------------------------------
VOUS 6,000 9901 9912 14
- --------------------------------------------------------------------------------
WAPA (CANAL 4) 90,000 9802 9812 16,735
- --------------------------------------------------------------------------------
WESTERN BOWLING 7,500 9701 9812 3,857
- --------------------------------------------------------------------------------
WYNDHAM PALMAS DEL MAR RESORT 8,700 9807 9812 (811)
- --------------------------------------------------------------------------------
1,146,146
- --------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 133
SCHEDULE 4.3
BUYER'S CONSENTS
1. FCC Consent
2. Expiration or termination of the applicable waiting period under the
Hart-Scott Rodino Act
<PAGE> 134
EXHIBIT A
ESCROW DEPOSIT AGREEMENT
This Escrow Deposit Agreement ("Agreement") is entered into
this ____ day, of September, 1999, by and among CHANCELLOR MEDIA CORPORATION OF
LOS ANGELES ("Seller"), SPANISH BROADCASTING SYSTEM OF PUERTO RICO, INC.
("Buyer"), and ALLFIRST BANK, as escrow agent ("Escrow Agent").
Seller and Buyer have entered into a Stock Purchase Agreement
(the "Purchase Agreement") of even date herewith for the sale by Seller and
certain of its subsidiaries to Buyer of all of the issued and outstanding
capital stock of certain companies listed on Schedule 1 hereto. Pursuant to the
Purchase Agreement, Buyer is required on this date to deposit TEN MILLION
DOLLARS ($10,000,000) in escrow to secure its obligations under the Purchase
Agreement. Buyer and Seller desire that Escrow Agent hold these funds as
provided in this Agreement.
Accordingly, in consideration of the mutual covenants
contained herein, the parties, intending to be legally bound, hereby agree as
follows:
1. Receipt of Escrow Deposit. By its signature below, Escrow Agent
acknowledges receipt of a deposit of TEN MILLION DOLLARS ($10,000,000) (the
"Escrow Deposit") from Buyer.
2. Investment of Escrow Deposit. The Escrow Deposit shall be invested
by Escrow Agent in interest bearing bank accounts or certificates of deposit of
federally insured financial institutions or in treasury bills or such other
investments as may be directed by the joint written instructions of Seller and
Buyer. All interest earned on the Escrow Deposit shall be paid periodically to
Buyer unless or until a claim to the Escrow Deposit is made by Seller. Upon and
after Seller's notice of claim thereto, all interest earned on the Escrow
Deposit shall become part of the Escrow Deposit.
3. Release of Escrow Deposit. Escrow Agent shall release the Escrow
Deposit only pursuant to (a) the written instructions of Seller, which
instructions shall include a certification that a copy of such instructions have
been delivered to Buyer, provided that the Escrow Agent does not receive a
written objection from Buyer within two (2) business days of Seller's delivery
of such instructions, except that with respect to a release of the Escrow
Deposit to Seller pursuant to Section 5.9, Buyer has no right to object and
Escrow Agent shall not honor any such objections, (b) joint written instructions
executed by Seller and Buyer, or (c) a final order of a court of competent
jurisdiction. Escrow Agent shall release the Escrow Deposit in accordance with
the above written instructions or final order within two (2) business days of
its receipt thereof. An order shall be deemed "final" when, by a lapse of time
or otherwise, it is no longer subject to administrative or judicial
reconsideration or review. Escrow Agent shall be authorized to act on any
document believed to be genuine and to be signed by the proper party or parties,
and will incur no liability in so acting. In the event of any disagreement or
presentation of adverse claims or demands in connection with the Escrow Deposit,
Escrow Agent may act as stake-holder and deposit the item in dispute with the
registry of the court having jurisdiction over the dispute.
<PAGE> 135
4. Indemnity. Seller and Buyer agree to indemnify and hold Escrow Agent
harmless against any loss, claim, damage, liability, or expense incurred in
connection with any action, suit, proceeding, claim or alleged liability arising
from this Agreement; provided, however, that Escrow Agent shall not be so
indemnified or held harmless for its gross negligence or acts in bad faith by it
or any of its agents or employees, nor for its breach of this Agreement.
5. Expenses. All expenses incurred by Escrow Agent in the
administration of this Agreement, including reasonable legal costs incurred by
Escrow Agent, shall be shared equally by Seller and Buyer. Any expenses incurred
by Seller or Buyer in connection with this Agreement shall be borne by the
parties incurring the expenses. If there arises a dispute concerning a party's
entitlement to some or all of the Escrow Deposit, the prevailing party shall be
entitled to recover its reasonable costs (including attorneys' fees) incurred in
connection with such dispute.
6. Notices. All notices and other communications required or permitted
pursuant to this Escrow Agreement shall be in writing and be deemed to have been
duly given and delivered if mailed by certified mail, return receipt requested,
postage prepaid, as follows:
If to Seller:
Chancellor Media Corporation of Los Angeles
c/o AMFM Inc.
1845 Woodall Rodgers Freeway
Suite 1300
Attention: William Banowsky, Esq.
Telecopier: (512) 340-7890
with copy to:
Latham & Watkins
Suite 1300
1001 Pennsylvania Avenue., N.W.
Washington, D.C. 20004
Attention: Eric L. Bernthal, Esq.
Telecopier: (202) 637-2201
If to Buyer:
Spanish Broadcasting System of Puerto Rico, Inc.
3191 Coral Way, #805
Miami, Florida 33145
Attention: Raul Alarcon, Jr., President
Telecopier: (305) 444-2179
2
<PAGE> 136
With a copy to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
901 Fifteenth Street, N.W.
Washington, D.C. 20005-2327
Attention: Jason L. Shrinsky, Esq.
Telecopier: (202) 682-3580
If to Escrow Agent:
All First Bank
Capital Markets Group
601 13th Street N.W.
Suite 1000
Washington, D.C. 20005
Attention: John G. Wise
Telecopier: (202) 434-7032
or to such other address as such party shall specify by written notice to the
other parties hereto. Any notice sent to Escrow Agent shall also be sent to the
other party to this Agreement.
7. Duties of Escrow Agent. The duties and responsibilities of Escrow
Agent shall be limited to those expressly set forth herein.
8. Assignment. Buyer and Seller may assign their rights under this
Agreement to the same extent they are permitted to assign their rights and
obligations under the Purchase Agreement.
9. Miscellaneous. This Agreement, and with respect to Buyer and Seller,
the Purchase Agreement, embody the entire agreement and understanding of the
parties concerning the Escrow Deposit. This Agreement may be amended only by a
writing signed by the party against whom enforcement is sought. The headings in
this Agreement are intended solely for convenience or reference and shall be
given no effect in the construction or interpretation of this Agreement. This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York, without regard to the choice of law rules utilized in that
state. This Agreement shall bind and inure to the benefit of the parties hereto
and their respective, heirs, personal representatives, successors and permitted
assigns.
3
<PAGE> 137
To evidence their agreement, the parties have caused this
Agreement to be executed on the date first written above.
CHANCELLOR MEDIA CORPORATION
OF LOS ANGELES
By: ___________________________________________
Name:
Title:
SPANISH BROADCASTING SYSTEM OF PUERTO RICO, INC.
By: ___________________________________________
Name:
Title:
ALL FIRST BANK
By: ___________________________________________
Name:
Title:
4
<PAGE> 138
SCHEDULE 1
PRIMEDIA BROADCAST GROUP, INC.
WIO, INC.
CADENA ESTEREOTEMPO, INC.
PORTORICAN AMERICAN BROADCASTING, INC.
WLDI, INC.
WRPC, INC.
WOYE, INC.
WZNT, INC.
WOQI, INC.
<PAGE> 139
EXHIBIT B
TIME BROKERAGE AGREEMENT
BY AND BETWEEN
CHANCELLOR MEDIA CORPORATION LOS ANGELES
AND
SPANISH BROADCASTING SYSTEM OF PUERTO RICO, INC.
DATED AS OF __________, ___1999
<PAGE> 140
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. SALE OF TIME.................................................................................................. 1
1.1. Broadcast of Programming........................................................................... 1
1.2. Payment............................................................................................ 2
1.3. CMC Programming.................................................................................... 2
1.4. Term............................................................................................... 2
2. PROGRAMMING AND OPERATING STANDARDS AND PRACTICES............................................................. 2
2.1. Compliance with Standards.......................................................................... 2
2.2. Political Broadcasts............................................................................... 2
2.3. Handling of Communications......................................................................... 3
2.4. Preemption......................................................................................... 3
2.5. Rights in Programs................................................................................. 4
2.6. "Payola" and "Plugola"............................................................................. 4
2.7. Advertising and Programming........................................................................ 4
2.8. Call Sign Changes.................................................................................. 4
2.9. Compliance with Laws............................................................................... 4
2.10. Certifications.................................................................................... 5
3. RESPONSIBILITY FOR EMPLOYEES AND EXPENSES..................................................................... 5
3.1. Time Broker's Employees............................................................................ 5
3.2. CMC's Employees.................................................................................... 5
3.3. Time Broker's Expenses............................................................................. 5
3.4. Operating Expenses................................................................................. 5
4. ASSIGNMENT OF CERTAIN AGREEMENTS AND RIGHTS................................................................... 6
4.1. Assignment......................................................................................... 6
4.2. Proration.......................................................................................... 6
4.3. Accounts Receivable................................................................................ 7
4.4. Payment of Station Obligations..................................................................... 7
5. OPERATION OF STATIONS......................................................................................... 8
6. GRANT OF LICENSES............................................................................................. 8
6.1. License to Use Station Facilities.................................................................. 8
6.2. License of Intellectual Property................................................................... 8
7. INDEMNIFICATION............................................................................................... 9
7.1. Indemnification Rights............................................................................. 9
7.2. Procedures......................................................................................... 9
</TABLE>
<PAGE> 141
<TABLE>
<S> <C>
8. DEFAULT....................................................................................................... 10
8.1. Events of Default.................................................................................. 10
8.2. Cure Periods....................................................................................... 10
9. TERMINATION................................................................................................... 10
9.1. Termination Upon Default or Change in FCC Rules or Policies........................................ 11
9.2. Certain Matters Upon Termination................................................................... 11
10. REMEDIES..................................................................................................... 12
11. CERTAIN REPRESENTATIONS AND WARRANTIES OF THE PARTIES........................................................ 12
11.1. Representations and Warranties of Time Broker..................................................... 12
11.1.1. Organization........................................................................... 12
11.1.2. Authorization; Enforceability.......................................................... 12
11.1.3. No Consent............................................................................. 12
11.1.4. No Breach.............................................................................. 12
11.1.5. Actions and Proceedings................................................................ 13
11.1.6. Qualifications......................................................................... 13
11.2. Representations, Warranties and Covenants of CMC.................................................. 13
11.2.1. Organization........................................................................... 13
11.2.2. Authorization; Enforceability.......................................................... 13
11.2.3. No Consent............................................................................. 14
11.2.4. No Breach.............................................................................. 14
11.2.5. Actions and Proceedings................................................................ 14
11.2.6. Maintenance of Current Coverage........................................................ 14
12. MISCELLANEOUS................................................................................................ 14
12.1. Modification and Waiver........................................................................... 14
12.2. No Waiver; Remedies Cumulative.................................................................... 14
12.3. Choice of Law..................................................................................... 15
12.4. Construction...................................................................................... 15
12.5. Headings.......................................................................................... 15
12.6. Successors and Assigns............................................................................ 15
12.7. Force Majeure..................................................................................... 15
12.8. Counterpart Signatures............................................................................ 16
12.9. Notices........................................................................................... 16
12.10. Entire Agreement................................................................................. 17
12.11. Severability..................................................................................... 17
12.12. No Joint Venture................................................................................. 17
12.13. Damage to Stations............................................................................... 17
12.14. Noninterference.................................................................................. 17
12.15. Adverse Orders................................................................................... 18
12.16. Publicity........................................................................................ 18
</TABLE>
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TABLE OF SCHEDULES
SCHEDULES
1.1 Programming
1.2 Allocation of Monthly Payment
2.1 Programming Policy
3.1 Employee Severance Package
4.1 Operating Contracts
6.2 Intellectual Property
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TIME BROKERAGE AGREEMENT
This Time Brokerage Agreement (this "Agreement") is made as of
the ____ day of __________, 1999, by and between CHANCELLOR MEDIA CORPORATION OF
LOS ANGELES, a Delaware corporation, with an address at 300 Crescent Court,
Suite 600, Dallas, Texas, 75201 ("CMC") and SPANISH BROADCASTING SYSTEM OF
PUERTO RICO, INC., a Delaware corporation, with an address at 3191 Coral Way,
#805, Miami, Florida 33145 ("Time Broker"). CMC is the parent corporation and
sole shareholder of: (i) WLDI, Inc., licensee of broadcast station WCOM(FM),
94.7 MHz in Bayamon, Puerto Rico ("WCOM"); (ii) WOYE, Inc., licensee of
Broadcast station WOYE-FM, 94.1 MHz in Mayaguez, Puerto Rico ("WOYE"); (iii)
WZNT, Inc., licensee of Broadcast station WZNT(FM), 93.7 MHz, San Juan, Puerto
Rico ("WZNT"); (iv) WRPC, Inc., licensee of Broadcast station WCTA-FM, 95.1 MHz
in San German, Puerto Rico ("WCTA"); (v) WOQI, Inc., which in turn is the sole
shareholder of Portorican American Broadcasting, Inc., licensee of Broadcast
station WZMT(FM), 93.3 MHz in Ponce, Puerto Rico ("WZMT"); and (vi) WIO, Inc.,
which in turn is the sole shareholder of Cadena Estereotempo, Inc., licensee of
(A) broadcast station WIOA(FM), 99.9 MHz in San Juan, Puerto Rico ("WIOA"), (B)
broadcast station WIOB(FM), 97.5 MHz in Mayaguez, Puerto Rico ("WIOB"), and (C)
broadcast station WIOC(FM), 105.1 MHz in Ponce, Puerto Rico ("WIOC").
WLDI, Inc., WOYE, Inc., WZNT, Inc., WRPC, Inc., WOQI, Inc.,
and WIO, Inc. are collectively referred to herein as the "Subsidiaries." WLDI,
Inc., WOYE, Inc., WZNT, Inc., WRPC, Inc., Portorican American Broadcasting,
Inc., and Cadena Estereotempo, Inc. are each referred to herein as a "Licensee"
and collectively as the "Licensees." WCOM, WOYE, WZNT, WCTA, WZMT, WIOA, WIOB,
and WIOC are each referred to herein as a "Station" and collectively as the
"Stations."
Concurrently with the execution of this Agreement, CMC and
Timer Broker are entering into a Stock Purchase Agreement ("Stock Purchase
Agreement") providing for the sale by CMC to Time Broker of the stock of each of
the Subsidiaries upon the terms and conditions set forth therein. CMC and Time
Broker desire to enter into an agreement providing for the sale of substantially
all of the broadcast time of the Stations to Time Broker, subject to the rules
and policies of the Federal Communications Commission (the "FCC").
Accordingly, in consideration of the foregoing and of the
mutual promises, covenants, and conditions set forth below, the parties agree as
follows:
1. SALE OF TIME.
1.1. Broadcast of Programming. Effective as of 12:01 a.m. on or before
the Commencement Date, as defined below, CMC shall broadcast on the Stations, or
cause to be broadcast on the Stations, programs that are presented to it by Time
Broker as described in greater detail on Schedule 1.1 (the "Programming"). The
"Commencement Date" shall be the later of (i) the date ten (10) days after the
waiting period for the notification filed pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, expires or is terminated,
<PAGE> 144
and (ii) October 15, 1999.
1.2. Payment. In exchange for providing substantially all of the
broadcast time on the Stations, Time Broker shall pay the Licensees the monthly
rate (the "Monthly Payment") of Five Hundred Thirty-seven Thousand Five Hundred
Dollars ($537,500.00), allocated among the Licensees as set forth on Schedule
1.2. The initial Monthly Payment shall be due on the Commencement Date, and all
other Monthly Payments shall be due and payable on the first business day of
each calendar month to which such Monthly Payment pertains. The first and last
Monthly Payments shall be prorated. CMC shall be responsible for expenses
related to the salaries, taxes, insurance, and related costs for one (1)
engineer and one (1) manager at each Station, and the expenses associated with
maintaining the public inspection file for each Station and one (1) telephone
line accessible at each Station.
1.3. CMC Programming. CMC shall present programming responsive to the
needs of the Station's community of license, as set forth on Schedule 1.1.
1.4. Term. This Agreement shall commence on the Commencement Date and
shall terminate on the earlier of (i) 11:59 p.m. on the Closing Date under the
Stock Purchase Agreement, (ii) the date that the Stock Purchase Agreement is
terminated, and (iii) the date that this Agreement is terminated pursuant to the
provisions hereof.
2. PROGRAMMING AND OPERATING STANDARDS AND PRACTICES.
2.1. Compliance with Standards. All Programming delivered by Time
Broker and all programming supplied by CMC during the term of this Agreement
shall be in accordance with applicable statutes, FCC requirements, and the
programming policies set forth on Schedule 2.1. CMC reserves the right to refuse
to broadcast any Programming containing matter that CMC in its sole discretion
believes: (i) may not be in the public interest, (ii) may violate a right of any
third party, (iii) may constitute a "personal attack" as that term is and has
been defined by the FCC, (iv) may be deemed indecent (and not broadcast during
the safe harbor for indecent programming established by the FCC) or obscene by
the FCC or any court or other regulatory body with authority over CMC or the
Stations. If Time Broker does not adhere to the foregoing requirements, CMC may
suspend or cancel any specific program not so in compliance, without any
reduction or offset in the payments due CMC under this Agreement.
2.2. Political Broadcasts. Time Broker shall maintain and deliver to
CMC all records and information required by the FCC to be placed in the public
inspection files of the Stations pertaining to the broadcast of political
programming and advertisements, in accordance with the provisions of Sections
73.1940 and 73.3526 of the FCC's rules. Time Broker shall consult and cooperate
with CMC and adhere to all applicable statutes and the rules, regulations, and
policies of the FCC, as announced from time to time, with respect to the
carriage of political advertisements and programming (including, without
limitation, the rights of candidates and, as appropriate, others to "equal
opportunities") and the charges permitted therefor. Time Broker shall promptly
provide to CMC such documentation relating to such programming as CMC or any
Licensee is required to maintain in its public inspection file or as CMC shall
reasonably request.
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2.3. Handling of Communications. CMC and Licensee shall cooperate in
promptly responding to all mail, cables, telegrams, or telephone calls directed
to the Stations in connection with the Programming provided by Time Broker or
any other matter relevant to its responsibilities hereunder. Time Broker shall
provide copies of all such correspondence to CMC, and CMC shall provide copies
of all such correspondence to Time Broker. Promptly upon receipt, Time Broker
shall advise CMC, and CMC shall advise Time Broker, of any public or FCC
complaint or inquiry known to Time Broker or CMC, respectively, concerning such
Programming, and each shall provide the other with copies of any letters from
the public, including complaints concerning such Programming. Upon CMC's
request, Time Broker shall broadcast material responsive to such complaints and
inquiries. Notwithstanding the foregoing, CMC shall handle all matters or
inquiries relating to FCC complaints and any other matters required to be
handled by CMC under the rules and policies of the FCC.
2.4. Preemption. CMC may, from time to time, preempt portions of the
Programming to broadcast emergency information or programs it deems would better
serve the public interest, and may refuse to broadcast any program or
announcement of Time Broker should CMC deem such program or announcement to be
contrary to the public interest as set forth in Section 2.1. Time Broker shall
be notified at least three (3) days in advance of any preemption of any of the
Programming for the purpose of broadcasting programs CMC deems necessary to
serve the public interest unless such advance notice is impossible or
impractical, in which case CMC shall notify Time Broker promptly upon making
such determination. In the event of any such preemption, Time Broker shall be
entitled to a credit against any other amounts due CMC under this Agreement in
an amount equal to the product of (a) the Monthly Payment and (b) the result of
dividing the number of hours so affected by the aggregate number of hours
available for Programming during such month. CMC represents and covenants that
preemption shall only occur to the extent CMC deems it necessary to carry out
any Licensee's obligations as an FCC licensee, and agrees that preemption shall
not be exercised in an arbitrary manner or for the commercial advantage of CMC
or others. In the event that CMC preempts more than forty (40) hours of
Programming and announcements over any consecutive thirty (30) day period, then
Time Broker shall be entitled at its sole option to terminate this Agreement
without further obligation to CMC except for payments (if any) already due to
CMC and to pursue all other legal remedies available to it.
2.5. Rights in Programs. All right, title, and interest in and to the
Programming, and the right to authorize the use of the Programming in any manner
and in any media whatsoever, shall be and remain vested at all times solely in
Time Broker.
2.6. "Payola" and "Plugola". Time Broker agrees that it will take
steps, including the continuation of CMC's system for periodic execution of
affidavits, reasonably designed to assure that neither it nor its employees or
agents will accept any gift, gratuity or other consideration, directly or
indirectly, from any person or company for the playing of records, the
presentation of any programming or the broadcast of any commercial announcement
over the Stations without such broadcast being announced as sponsored. It is
further understood and agreed that no commercial message, plugs, or undue
reference shall be made in programming presented over the Stations to any
business venture, profit-making activity or other interest (other than
non-
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commercial announcements for bona fide charities, church activities, or other
public service activities) without such broadcast being announced as sponsored.
2.7. Advertising and Programming. Beginning on the Commencement Date,
Time Broker shall be solely responsible for any expenses incurred in connection
with and shall be entitled to all revenue from the sale of advertising or
program time on the Stations broadcast on or after the Commencement Date. CMC
shall remain entitled to all revenue from the sale of advertising or program
time on the Stations broadcast prior to the Commencement Date. Time Broker does
not assume any obligation of CMC under any contract or advertising arrangement
entered into by CMC on or after the Commencement Date. Time Broker will advise
CMC of its lowest unit charges for political advertising, and CMC shall not do
anything that would lower Time Broker's lowest unit charges.
2.8. Call Sign Changes. At one or more times during the term of this
Agreement, Time Broker may request that CMC change the FCC assigned call sign of
a Station. CMC will honor such request and promptly seek FCC assignment to the
Station of the call sign specified by Time Broker provided that (i) CMC
determines in good faith that the call sign requested by Time Broker is
consistent with CMC's obligations under the Communications Act of 1934, as
amended (the "Communications Act"), the rules of the FCC and all other
applicable laws, and (ii) Time Broker agrees to reimburse CMC for its reasonable
expenses incurred in connection with requesting and obtaining the change.
2.9. Compliance with Laws. At all times during the term of this
Agreement, Time Broker and CMC shall comply in all material respects with all
applicable federal, state and local laws, rules and regulations.
2.10. Certifications. Pursuant to Section 73.3555(a)(2)(ii) of the
FCC's rules, CMC certifies that it maintains ultimate control over the
facilities of the Stations, including specifically control over station
finances, personnel, and programming, and Time Broker certifies that this
Agreement complies with the provisions of Sections 73.3555(a)(1) and (e)(1) of
the FCC's rules.
3. RESPONSIBILITY FOR EMPLOYEES AND EXPENSES.
3.1. Time Broker's Employees. Time Broker shall employ and be
responsible for the payment of salaries, taxes, insurance, and all other costs
related to all personnel used in the production of the Programming. Time Broker
will not incur any liability on account of CMC's employees. Notwithstanding the
provisions of this Section 3.1, Time Broker assumes and undertakes to pay,
satisfy, or discharge CMC's liabilities, obligations, commitments, or
responsibilities for the employee severance benefits set forth on Schedule 3.1
with respect to the employees specified on such Schedule that it terminates
during the period that begins upon the Commencement Date and ends upon the
termination of this Agreement.
3.2. CMC's Employees.
(a) CMC, through the Licensees, shall employ and be
responsible for the payment of salaries, taxes, insurance, and all other costs
related to all personnel necessary to
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(i) fulfill the Licensee's obligations as FCC licensees, (ii) transmit the
Programming and (iii) deliver any other programming. CMC will not incur any
liability on account of Time Broker's employees.
(b) Time Broker shall have no authority over and shall not
supervise persons in the employ of CMC after the Commencement Date.
3.3. Time Broker's Expenses. Time Broker shall pay for all costs
associated with the production and delivery of the Programming, including but
not limited to, (i) all ASCAP, BMI, SESAC, and other copyright fees associated
with delivery of the Programming; (ii) any expenses incurred in connection with
its sale of advertising time hereunder (including without limitation sales
commissions) in connection with the Programming; and (iii) the salaries, taxes,
insurance, and related costs for all personnel used in the production of the
Programming and all sales personnel (including salespeople, traffic personnel,
and programming staff).
3.4. Operating Expenses. CMC shall ensure the payment when due of fees
and expenses relating to the operation and maintenance of the Stations necessary
to maintain the licensed transmitting capability of the Stations and to fulfill
the Licensee's obligations as FCC licensees, including, but not limited to, (i)
all ASCAP, BMI, SESAC and other copyright fees associated with the delivery of
programming by CMC, (ii) any expenses incurred in connection with its sale of
advertising time hereunder (including without limitation sales commissions) in
connection with the delivery of programming by CMC, (iii) the salaries, taxes,
insurance and related costs for all personnel required to be employed by CMC
pursuant to Section 3.2 of this Agreement, (iv) rent and utility payments for
the towers and transmitters used in the operation of the Stations, (v) rent and
other payments for equipment used by CMC in the operation of the Stations, (vi)
rent and other payments for studio space used by CMC, (vii) insurance on the
equipment of the Stations, and (viii) its federal, state, and local taxes (the
"Operating Expenses").
4. ASSIGNMENT OF CERTAIN AGREEMENTS AND RIGHTS.
4.1. Assignment. On the Commencement Date, CMC shall assign or cause to
be assigned to Time Broker all contracts for the sale of time on the Stations
(the "Time Sales Agreements") together with those contracts, leases, and other
agreements identified on Schedule 4.1 (collectively, the "Contracts"). Time
Broker shall, on and as of the Commencement Date, assume and become fully liable
and responsible for all liabilities and obligations of CMC under the Contracts.
CMC has provided Time Broker with true and complete copies, including
amendments, of the Contracts (excluding Time Sale Agreements) and a list, set
forth on Schedule 4.1, of the Time Sales Agreements, which schedule includes the
air time due under the Time Sales Agreements as of the date hereof. The
Contracts are freely assignable, or, if consent of the other contracting party
to the assignment is required, CMC shall use its reasonable efforts to obtain
such consent as promptly as practicable. If CMC is unable to obtain any consent
necessary to permit the valid assignment of a Contract, CMC shall act as Time
Broker's agent in connection with such Contract and the parties shall cooperate
to cause Time Broker to receive the benefit of the Contract in exchange for
performance by Time Broker of all of CMC's obligations under such Contract
(including but not limited to the payment to
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CMC of all amounts due under the Contract on or after the Commencement Date for
services provided by CMC).
4.2. Proration. All expenses and income arising under the Contracts
shall be prorated between CMC and Time Broker as of the Commencement Date in a
manner such that the costs and benefits in respect of the period prior to the
Commencement Date shall be for the account of CMC, and those in respect of the
period thereafter, during the term of this Agreement, for the account of Time
Broker. Such proration shall include an adjustment for the Time Sales Agreements
for consideration other than cash ("Trade Agreements") only to the extent of any
Net Negative Trade Balance (as defined below) and only to the extent that the
Net Negative Trade Balance exceeds Two Hundred Ninety-Eight Thousand Six Hundred
Twenty-Six Dollars ($298,626). "Net Negative Trade Balance" means the extent, if
any, to which the value (at current rates for time on the Station in question as
of the Commencement Date) of unfulfilled obligations of a Station under Trade
Agreements exceed the reasonable fair market value of any consideration yet to
be received by the Station pursuant to such Trade Agreements. Such prorations
shall be completed and any necessary payments on account of such prorations paid
within sixty (60) days of the Commencement Date. With respect to the preceding,
CMC shall be responsible for paying the Licensees' employees' sales commissions
arising and accruing prior to the Commencement Date, but Time Broker shall
reimburse CMC for such sales commissions to the extent that the revenue from
such sales relates to advertising or programming broadcast on or after the
Commencement Date. If any disagreement with respect to the proration of such
income and expenses cannot be resolved by the parties, CMC and Time Broker will
select a certified public accountant knowledgeable in the broadcast industry to
resolve the dispute. The parties will use their best efforts in good faith to
cause to occur as expeditiously as possible the appointment of the certified
public accountant, and once appointed, the resolution of the dispute. The
resolution of such accountant shall be binding on the parties and subject to
judicial enforcement. One-half of the cost of the accountant shall be paid by
each party.
4.3. Accounts Receivable. On the Commencement Date, CMC will deliver to
Time Broker a list of the Licensees' accounts receivable arising from the
operation of the Stations prior to the Commencement Date (the "Receivables").
Time Broker shall diligently collect the Receivables after the Commencement Date
from the Commencement Date until the Closing Date (as defined in the Stock
Purchase Agreement) or, if this Agreement is terminated for any reason other
than the Closing (as defined in the Stock Purchase Agreement), until the
termination date of this Agreement (the "Collection Period"). All payments
received from account debtors shall be applied on a "first in, first out" basis,
except to the extent an account is disputed by the account debtor as properly
due, in which case Time Broker shall reassign such account to CMC and be
relieved of any further obligation or liability with respect to such account but
only to the extent that Time Broker is unable to resolve such dispute after
reasonable review. All amounts received by Time Broker from payors with accounts
included among the Receivables shall be applied first to the Receivables. Within
fifteen days of the end of each calendar month during the Collection Period,
Time Broker will deliver to CMC an accounting of collections made with respect
to the Receivables and remit to CMC all amounts collected by Time Broker on
account of the Receivables during the previous month. At the conclusion of the
Collection Period, any remaining Receivables shall be assigned to CMC and Time
Broker shall have no further
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obligation with respect to any remaining Receivables. If during the Collection
Period a dispute arises between Time Broker and an account debtor included among
the Receivables, Time Broker shall promptly return that account to CMC and
collect from such account debtor the amounts owed to Time Broker for services
provided after the Commencement Date.
4.4. Payment of Station Obligations. CMC shall make reasonable efforts
to effect payment and satisfaction of obligations owing to, or reach a
settlement with, all third parties with respect to the operation of the Stations
prior to the Commencement Date, to the extent required to prevent material
interference with Time Broker's full enjoyment of its rights hereunder.
5. OPERATION OF STATIONS.
Notwithstanding any provision of this Agreement to the
contrary, CMC and the Licensees shall retain full authority and power with
respect to the operation of the Stations during the term of this Agreement. The
parties agree and acknowledge that CMC's and the Licensees' continued control of
the Stations is an essential element of the continuing validity and legality of
this Agreement. Accordingly, CMC, through the Licensees, shall employ the
general manager of each Station and such other personnel (not less than one per
Station) as CMC determines may be necessary to fulfill the Licensees'
obligations as licensees under the Communications Act and CMC's obligations in
accordance with Section 3.2 hereof. CMC shall retain full authority and control
over the policies, programming and operations of the Stations, including,
without limitation, the decision whether to preempt programming in accordance
with Section 2.4 hereof. CMC shall have full responsibility to effectuate
compliance with the Communications Act and with FCC rules, regulations and
policies. CMC shall be responsible for maintaining the public inspection files
for the Stations.
6. GRANT OF LICENSES.
6.1. License to Use Station Facilities. Effective as of the
Commencement Date, CMC grants Time Broker a license to access and use all of the
studio and office space and other facilities of the Stations except for the
space reserved exclusively for CMC's use ("Station Facilities") and all
equipment and furnishings contained therein ("Station Equipment") in the
production and broadcasting of the Programming and sales and administration
relating thereto, in accordance with the terms set forth in this Section 6 (the
"Time Broker License"). The Time Broker License shall have a term beginning on
the Commencement Date and ending upon the earlier of (i) termination of this
Agreement and (ii) the Closing (as defined in the Stock Purchase Agreement). CMC
shall not license the use of the Station Facilities to any other party during
the term of the Time Broker License; and Time Broker's use of the Station
Facilities shall be exclusive except for CMC's right to use such facilities as
it deems appropriate in its sole discretion in connection with the satisfaction
of Licensees' obligations as the licensees of the Stations, including the use of
such facilities and adequate office space for the employees of CMC that are
required for CMC to comply with its obligations under Sections 3.2 and 5 hereof.
Time Broker shall use due care in the use of any property of CMC or the
Licensees and shall not remove any property from CMC's or the Licensees'
premises.
6.2. License of Intellectual Property. Effective as of the Commencement
Date, CMC
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licenses or causes to be licensed, as appropriate, to Time Broker the exclusive
right to use (or, to the extent CMC does not hold exclusive rights, the
non-exclusive right to use) all intellectual property owned by or licensed to
CMC, the Subsidiaries or the Licensees and used in the operation of the Stations
(including, but not limited to those set forth on Schedule 6.2, and call signs
and goodwill) (the "IP License"). Time Broker shall not have the right to
sublicense or assign the IP License without CMC's express written consent. In
the event of termination of this Agreement, the IP License shall terminate;
provided, however, that Time Broker shall own all trademarks, service marks,
trade names, characters, formats, jingles, promotional materials, logos, and
positioning statements that Time Broker develops primarily for the Programming
and uses in the broadcast of such Programming during the term of the Agreement,
and CMC shall not make use of any such materials without the express written
consent of Time Broker.
7. INDEMNIFICATION.
7.1. Indemnification Rights. Each party will indemnify and hold
harmless the other party, and the partners, employees, agents, and affiliates of
such other party, from and against any and all liability, including, without
limitation, reasonable attorneys' fees arising out of or incident to (i) any
breach by such party of a representation, warranty, or covenant made herein,
(ii) the programming produced or furnished by such party hereunder, or (iii) the
conduct of such party, its employees, contractors, or agents (including
negligence) in performing its or their obligations hereunder. Without limiting
the generality of the foregoing, each party will indemnify and hold harmless the
other party, and the partners, employees, agents, and affiliates of such other
party, from and against any and all liability for libel, slander, infringement
of trademarks, trade names, or program titles, violation of rights of privacy,
and infringement of copyrights and proprietary rights relating to performance of
its obligations hereunder by such indemnifying party. The parties'
indemnification obligations hereunder shall survive any termination or
expiration of this Agreement for a period of one year; provided, however, that
if this Agreement terminates pursuant to an Event of Default as described in
Section 8.1(d) of this Agreement, the indemnification rights provided in this
Section 7 shall terminate, whereupon the indemnification rights set forth in the
Stock Purchase Agreement shall control.
7.2. Procedures. If any claim (or proceeding relating thereto) by a
person or entity not a party to this Agreement that is covered by the foregoing
agreements to indemnify and hold harmless shall arise, the party who seeks
indemnification (the "Indemnified Party") shall give written notice thereof to
the other party (the "Indemnitor") pursuant to the notice provisions set forth
in Section 12.10 promptly after the Indemnified Party learns of the existence of
such claim or proceeding; provided, however, that the Indemnified Party's
failure to give the Indemnitor prompt notice shall not bar the Indemnified
Party's right to indemnification unless such failure has materially prejudiced
the Indemnitor's ability to defend the claim or proceeding. The Indemnitor shall
have the right to employ counsel reasonably acceptable to the Indemnified Party
to defend against any such claim or proceeding, or to compromise, settle or
otherwise dispose of the same, if the Indemnitor deems it advisable to do so,
all at the expense of the Indemnitor; provided that the Indemnitor shall not
have the right to control the defense of any such claim or proceeding unless it
has acknowledged in writing its obligation to indemnify the Indemnified Party
fully from all liabilities incurred as a result of such claim or proceeding; and
provided
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further that (i) the Indemnitor shall not effect any settlement relating to any
such claim or proceeding unless such settlement includes an unconditional
release of such Indemnified Party from all liability on any claims that are the
subject of such claim or proceeding and (ii) the Indemnitor may not
contractually bind any Indemnified Party without the written consent of the
Indemnified Party. The parties will fully cooperate in any such action, and
shall make available to each other any books or records useful for the defense
of any such claim or proceeding. If the Indemnitor fails to acknowledge in
writing its obligation to defend against or settle such claim or proceeding
within twenty (20) days after receiving notice thereof from the Indemnified
Party (or such shorter time specified in the notice as the circumstances of the
matter may dictate), the Indemnified Party shall be free to dispose of the
matter, at the expense of the Indemnitor, in any way in which the Indemnified
Party deems to be in its best interest.
8. DEFAULT.
8.1. Events of Default. The following, after the expiration of the
applicable cure periods specified in Section 8.2, shall constitute Events of
Default under this Agreement:
(a) Non-Payment. Time Broker's failure to timely pay the
consideration provided in Section 1.2;
(b) Default in Covenants. Time Broker's or CMC's material
default in the observance or performance of any material covenant, condition, or
agreement contained herein;
(c) Breach of Representation or Warranty. Time Broker's or
CMC's material breach of any representation or warranty made by it herein, or in
any certificate or document furnished pursuant to the provisions hereof, which
shall prove to have been false or misleading in any material respect as of the
time made or furnished; or
(d) Default under the Stock Purchase Agreement. At any period
during the term of this Agreement in which the Stock Purchase Agreement is in
effect, the material breach by any party hereto of any representation, warranty,
covenant, condition, or agreement in the Stock Purchase Agreement that is not
cured within any time period provided for such cure in the Stock Purchase
Agreement, provided, that no party may use its own breach under the Stock
Purchase Agreement as grounds to terminate this Agreement.
8.2. Cure Periods. Unless provided otherwise in this Agreement, an
Event of Default shall not be deemed to have occurred until thirty (30) days
after the non-defaulting party has provided the defaulting party with written
notice specifying the event or events that if not cured would constitute an
Event of Default, and such event has not been cured within such time period.
9. TERMINATION.
This Agreement shall automatically terminate upon the
expiration of the term of this Agreement as set forth in Section 1.4. In
addition, this Agreement shall terminate as provided below.
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9.1. Termination Upon Default or Change in FCC Rules or Policies. In
addition to other remedies available to the parties hereto at law or equity, and
in addition to other provisions providing for termination herein, this Agreement
may be terminated as set forth below by either CMC or Time Broker by written
notice to the other if the party seeking to terminate is not then in material
default or breach hereof, upon either:
(a) an uncured Event of Default; or
(b) subject to and as defined in Section 12.15, an Adverse
Order.
9.2. Certain Matters Upon Termination.
(a) Upon any termination of this Agreement, CMC shall have no
further obligation to provide to Time Broker any broadcast time or broadcast
transmission facilities. Upon any termination, Time Broker shall be responsible
for all debts and obligations of Time Broker to third parties based upon the
purchase of air time on the Stations and the use of CMC's transmission
facilities relating to the Stations, including, without limitation, accounts
payable and net trade balances to the extent the value (at current rates for
time on the Stations as of the date of such termination or expiration) of
unfilled obligations of the Time Broker under any Trade Agreements entered into
by Time Broker on or after the Commencement Date exceeds in the aggregate the
reasonable fair market value of any consideration yet to be received in exchange
for the provision of time on the Stations.
(b) If this Agreement terminates other than as a result of the
Closing (as defined in the Stock Purchase Agreement), Time Broker shall (i)
assign to CMC and CMC shall assume: (x) the Contracts, (y) contracts for the
sale of time on the Stations entered into by Time Broker that are in effect on
the date of such termination; and (z) other contracts and agreements that Time
Broker has entered into with respect to the Stations ("Time Broker Contracts")
that are in effect on the date of such termination and that, as determined by
CMC, do not materially and adversely affect the fair market value or the
financial status of the Stations or assets thereof (all such agreements to be
assumed by CMC pursuant to clauses (x), (y), and (z), collectively, the "Assumed
Contracts"); (ii) be responsible for its obligations under the Time Broker
Contracts that are not Assumed Contracts; (iii) be responsible for those
obligations under the Assumed Contracts arising on or after the Commencement
Date and prior to the termination of this Agreement; and (iv) be responsible for
collecting the accounts receivable arising from Time Broker's operation of the
Stations on or after the Commencement Date and prior to the termination of this
Agreement. In addition, if this Agreement terminates other than as a result of
the Closing (as defined in the Stock Purchase Agreement), CMC shall reimburse
Time Broker for sales commissions paid by Time Broker for sales relating to the
Time Broker Contracts to the extent that the revenue from such sales relates to
commercial announcements to be broadcast after the termination of this
Agreement.
(c) Notwithstanding anything in Section 7.1 to the contrary,
no expiration or termination of this Agreement shall terminate the obligation of
each party to indemnify the other for claims under Section 7 hereof or limit or
impair any party's rights to receive payments due and owing hereunder on or
before the date of such termination.
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10. REMEDIES.
In addition to a party's rights of termination hereunder (and
in addition to any other remedies available to it or provided under law), in the
event of an uncured Event of Default with respect to either party, the other may
seek specific performance of this Agreement, in which case the defaulting party
shall waive the defense in any such suit that the other party has an adequate
remedy at law and interpose no opposition, legal or otherwise, as to the
propriety of specific performance as a remedy hereunder.
11. CERTAIN REPRESENTATIONS AND WARRANTIES OF THE PARTIES.
11.1. Representations and Warranties of Time Broker. Time Broker hereby
represents and warrants to CMC as follows:
11.1.1. Organization. Time Broker is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, is duly qualified to conduct business in the Commonwealth of Puerto
Rico and has full power and authority to conduct its business as currently
conducted.
11.1.2. Authorization; Enforceability. This Agreement has been
duly executed and delivered by Time Broker, and is valid, binding, and
enforceable against Time Broker in accordance with its terms. Time Broker has
full right, power, authority, and legal capacity to enter into and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery, and performance of this Agreement and the
consummation of the transactions provided for hereby have been duly authorized
by all necessary corporate action on the part of Time Broker, and no other
corporate or other proceedings on the part of Time Broker are necessary to
authorize the execution or delivery of this Agreement or the transactions
contemplated hereby.
11.1.3. No Consent. No consent of any other party and no
consent, license, approval, or authorization of, or exemption by, or filing,
restriction, or declaration with, any governmental authority, bureau, agency, or
regulatory authority, other than the filing of this Agreement with the FCC, is
required in connection with the execution, delivery, or performance of this
Agreement by Time Broker or will affect the validity or performance of this
Agreement.
11.1.4. No Breach. Neither the execution or delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
constitute or result in the breach of any term, condition, or provision of, or
constitute a default under, or result in the creation of any lien, charge, or
encumbrance upon any property or assets of Time Broker pursuant to the Articles
of Incorporation or By-laws of Time Broker, any agreement or other instrument to
which Time Broker is a party or by which any part of its property is bound, or
violate any law, regulation, judgment or order binding upon Time Broker.
11.1.5. Actions and Proceedings. There is no judgment
outstanding and no litigation, claim, investigation, or proceeding pending
against Time Broker or, to the knowledge of Time Broker, threatened before any
court or governmental agency to restrain or prohibit, or to
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obtain damages, or other relief in connection with, this Agreement, the Stock
Purchase Agreement or the consummation of the transactions contemplated hereby
or thereby or that might adversely affect Time Broker's performance under this
Agreement.
11.1.6. Qualifications. Time Broker is qualified in accordance
with the Communications Act and the rules and policies of the FCC to enter into
this Agreement and provide Programming on the Stations in accordance with its
terms. Between the date hereof and the termination of this Agreement either by
the Closing (as defined in the Stock Purchase Agreement) or the earlier
termination in accordance with Section 9 hereof, Time Broker will not take any
action that Time Broker knows, or has reason to believe, would disqualify it
from providing Programming on the Stations pursuant to this Agreement.
11.2. Representations, Warranties and Covenants of CMC. CMC hereby
represents, warrants and covenants to Time Broker as follows:
11.2.1. Organization. CMC is a corporation duly organized,
validly existing and in good standing under the laws of Delaware, is duly
authorized to conduct business in the Commonwealth of Puerto Rico, and has full
power and authority to conduct its business as currently conducted.
11.2.2. Authorization; Enforceability. This Agreement has been
duly executed and delivered by CMC, and is valid, binding, and enforceable
against CMC in accordance with its terms. CMC has full right, power, authority,
and legal capacity to enter into and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions provided
for hereby have been duly authorized by all necessary corporate action on the
part of CMC, and no other corporate or other proceedings on the part of CMC are
necessary to authorize the execution or delivery of this Agreement or the
transactions contemplated hereby.
11.2.3. No Consent. No consent, license, approval, or
authorization of, or exemption by, or filing, restriction, or declaration with,
any governmental authority, bureau, agency, or regulatory authority, other than
the filing of this Agreement with the FCC, is required in connection with the
execution, delivery, or performance of this Agreement or will affect the
validity or enforceability of this Agreement.
11.2.4. No Breach. Neither the execution or delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
constitute or result in the breach of any term, condition, or provision of, or
constitute a default under, or result in the creation of any lien, charge, or
encumbrance upon any property or assets of CMC pursuant to the Articles of
Incorporation or By-laws of CMC, any agreement or other instrument to which CMC
is a party or by which any part of its property is bound, or violate any law,
regulation, judgment, or order binding upon CMC.
11.2.5. Actions and Proceedings. There is no judgment
outstanding and no litigation, claim, investigation, or proceeding pending
against CMC or, to the knowledge of CMC, threatened before any court or
governmental agency to restrain or prohibit, or to obtain
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damages or other relief in connection with this Agreement or the consummation of
the transactions contemplated hereby.
11.2.6. Maintenance of Current Coverage. During the term
hereof, CMC shall take no action that will have the effect of reducing the
effective radiated power and coverage of any of the Stations, except in
connection with necessary maintenance on or near the transmission facilities of
such Stations.
12. MISCELLANEOUS.
12.1. Modification and Waiver. No modification or waiver of any
provision of this Agreement shall in any event be effective unless the same
shall be in writing signed by the party against whom the waiver is sought to be
enforced, and then such waiver and consent shall be effective only in the
specific instance and for the purpose for which given.
12.2. No Waiver; Remedies Cumulative. No failure or delay on the part
of CMC or Time Broker in exercising any right or power hereunder shall operate
as a waiver thereof, nor any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, shall preclude any other or further exercise thereof or the exercise of
any other right or power. The rights and remedies of CMC and Time Broker herein
provided are cumulative and are not exclusive of any rights or remedies which
they may otherwise have.
12.3. Choice of Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to the
choice of law rules utilized in that jurisdiction, and the obligations of the
parties hereto are subject to all federal, state, or municipal laws or
regulations now or hereafter in force and to the regulations of the FCC and all
other governmental bodies or authorities presently or hereafter duly
constituted. Buyer and Seller hereby submit to the jurisdiction of any state or
federal court sitting in the State of New York over any suit, action, or
proceeding arising out of or relating to this Agreement.
12.4. Construction. The Section headings of this Agreement are for
convenience only and in no way modify, interpret or construe the meaning of
specific provisions of the Agreement. As used herein, the neuter gender shall
also denote the masculine and feminine, and the masculine gender shall also
denote the neuter and feminine, where the context so permits.
12.5. Headings. The headings contained in this Agreement are included
for convenience only and no such heading shall in any way alter the meaning of
any provision.
12.6. Successors and Assigns. Time Broker may not assign this Agreement
without the prior written consent of CMC, except (i) to any corporation,
partnership, or other business entity that controls, is controlled by, or is
under common control with Time Broker or (ii) pursuant to a collateral
assignment to Time Broker's lenders strictly for the purpose of securing Time
Broker's obligations to such lenders; provided, however, that no such assignment
shall relieve Time Broker of its obligations hereunder. This Agreement may not
be assigned by CMC without the consent of Time Broker, provided, however, that
CMC may assign this Agreement to any party
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to which it assigns its right, title, and interest in and to the Stock Purchase
Agreement. Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.
For so long as this Agreement or the Stock Purchase Agreement remains in effect
neither CMC nor Time Broker nor any party acting as CMC's or Time Broker's agent
shall directly or indirectly solicit or initiate any offer from, or conduct any
negotiations with, or provide any information to any person (other than to CMC
or Time Broker, as the case may be) concerning the acquisition of the Stations.
12.7. Force Majeure. Each party acknowledges and agrees that a party
will not be liable for any failure to timely perform any of its obligations
under this Agreement if such failure is due, in whole or in part, directly or
indirectly, to accidents, fires, floods, governmental actions, war, civil
disturbances, other causes beyond such party's control, or any other occurrence
that would generally be considered an event of force majeure.
12.8. Counterpart Signatures. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
12.9. Notices. All notices, requests, demands, and other communications
pertaining to this Agreement shall be in writing and shall be deemed duly given
when delivered personally (which shall include delivery by facsimile or by
Federal Express or other recognized courier service that issues a receipt or
other confirmation of delivery) to the party for whom such communications is
intended, or three (3) business days after the date mailed by certified or
registered U.S. mail, return receipt requested, postage prepaid, addressed as
follows:
If the notice is to Time Broker:
Raul Alarcon, Jr., President
Spanish Broadcasting System of Puerto Rico, Inc.
3191 Coral Way, #805
Miami, Florida 33145
with a copy (which shall not constitute notice
hereunder) to:
Jason L. Shrinsky, Esq.
Kaye, Scholer, Fierman, Hays & Handler, LLP
901 Fifteenth Street, N.W.
Washington, D.C. 20005-2327
(Counsel to Spanish Broadcasting System of Puerto
Rico, Inc.
If the notice is to CMC:
James de Castro
Chancellor Media Corporation Of Los Angeles
300 Crescent Court
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Suite 600
Dallas, Texas, 75201
with a copy (which shall not constitute notice
hereunder) to:
Eric L. Bernthal, Esq.
Raymond B. Grochowski, Esq.
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, D.C. 20004
(Counsel to Chancellor Media Corporation of Los
Angeles)
Either party may change its address for notices by notice to such
effect to the other party.
12.10. Entire Agreement. This Agreement (including all attachments,
exhibits and schedules) embody the entire agreement between the parties with
respect to the matters contained herein and there are no other agreements,
representations, warranties, or understandings, oral or written, between them
with respect to the subject matter herein.
12.11. Severability. Except as expressly set forth in Section 12.15, if
any provision contained in this Agreement is held to be invalid, illegal, or
unenforceable in any respect by any court or other authority, then such
provision shall be deemed limited to the extent that such court or other
authority deems it reasonable and enforceable, and as so limited shall remain in
full force and effect. In the event that such court or other authority shall
deem any such provision wholly unenforceable, this shall not affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision or provisions had not been contained herein.
12.12. No Joint Venture. The parties agree that nothing herein shall
constitute a joint venture between them. The parties acknowledge that call
letters, trademarks, and other intellectual property shall at all times remain
the property of the respective parties and that neither party shall obtain any
ownership interest in the other party's intellectual property by virtue of this
Agreement (subject to Section 6.2).
12.13. Damage to Stations. In the event of damage or destruction to the
Stations (other than damage or destruction caused by Time Broker), CMC shall
proceed to repair, replace, or restore the Stations to their former condition as
promptly as is commercially reasonable.
12.14. Noninterference. During the term of this Agreement, neither CMC
nor any of its employees shall take any actions that might impair the operations
of Time Broker conducted hereunder, except to the extent expressly contemplated
by this Agreement or as otherwise required by law.
12.15. Adverse Orders. In the event of any order or decree of an
administrative agency
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or court of competent jurisdiction, including without limitation any material
change or clarification in FCC rules, policies, or precedent, that would cause
this Agreement to be invalid or violate any applicable law, and such order or
decree has become effective and has not been stayed (an "Adverse Order"), the
parties will use their respective best efforts and negotiate in good faith to
modify this Agreement to the minimum extent necessary so as to comply with such
Adverse Order without material economic detriment to either party, and this
Agreement, as so modified, shall then continue in full force and effect. In the
event that the parties are unable to agree upon a modification of this Agreement
so as to cause it to comply with such Adverse Order without material economic
detriment to either party, then this Agreement shall be terminated pursuant to
Section 9.1(b) of this Agreement.
12.16. Publicity. Neither Time Broker nor CMC nor any of their
respective affiliates shall issue any press release or make any public statement
(oral or written) regarding the transactions contemplated by this Agreement
except as required by law or regulation or as agreed to in writing in advance by
CMC and Time Broker.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
"CMC":
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
By: ___________________________________
Name: ___________________________________
Title: ___________________________________
"TIME BROKER":
SPANISH BROADCASTING SYSTEM OF PUERTO RICO,
INC.
By: ___________________________________
Name: ___________________________________
Title: ___________________________________
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SCHEDULE 1.1
PROGRAMMING
Time Broker shall have the right to program up to one hundred
sixty-six (166) hours per week (the "Programming") on each of the Stations in an
entertainment format to be chosen by Time Broker, subject to Section 2 of this
Agreement. The Programming shall include (a) news and weather information; (b)
public service announcements (including, at CMC's directive from time to time, a
reasonable number of public service announcements of local interest supplied by
CMC or produced by Time Broker under CMC's supervision); (c) an announcement in
form sufficient to meet the station identification requirements of the FCC at
the beginning of each hour; (d) an announcement at the beginning of each segment
of Programming to indicate that program time has been purchased by Time Broker;
and (e) any other announcement that may be required by applicable law or
regulation (including but not limited to EBS tests). Time Broker shall maintain
and deliver to CMC copies of all operating and programming information including
without limitation information concerning portions of the Programming that are
responsive to issues of public importance identified to Time Broker by CMC, EBS
announcements, and station operating logs, necessary for CMC to maintain public
inspection files at the Stations, and all other records required to be kept by
FCC rule or policy.
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SCHEDULE 2.1
PROGRAMMING POLICY
Time Broker and CMC shall cooperate with each other in the
broadcasting and programming of the highest possible standard of excellence.
Without limiting the generality of the foregoing, the parties will observe the
following policies in the preparation, writing and production of their own
(non-syndicated or network) programs:
I. Respectful of Faiths. The subject of religion and
references to particular faiths and tenets shall be
treated with respect at all times.
II. Controversial Issues. Any discussion of controversial
issues of public importance shall be reasonably
balanced with the presentation of contrasting
viewpoints in the course of overall programming; no
attacks on the honesty, integrity, or like personal
qualities of any person or group of persons shall be
made; and Station programs (other than public forum
or talk features) are not to be used as a forum for
editorializing about individual candidates. If such
events occur, CMC may require that responsive
programming be aired. In the event that a statute,
regulation, or policy is adopted that requires the
airing of responsible programming, Time Broker agrees
to comply with such statute, regulation, or policy
and will prepare such responsible programming.
III. Donation Solicitation. Requests for donations in the
form of a specific amount shall not be made if there
is any suggestion that such donation will result in
miracles, physical cures, or life-long prosperity.
However, statements generally requesting donations to
support a broadcast or church are permitted.
IV. Treatment of Parapsychology. The advertising or
promotion of fortune telling, occultism, astrology,
phrenology, palm reading, numerology, mind-reading,
character readings, or subjects of the like nature
will not be broadcast.
V. No Ministerial Solicitations. No invitations by a
minister or other individual appearing on the program
to have listeners come and visit him or her for
consultation or the like shall be made if such
invitation implies that the listeners will receive
consideration, monetary gain, or physical cures for
illness.
<PAGE> 162
VI. No Vending of Miracles. Any exhortation to listeners
to bring money to a church affair or service shall
not contain any suggestion that miracles, physical
cures, or prosperity will result.
VII. Sale of Religious Artifacts. The offering for sale of
religious artifacts or other items for which
listeners would send money is prohibited unless such
items are normally available in ordinary commerce or
are clearly being sold for proper fund-raising
purposes.
VIII. No Miracle Solicitation. Any invitation to listeners
to meet at places other than a church and/or to
attend other than regular services of a church is
prohibited if the invitation, meeting, or service
contains any claim that miracles, physical cures, or
prosperity will result.
IX. No Plugola or Payola. The mention of any business
activity or "plug" for any commercial, professional,
or other related endeavor, except where contained in
an actual commercial message of a sponsor, or
otherwise lawful, is prohibited.
X. No Lotteries. Announcements giving any information
about lotteries or games prohibited by federal or
state law or regulations are prohibited.
XI. No Gambling. References to "dream books," the
"straight line," or other direct or indirect
descriptions or solicitations relative to the
"numbers game," or the "polity game," or any other
form of gambling are prohibited.
XII. No Numbers Games. References to chapter and verse
paragraphs, paragraph numbers, or song numbers, which
involve three digits should be avoided and, when
used, must reasonably relate to a non-gambling
activity.
XIII. Election Procedures. At least fifteen (15) days
before the start of any lowest-unit-charge period for
any primary or general election, Time Broker will
clear with CMC's managers at the Stations the rates
Time Broker will charge for time to be sold to
candidates for public office or to any other party
entitled to the lowest unit charge to make certain
the rates charged are in conformance with applicable
law and station policy. Time Broker shall also clear
with CMC's managers at the Stations its forms for
disclosure of political time sales practices and
rates.
XIV. Required Announcements. Time Broker shall broadcast
(i) an announcement in form satisfactory to CMC at
the beginning of each hour to identify the Station,
(ii) an announcement at the beginning of each
broadcast day or appropriate broadcast period to
indicate that program
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time has been purchased by Time Broker, and (iii) any
other announcement that may be required by law,
regulation or Station policy.
XV. Commercial Record Keeping. No commercial messages or
"plugs" (other than references to Time Broker's
Denver-area station and its programs and promotion
and other activities) shall be made in programming
presented over the Station with reference to any
business venture, profit-making activity, or other
interest (other than non-commercial announcements for
bona fide charities, church activities, or other
public service activities) in which Time Broker or
its employees is or are directly or indirectly
interested without the same having been approved in
advance by CMC's manager or such broadcast being
announced and logged as sponsored.
XVI. No Illegal Announcements. No announcement or
promotion prohibited by federal or state law or
regulation of any lottery or game shall be made over
the Station.
XVII. CMC Discretion Paramount. In accordance with CMC's
and the Licensees' responsibilities under the
Communications Act of 1934, as amended, and the rules
and regulations of the FCC, CMC reserves the right to
reject or terminate any advertising or programming
being presented over the Station which is in conflict
with Station policy or which in CMC's sole judgment
would not serve the public interest.
XVIII. Programming Prohibitions. Time Broker shall not
knowingly broadcast any of the following programs or
announcements:
A. False Claims. False or unwarranted claims
for any product or service.
B. Unfair Imitation. Infringements of another
advertiser's rights through plagiarism or
unfair imitation of either program idea or
copy, or any other unfair competition.
C. Commercial Disparagement. Any unfair
disparagement of competitors or competitive
goods.
D. Profanity. Any programs or announcements
that are slanderous, obscene, indecent
(except during the safe harbor for indecent
programming established by the FCC),
profane, vulgar, repulsive or offensive,
either in theme or treatment.
E. Unauthenticated Testimonials. Any
testimonials that cannot be authenticated.
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F. Descriptions of Bodily Functions. Any
presentation which describes in a repellent
manner bodily functions.
G. Advertising. Any advertising matter or
announcement which may, in the opinion of
CMC, be injurious or prejudicial to the
interests of the public or the Station, or
to honest advertising and reputable business
in general.
H. Contests. Any contests or promotions which
are in any way misleading or constitute a
public nuisance or are likely to lead to
injury to persons or property.
I. Telephone Conversations. Any programming in
violation of any statute, regulation, or
policy, including without limitation to,
Section 73.1206 of the FCC's rules, or any
successor regulation, dealing with the
taping and/or broadcast of telephone
conversations.
The parties may jointly waive any of the foregoing policies in
specific instances if, in their opinion, good broadcasting in the public
interest is served.
In any case where obvious questions of policy or
interpretation arise, Time Broker will attempt in good faith to submit the same
to CMC for decision before making any commitments in connection therewith.
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EXHIBIT C
---------
FORM OF OPINION OF SELLER'S COUNSEL
Terms used herein and not otherwise defined shall have the meaning
set forth in the Purchase Agreement.
1. The Seller has been duly incorporated and is validly
existing and in good standing under the laws of the State of Delaware. Each of
the Seller and Companies has the corporate power and authority to enter into the
Purchase Agreement and each Exhibit attached thereto and all other agreements,
instruments, documents and certificates to be executed and delivered by such
party pursuant thereto (collectively, the "Related Documents"), and perform the
obligations thereunder.
2. The execution, delivery and performance of the Purchase
Agreement and the Related Documents have been duly authorized by all necessary
corporate action of each of the Seller and Companies, and the Purchase Agreement
and Related Documents have been duly executed and delivered by each of the
Seller and Companies.
3. The Purchase Agreement and Related Documents constitute
legally valid and binding obligations of each of the Seller and Companies,
enforceable against each of the Seller and Companies in accordance with its
terms.
4. The execution and delivery of the Purchase Agreement and
Related Documents by each of the Seller and Companies and performance of the
obligations of each of the Seller and Companies under the Purchase Agreement and
Related Documents do not: (i) to the best of our knowledge violate any federal
or Delaware statute, rule or regulation applicable to each of the Seller and
Companies, (ii) violate the provisions of the charters or bylaws of each of the
Seller and Companies, (iii) result in the breach of or a default under any
material agreement, lease, or other obligations to which any of the Seller and
Companies are a party, or (iv) to the best of our knowledge, except for the
consents described in Schedules 3.3 and 3.9, require any consents, approvals,
authorizations, registrations, declarations or filings by each of the Seller and
Companies under any federal or Delaware statute, rule or regulations applicable
to each of the Seller and Companies. No opinion is expressed in clauses (i) and
(iv) of this paragraph 4 as
- -----------------------------
1 This opinion is subject to the approval of this firm's Opinion Committee.
2 Whenever a statement herein is qualified by "to the best of our knowledge"
or a similar phrase, it is intended to indicate that those attorneys in
this firm who have rendered legal services in connection with the
transactions pursuant to the Purchase Agreement do not have current actual
knowledge of the inaccuracy of such statement. However, except as otherwise
expressly indicated, we have not undertaken any independent investigation
to determine the accuracy of any such statement, and no inference that we
have any knowledge of any matters pertaining to such statement should be
drawn from our representation of the Seller and Companies.
<PAGE> 166
to the application of Section 548 of the federal Bankruptcy Code and comparable
provisions of state law or any antifraud laws, antitrust or trade regulations.
5. The Companies hold the respective FCC licenses, permits and
authorizations specified on Attachment A (the "FCC Licenses"). The FCC Licenses
are in effect on the date hereof.
6. The FCC has granted its consent to the transfer of control of
the Companies from the Seller to Buyer (the "Consent") without the imposition of
conditions outside the ordinary course and is in effect as of the date hereof.
The order of the FCC granting its Consent was issued on _________, and public
notice of such consent was given on _________. The time within which any party
in interest other than the FCC may seek administrative or judicial
reconsideration or review has expired, and to the best of our knowledge, no
petition for such reconsideration or review was timely filed with the FCC or
with the appropriate court. The time within which the FCC may review the consent
on its own motion has expired, and to the best of our knowledge, the FCC has not
undertaken such review.
7. Based upon a review of the public files of the FCC,
appropriate files of this firm, and an inquiry of lawyers in this firm who have
substantial responsibility for the Companies' legal matters handled by this
firm, we confirm that, except as disclosed at Schedule 3.4, there is not
unsatisfied adverse FCC orders, decree, or ruling outstanding against the
Companies, the Stations, or any of the FCC Licenses.
<PAGE> 167
EXHIBIT D
---------
FORM OF OPINION OF BUYER'S COUNSEL
Terms used herein and not otherwise defined shall have the
meaning set forth in the Purchase Agreement.
1. The Buyer has been duly incorporated and is validly
existing and in good standing under the laws of the State of -------. The Buyer
has the corporate power and authority to enter into the Purchase Agreement and
each Exhibit attached thereto and all other agreements, instruments, documents
and certificates to be executed and delivered pursuant thereto (collectively,
the "Related Documents"), and perform the obligations thereunder.
2. The execution, delivery and performance of the Purchase
Agreement and the Related Documents have been duly authorized by all necessary
corporate action of the Buyer, and the Purchase Agreement and Related Documents
have been duly executed and delivered by the Buyer. The Purchase Agreement and
Related Documents constitute legally valid and binding obligations of the
Buyer, enforceable against the Buyer in accordance with its terms.
3. The execution and delivery of the Purchase Agreement and
Related Documents by the Buyer and performance of the obligations of the Buyer
under the Purchase Agreement and Related Documents do not: (i) violate any
federal, State of--------- statute, rule or regulation applicable to the Buyer,
(ii) violate the provisions of the charters or bylaws of the Buyer, (iii)
result in the breach of or a default under any material agreement, lease, or
other obligations to which the Buyer is a party, (iv) except for the consents
described in Schedule 4.3, require any consents, approvals, authorizations,
registrations, declarations of filings by the Buyer under any federal or ------
statute, rule or regulations applicable to the Buyer, or (v) violate any
judgment, writ, injunction, decree, order or ruling of any court or
governmental authority binding on Buyer of which we are aware.
<PAGE> 1
January 3, 2000
Reference is made to that certain Stock Purchase Agreement, dated as of
September 22, 1999 (the "Stock Purchase Agreement") among Chancellor Media
Corporation of Los Angeles ("Seller"), Primedia Broadcast Group, Inc., WIO,
Inc., Cadena Estereotempo, Inc., Portorican American Broadcasting, Inc., WLDI,
Inc., WRPC, Inc., WOYE, Inc., WZNT, Inc., WOQI, Inc. (the "Companies"), and
Spanish Broadcasting System of Puerto Rico, Inc. ("Buyer"). The Buyer, Seller
and the Companies are referred to collectively herein as the "Parties."
Whereas the Seller owns all of the issued and outstanding capital stock
of the Companies, except for Portorican American Broadcasting, Inc., a wholly
owned subsidiary of WOQI, Inc, and Cadena Estereotempo, Inc., a wholly owned
subsidiary of WIO, Inc, (the capital stock of all of the Companies, except for
the capital stock of Portorican American Broadcasting, Inc. and Cadena
Estereotempo, Inc., is collectively referred to herein as the "Target Shares,"
and the capital stock of Cadena Estereotempo, Inc, and Portorican American
Broadcasting, Inc. is collectively referred to herein as the "Subsidiary
Shares");
Whereas the Companies own and operate radio stations WIOA(FM), San
Juan, Puerto Rico, WIOB (FM), Mayaguez, Puerto Rico, WIOC(FM), Ponce, Puerto
Rico, WCOM(FM), Bayamon, Puerto Rico, WZMT(FM), Ponce, Puerto Rico, WOYE-FM,
Mayaguez, Puerto Rico, WCTA-FM, San German, Puerto Rico, and WZNT(FM), San Juan,
Puerto Rico (all of the above enumerated radio stations being hereinafter
referred collectively to as the "Stations" or individually as "Station")
pursuant to licenses issued by the Federal Communications Commission ("FCC");
Whereas, the Parties entered into the Stock Purchase Agreement and
pursuant to the terms of the Stock Purchase Agreement the Seller is to sell and
the Buyer is to purchase all of the issued and outstanding Target Shares and
Subsidiary Shares and by so doing acquire the radio broadcasting business
currently conducted by the Stations, upon the terms and conditions set forth in
the Stock Purchase Agreement;
Whereas the Parties entered into the Time Brokerage Agreement, (the
"TBA") concurrently with the execution of the Stock Purchase Agreement, the TBA
was to become effective as of the Commencement Date (as defined in the Stock
Purchase Agreement) and such Commencement Date has passed and the Parties have
agreed that the TBA never became effective; and
Whereas, the Parties wish to effect the Closing, as defined in the
Stock Purchase Agreement.
<PAGE> 2
Now, therefore, the Parties agree to the following:
1. The Closing will close on January 14, 2000.
2. the Parties agree not to enter into the TBA as required by the Stock
Purchase Agreement and each Party agrees that such TBA did not come into effect
and the Commencement Date did not occur;
3. The Buyer agrees to pay to the Seller an additional $300,000 as an
increase in Purchase Price (as defined in the Stock Purchase Agreement).
This letter agreement incorporates by reference the provisions of
Article XI, entitled "Miscellaneous," of the Stock Purchase Agreement.
2
<PAGE> 3
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
SPANISH BROADCASTING SYSTEM OF
PUERTO RICO, INC.
By: /s/ Joseph A. Garcia
Name: Joseph A. Garcia
Title: Chief Financial Officer
Executive Vice President
and Secretary
CHANCELLOR MEDIA CORPORATION
OF LOS ANGELES
By: /s/ Kathy Archer
Name: Kathy Archer
Title: Senior Vice President
PRIMEDIA BROADCAST GROUP, INC.
By: /s/ Kathy Archer
Name: Kathy Archer
Title: Senior Vice President
WIO, INC.
By: /s/ Kathy Archer
Name: Kathy Archer
Title: Senior Vice President
CADENA ESTEREOTEMPO, INC.
By: /s/ Kathy Archer
Name: Kathy Archer
Title: Senior Vice President
3
<PAGE> 4
PORTORICAN AMERICAN
BROADCASTING, INC.
By: /s/ Kathy Archer
Name: Kathy Archer
Title: Senior Vice President
WLDI, INC.
By: /s/ Kathy Archer
Name: Kathy Archer
Title: Senior Vice President
WPRC, INC.
By: /s/ Kathy Archer
Name: Kathy Archer
Title: Senior Vice President
WOYE, INC.
By: /s/ Kathy Archer
Name: Kathy Archer
Title: Senior Vice President
WZNT, INC.
By: /s/ Kathy Archer
Name: Kathy Archer
Title: Senior Vice President
WOQI, INC.
By: /s/ Kathy Archer
Name: Kathy Archer
Title: Senior Vice President
4
<PAGE> 1
January 14, 2000
Reference is made to that certain Stock Purchase Agreement, dated as of
September 22, 1999, as amended by the letter agreement dated January 3, 2000
(the "Stock Purchase Agreement"), among Chancellor Media Corporation of Los
Angeles ("Seller"), Primedia Broadcast Group, Inc., WIO, Inc., Cadena
Estereotempo, Inc., Portorican American Broadcasting, Inc., WLDI, Inc., WRPC,
Inc., WOYE, Inc., WZNT, Inc., WOQI, Inc. (the "Companies"), and Spanish
Broadcasting System of Puerto Rico, Inc. ("Buyer"). The Buyer, Seller and the
Companies are referred to collectively herein as the "Parties."
Whereas, the Seller owns all of the issued and outstanding capital
stock of the Companies, except for Portorican American Broadcasting, Inc., a
wholly owned subsidiary of WOQI, Inc., and Cadena Estereotempo, Inc., a wholly
owned subsidiary of WIO, Inc., (the capital stock of all of the Companies,
except for the capital stock of Portorican American Broadcasting, Inc. and
Cadena Estereotempo, Inc., is collectively referred to herein as the "Target
Shares," and the capital stock of Cadena Estereotempo, Inc., and Portorican
American Broadcasting, Inc. is collectively referred to herein as the
"Subsidiary Shares");
Whereas, the Companies own and operate radio stations WIOA(FM), San
Juan, Puerto Rico, WIOB(FM), Mayaguez, Puerto Rico, WIOC(FM), Ponce, Puerto
Rico, WCOM(FM), Bayamon, Puerto Rico, WZMT(FM), Ponce, Puerto Rico, WOYE-FM,
Mayaguez, Puerto Rico, WCTA-FM, San German, Puerto Rico, and WZNT(FM), San Juan,
Puerto Rico (all of the above enumerated radio stations being hereinafter
referred collectively to as the "Stations" or individually as "Station")
pursuant to licenses issued by the Federal Communications Commission;
Whereas, the Parties entered into the Stock Purchase Agreement and
pursuant to the terms of the Stock Purchase Agreement the Seller is to sell and
the Buyer is to purchase all of the issued and outstanding Target Shares and
Subsidiary Shares and by so doing acquire the radio broadcasting business
currently conducted by the Stations, upon the terms and conditions set forth in
the Stock Purchase Agreement;
Whereas, pursuant to the terms of the Stock Purchase Agreement the
Seller and the Buyer are to fully account for Working Capital pursuant to
Section 2.6 thereof;
Whereas, Seller has delivered to Buyer a notice setting forth gross
Estimated Closing Working Capital without any supporting documentation;
Whereas, without any documentation supporting the Estimated Closing
Working Capital Buyer cannot prepare and deliver to Seller the Initial WC
Statement;
<PAGE> 2
Now, therefore, the Parties agree to the following:
1. Seller shall deliver documentation supporting the Estimated Closing
Working Capital estimate to Buyer within 45 days of the Closing Date, such
delivery of the Estimated Closing Working Capital estimate and supporting
documentation to be deemed the new "Estimated Closing Working Capital" estimate.
2. Within 30 days of its receipt from Seller of the new Estimated
Closing Working Capital estimate, Buyer shall prepare and deliver to Seller the
Initial WC Statement.
3. Within 15 days of the delivery to Seller from Buyer of the Initial
WC Estimate, the Initial WC Estimate shall become final and binding upon the
Parties and thereupon become the "Final WC Statement" reflecting "Closing
Working Capital" unless Seller shall provide Buyer with a Notice of Disagreement
with the Initial WC Estimate prior to such date.
4. The procedures currently provided for in Section 2.6 of the Stock
Purchase Agreement with respect to the resolution of any disagreement with the
Initial WC Estimate, as documented by the delivery to Buyer from Seller of a
Notice of Disagreement, shall remain in full force and effect.
5. Any adjustment to the Purchase Price shall be made within five days
of the delivery by Seller to Buyer of the new Estimated Closing Working Capital,
i.e., any amount above Base Amount shall be paid to Seller and any amount under
Base Amount shall be paid to Buyer. All payments shall be made by wire transfer
of federally available funds.
6. Buyer's decision to retain or return the Aged Receivables currently
provided for in Section 2.6(b)(ii) of the Stock Purchase Agreement shall be made
within five days of the delivery by Seller to Buyer of the new Estimated Closing
Working Capital.
7. Buyer does not waive any rights it may have to indemnification
pursuant to Section 8.3 of the Stock Purchase Agreement with respect to Section
3.14 of the Stock Purchase Agreement subject to the provisions of Section 2.6 of
the Stock Purchase Agreement. The Parties agree that any tax liabilities for the
period during which Seller or any of its affiliates was the reporting entity for
tax purposes suffered by Buyer that are not resolved in conjunction with the
procedures described above and that are otherwise subject to the provisions of
Section 8.3 of the Stock Purchase Agreement will be indemnified dollar for
dollar without regard to the Threshold Amount by an amount not greater than
$2,150,000 and further that such reimbursement will not be included in or
counted against the $9,000,000 maximum indemnification amount.
Capitalized terms not defined in this letter agreement shall have the
same meanings as set forth in the Stock Purchase Agreement.
This letter agreement incorporates by reference the provisions of
Article XI, entitled "Miscellaneous," of the Stock Purchase Agreement.
2
<PAGE> 3
IN WITNESS WHEREOF, the Parties hereto have executed this letter
agreement as of the date first above written.
SPANISH BROADCASTING SYSTEM OF
PUERTO RICO, INC.
By: /s/ Joseph A. Garcia
Name: Joseph A. Garcia
Title: Vice President and CFO
CHANCELLOR MEDIA CORPORATION
OF LOS ANGELES
By:
Name:
Title:
PRIMEDIA BROADCAST GROUP, INC.
By:
Name:
Title:
WIO, INC.
By:
Name:
Title:
CADENA ESTEREOTEMPO, INC.
By:
Name:
Title:
3
<PAGE> 4
IN WITNESS WHEREOF, the Parties hereto have executed this letter
agreement as of the date first above written.
SPANISH BROADCASTING SYSTEM OF
PUERTO RICO, INC.
By:
Name:
Title:
CHANCELLOR MEDIA CORPORATION
OF LOS ANGELES
By: /s/ W. Schuyler Hansen
Name: W. Schuyler Hansen
Title: Chief Accounting Officer
PRIMEDIA BROADCAST GROUP, INC.
By: /s/ W. Schuyler Hansen
Name:
Title:
WIO, INC.
By: /s/ W. Schuyler Hansen
Name:
Title:
CADENA ESTEREOTEMPO, INC.
By: /s/ W. Schuyler Hansen
Name:
Title:
4
<PAGE> 5
PORTORICAN AMERICAN
BROADCASTING, INC.
By: /s/ W. Schuyler Hansen
Name:
Title:
WLDI, INC.
By: /s/ W. Schuyler Hansen
Name:
Title:
WPRC, INC.
By: /s/ W. Schuyler Hansen
Name:
Title:
WOYE, INC.
By: /s/ W. Schuyler Hansen
Name:
Title:
WZNT, INC.
By: /s/ W. Schuyler Hansen
Name:
Title:
WOQI, INC.
By: /s/ W. Schuyler Hansen
Name:
Title:
5