FORM 10-QSB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
FOR THE TRANSITION PERIOD FROM TO
-------------------- --------------------
Commission File Number 0-26530
TRIATHLON BROADCASTING COMPANY
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
DELAWARE 33-0668235
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
Symphony Towers
750 B Street, Suite 1920
San Diego, CA 92101
(Address of principal executive offices)
(619) 239-4242
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares of the Company's common equity outstanding as of August
14, 1996 is: 3,102,344 shares of Class A Common Stock, par value $.01 per
share; 244,890 shares of Class B Common Stock, par value $.01 per share;
50,000 shares of Class C Common Stock, par value $.01 per share; 1,444,366
shares of Class D Common Stock, par value $.01 per share; and 5,834,000
Depository Shares, each representing a one-tenth interest in a share of 9%
Mandatory Convertible Preferred Stock, par value $.01 per share.
Transitional Small Business Disclosure Format. Yes [ ] No [x]
<PAGE>
TRIATHLON BROADCASTING COMPANY
FORM 10-QSB
INDEX
<TABLE>
<CAPTION>
Page
----
PART I-FINANCIAL INFORMATION
- ----------------------------
Item 1. Financial Statements
- ------- --------------------
<S> <C>
Condensed consolidated balance sheets -June 30, 1996 (unaudited)
and March 31, 1996 3
Condensed consolidated statements of operations - Three months
ended June 30, 1996 and 1995 (unaudited) 4
Condensed consolidated statements of cash flows - Three months
ended June 30, 1996 and 1995 (unaudited) 5
Condensed consolidated statements of stockholders' equity -Three months
ended June 30, 1996 (unaudited) 6
Notes to condensed consolidated financial statements 7
Item 2. Management's Discussion and Analysis or Plan of Operation 10
- ------- ---------------------------------------------------------
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. 14
- ------- ---------------------------------
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRIATHLON BROADCASTING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, March 31,
1996 1996
-------- --------
(unaudited) (Note)
<S> <C> <C>
ASSETS
- ------
Current Assets
Cash and cash equivalents $ 14,059 $ 36,845
Accounts receivable, net 3,482 1,394
Notes receivable from officer 25 50
Other current assets 764 88
-------- --------
Total Current Assets 18,330 38,377
Property and equipment - less accumulated depreciation 4,853 2,809
Intangible assets, net of accumulated amortization 42,400 19,339
Other assets, principally deposits for station acquisitions 7,149 8,856
-------- --------
$ 72,732 $ 69,381
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Due to affiliates $ 1,792 $ 4,270
Accounts payable and accrued expenses 2,428 1,520
Other current liabilities 105 27
-------- --------
Total Current Liabilities 4,325 5,817
Deferred taxes 2,502 2,502
Stockholders' Equity
Preferred Stock 12 11
Common Stock 48 48
Paid-in-capital 67,305 62,370
Accumulated deficit (1,460) (1,367)
-------- --------
65,905 61,062
-------- --------
$ 72,732 $ 69,381
======== ========
</TABLE>
Note: The balance sheet at March 31, 1996 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
TRIATHLON BROADCASTING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------
1996 1995
---------- ----------
<S> <C> <C>
Net revenues $ 4,526
----------
Operating expenses
Station operating expenses 3,233
Depreciation and amortization 333
Corporate, general and administrative expenses 491
Deferred compensation 113
----------
Total operating expenses 4,170
----------
Operating income 356
Interest expense - net 449 $ 8
---------- ----------
Net loss (93) (8)
Preferred stock dividend requirement 1,346 -
---------- ----------
Net loss applicable to common stock $ (1,439) $ (8)
========== ==========
Net loss per common share $ (.30) $ (.02)
========== ==========
Weighted average common shares outstanding 4,842 490
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
TRIATHLON BROADCASTING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
-------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash used in operations $ (3,157)
Investing activities
Acquisition of net assets of radio stations (23,990)
Capital expenditures (8)
Deposits on radio station acquisitions (165)
------------
(24,163)
Financing activities
Net proceeds from sale of preferred stock 6,248
Preferred stock dividends (1,714)
4,534
Net decrease in cash and cash equivalents (22,786)
Cash and cash equivalents at April 1, 1996 36,845
------------
Cash and cash equivalents at June 30, 1996 $ 14,059
============
Supplemental cash flow information:
Cash paid for interest $ 190
============
Cash paid for taxes $ 35
============
Non-cash operating and financing activities:
Restricted cash transferred by SCMC in exchange
for issuance of Common Stock and Liability $ 765,000
============
Conversion of Liability to Radio Investors, Inc. into:
Note Payable $ 515,000
Common Stock 247,551
------------
$ 762,551
============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
TRIATHLON BROADCASTING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED JUNE 30, 1996
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Series B Mandatory
Convertible Convertible Class A Class B Class C Class D Total
Preferred Preferred Common Common Common Common Paid-In Accumulated Stockholders'
Stock Stock Stock Stock Stock Stock Capital Deficit Equity
----- ----- ----- ----- ----- ----- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at March 31, 1996 $6 $5 $28 $2 $4 $14 $62,370 $(1,367) $61,062
Issuance of 63 shares of Mandatory
Convertible Preferred Stock 1 6,247 6,248
Issuance of 317 shares of Class A
Common Stock upon conversion
of Class C Common Stock on a
one-for-one basis 3 (3)
Deferred compensation 34 34
Dividends on Mandatory
Convertible Preferred Stock (1,346) (1,346)
Net loss (93) (93)
----- ----- ----- ----- ----- ----- ------- ------- --------
Balance at June 30, 1996 $6 $6 $31 $2 $1 $14 $67,305 $(1,460) $65,905
===== ===== ===== ===== ===== ==== ======= ======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
TRIATHLON BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Item 310(b) of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for an interim
period are not necessarily indicative of the results that may be expected for
a full year. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Triathlon Broadcasting
Company ("Company") annual report on Form 10-KSB for the year ended March 31,
1996. The condensed consolidated financial statements include the amounts of
the Company and its wholly owned subsidiaries.
The Company's revenues vary throughout the year. As is typical in the radio
broadcasting industry, the Company's fourth fiscal quarter (first calendar
quarter) generally produces the lowest revenues for the year and the third
fiscal quarter (fourth calendar quarter) generally produces the highest
revenues for the year. The Company's operating results in any period may be
affected by the incurrence of advertising and promotion expenses that do not
necessarily produce commensurate revenues until the impact of the advertising
and promotion is realized in future periods.
NOTE 2 - MANDATORY CONVERTIBLE PREFERRED STOCK
In March 1996, the Company completed an offering of 5,834,000 Depositary
Shares, including the exercise of the underwriters' over-allotment in April
1996, each representing a one-tenth interest in a share of 9% Mandatory
Convertible Preferred Stock ( "Preferred Stock") at a price of $10.50 per
share ("Preferred Stock Offering"). The Company's net proceeds from the
Preferred Stock Offering was approximately $55,700,000.
NOTE 3- ACQUISITIONS
The Company did not commence radio station ownership and operations until
September 13, 1995. As of August 12, 1996, the Company owns and operates,
sells advertising pursuant to Joint Sales Agreements ("JSAs") or provide
programming and sells advertising pursuant to Local Marketing Agreements
("LMAs") on 21 FM and 10 AM radio stations in the following seven markets:
Wichita, Kansas; Lincoln, Nebraska; Omaha, Nebraska; Little Rock, Arkansas;
Colorado Springs, Colorado; Spokane, Washington; and Tri-Cities, Washington.
Stations Owned and Operated. In September 1995, the Company acquired radio
stations KRBB-FM, KXLK-FM, KFH-AM, and KQAM-AM, each operating in the Wichita,
Kansas market, for an aggregate purchase price of $5.9 million. On January 24,
1996, the Company acquired radio stations KZKX-FM and KTGL-FM, each operating
in the Lincoln, Nebraska market, for an aggregate purchase price of
approximately $9.7 million.
On April 10, 1996, the Company acquired the assets of KRRK-FM, operating in
the Omaha, Nebraska market, from 93.3 Inc. for a purchase price of $2.7
million, and the assets of KXKT-FM from Valley Broadcasting
7
<PAGE>
TRIATHLON BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Inc., also operating in the Omaha market, for a purchase price of $8.1 million
creating a duopoly in this market. Also in April 1996, the Company acquired
from Sterling Realty Organization Co. the assets of KALE-AM and KIOK-FM, each
operating in the Tri-Cities, Washington market, for an aggregate purchase
price of $1.2 million.
On May 15, 1996, the Company acquired the assets of KISC-FM, KNFR-FM and
KAQQ-AM, each operating in the Spokane, Washington market, from Silverado
Broadcasting Company, Inc., for an aggregate purchase price of approximately
$8.75 million (the "Silverado Acquisition"). The Company had been providing
programming and selling advertising on these stations since March 1, 1996,
pursuant to an LMA. In connection with the Silverado Acquisition, the Company
also assumed Silverado's rights and obligations under two JSAs for KNJY-FM and
KCDA-FM operating in the Spokane market. Pursuant to these JSAs, the Company
pays to the station owners a fee determined pursuant to formulas based on net
collected revenues.
In June 1996, the Company acquired KIBZ-FM, KKNB-FM and KHAT-AM from Rock
Steady, Inc., each operating in Lincoln, Nebraska, for an aggregate purchase
price of $3.3 million. The Company, since January 29, 1996, had been selling
advertising on KIBZ-FM and KKNB-FM pursuant to a JSA. The JSA terminated upon
the acquisition.
Stations Under JSA or LMA. Pursuant to a JSA entered into in September 1995,
the Company began selling advertising on a third FM radio station in the
Wichita market, KEYN-FM. The JSA is for a term of 5 years or until the
purchase of KEYN-FM by the Company, whichever is earlier. The Company retains
all of the revenue it receives from the sale of advertising time less a
monthly payment to the owner.
On January 15, 1996, the Company entered into an agreement to acquire from
Pourtales Radio Partnership, for an aggregate purchase price of $22.5 million,
radio stations KVOR-AM, KSPZ-FM, KTWK-AM and KVUU-FM each operating in the
Colorado Springs, Colorado market (collectively, the "Colorado Springs
Stations"), radio stations KEYF-AM/FM, KUDY-AM and KKZX-FM each operating in the
Spokane, Washington market (collectively, the "Spokane Stations") and radio
stations KEGX-FM and KTCR-AM , each operating in the Tri-Cities, Washington
market (collectively, the "Tri-Cities Stations"), and to assume an LMA on July
1, 1996 for radio station KNLT-FM, also operating in the Tri-Cities, Washington
market (the "Pourtales Acquisition"). In connection with the Pourtales
Acquisition, the Company made a non-refundable deposit in the form of an
irrevocable stand-by letter of credit in the amount of $925,000, and made
further non-refundable deposits in the aggregate amount of $2 million. The
Company has also entered into an LMA to provide programming on the Colorado
Springs Stations and Spokane Stations ("Colorado Springs/Spokane LMA") until the
Pourtales Acquisition is consummated. The additional $2 million deposit is
being recorded as a financing expense by the Company during the period of the
Colorado Springs/Spokane LMA. Additionally, to take advantage of certain
synergies in these markets the Company entered into a JSA with Citadel
Broadcasting Company with respect to the stations subject to the Colorado
Springs/Spokane LMA whereby Citadel sells advertising time on these stations and
shares the Broadcast Cash Flow with the Company. Further, on July 1, 1996, the
Company began selling advertising on and providing programming to the Tri-Cities
Stations pursuant to an LMA until the Pourtales Acquisition is consummated.
In March 1996, the Company and Multi-Market Radio, Inc. ("MMR"), an affiliate,
entered into an LMA pursuant to which the Company provides programming and
sells advertising on KOLL-FM, which operates in the Little Rock, Arkansas
market, pending the consummation of the acquisition of the station by the
8
<PAGE>
TRIATHLON BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Company. In July 1996, the Company entered into an agreement with MMR to
purchase KOLL-FM for a purchase price of $4.1 million, based on an independent
valuation. In connection with entering into the LMA, the Company made a
payment of $3.5 million to MMR which will be credited towards the purchase price
of the station. The Company expects to complete the acquisition during the
quarter ended September 30, 1996.
Additional Stations to be Acquired. On February 8, 1996, the Company entered
into an agreement with Southern Skies Corporation and its affiliate Arkansas
Skies Corporation (collectively, "Southern Skies") to acquire KZSN-FM and
KZSN-AM, and KSSN-FM and KMVK-FM, respectively, for an aggregate purchase
price of $24.5 million (the "Southern Skies Acquisition"). A portion of the
purchase price of the Southern Skies Acquisition equal to $.5 million will be
paid by delivery of 46,189 shares of Class A Common Stock and the Company has
granted registration rights to Southern Skies with respect to such shares. In
addition, $750,000 of such purchase price will be paid over five years in
consideration for one of the principals entering into a non-competition
agreement. The Company has provided a deposit in the form of a letter of
credit in the amount of approximately $1.2 million. Assuming completion of the
above described pending acquisitions, the Company will own 4 FM and 3 AM
stations in the Wichita market and 3 FM in the Little Rock market.
NOTE 4 - FEDERAL INCOME TAXES
No provision for income taxes has been reflected in the Statements of
Operations for the three month periods ended June 30, 1996 and 1995, in
accordance with FAS 109, Accounting for Income Taxes.
NOTE 5 - LOSS PER COMMON SHARE
Loss per common share is based upon the net loss applicable to common shares
which is net of preferred dividends and upon the weighted average of common
shares outstanding during the period. The conversion of securities convertible
into common stock and the exercise of stock options were not assumed in the
calculation of loss per common share because the effect would be antidilutive.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
INTRODUCTION
The Company currently owns and operates, provides programming to or sells
advertising on 21 FM and 10 AM radio stations in seven markets: Wichita,
Kansas; Lincoln, Nebraska; Omaha, Nebraska; Little Rock, Arkansas; Colorado
Springs, Colorado; Tri-Cities, Washington and Spokane, Washington. In
addition, the Company has pending acquisitions (described in Note 2 to the
Condensed Consolidated Financial Statements) subject to FCC approval. Assuming
the consummation of each of the acquisitions, the Company will own or operate
35 radio stations in the following seven markets:
<TABLE>
<CAPTION>
Number of
Stations
Number of Presently Under Additional
Stations LMA or JSA Number of
Presently Which Will Be Stations To Be Stations Total Number
Owned Acquired Acquired Under LMA or JSA of Stations
----- -------- -------- ---------------- -----------
Market AM FM AM FM AM FM AM FM AM FM
-- -- -- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Wichita, Kansas.......... 2 2 -- 1 1 1 -- -- 3 4
Lincoln, Nebraska........ 1(1) 4 -- -- -- -- -- -- 1 4
Omaha, Nebraska.......... -- 2 -- -- -- -- -- -- -- 2
Colorado Springs, Colorado -- -- 2 2 -- -- -- -- 2 2
Tri-Cities, Washington 1 1 1(2) 1(2) -- -- -- 1(3) 2 3
Spokane, Washington...... 1 2 2 2 -- -- -- 2 3 6
Little Rock, Arkansas.... -- -- -- 1 -- 2 -- -- -- 3
-- -- -- -- -- -- -- -- -- --
Total.................... 5 11 5 7 1 3 -- 3 11 24
== == == == == == == == == ==
</TABLE>
(1) KHAT-AM is not currently operating and the Company is exploring options
for the FCC License for this station.
(2) The Company began operating KEGX-FM and KTCR-AM pursuant to an LMA
agreement on July 1, 1996. The Company will acquire these stations in the
event Pourtales is unable to sell them to a third party.
(3) The Company began operating KNLT-FM pursuant to an LMA on July 1, 1996.
The performance of a radio station group, such as the Company, is customarily
measured by its ability to generate Broadcast Cash Flow. Broadcast Cash Flow
is defined as net revenues less station operating expenses and excludes
depreciation, amortization and corporate and non-cash compensation expenses.
Broadcast Cash Flow, although not calculated in accordance with generally
accepted accounting principles ("GAAP"), is widely used in the broadcasting
industry as a measure of a radio broadcasting company's operating performance.
Broadcast Cash Flow is not an alternative to operating income, net income or
net cash provided by operating activities or any other measure for determining
the Company's operating performance or liquidity which is calculated in
accordance with GAAP. The primary source of the Company's revenues is from the
sale of radio advertising time. The Company's most significant station
operating expenses are employee salaries and commissions, programming expenses
and advertising and promotional expenses. The Company strives to control these
expenses by working closely with local station management.
The Company's revenues are primarily affected by the advertising rates charged
by radio stations. The Company's advertising rates are in large part based on
a station's ability to attract audiences in the demographic
10
<PAGE>
groups targeted by its advertisers, as measured principally by Arbitron on a
quarterly basis. Because audience ratings in local markets are crucial to a
station's financial success, the Company endeavors to develop strong listener
loyalty. In addition, revenues of radio stations may be affected by many other
factors including: (i) the popularity of programming; (ii) regulatory
restrictions on types of programming or advertising (such as beer, wine,
liquor and cigarette advertising); (iii) competition within national, regional
or local markets from programming on other stations and from other media; and
(iv) loss of market share to other technologies.
The number of advertisements that can be broadcast without jeopardizing
listening levels (and the resulting ratings) is limited in part by the format
of a particular station. The Company will strive to maximize station revenue
by managing the number of commercials available for sale and adjusting prices
based upon local market conditions. In the broadcasting industry, radio
stations often utilize trade or barter agreements, which exchange advertising
time for goods or services (such as travel or lodging), instead of for cash.
The Company seeks to minimize its use of trade agreements.
The Company's advertising contracts are generally short-term. The Company
generates most of its revenue from local advertising, which is sold primarily
by a station's sales staff. To generate national advertising sales, the
Company engages independent advertising sales representatives that specialize
in national sales for each of its stations.
The Company's revenues vary throughout the year. As is typical in the radio
broadcasting industry, the Company's fourth fiscal quarter (first calendar
quarter) generally produces the lowest revenues for the year and the third
fiscal quarter (fourth calendar quarter) generally produces the highest
revenues for the year. The Company's operating results in any period may be
affected by the incurrence of advertising and promotion expenses that do not
necessarily produce commensurate revenues until the impact of the advertising
and promotion is realized in future periods.
The Company may experience continuing net losses due to anticipated high
levels of depreciation and amortization arising from the acquisitions as well
as interest expense arising under the Proposed Credit Agreement (as defined
herein) and any future borrowings resulting from station acquisitions and
financing therefor.
RESULTS OF OPERATIONS
The Company did not commence radio broadcast operations until September 13,
1995. The same station pro forma comparisons described below compare the
Company's results of operations for the stations owned and operated at June
30, 1996 as if such stations were owned for the three months ended June
30,1996 and 1995.
Net revenues (total revenues less agency commissions) for the three months
ended June 30, 1996 were $4,526,000. On a same station basis, pro forma net
revenues decreased 4.5 % to $5,586,000 for the 1996 period from $5,847,000 for
the three months ended June 30, 1995. The decrease was principally
attributable to decreased advertising at three stations as a result of
adjustments to the programming format instituted by the Company. The format
changes were instituted during the 1996 quarter to better position the
Stations for future growth.
Station operating expenses for the three months ended June 30, 1996 was
$3,233,000. On a same station basis, pro forma station operating expenses
decreased 2.5% to $4,026,000 for 1996 from $4,129,000 for the three month
period ended June 30,1995. As the Company only took control of some of the
stations in the 1996
11
<PAGE>
quarter, the benefits of the Company's cost reduction programs and
efficiencies of combined operations in the markets served have not been fully
implemented.
Broadcast Cash Flow for the three month period ended June 30, 1996 was
$1,293,000 with a Broadcast Cash Flow Margin (broadcast cash flow as a
percentage of net revenues) of 28.6%. On a same station basis, pro forma
Broadcast Cash Flow decreased 9.2% to $1,560,000 for the three month period
ended June 30, 1996 from $1,718,000 for the 1995 period principally as a
result of the revenue reduction mentioned above.
Depreciation and amortization expenses for the three month period ended June
30, 1996 was $333,000.
Corporate, general and administrative expenses consisting primarily of
officer's salary, professional fees and expenses and office expenses for the
1996 three month period were $491,000.
The Company recorded deferred compensation expense of $113,000. This recurring
expense, not currently affecting cash flow, is related to stock options and
stock appreciation rights granted to officers, directors and advisors in the
prior year.
Operating income (net revenues less total operating expenses) for the three
month period ended June 30, 1996 was $356,000.
Net interest expense for the 1996 period was $449,000, principally financing
costs as a result of delays in closing on certain acquisitions, net of
interest income of $236,000 from the Company's investment of idle cash which
will be used to complete the Southern Skies Acquisition and the Pourtales
Acquisition.
Net loss for the three months ended June 30, 1996 was $93,000. Net loss
applicable to common stock for this period was $1,439,000 after the provision
for the preferred stock dividend requirement of $1,346,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal source of funds has been the net proceeds from the
Initial Public Offering of approximately $12,900,000, a $9,000,000 credit
agreement from AT&T Commercial Finance Corporation (the "Credit Agreement") and
net proceeds from the Preferred Stock Offering, of approximately $55,700,000.
The cost of the acquisitions completed through June 30, 1996 of approximately
$45,929,000, including deposits in connection with the pending acquisitions,
were financed with the proceeds from the Company's Initial Public Offering and
the Preferred Stock Offering. Amounts borrowed under the Credit Agreement for
acquisitions were also repaid with proceeds from the Preferred Stock Offering.
Cash flow used in operating activities for the three months ended June 30,
1996 totaled $3,157,000. Cash flow used for investing activities for the
period of $24,163,000 related to acquisitions and deposits and other costs of
pending transactions. Cash flow provided by financing activities for the
Company totaled $4,534,000 and related primarily to the proceeds of the
over-allotment from the Preferred Stock Offering reduced by the first
quarterly payment of dividends to the preferred holders.
The Company has received a commitment letter from AT&T for a proposed credit
agreement (the "Proposed Credit Agreement") of up to $40,000,000 which will be
used to fund a portion of the purchase price of the Southern Skies Acquisition
and the Pourtales Acquisition. Pursuant to the proposal, the amount of funding
12
<PAGE>
available under the Proposed Credit Agreement will be limited to an amount,
which equals 5.5 times the combined historical 12-month trailing EBITDA
(defined as earnings before interest, taxes depreciation and amortization).
The calculation of such EBITDA is made on a pro forma basis which includes the
trailing 12 month operating cash flow of the stations currently owned and/or
operated by the Company and the stations subject to the Acquisitions. There
can be no assurance that the Company will be able to enter into the Proposed
Credit Agreement or that the stations will achieve the requisite cash flow
levels required thereunder to obtain the financing necessary to fund the
pending acquisitions. In the event the Company does not enter into the
Proposed Credit Agreement there can be no assurance it will otherwise be able
to obtain the financing necessary to consummate the Pourtales Acquisition and
the Southern Skies Acquisition.
The Company believes that cash flows from operations, borrowings under the
Proposed Credit Agreement and existing funds will be sufficient to meet the
Company's current cash requirements. However, under the terms of the Proposed
Credit Agreement, if entered into, there is no assurance that the Company will
be able to borrow enough to fund its pending acquisitions. In addition, as
anticipated, current dividend payments on the Preferred Stock have been and
will be made out of the remaining proceeds of the Preferred Stock Offering
and/or the Proposed Credit Agreement. In order to fund future dividend
payments from operating income, the Company will have to improve the operating
results of its current radio stations and those to be acquired in the pending
acquisitions. The Company's ability to make these improvements will be subject
to prevailing economic conditions and to legal, financial, business,
regulatory, industry and other factors, many of which are beyond the Company's
control.
The Company will be required to incur additional indebtedness or raise
additional equity financing in connection with future acquisitions of radio
properties and is likely to need to incur or raise such additional financing
when the balloon payment is due in 2002 under the Proposed Credit Agreement.
There can be no assurance that the Company will be able to incur such
additional indebtedness or raise additional equity on terms acceptable to the
Company. The Company's ability to make future acquisitions and incur
additional indebtedness will also be restricted by the Proposed Credit
Agreement. Without such sources of funding, it is unlikely that the Company
will be able to implement its acquisition strategy.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
10.1 Asset Purchase Agreement dated as of July 15, 1996 between Triathlon
Broadcasting of Little Rock, Inc. and Southern Starr of Arkansas, Inc.
REPORTS ON FORM 8-K
A report on Form 8-K was filed on June 21, 1996 under Item 5 thereof (other
events) to disclose the acquisition from Rock Steady, Inc. of radio stations
KIBZ-FM, KKNB-FM and KHAT-AM, each operating in Lincoln, Nebraska, for an
aggregate purchase price of $3.3 million.
14
<PAGE>
TRIATHLON BROADCASTING COMPANY
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
TRIATHLON BROADCASTING COMPANY
Dated: August 12, 1996
By: /s/ Norman Feuer
----------------------------------------
Norman Feuer
Chief Executive Officer, Chief Financial
Officer and Treasurer
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of the 15 day of July, 1996 by and between TRIATHLON BROADCASTING OF
LITTLE ROCK, INC., a Delaware corporation ("Buyer"), and SOUTHERN STARR OF
ARKANSAS, INC., an Arkansas corporation ("Seller"), under the following
circumstances;
WHEREAS, Seller owns and operates radio station KOLL (FM) operating
in Little Rock, Arkansas (the "Station"), pursuant to licenses issued by the
Federal Communications Commission (the "FCC"); and
WHEREAS, Seller desires to sell and Buyer desires to purchase certain
assets and assume certain liabilities associated with the ownership and
operation of the Station, all on the terms and subject to the conditions set
forth herein; and
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE 1
PURCHASE OF ASSETS
1.1 Transfer of Assets. On the Closing Date, Seller shall sell,
assign, transfer and convey to Buyer, and Buyer shall purchase and assume from
Seller, all of the assets, properties, interests and rights of Seller of
whatsoever kind and nature, real and personal, tangible and intangible, owned
or leased by the Seller as the case may be, which are used or held for use by
or relate to the Station as the same shall exist on the Closing Date (the
"Station Assets"), including but not limited to the following (but excluding
the assets specified in Section 1.2 hereof):
1.1.1 all of Seller's rights in and to the licenses, permits
and other authorizations issued to Seller by any governmental authority and
used directly in, or relating directly to, the conduct of the business and
operations of the Station, including those issued by the FCC (the latter
hereafter referred to as the "Station Licenses") and as described more fully
in Section 7.4, along with
1
<PAGE>
renewals or modifications of such items between the date hereof and the
Closing Date as well as all of Seller's rights in and to the call letters
"KOLL (FM)";
1.1.2 all equipment, office furniture and fixtures, office
materials and supplies, inventory, spare parts and other tangible personal
property of every kind and description, owned, leased or held by Seller and
used in the conduct of the business and operations of the Station, and which
are described more fully in Section 7.7, together with any replacements of
equal quality thereof and additions thereto, made between the date hereof and
the Closing Date, and less any retirements or dispositions thereof made
between the date hereof and the Closing Date in the ordinary course of
business and consistent with past practices of the Seller;
1.1.3 all of Seller's rights in and under such contracts,
agreements or leases, written or oral, relating directly or exclusively to the
conduct of the Station ("Contracts"), and which are described more fully in
Sections 7.7, 7.8 and 7.9, together with all Contracts entered into or
acquired by Seller between the date hereof and the Closing Date in the
ordinary course of business and consistent with the terms of this Agreement;
1.1.4 all of Seller's rights in any programs and programming
material of whatever form or nature owned by Seller and used directly and
exclusively in, or relating directly and exclusively to, the Station;
1.1.5 all of Seller's rights in and to the trademarks, trade
names, service marks, franchises, copyrights, including registrations and
applications for registration of any of them, jingles, logos and slogans or
licenses to use same owned or held by it and used directly and exclusively in,
or relating directly and exclusively to, the conduct of the business and
operations of the Station, as described more fully in Section 7.12, together
with any associated good will and any additions thereto between the date
hereof and the Closing Date;
1.1.6 all of Seller's rights in and to the files, records,
and books of account of the Station including, without limitation, programming
information and studies, technical information and engineering data, news and
advertising studies or consulting reports, marketing and demographic data,
sales correspondence, lists of advertisers, promotional materials, credit and
sales reports and filings with the FCC, executed copies of all written
Contracts to be assigned hereunder, logs and commercially available software
programs to the extent the same are transferable by Seller;
2
<PAGE>
provided, however, that Seller shall for a period of two (2) years
following the Closing Date have access to all of the foregoing for audit,
inspection and duplication by Seller or its designees, at Seller's expense,
upon reasonable prior notice during normal business hours; and
1.1.7 all of Seller's rights under manufacturers' and
vendors' warranties relating to items included in the Station Assets and all
similar rights against third parties relating to items included in the Station
Assets.
The Station Assets shall be transferred to Buyer free and clear of
all debts, security interests, mortgages, trusts, claims, pledges, conditional
sales agreements or other liens, liabilities and encumbrances whatsoever,
other than informational filings made by equipment lessors under the Uniform
Commercial Code.
1.2 Excluded Assets. Notwithstanding anything to the contrary
contained herein, it is expressly understood and agreed that the Station
Assets shall not include the following assets along with all rights, title and
interest therein which shall be referred to as the "Excluded Assets":
1.2.1 all cash, cash equivalents or similar type investments
of Seller, such as certificates of deposit, Treasury bills and other
marketable securities on hand and/or in banks;
1.2.2 all accounts receivable or notes receivable of Seller
for services performed or provided by Seller prior to the Closing Date;
1.2.3 all tangible and intangible personal property disposed
of or consumed in the ordinary course of business between the date of this
Agreement and the Closing Date, or as permitted under the terms hereof;
1.2.4 all Contracts that have terminated or expired prior to
the Closing Date in the ordinary course of business or as permitted hereunder;
1.2.5 Seller's corporate seal, minute books, charter
documents, corporate stock record books and such other books and records as
pertain to the organization, existence or share capitalization of Seller and
duplicate copies of such records as are necessary to enable Seller to file its
tax returns and reports as well as any other records or materials relating to
Seller generally and not involving specific aspects of the Station's
operation;
1.2.6 Contracts of insurance and all insurance proceeds or
claims made by Seller relating to property or equipment repaired, replaced or
restored by Seller prior to the Closing Date;
3
<PAGE>
1.2.7 any and all other claims made by Seller with respect
to transactions prior to the Closing Date and the proceeds thereof to the
extent Seller has expended funds or incurred a loss relating to same;
1.2.8 all pension, profit sharing or cash or deferred
(Section 401(k)) plans and trusts and the assets thereof and any other
employee benefit plan or arrangement and the assets thereof, if any,
maintained by Seller or its parent organization; and
1.2.9 any books and records relating to any of the foregoing.
ARTICLE 2
ASSUMPTION OF OBLIGATIONS
2.1 Assumption of Obligations. Subject to the provisions of this
Section 2.1 and Section 2.2 andthe LMA (as defined below), on the Closing
Date, Buyer shall only assume and undertake to pay, satisfy or discharge the
liabilities, obligations and commitments of Seller arising under (i) the
Contracts described more fully in Sections 7.7, 7.8 and 7.9; (ii) all other
Contracts of Seller arising in the ordinary course of business and consistent
with past practices between the date hereof and the Closing Date, including,
but not limited to, all contracts for the sale of advertising time for cash
arising in the ordinary course of business of Seller or for consideration
other than cash such as merchandise, services or promotional consideration
("Trade Agreements") as the same may exist or arise in the ordinary course of
business; and (iii) any other Contracts entered into between the date hereof
and the Closing Date which Buyer expressly agrees in writing to assume. All of
the foregoing liabilities and obligations shall be referred to herein
collectively as the "Assumed Liabilities".
2.2 Limitation. Except as set forth in Section 2.1 hereof, Buyer
expressly does not, and shall not, assume or be deemed to assume, under this
Agreement or otherwise by reason of the transactions contemplated hereby, any
liabilities, obligations or commitments of Seller of any nature whatsoever.
Without limiting the generality of the foregoing, except as set forth in
Section 2.1, Buyer shall not assume or be liable for any liability or
obligation of Seller arising out of any contract of employment, collective
bargaining agreement, insurance, pension, retirement, deferred compensation,
incentive bonus or profit sharing or employee benefit plan or trust, or any
judgment, litigation, proceeding or claim by any person or entity relating to
the business or operation of the Station prior to the Closing Date, whether or
not such judgment, litigation, proceeding or claim is
4
<PAGE>
pending, threatened or asserted before, on or after the Closing Date.
ARTICLE 3
CONSIDERATION
3.1 Purchase Price. The aggregate consideration (the "Purchase
Price") for the transfer of the Station Assets from the Seller to the Buyer
shall be Four Million One Hundred Thousand Dollars ($4,100,000), plus the
assumption at Closing of the Assumed Liabilities, subject to the adjustments
described in Section 8.5 herein.
3.2 Payment. Buyer shall pay to Seller the Purchase Price as follows:
(i) $600,000 at Closing by wire transfer in immediately available funds to a
bank designated in writing by Seller and (ii) $3,500,000 in accordance with
that certain Local Market Agreement by and between the Seller and the Buyer as
of March 15, 1996 (the "LMA").
3.3 [RESERVED]
3.4 Proration of Revenue and Expenses.
3.4.1 Except as otherwise provided herein or as limited by
the LMA, all expenses incurred and all revenue earned arising from the conduct
of the business and operations of the Station shall be prorated between Buyer
and Seller in accordance with generally accepted accounting principles as of
11:59 p.m., local time, on the date immediately preceding the Closing Date.
Such prorations shall include, without limitation, all ad valorem, real estate
and other property taxes (but excluding taxes arising by reason of the
transfer of the Station Assets as contemplated hereby, which shall be paid as
set forth in Article 13 of this Agreement), business and license fees, music
and other license fees (including any retroactive adjustments thereof), wages
and salaries of employees, including accruals up to the Closing Date for
bonuses, commissions, vacations and sick pay, and related payroll taxes,
utility expenses, time sales agreements, contracts for the sale of advertising
for consideration other than cash ("Trade Agreements") to the extent provided
in Section 3.5.2 hereof, rents and similar prepaid and deferred items
attributable to the ownership and operation of the Station. Real estate taxes
shall be apportioned on the basis of taxes assessed for the preceding year,
with a reapportionment as soon as the new tax rate and valuation can be
ascertained.
3.4.2 The prorations and adjustments contemplated by this
Section, to the extent
5
<PAGE>
practicable, shall be made on the Closing Date. As to those prorations and
adjustments not capable of being ascertained on the Closing Date, an
adjustment and proration shall be made within ninety (90) calendar days of the
Closing Date.
3.4.3 In the event of any disputes between the parties as to
such adjustments, the amounts not in dispute shall nonetheless be paid at the
time provided in Section 3.4.2 and such disputes shall be determined by an
independent certified public accountant mutually acceptable to the parties,
and the fees and expenses of such accountant shall be paid one-half by Seller
and one-half by Buyer.
ARTICLE 4
CLOSING
4.1 Closing. Except as otherwise mutually agreed upon by Seller and
Buyer, the consummation of the transactions contemplated herein (the
"Closing") shall occur within ten (10) business days following the date on
which the last of the FCC Consents (as defined in Section 5.1) shall have
become a Final Order (as defined below), unless Buyer in its sole discretion
shall have waived the condition that such consent shall have become final (the
"Closing Date"). For purposes of this Agreement, the FCC Consents shall be
deemed to be a Final Order when (i) they have not been vacated, reversed,
stayed, set aside, annulled or suspended; (ii) they are not the subject of any
pending timely appeal, request for stay or petition for rehearing,
reconsideration or review by any party or by the FCC on its own motion; and
(iii) they are actions by the FCC as to which the time for filing any such
appeal, request, petition or similar document or for the reconsideration or
review by the FCC on its own motion under the Communications Act of 1934 and
the rules and regulations of the FCC has expired. The Closing shall be held at
such offices as shall be specified by Buyer in New York City or at such other
place as the parties shall mutually agree.
ARTICLE 5
GOVERNMENTAL CONSENTS
5.1 FCC Consents. It is specifically understood and agreed by Buyer
and Seller that the Closing and the assignment of the Station Licenses and the
transfer of the Station Assets is expressly conditioned on and is subject to
the prior consent and approval of the FCC and any reasonably acceptable
conditions imposed in such approval, which conditions are not deemed, in
Buyer's sole
6
<PAGE>
judgement, material or adverse to Buyer's interest in the Station Assets
(the "FCC Consents").
5.2 FCC Application. Seller and Buyer shall hereafter file with
the FCC the requisite applications for assignment of the Station
Licenses ("FCC Applications") from Seller to Buyer within ten (10) business
days following the date of this Agreement. Buyer shall have the right to make
such amendments to the FCC Applications and waiver requests as shall be
necessary to reflect changes that may occur in the structure of Buyer.
Thereafter, Seller and Buyer shall prosecute the FCC Applications with all
reasonable diligence and otherwise use their best efforts to obtain the grant
of the FCC Applications as expeditiously as practicable (but neither Seller
nor Buyer shall have any obligation to satisfy complainants or the FCC by
taking any steps which would have a material adverse effect upon Seller or
Buyer or upon any affiliated entity). If the FCC Consents impose any condition
on either party hereto, such party shall use its best efforts to comply with
such condition; provided, however, that neither party shall be required
hereunder to comply with any condition that would have a material adverse
effect upon it or any affiliated entity. If reconsideration or judicial review
is sought with respect to the FCC Consents, the party affected shall
vigorously oppose such efforts for reconsideration or judicial review;
provided, however, that nothing herein shall be construed to limit either
party's right to terminate this Agreement pursuant to Article 17 hereof.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby makes the following representations and warranties to
Seller, each of which is true and correct on the date hereof, shall remain
true and correct through and including the Closing Date, shall be unaffected
by any notice to Seller other than in the Disclosure Schedule (as defined
herein) and shall survive the Closing to the extent provided in Section 16.4.
6.1 Organization and Standing. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and as of the Closing Date Buyer shall be duly qualified to do business and be
in good standing in the States of Arkansas.
6.2 Authorization and Binding Obligation. Buyer has all necessary
power and authority to enter into and perform this Agreement and the
transactions contemplated hereby, and to own or lease the Broadcast Assets and
to carry on the business of the Station as they are now being
7
<PAGE>
conducted, and Buyer's execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly and validly
authorized by all necessary action on its part. This Agreement has been duly
executed and delivered by Buyer and this Agreement constitutes, and the other
agreements to be executed in connection herewith will constitute, the valid
and binding obligation of Buyer, enforceable in accordance with their terms,
except as limited by laws affecting creditors' rights or equitable principles
generally.
6.3 Absence of Conflicting Agreements or Required Consents. Except as
set forth in Article 5 hereof with respect to governmental consents, the
execution, delivery and performance of this Agreement by Buyer: (a) does not
require the consent of any third party; (b) will not violate any applicable
law, judgment, order, injunction, decree, rule, regulation or ruling of any
governmental authority to which Buyer is a party; and (c) will not, either
alone or with the giving of notice or the passage of time, or both, conflict
with, constitute grounds for termination of or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any
agreement, instrument, license or permit to which Buyer is now subject.
6.4 Litigation and Compliance with Law. There is no litigation,
administrative, arbitration or other proceeding, or petition, complaint or
investigation before any court or governmental body, pending against Buyer or
any of its principals that would adversely affect Buyer's ability to perform
its obligations pursuant to this Agreement or the agreements to be executed in
connection herewith. There is no violation of any law, regulation or ordinance
or any other requirement of any governmental body or court which would have a
material adverse effect on Buyer or its ability to perform its obligations
pursuant to this Agreement or the agreements to be executed in connection
herewith.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby makes the following representations and warranties to
Buyer, each of which is true and correct on the date hereof, shall remain true
and correct to and including the Closing Date, shall be unaffected by any
notice to Buyer other than in the Disclosure Schedule (as defined herein) and
shall survive the Closing to the extent provided in Section 16.4. Such
representations and warranties are subject to, and qualified by, any fact or
facts disclosed in the appropriate section of
8
<PAGE>
the separate Disclosure Schedule which is hereby made a part of this Agreement
(the "Disclosure Schedule").
7.1 Organization and Standing. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Arkansas, and has the corporate power and authority to own, lease and
operate the Station Assets and to carry on the business of the Station as now
being conducted and as proposed to be conducted by Seller between the date
hereof and the Closing Date.
7.2 Authorization and Binding Obligation. Seller has the corporate
power and authority to enter into and perform this Agreement and the
transactions contemplated hereby, and Seller's execution, delivery and
performance of this Agreement, and the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action on its
part. This Agreement has been duly executed and delivered by Seller and this
Agreement and the agreements to be executed in connection herewith will
constitute the valid and binding obligation of Seller enforceable in
accordance with their terms, except as limited by laws affecting the
enforcement of creditor's rights or equitable principles generally.
7.3 Absence of Conflicting Agreements or Required Consents. Except as
set forth in Article 5 hereof with respect to governmental consents and as set
forth in Sections 7.7, 7.8 or 7.9 of the Disclosure Schedule with respect to
consents required in connection with the assignment of certain Contracts, the
execution, delivery and performance of this Agreement by Seller: (a) does not
require the consent of any third party; (b) will not violate any applicable
law, judgment, order, injunction, decree, rule, regulation or ruling of any
governmental authority to which Seller is a party or by which it or the
Station Assets are bound; (c) will not, either alone or with the giving of
notice or the passage of time, or both, conflict with, constitute grounds for
termination of or result in a breach of the terms, conditions or provisions
of, or constitute a default under, any Contract, agreement, instrument,
license or permit to which Seller or the Station Assets is now subject; and
(d) will not result in the creation of any lien, charge or encumbrance on any
of the Station Assets, except to the extent that any such matter or matters
referred to in sub parts (a) through (d) would not in the aggregate have a
material adverse effect on the Buyer.
7.4 Government Authorizations. Section 7.4 of the Disclosure Schedule
contains a true
9
<PAGE>
and complete list of the Station Licenses and other material
licenses, permits or other authorizations from governmental and regulatory
authorities which are required for the lawful conduct of the business and
operations of the Station in the manner and to the full extent they are
presently conducted. Seller is the authorized legal holder of the Station
Licenses and other licenses, permits and authorizations listed in said Section
7.4, none of which is subject to any restrictions or condition which would
limit in any respect the full operation of the Station as now operated. There
are no applications, complaints or proceedings pending or, to the best of
Seller's knowledge, threatened as of the date hereof before the FCC relating
to the business or operations of the Station other than applications,
complaints or proceedings which generally affect the broadcasting industry.
Seller has delivered to Buyer true and complete copies of the Station
Licenses, including any and all amendments and other modifications thereto.
The Station Licenses are in good standing, are in full force and effect and
are unimpaired by any act or omission of Seller or its officers, directors or
employees; and the operation of the Station is in accordance with the Station
Licenses and the underlying construction permits. No proceedings are pending
or, to the knowledge of Seller, are threatened with respect to the Station
Licenses which may result in the revocation, modification, non-renewal or
suspension of any of the Station Licenses, the denial of any pending
applications, the issuance of any cease and desist order, the imposition of
any administrative actions by the FCC with respect to the Station Licenses or
which may affect Buyer's ability to continue to operate the Station as they
are currently operated. Seller has no reason to believe that the Station
Licenses will not be renewed in their ordinary course. All material reports,
forms and statements required to be filed by Seller with the FCC with respect
to the Station since the grant of the last renewal of the Station Licenses
have been filed and are substantially complete and accurate. To the best
knowledge of Seller, there are no facts which, under the Communications Act of
1934, as amended, or the existing Rules and Regulations of the FCC, would
disqualify Seller as an assignor of the Station Licenses.
7.5 Compliance with FCC Regulations. The operation of the Station and
all of the Station Assets are in compliance in all material respects with (i)
all material applicable engineering standards required to be met under
applicable FCC rules, and (ii) all other applicable rules, regulations,
requirements and policies of the FCC, including, but not limited to, ANSI
Radiation
10
<PAGE>
Standards C95.1 - 1982 to the extent required to be met under
applicable FCC rules and regulations; and there are no existing claims known
to Seller to the contrary.
7.6 Taxes. Seller has filed all federal, state, local and foreign
income, franchise, sales, use, property, excise, payroll and other tax returns
required by law and has paid in full all taxes, estimated taxes, interest,
assessments, and penalties due and payable. All returns and forms which have
been filed have been true and correct in all material respects and no tax or
other payment in a material amount other than as shown on such returns and
forms are required to be paid and have been paid by Seller. There are no
present disputes as to taxes of any nature payable by Seller which in any
event could materially adversely affect any of the Station Assets or the
operation of the Station.
7.7 Personal Property.
7.7.1 Section 7.7 of the Disclosure Schedule contains a list
of all material tangible personal property and assets owned and leased by the
Seller and used primarily or exclusively in the conduct of the business and
operations of the Station. Except as may be subject to lease agreements of the
Seller (the "Personal Property Contracts"), Seller owns and has, and will have
on the Closing Date, good and marketable title to all such property (and to
all other tangible personal property and assets to be transferred to Buyer
hereunder), and none of such property is, or at the Closing will be, subject
to any security interest, mortgage, pledge, conditional sales agreement or
other lien or encumbrance. All of the items of the tangible personal property
and assets included in the Station Assets are in all material respects in good
operating condition (ordinary wear and tear excepted) and are available for
immediate use in the conduct of the business and operations of the Station.
The technical equipment, constituting a part of the tangible personal property
transferred hereunder, has been maintained in accordance with industry
practice and is in good operating condition and complies in all material
respects with all applicable rules and regulations of the FCC and the terms of
the Station Licenses. The properties listed in said Section 7.7 include all
such properties necessary to conduct in all material respects the business and
operations of the Station as now conducted.
7.7.2 The Personal Property Contracts listed on such Section
7.7 constitute valid and binding obligations of Seller and, to the best of
Seller's knowledge, of all other persons purported to be parties thereto and
are in full force and effect as of the date hereof and will on the
11
<PAGE>
Closing Date constitute valid and binding obligations of Seller and,
to the best of Seller's knowledge, of all other persons purported to be
parties thereto and shall be in full force and effect. Seller is not in
default under any of such Personal Property Contracts and has not received or
given written notice of any default thereunder from or to any of the other
parties thereto. Seller will use reasonable efforts to obtain valid and
binding third-party consents from all required third parties to the Personal
Property Contracts to be conveyed and assigned to Buyer as part of the Station
Assets, so as to insure the Buyer will enjoy all of the privileges of Seller
thereunder. Except as set forth in Section 7.7 of the Disclosure Schedule,
Seller has full legal power and authority to assign its rights under the
Personal Property Contracts to Buyer in accordance with this Agreement on
terms and conditions no less favorable than those in effect on the date
hereof, and such assignment will not affect the validity, enforceability and
continuity of any of the Personal Property Contracts.
7.8 Real Property.
7.8.1 Section 7.8 to the Disclosure Schedule contains a
complete and accurate list of all real property owned and/or leased by the
Seller and used primarily or exclusively by the Station and all agreements,
leases and contracts of Seller relating to the tower, transmitter, studio site
and offices of the Station (collectively the "Real Estate Contracts") and a
summary of the applicable leases.
7.8.2 The Real Estate Contracts listed on such Section 7.8
constitute valid and binding obligations of Seller and, to the best of
Seller's knowledge, of all other persons purported to be parties thereto and
are in full force and effect as of the date hereof and will on the Closing
Date constitute valid and binding obligations of Seller and, to the best of
Seller's knowledge, of all other persons purported to be parties thereto and
shall be in full force and effect. Seller is not in default under any of such
Real Estate Contracts and has not received or given written notice of any
default thereunder from or to any of the other parties thereto. Seller will
use reasonable efforts to obtain valid and binding third-party consents from
all required third parties to the Real Estate Contracts to be conveyed and
assigned to Buyer as part of the Station Assets, so as to insure that Buyer
will enjoy all of the privileges of Seller thereunder. Except as set forth in
Section 7.8 of the Disclosure Schedule, Seller has full legal power and
authority to assign its rights under the Real Estate Contracts to Buyer in
accordance with this Agreement on terms and conditions no less favorable than
12
<PAGE>
those in effect on the date hereof, and such assignment will not affect the
validity, enforceability and continuity of any of the Real Estate Contracts.
7.9 Contracts. Section 7.9 of the Disclosure Schedule lists all
Contracts as of the date of this Agreement which shall be assumed by the Buyer
as of the Closing Date, except contracts entered into in the ordinary course
of business (i) of less than three (3) months duration and which impose
monetary obligations of less than Five Thousand Dollars ($5,000) each or Fifty
Thousand Dollars ($50,000) in the aggregate, (ii) for the sale or sponsorship
of broadcast time on the Station for cash, for which no prepayment has been
received and with not more than twelve (12) months remaining in their terms,
or (iii) contracts which are currently scheduled to expire prior to Closing
Date and for which Buyer will assume no obligations. Those Contracts requiring
the consent of a third party to assignment which Seller and Buyer agree are
critical to the consummation of the transactions contemplated hereby are
identified as "Material Contracts". Notwithstanding the foregoing, if it is
discovered before Closing that Seller failed to list a contract in said
Section 7.9 which was required to be listed, then the Buyer may elect in its
sole discretion to accept or reject such contract.
7.10 Status of Contracts. Except as noted in Section 7.9 of the
Disclosure Schedule, Seller has delivered to Buyer true and complete copies of
all written Material Contracts, including any and all amendments and other
modifications to such Material Contracts. All Material Contracts are valid,
binding and enforceable by Seller in accordance with their respective terms,
except as limited by laws affecting creditors' rights or equitable principles
generally. To the best of Seller's knowledge, Seller has complied in all
material respects with all Material Contracts and is not in default beyond any
applicable grace periods under any of the Material Contracts, and no other
contracting party is in default under any of the Material Contracts. Except as
set forth in Section 7.9 of the Disclosure Schedule, Seller has full legal
power and authority to assign its respective rights under the Material
Contracts to Buyer in accordance with this Agreement on terms and conditions
no less favorable than those in effect on the date hereof, and such assignment
will not affect the validity, enforceability and continuity of any of the
Material Contracts.
7.11 Environmental Matters. Seller has not unlawfully disposed of any
hazardous waste or hazardous substance including Polychlorinated Byphenyls
("PCBs") in a manner which has
13
<PAGE>
caused, or could cause, Buyer to incur a material liability under
applicable law in connection therewith; and Seller warrants that the technical
equipment included in the Station Assets does not contain any PCBs which are
required by law to be removed and if any equipment does contain PCBs, that
such equipment is stored and maintained in compliance with applicable law. To
the best of Seller's knowledge, Seller has complied in all material respects
with all federal, state and local environmental laws, rules and regulations
applicable to the Station and its operations, including but not limited to the
FCC's guidelines regarding RF radiation. No hazardous waste has been disposed
of by Seller, and to the best of Seller's knowledge, no hazardous waste has
been disposed of by any other person, on the real estate occupied by the
Station or its transmitters. As used herein, the term "hazardous waste" shall
mean as defined in the Resource Conservation and Recovery Act (RCRA) as
amended and in the equivalent state statute under the law of the state in
which such real estate is located. Seller shall, at the request of Buyer and
at its own expense, cause an engineering firm to conduct Phase I environmental
studies of the real property and transmitting equipment used by Seller in
connection with the operation of the Station. In the event that the Phase I
environmental studies conducted by Seller discloses a potential material
environmental liability, whether fixed or contingent, and such liability costs
less than One Hundred Fifty Thousand Dollars ($150,000) to cure, Seller shall
promptly begin remedial action to cure the condition giving rise to such
liability and shall either cure such condition prior to Closing or reduce the
Purchase Price by the amount agreed to by the parties as being adequate to
cure such condition. However, in the event such remedial action is likely to
cost Seller in excess of One Hundred Fifty Thousand Dollars ($150,000), Buyer
or Seller may terminate this Agreement prior to Closing and neither party
shall have any liability to the other as a result of such termination, other
than the release of the Escrow Account to the Buyer, unless: (a) Seller shall
at its sole expense cure the condition giving rise to such liability prior to
Closing; (b) Seller shall reduce the Purchase Price by the amount agreed to by
the parties as being adequate to cure such condition; or (c) as to contingent
liabilities, Seller shall provide (i) collateral acceptable to the Buyer or a
security bond in such reasonably adequate amount as shall be sufficient to
cover such liability, which collateral or security bond shall remain in place
for a period of twenty (20) years from and after the Closing, or (ii) such
other resolution mutually agreed to by the Buyer and the Seller and reasonably
acceptable to Buyer's financing sources.
14
<PAGE>
7.12 Copyrights, Trademarks and Similar Rights. Section 7.12 of the
Disclosure Schedule is a true and complete list, in all material respects, of
all copyrights, trademarks, trade names, licenses, patents, permits, jingles
and other similar intangible property rights and interests applied for, issued
to or owned by the Seller or under which Seller is a licensee or franchisee
and used exclusively or primarily in the conduct of the business and
operations of the Station referred to in Section 1.1.5 hereof.
All of such rights and interests are issued to or owned by Seller, or
if licensed or franchised to Seller, to the best of Seller's knowledge, are
valid and in good standing and uncontested. Seller has delivered or made
available to Buyer copies of all material documents, if any, establishing such
rights, licenses or other authority. Seller has received no written notice and
has no knowledge of any infringements or unlawful use of such property. The
properties listed in Section 7.12 of the Disclosure Schedule include all such
properties necessary to conduct in all material respects the business and
operations of the Station as now conducted.
7.13 [RESERVED]
7.14 Personnel Information Seller is not a party to any Contract with
any labor organization, nor has Seller agreed to recognize any union or other
collective bargaining unit, nor has any union or other collective bargaining
unit been certified as representing any of Seller's employees. Seller has no
knowledge of any organizational effort currently being made or threatened by
or on behalf of any labor union with respect to employees of Seller. During
the past three (3) years, Seller has not experienced any strikes, work
stoppages, grievance proceedings, claims of unfair labor practices filed or
other significant labor difficulties of any nature. Seller, to the best of its
knowledge, has complied in all material respects with all laws relating to the
employment of labor, including, without limitation, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and those laws relating to
wages, hours, collective bargaining, unemployment insurance, workers'
compensation, equal employment opportunity and payment and withholding of
taxes.
7.15 Litigation. Seller is subject to no judgment, award,
order, writ, injunction, arbitration decision or decree materially adversely
affecting the conduct of the business of the Station or the Station Assets,
and there is no litigation or proceeding or, to the best of Seller's
knowledge, investigation pending or, to the best of Seller's
15
<PAGE>
knowledge, threatened against Seller or the Station in any federal,
state or local court, or before any administrative agency or arbitrator
(including, without limitation, any proceeding which seeks the forfeiture of,
or opposes the renewal of, any of the Station Licenses), or before any other
tribunal duly authorized to resolve disputes, which would reasonably be
expected to have any material adverse effect upon the business, property,
assets or condition (financial or otherwise) of the Station or which seeks to
enjoin or prohibit, or otherwise questions the validity of, any action taken
or to be taken pursuant to or in connection with this Agreement. In
particular, but without limiting the generality of the foregoing, there are no
applications, complaints or proceedings pending or, to the best of Seller's
knowledge, threatened before the FCC or any other governmental organization
with respect to the business or operations of the Station other than
applications, complaints or proceedings which affect the broadcasting industry
generally.
7.16 Compliance With Laws. Seller has not received any notice
asserting any non-compliance by it in connection with the business or
operation of the Station with any applicable statute, rule or regulation,
federal, state or local. Seller is not in default with respect to any
judgment, order, injunction or decree of any court, administrative agency or
other governmental authority or any other tribunal duly authorized to resolve
disputes in any respect material to the transactions contemplated hereby.
Seller is in compliance in all material respects with all laws, regulations
and governmental orders applicable to the conduct of the business and
operations of the Station, the failure to comply with which would have a
material adverse effect on the business, operations or financial condition of
the Station, and its present use of the Station Assets does not violate any of
such laws, regulations or orders, violation of which would have a material
adverse effect on the Station Assets or Station's operation.
7.17 [RESERVED]
7.18 Accuracy of Information. No written statements made by Seller
herein and no information provided by Seller herein or in the documents,
instruments or other written communications made or delivered directly by
Seller to Buyer in connection with the negotiations covering the purchase and
sale of the Station Assets contains any untrue statement of a material fact or
omits a material fact necessary to make the statements contained therein or
herein not misleading
16
<PAGE>
and there is no fact known to Seller which relates to any
information contained in any such written document, instrument or
communications which Seller has not disclosed to Buyer in writing which
materially affects adversely the Station or the Station Assets. To the extent
that a representation or other information is made to the Seller's knowledge
or is otherwise qualified by its terms, this representation shall not be
interpreted to expand such limitations or qualifications.
ARTICLE 8
COVENANTS OF BUYER
8.1 Closing. On the Closing Date, Buyer or its assignee shall
purchase the Station Assets from Seller as provided in Article 1 hereof and
shall assume the Assumed Liabilities of Seller as provided in Article 2
hereof.
8.2 Notification. Buyer shall notify Seller of any litigation,
arbitration or administrative proceeding pending or, to its knowledge,
threatened against Buyer which challenges the transactions contemplated
hereby.
8.3 No Inconsistent Action. Buyer shall not take any other action
which is materially inconsistent with its obligations under this Agreement.
8.4 Buyer's Post-Closing Covenant. Buyer, for a period of two (2)
years following the Closing Date, shall make available for audit and
inspection by Seller and its representatives for any reasonable purpose all
records, files, documents and correspondence transferred to it hereunder.
Buyer shall at no time dispose of or destroy any such records, files,
documents and correspondence without giving sixty (60) days prior notice to
Seller to permit Seller, at its expense, to examine, duplicate or take
possession of and title to such records, files, documents and correspondence.
All personnel records shall be maintained as confidential if required by any
applicable state or federal law.
8.5 [RESERVED]
ARTICLE 9
COVENANTS OF SELLER
9.1 Seller's Pre-Closing Covenants. Seller covenants and agrees with
respect to the Station that between the date hereof and the Closing Date,
except as expressly permitted by this Agreement or with the prior written
consent of Buyer, it shall act in accordance with the following:
17
<PAGE>
9.1.1 Except as may be limited by Buyer's activities
pursuant to the LMA, Seller shall conduct the business and operations
of the Station in the ordinary and prudent course of business
and with the intent of preserving the ongoing operations and assets
of the Station, including, but not limited to, maintaining the independent
identity of the Station, retaining the current format of the Station and using
its best efforts to retain the services of key employees.
9.1.2 Seller shall operate the Station in all material
respects in accordance with FCC Rules and Regulations and the Station Licenses
and with all other laws, regulations, rules and orders, and shall not cause or
permit by any act, or failure to act, any of the Station Licenses to expire,
be surrendered, adversely modified, or otherwise terminated, or the FCC to
institute any proceedings for the suspension, revocation or adverse
modification of any of the Station Licenses, or fail to prosecute with due
diligence any pending applications to the FCC.
9.1.3 Should any fact relating to Seller which would cause
the FCC to deny its consent to the transactions contemplated by this Agreement
come to Seller's attention, Seller shall promptly notify Buyer thereof and
shall use its reasonable efforts to take such steps as may be necessary to
remove any such impediment to the transactions contemplated by this Agreement.
9.1.4 Seller shall not other than in the ordinary course of
business or after receiving Buyer's prior written approval (i) sell or dispose
of or commit to sell or dispose of any of the Station Assets; (ii) grant or
agree to grant any general increases in the rates of salaries or compensation
payable to employees of the Station; (iii) grant or agree to grant any
specific bonus or increase to any executive or management employee of the
Station; or (iv) provide for any new pension, retirement or other employment
benefits for employees of the Station or any increases in any existing
benefits.
9.1.5 Seller shall provide Buyer prompt written notice of
any change in any of the information contained in the representations and
warranties made in Article 7 hereof or any Exhibits or Schedules herein or
attached hereto.
9.1.6 Seller may enter into or renew any contract,
agreement, commitment or other understanding or arrangement in the ordinary
course of business, provided, however, that except with respect to contracts
for the sale of time for cash and except for Trade Agreements, the liability
under said contracts to be assumed by Buyer at Closing shall not exceed Five
Thousand Dollars ($5,000) per contract or Fifty Thousand Dollars ($50,000) in
the aggregate, without the written
18
<PAGE>
approval of the Buyer.
9.1.7 The Seller shall give the Buyer and the Buyer's counsel,
accountants, engineers and other representatives, full and reasonable access
during normal business hours to all of the Station' personnel, properties,
books, contracts, reports and records including financial information and tax
returns with supporting work papers relating to the Station, to all real
estate buildings and equipment relating to the Station, and to the Station's
employees in order that the Buyer may have full opportunity to make such
investigation as it desires of the affairs of the Station. Seller shall to
furnish Buyer with information and copies of all documents and agreements
including but not limited to financial and operating data and other
information concerning the financial condition, results of operations and
business of the Seller and the Station, that the Buyer may reasonably request
in order to complete the Buyer's due diligence examination of the Station. The
rights of the Buyer under this Section shall not be exercised in such a manner
as to materially interfere with the business of the Station.
9.1.8 Notwithstanding anything in this Agreement to the
contrary, Seller may enter into any contract without the consent of Buyer, but
if any such contract is outside the scope of the restrictions set forth in
this Section 9.1, Buyer shall not be obligated to accept and assume such
contract at Closing.
9.1.9 Seller shall use its best efforts to maintain the
employment at the Station and to renew, in accordance with this Agreement, the
existing employment contracts of the employees listed in Section 7.14 of the
Disclosure Schedule.
9.1.10 The Seller shall cooperate with the Buyer by
providing the Buyer with such financial and accounting records as Buyer may
reasonably request in connection with the preparation of financial statements
of the Station.
9.2 Notification. Seller shall notify Buyer of any material
litigation, arbitration or administrative proceeding pending or, to its
knowledge, threatened against Seller which challenges the transactions
contemplated hereby.
9.3 No Inconsistent Action. Seller shall not take any action which is
materially inconsistent with its obligations under this Agreement.
9.4 Closing Covenant. On the Closing Date, Seller shall transfer,
convey, assign and deliver
19
<PAGE>
to Buyer the Station Assets and the Assumed Liabilities as provided in
Articles 1 and 2 of this Agreement.
ARTICLE 10
JOINT COVENANTS
Buyer and Seller covenant and agree that between the date hereof and
the Closing Date, they shall act in accordance with the following:
10.1 Conditions. If any event should occur, either within or without
the control of any party hereto, which would prevent fulfillment of the
conditions upon the obligations of any party hereto to consummate the
transactions contemplated by this Agreement, the parties hereto shall use
their best efforts to cure the event as expeditiously as possible.
10.2 Confidentiality. Buyer and Seller shall each keep confidential
all information obtained by it with respect to the other in connection with
this Agreement and the negotiations preceding this Agreement, and will use
such information solely in connection with the transactions contemplated by
this Agreement, and if the transactions contemplated hereby are not
consummated for any reason, each shall return to the other, without retaining
a copy thereof, any schedules, documents or other written information obtained
from the other in connection with this Agreement and the transactions
contemplated hereby. Notwithstanding the foregoing, neither party shall be
required to keep confidential or return any information which (i) is known or
available through other lawful sources, not bound by a confidentiality
agreement with the disclosing party; (ii) is or becomes publicly known through
no fault of the receiving party or its agents; (iii) is required to be
disclosed pursuant to an order or request of a judicial or governmental
authority (provided the disclosing party is given reasonable prior notice) or
pursuant to the requirements of the Securities Act of 1933 or the Securities
Exchange Act of 1934; or (iv) is independently acquired or developed by such
party without violating any of the provision of this Section 10.2.
10.3 Cooperation. Buyer and Seller shall cooperate fully with each
other in taking any actions, including actions to obtain the required consent
of any governmental instrumentality or any third party necessary or helpful to
accomplish the transactions contemplated by this Agreement; provided, however,
that no party shall be required to take any action which would have a material
adverse effect upon it or any affiliated entity.
20
<PAGE>
10.4 Control of Station. Buyer shall not, directly or indirectly,
control, supervise or direct the operations of the Station. Such operations,
including complete control and supervision of all Station programs, employees
and policies, shall be the sole responsibility of Seller.
10.5 Consents to Assign. To the extent that any Contract is not
capable of being sold, assigned, transferred, delivered or subleased without
the waiver or consent of any third person (including a government or
governmental unit), or if such sale, assignment, transfer, delivery or
sublease or attempted sale, assignment, transfer, delivery or sublease would
constitute a breach thereof or a violation of any law or regulation, this
Agreement and any Assignment executed pursuant hereto shall not constitute a
sale, assignment, transfer, delivery or sublease or an attempted sale,
assignment, transfer, delivery or sublease thereof. In those cases where
consents, assignments, releases and/or waivers have not been obtained at or
prior to the Closing Date to the transfer and assignment to the Buyer of the
Contracts, this Agreement and any Assignment executed pursuant hereto, to the
extent permitted by law, shall constitute an equitable assignment by Seller to
the Buyer of all of Seller's rights, benefits, title and interest in and to
the Contracts, and where necessary or appropriate, the Buyer shall be deemed
to be the Seller's agent for the purpose of completing, fulfilling and
discharging all of Seller's rights and liabilities arising after the Closing
Date under such Seller Contracts. Seller shall use its reasonable efforts to
provide the Buyer with the benefits of such Contracts (including, without
limitation, permitting the Buyer to enforce any rights of Seller arising under
such Contracts), and the Buyer shall, to the extent the Buyer is provided with
the benefits of such Contracts, assume, perform and in due course pay and
discharge all debts, obligations and liabilities of Seller under such
Contracts.
10.6 Bulk Sales Laws. The Buyer hereby waives compliance by Seller
with the provisions of the "bulk sales" or similar laws of any state. Seller
agrees to indemnify the Buyer and hold it harmless against any and all claims,
losses, damages, liabilities, costs and expenses incurred by the Buyer or any
affiliate as a result of any failure to comply with any "bulk sales" or
similar laws.
ARTICLE 11
CONDITIONS OF CLOSING BY BUYER
The obligations of Buyer hereunder are, at its option, subject to
satisfaction, at or prior to the Closing Date, of each of the following
conditions:
21
<PAGE>
11.1 Representations, Warranties and Covenants.
11.1.1 All representations and warranties of Seller made
in this Agreement shall be true and complete in all material respects as of
the date hereof and on and as of the Closing Date as if made on and as of
that date, except for changes expressly permitted or contemplated by the
terms of this Agreement.
11.1.2 All of the terms, covenants and conditions to be
complied with and performed by Seller on or prior to Closing Date shall have
been complied with or performed in all material respects.
11.2 Governmental Consents. The FCC Consents shall have become a
Final Order, or such condition shall have been waived by Buyer.
11.3 Governmental Authorizations. Seller shall be the holder of the
Station Licenses and all other material licenses, permits and other
authorizations listed in Section 7.4 of the Disclosure Schedule, and there
shall not have been any modification of any of such licenses, permits and
other authorizations which has a material adverse effect on the Station or the
conduct of its business and operations. No proceeding shall be pending which
seeks or the effect of which reasonably could be to revoke, cancel, fail to
renew, suspend or modify materially and adversely the Station Licenses or any
other material licenses, permits or other authorizations.
11.4 Adverse Proceedings. No suit, action, claim or governmental
proceeding shall be pending against, and no order, decree or judgment of any
court, agency or other governmental authority shall have been rendered
against, any party hereto which would render it unlawful, as of the Closing
Date, to effect the transactions contemplated by this Agreement in accordance
with its terms.
11.5 Legal Opinion. Seller shall have delivered to Buyer a written
opinion of its counsel, dated as of the Closing Date, addressed to Buyer in
the form attached hereto as Exhibit A.
11.6 FCC Legal Opinion. Seller shall have furnished Buyer a written
opinion of Seller's FCC counsel, dated the Closing Date, addressed to Buyer in
the form attached hereto as Exhibit B.
11.7 Third-Party Consents. Seller shall have obtained and shall have
delivered to Buyer all third-party consents to the Material Contracts and to
all other Contracts assigned or transferred
22
<PAGE>
hereunder, except those the absence of which will not have a
material adverse effect on the operation of the Station.
11.8 Closing Documents. Seller shall have delivered or caused to be
delivered to Buyer, on the Closing Date, all deeds, bills of sale,
endorsements, assignments and other instruments of conveyance and transfer
reasonably satisfactory in form and substance to Buyer, effecting the sale,
transfer, assignment and conveyance of the Station Assets to Buyer, including,
without limitation, each of the documents required to be delivered pursuant to
Article 15.
11.9 Financing Statements. Seller shall have delivered to Buyer
releases, if any, under the Uniform Commercial Code of any financing
statements filed against any Station Assets in the jurisdiction in which the
Station Assets are and have been located since such Station Assets were
acquired by Seller, except for informational filings made by equipment lessors
on lease obligations being specifically assumed by Buyer as set forth in
Section 7.9 of the Disclosure Schedule.
ARTICLE 12
CONDITIONS OF CLOSING BY SELLER
The obligations of Seller hereunder are, at its option, subject to
satisfaction, at or prior to the Closing Date, of each of the following
conditions:
12.1 Representations, Warranties and Covenants.
12.1.1 All representations and warranties of Buyer made in
this Agreement shall be true and complete in all material respects as of the
date hereof and on and as of the Closing Date as if made on and as of that
date, except for changes expressly permitted or contemplated by the terms of
this Agreement.
12.1.2 All the terms, covenants and conditions to be
complied with and performed by Buyer on or prior to the Closing Date shall
have been complied with or performed in all material respects.
12.2 Governmental Consents. The FCC Consents shall have
become a Final Order, or such condition shall have been waived by Buyer.
12.3 Adverse Proceedings. No suit, action, claim or governmental
proceeding shall be pending against, and no other, decree or judgment of any
court, agency or other governmental authority shall have been rendered against
any party hereto which would render it unlawful, as of
23
<PAGE>
the Closing Date, to effect the transactions contemplated by this
Agreement in accordance with its terms.
12.4 Legal Opinion. Buyer shall have delivered to Seller an
opinion of its counsel, dated as of the Closing Date, addressed to Seller
in the form attached hereto as Exhibit C.
ARTICLE 13
TRANSFER TAXES; FEES AND EXPENSES
13.1 Expenses. Except as set forth in Section 13.2 and 13.3 hereof,
each party hereto shall be solely responsible for all costs and expenses
incurred by it in connection with the negotiation, preparation and performance
of and compliance with the terms of this Agreement.
13.2 Transfer Taxes and Similar Charges. All costs of transferring
the Station Assets in accordance with this Agreement, including recordation,
transfer and documentary taxes and fees, and any excise, sales or use taxes,
shall be borne equally by Buyer and Seller.
13.3 Governmental Filing or Grant Fees. Any filing or grant fees
imposed by any governmental authority the consent of which is required to the
transactions contemplated hereby shall be borne equally by Buyer and Seller.
ARTICLE 14
COMMISSIONS OR FINDER'S FEE
14.1 Buyer's Representation and Agreement to Indemnify. Buyer
represents and warrants to Seller that neither it nor any person or entity
acting on its behalf has agreed to pay a commission, finder's fee or similar
payment in connection with this Agreement or any matter related hereto to any
person or entity except to The Sillerman Companies. Buyer further agrees to
indemnify, defend and hold Seller harmless from and against any and all
claims, losses, liabilities and expenses (including reasonable attorney's
fees) arising out of a claim by The Sillerman Companies or any other person or
entity based on any such arrangement or agreement made or alleged to have been
made by Buyer. Buyer shall be solely responsible for any fees due to The
Sillerman Companies.
14.2 Seller's Representation and Agreement to Indemnify. Seller
represents and warrants to Buyer that neither it nor any person or entity
acting on its behalf has agreed to pay a commission, finder's fee or similar
payment in connection with this Agreement or any matter related hereto to any
person or entity. Seller further agrees to indemnify, defend and hold Buyer
harmless from and
24
<PAGE>
against any and all claims, losses, liabilities and expenses (including
reasonable attorney's fees) arising out of a claim by any person or entity based
on any such arrangement or agreement made or alleged to have been made by
Seller.
ARTICLE 15
DOCUMENTS TO BE DELIVERED AT CLOSING
15.1 Seller's Documents. At the Closing, Seller shall deliver or
cause to be delivered to Buyer the following:
15.1.1 Governmental Certificates showing that Seller is duly
incorporated and in good standing in the State of Arkansas dated not more than
forty-five (45) days before the Closing Date;
15.1.2 Bill of Sale, assignments and other good and
sufficient instruments of conveyance, transfer and assignment, all in form and
substance reasonably satisfactory to counsel for Buyer, as shall be effective
to vest in Buyer or its permitted assignees, good and marketable title in and
to the Station Assets transferred pursuant to this Agreement in accordance
with the terms of this Agreement;
15.1.3 At the time and place of Closing, originals or copies
of all program, operations, transmissions, or maintenance logs and all other
records required to be maintained by the FCC with respect to the Station,
including the Station's public file, shall be left at the Station and thereby
delivered to Buyer;
15.1.4 The Seller's opinion letters referenced in Sections
11.5 and 11.6 above; and
15.1.5 Such additional information and materials as
Buyer shall have reasonably requested.
15.2 Buyer's Documents. At the Closing, Buyer shall deliver or
cause to be delivered to Seller the following:
15.2.1 The Purchase Price in accordance with Section 3.3
hereof;
15.2.3 The opinion of Buyer's counsel, dated the Closing
Date, to the effect set forth in Section 12.4;
15.2.4 Governmental certificates showing that Buyer is duly
incorporated and in
25
<PAGE>
good standing in the State of Delaware and qualified and in good
standing in the State of Arkansas dated not more than forty-five (45) days
before the Closing Date;
15.2.5 An assignment and assumption agreement or
agreements reasonably satisfactory in form and substance to counsel to
Seller effecting the assumption of the Assumed Liabilities;
15.2.6 Such additional information and materials as Seller
shall have reasonably requested.
ARTICLE 16
INDEMNIFICATION
16.1 Seller's Indemnities. Seller hereby agrees to indemnify, defend
and hold Buyer harmless with respect to any and all demands, claims, actions,
suits, proceedings, assessments, judgments, costs, losses, damages,
liabilities and expenses (including, without limitation, reasonable attorneys'
fees) asserted against, resulting from, imposed upon or incurred by Buyer
directly or indirectly relating to or arising out of:
16.1.1 Any and all liabilities, obligations, or commitments
of Seller of any nature, whether absolute, accrued, contingent, or otherwise,
including those relating to all periods prior to the Closing, whether the
claim is asserted prior to or after the Closing, by reason of or resulting
from liabilities or obligations of or claims against Seller in connection with
Seller's ownership or operation of the Station prior to the Closing, except
liabilities, obligations, or commitments of Seller included in the Assumed
Liabilities;
16.1.2 The breach of any of the representations or
warranties or failure by Seller to perform any covenants, conditions or
agreements of Seller set forth in this Agreement;
16.1.3 Any failure to comply with any "bulk sales" laws
applicable to the transactions contemplated hereby;
16.1.4 The failure of Seller to pay, perform or discharge
when due any of Seller's obligations, liabilities or Contracts not assumed by
Buyer pursuant to this Agreement;
16.1.5 Any employee benefit plan maintained by Seller.
16.2 Buyer's Indemnities. Buyer hereby agrees to indemnify, defend
and hold Seller harmless with respect to any and all demands, claims, actions,
suits, proceedings, assessments,
26
<PAGE>
judgments, costs, losses, damages, liabilities and expenses
(including, without limitation, reasonable attorneys' fees) asserted against,
resulting from, imposed upon or incurred by Seller directly or indirectly
relating to or arising out of:
16.2.1 The use or operation of the Station Assets after the
Closing Date;
16.2.2 The breach of any of the representations, warranties,
covenants, conditions or agreements of Buyer set forth in this Agreement; and
16.2.3 The Assumed Liabilities.
16.3 Rights. Buyer and Seller agree that the rights of
indemnification provided in this Article 16 are exclusive of and in addition
to any and all other such rights of Buyer or Seller hereunder.
16.4 Survival of Representations and Warranties. Either party shall
have the right to bring an action with respect to the representations and
warranties contained herein for a period of eighteen (18) months following the
Closing Date, and upon the expiration of such period such right shall lapse
and be of no further force or effect.
16.5 Limitation on Indemnity. Notwithstanding anything to the
contrary contained in this Agreement, and subject to the proviso set forth
below, neither party shall have any liability or obligation to the other for
breach of any representation, warranty, covenant or agreement of the other in
this Agreement except to the extent that the aggregate of all claims for such
breaches exceeds Twenty-Five Thousand Dollars ($25,000) (the "Threshold
Amount"), in which event the party so liable shall then be liable for all
claims for any such breaches, including the sums constituting the Threshold
Amount; provided, however, that the foregoing Threshold Amount limitation
shall not apply to Seller's obligation for the Excess Trade Balance.
16.6 Procedures.
16.6.1 Promptly after the receipt by either party (the
"Indemnified Party") of notice of (A) any claim or (B) the commencement of any
action or proceeding which may entitle such party to indemnification under
this Section, such party shall give the other party (the "Indemnifying Party")
written notice of such claim or the commencement of such action or proceeding
and shall permit the Indemnifying Party to assume the defense of any such
claim or any litigation resulting from such claim. The failure to give the
Indemnifying Party timely notice under this Section 16.6.1
27
<PAGE>
shall not preclude the Indemnified Party from seeking indemnification
from the Indemnifying Party unless such failure has materially
prejudiced the Indemnifying Party's ability to defend the claim or litigation.
16.6.2 If the Indemnifying Party assumes the defense of any
such claim or litigation resulting therefrom with counsel reasonably
acceptable to Indemnified Party, the obligations of the Indemnifying Party as
to such claim shall be limited to taking all steps necessary in the defense or
settlement of such claim or litigation resulting therefrom and to holding the
Indemnified Party harmless from and against any losses, damages and
liabilities caused by or arising out of any settlement approved by the
Indemnifying Party or any judgment in connection with such claim or litigation
resulting therefrom; provided, however, that the Indemnified Party may
participate, at its expense, in the defense of such claim or litigation
provided that the Indemnifying Party shall direct and control the defense of
such claim or litigation. The Indemnified Party shall cooperate and make
available all books and records reasonably necessary and useful in connection
with the defense. The Indemnifying Party shall not, in the defense of such
claim or any litigation resulting therefrom, consent to entry of any judgment,
except with the written consent of the Indemnified Party, or enter into any
settlement, except with the written consent of the Indemnified Party, which
does not include as an unconditional term thereof the giving by the claimant
or the plaintiff to the Indemnified Party of a release from all liability in
respect of such claim or litigation.
16.6.3 If the Indemnifying Party shall not assume the
defense of any such claim or litigation resulting therefrom, the Indemnified
Party may, but shall have no obligation to, defend against such claim or
litigation in such manner as it may deem appropriate, and the Indemnified
Party may compromise or settle such claim or litigation without the
Indemnifying Party's consent. The Indemnifying Party shall promptly pay any
such settlement of such claim or litigation and shall also promptly reimburse
the Indemnified Party for the amount of all expenses, legal or otherwise,
incurred by the Indemnified Party in connection with the defense against or
settlement of such claim or litigation. If no settlement of the claim or
litigation is made, the Indemnifying Party shall promptly reimburse the
Indemnified Party for the amount of any judgment rendered with respect to such
claim or in such litigation and of all expenses, legal or otherwise, incurred
by the Indemnified Party in the defense against such claim or litigation.
28
<PAGE>
ARTICLE 17
TERMINATION RIGHTS
17.1 Termination. This Agreement may be terminated by either
Buyer or Seller, if the party seeking to terminate is not in material default
or breach of this Agreement, upon written notice to the other upon the
occurrence of any of the following:
(a) if the other party defaults in any
material respect in the observance or in the due and timely performance
of any of its covenants or agreements herein contained and such material
default shall not be cured within thirty (30) days of the date of notice
of default served by the party claiming such material default; or
(b) if the FCC denies the FCC Application, or
if the FCC fails to grant the FCC Consents within twelve (12) months following
the filing of the FCC Application, provided that the party seeking termination
has diligently prosecuted the FCC Application in good faith; or
(c) on the first anniversary of this Agreement,
if there shall be in effect any judgment, final decree or order that would
prevent or make unlawful the Closing of this Agreement; or
(d) by the Buyer only, if there is a cessation
of broadcast transmissions by the Station, for a period of three (3) full
consecutive days or for seven (7) or more days within any thirty (30) day
period, or normal broadcast transmissions are not resumed by the date
immediately preceding the Closing Date; or
(e) as provided in Sections 7.11 and 18.3 or
any other section of this Agreement which specifically provides for
terminations.
17.2 Liability. The termination of this Agreement under Section 17.1
shall not relieve any party of any liability for breach of this Agreement
prior to the date of termination.
ARTICLE 18
OTHER PROVISIONS
18.1 Specific Performance. Seller recognizes that, in the event
Seller refuses to perform the provisions of this Agreement, monetary damages
alone will not be adequate. Buyer shall, therefore, be entitled in such event,
in addition to bringing suit at law or equity for money or other damages, to
obtain specific performance of the terms of this Agreement. In any action to
enforce
29
<PAGE>
the provisions of this Agreement, Seller shall waive the defense that
there is an adequate remedy at law or equity and agrees that Buyer shall have
the right to obtain specific performance of the terms of this Agreement
without being required to prove actual damages, post bond or furnish other
security.
18.2 Liquidated Damages. If the Seller terminates this Agreement
pursuant to Section 17.1 above due to Buyer's breach of any material
representation, warranty, covenant or condition hereunder, and Seller is not
at that time in breach of any material representation, warranty, covenant or
condition hereunder, then Seller would suffer direct and substantial damages,
which damages cannot be determined within reasonable certainty. Therefore,
because of the expense and delay which would be incurred in such event by
Seller, Buyer shall pay to Seller the amount of Four Hundred Ten Thousand
Dollars ($410,000), which amount shall constitute liquidated damages. It is
understood and agreed that such liquidated damage amount represents Buyer's
and Seller's reasonable estimate of actual damages and does not constitute a
penalty. Recovery of liquidated damages shall be the sole and exclusive remedy
of Seller against Buyer for failing to consummate this Agreement on the
Closing Date and shall be applicable regardless of the actual amount of
damages sustained. In the event that either of the parties hereto bring suit
to enforce the provisions of this Section 18.2 or Section 18.1 above, the
prevailing party in any such action shall, in addition to any remedies set
forth in this Agreement, be entitled to recover reasonable attorney's fees
from the other party.
18.3 Risk of Loss. The risk of loss or damage to any of the Station
Assets prior to the Closing Date shall be upon Seller. Seller shall repair,
replace and restore any such damaged or lost Station Asset to its prior
condition as soon as possible and in no event later than the Closing Date.
Except as provided below, if Seller fails to restore or replace a Station
Asset with a value exceeding Fifty Thousand Dollars ($50,000), Buyer may elect
either to terminate this Agreement pursuant to Article 17 hereof or to
consummate the Closing on the Closing Date. If Seller fails to restore or
replace such Station Asset and Buyer does not elect to terminate this
Agreement, Seller shall assign to Buyer at Closing Seller's rights under any
insurance policy or pay over to Buyer all proceeds of insurance covering such
Station Asset's damage, destruction or loss. If the restoration and
replacement of any damaged or destroyed property has not been completed at the
time the Closing
30
<PAGE>
would otherwise be held, then unless Seller and Buyer otherwise
agree, the Closing Date shall be delayed and shall take place within fifteen
(15) days after Seller gives written notice to Buyer of completion of the
restoration or replacement of such Station Asset. If the delay in the Closing
Date under this Section 18.3 would cause the Closing to fall at anytime after
the period permitted by the FCC Consents, Seller and Buyer shall file an
appropriate request with the FCC for an extension of time within which to
complete the Closing.
18.4 Further Assurances. After the Closing, Seller shall from time to
time, at the request of and without further cost or expense to Buyer, execute
and deliver such other instruments of conveyance and transfer and take such
other actions as may reasonably requested in order to more effectively
consummate the transactions contemplated hereby to vest in Buyer good and
marketable title to the assets being transferred hereunder, and Buyer shall
from time to time, at the request of and without further cost or expense to
Seller, execute and deliver such other instruments and take such other actions
as may reasonably be requested in order to more effectively relieve Seller of
any obligations being assumed by Buyer hereunder.
18.5 Waiver. No delay or failure by any party hereto in exercising
any right, power or privilege under this Agreement, or under any other
instrument or document given in connection with or pursuant to this Agreement,
shall impair any such right, power or privilege or be construed as a waiver of
any default or any acquiescence therein. No single or partial exercise of any
such right, power or privilege shall preclude the further exercise of any
right, power of privilege, or the exercise of any other right, power or
privilege.
18.6 Severability. If any part or any provision of this Agreement
shall be invalid or unenforceable under applicable law, said part or
provisions shall be ineffective to the extent of such invalidity or
unenforceability only, without in any way affecting the remaining provisions
of this Agreement which shall be construed as if such invalid parts or
provisions had not been inserted, and such invalid or unenforceable provisions
shall become and be immediately amended and reformed to include only the
portions thereof as are enforceable by the court or such other body having
jurisdiction of this Agreement; and the parties agree that such portions as so
amended and reformed shall be valid and binding as though any wholly invalid
or unenforceable portion had not been included herein.
31
<PAGE>
18.7 Benefit and Assignment. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. No party may voluntarily or involuntarily
assign its interest under this Agreement without the prior written consent
of the other party; except that Buyer may assign its interests under this
Agreement pursuant to the provisions of Section 5.2 hereof.
18.8 Entire Agreement. This Agreement and the Exhibits hereto embody
the entire agreement and understanding of the parties hereto and supersede any
and all prior agreements, arrangements and understandings relating to the
matters provided for herein. No amendment, waiver of compliance with any
provision or condition hereof or consent pursuant to this Agreement shall be
effective unless evidenced by an instrument in writing signed by the party
against whom enforcement of any waiver, amendment, change, extension or
discharge is sought.
18.9 Headings. The headings set forth in this Agreement are for
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement.
18.10 Governing Law. The construction and performance of this
Agreement shall be governed by the laws of the State of New York without
giving effect to the choice of law provisions thereof.
18.11 Notices. Any notice, demand or request required or permitted to
be given under the provisions of this Agreement shall be in writing and shall
be deemed to have been duly delivered and received on the date of personal
delivery or on the date of receipt, if mailed by registered or certified mail,
postage prepaid and return receipt requested, or on the date of a stamped
receipt, if sent by an overnight delivery service, and shall be addressed to
the following addresses, or to such other address as any party may request, in
the case of Seller, by notifying Buyer, and in the case of Buyer, by notifying
Seller:
To Seller: Multi-Market Radio, Inc.
150 East 58th Street, 19th Floor
New York, New York 10155
Attn: Legal Department
To Buyer: Triathlon Broadcasting of Little Rock, Inc.
650 B Street, Suite 1920
32
<PAGE>
San Diego, California
Attn: Norman Feuer
33
<PAGE>
18.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date and year first above written.
SELLER:
SOUTHERN STARR OF ARKANSAS, INC.
By: /s/ Michael G. Ferrel
----------------------------------
Michael G. Ferrel
President
BUYER:
TRIATHLON BROADCASTING OF LITTLE ROCK, INC.
By: /s/ Norman Feuer
----------------------------------
Norman Feuer
President
34
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 14,059,000
<SECURITIES> 0
<RECEIVABLES> 3,738,000
<ALLOWANCES> 256,000
<INVENTORY> 0
<CURRENT-ASSETS> 18,330,000
<PP&E> 5,087,000
<DEPRECIATION> 234,000
<TOTAL-ASSETS> 72,732,000
<CURRENT-LIABILITIES> 4,325,000
<BONDS> 0
<COMMON> 48,000
6,000
6,000
<OTHER-SE> 65,905,000
<TOTAL-LIABILITY-AND-EQUITY> 72,732,000
<SALES> 5,080,000
<TOTAL-REVENUES> 4,526,000
<CGS> 0
<TOTAL-COSTS> 3,787,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 690,000
<INCOME-PRETAX> (93,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (93,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (93,000)
<EPS-PRIMARY> (.30)
<EPS-DILUTED> (.30)
</TABLE>
