-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DzNKEfwRy4AQW3XuXA6VATcBtOd2gpdJiGra4tOmzEuWKDkmdcFCtxysnkEtExrC LEtgA1jLk40RP6vLbKzm+A== 0000950144-96-004575.txt : 19960726 0000950144-96-004575.hdr.sgml : 19960726 ACCESSION NUMBER: 0000950144-96-004575 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19960724 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COX RADIO INC CENTRAL INDEX KEY: 0001018522 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 581620022 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-08737 FILM NUMBER: 96598494 BUSINESS ADDRESS: STREET 1: C/O COX ENTERPRISES INC STREET 2: 1400 LAKE HEARN DR CITY: ATLANTA STATE: GA ZIP: 30319 BUSINESS PHONE: 4048435000 MAIL ADDRESS: STREET 1: C/O COX ENTERPRISES INC STREET 2: 1400 LAKE HEARN DR CITY: ATLANTA STATE: GA ZIP: 30319 S-1 1 COX RADIO, INC FORM S-1 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON , 1996 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------ FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ COX RADIO, INC. (Exact name of Registrant as specified in its charter) DELAWARE 4832 58-1620022 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification No.)
1400 LAKE HEARN DRIVE ATLANTA, GEORGIA 30319 (404) 843-5000 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) ------------------------ MARITZA C. PICHON CHIEF FINANCIAL OFFICER COX RADIO, INC. 1400 LAKE HEARN DRIVE ATLANTA, GEORGIA 30319 (404) 843-5000 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------------------ PLEASE ADDRESS A COPY OF ALL COMMUNICATIONS TO: STUART A. SHELDON, ESQ. KRIS F. HEINZELMAN, ESQ. DOW, LOHNES & ALBERTSON, PLLC CRAVATH, SWAINE & MOORE 1200 NEW HAMPSHIRE AVENUE, N.W. WORLDWIDE PLAZA, 825 EIGHTH AVENUE WASHINGTON, D.C. 20036-6802 NEW YORK, NEW YORK 10019 (202) 776-2000 (212) 474-1000
------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement is declared effective. ------------------------ If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. / / ------------------------ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / ------------------------ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / ------------------------ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / ------------------------ CALCULATION OF REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------- PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE (2) REGISTRATION FEE - ---------------------------------------------------------------------------------------------------------- Class A Common Stock, $1.00 par value per share.............. shares $ $138,000,000 $47,587 - ---------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------
(1) Includes shares of Class A Common Stock deliverable on exercise of an over-allotment option, if any. (2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457 under the Securities Act of 1933, as amended. ------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 COX RADIO, INC. CROSS REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K
ITEM NUMBER CAPTION LOCATION IN PROSPECTUS - ----------- ---------------------------------------- -------------------------------------------- 1. Forepart of the Registration Statement and Outside Front Cover Page of Prospectus.............................. Outside Front Cover Page 2. Inside Front and Outside Back Cover Pages of Prospectus..................... Inside Front and Outside Back Cover Pages 3. Summary Information, Risk Factors....... Prospectus Summary; Risk Factors; Selected Historical Consolidated Financial Data; Management's Discussion and Analysis of the Pro Forma Combined Results of Operations; Management's Discussion and Analysis of Financial Condition and Results of Operations of Cox Radio; Management's Discussion and Analysis of Financial Condition and Results of Operations of NewCity 4. Use of Proceeds......................... Prospectus Summary; Use of Proceeds 5. Determination of Offering Price......... Outside Front Cover Page; Underwriting 6. Dilution................................ Dilution 7. Selling Security Holders................ * 8. Plan of Distribution.................... Outside Front Cover Page; Underwriting 9. Description of Securities to be Registered.............................. Outside Front Cover Page; Prospectus Summary; Capitalization; Dividend Policy; Description of Capital Stock; Underwriting 10. Interests of Named Experts and Counsel................................. *
3
ITEM NUMBER CAPTION LOCATION IN PROSPECTUS - ----------- ---------------------------------------- -------------------------------------------- 11. Information with Respect to the Registrant.............................. Outside Front Cover Page; Certain Definitions and Market and Industry Data; Prospectus Summary; Risk Factors; Use of Proceeds; Dividend Policy; Dilution; Capitalization; Unaudited Pro Forma Combined Financial Data; Unaudited Pro Forma Combined Balance Sheet; Unaudited Pro Forma Combined Statements of Operations; Selected Historical Consolidated Financial Data; Management's Discussion and Analysis of the Pro Forma Combined Results of Operations; Management's Discussion and Analysis of Financial Condition and Results of Operations of Cox Radio; Management's Discussion and Analysis of Financial Condition and Results of Operations of NewCity; Business; The NewCity Acquisition; Management; Security Ownership of Certain Beneficial Owners; Certain Relationships and Related Transactions; Description of Capital Stock; Description of Indebtedness; Shares Eligible for Future Sale; Underwriting 12. Disclosure of Commission Position on Indemnification for Securities Act Liabilities............................. *
- --------------- * Omitted from Prospectus because item is inapplicable. 4 EXPLANATORY NOTE This Registration Statement contains a preliminary prospectus relating to the offering of Class A Common Stock of Cox Radio, Inc. in the United States and Canada (the "U.S. Offering"), together with separate preliminary prospectus pages relating to a concurrent public offering of Class A Common Stock outside the United States and Canada (the "International Offering"). The complete preliminary prospectus for the U.S. Offering follows immediately after this Explanatory Note. After such preliminary prospectus are the following alternate pages for the preliminary prospectus for the International Offering: a front cover page and a back cover page. Each such page has been labeled "Alternate Page for International Prospectus." All other pages of the preliminary prospectus for the U.S. Offering are to be used for both the U.S. Offering and the International Offering. 5 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. Subject to Completion, dated , 1996 PROSPECTUS SHARES COX RADIO, INC. [COX RADIO LOGO] CLASS A COMMON STOCK --------------------------- All of the shares of Class A Common Stock, par value $1.00 per share (the "Class A Common Stock"), offered hereby are being sold by Cox Radio, Inc. ("Cox Radio" or the "Company"). Of the shares of Class A Common Stock being offered, shares are being offered initially in the United States and Canada (the "U.S. Offering") by the U.S. Underwriters and shares are being concurrently offered outside the United States and Canada (the "International Offering") by the International Managers (together with the U.S. Underwriters, the "Underwriters"). The U.S. Offering and the International Offering are collectively referred to as the "Offerings." Cox Radio's authorized capital stock includes Class A Common Stock and Class B Common Stock, par value $1.00 per share (the "Class B Common Stock" and, together with the Class A Common Stock, the "Common Stock"). Except with respect to voting and conversion, the rights of holders of Class A Common Stock and Class B Common Stock are identical. Each share of Class B Common Stock generally entitles its holder to ten votes, whereas each share of Class A Common Stock entitles its holder to one vote. Shares of Class B Common Stock are convertible into shares of Class A Common Stock on a one-for-one basis at the option of the holder. After giving effect to the sale of Class A Common Stock offered hereby (assuming that the Underwriters' over-allotment option is not exercised), Cox Enterprises, Inc. ("CEI") will own approximately % of the outstanding Common Stock and % of the voting power of the Company. See "Description of Capital Stock." Prior to the Offerings, there has been no public market for the Class A Common Stock. The initial public offering price is expected to be between $ and $ per share. See "Underwriting" for information relating to the factors to be considered in determining the initial public offering price. The initial public offering price and the underwriting discounts and commissions per share are identical for each of the Offerings. At the request of Cox Radio, the Underwriters have reserved shares of the Class A Common Stock for sale at the initial public offering price to certain of Cox Radio's employees and certain other persons. If such shares are not purchased by such employees or other persons, they will be offered by the Underwriters to the public upon the terms and conditions set forth in this Prospectus. See "Underwriting." Application has been made for listing of the Class A Common Stock on under the symbol " ." --------------------------- SEE "RISK FACTORS" COMMENCING ON PAGE 9 HEREIN FOR CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS. --------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ---------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------- UNDERWRITING PRICE TO DISCOUNTS AND PROCEEDS TO PUBLIC COMMISSIONS(1) COMPANY(2) - ---------------------------------------------------------------------------------------------------------- Per Share................................................. $ $ $ - ---------------------------------------------------------------------------------------------------------- Total(3).................................................. $ $ $ - ---------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------
(1) Cox Radio has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933 (the "Securities Act"). See "Underwriting." (2) Before deducting expenses payable by Cox Radio estimated to be $ . (3) Cox Radio has granted the Underwriters a 30-day option to purchase up to an aggregate of additional shares of Class A Common Stock on the same terms and conditions as set forth herein, solely to cover over-allotments, if any. If such option is exercised in full, the total Price to Public, Underwriting Discounts and Commissions and Proceeds to Company will be $ , $ and $ , respectively. See "Underwriting." --------------------------- The shares of Class A Common Stock offered by this Prospectus are offered by the U.S. Underwriters subject to prior sale, to withdrawal, cancellation, or modification of the offer without notice, to delivery to and acceptance by the U.S. Underwriters and to certain further conditions. It is expected that delivery of the shares will be made at the offices of Lehman Brothers Inc., New York, New York, on or about , 1996. --------------------------- LEHMAN BROTHERS ALLEN & COMPANY INCORPORATED CS FIRST BOSTON MORGAN STANLEY & CO. INCORPORATED , 1996 6 [STATION LOGOS OR MAP OF STATIONS TO BE SUPPLIED] ------------------------ IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A COMMON STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. DURING THIS OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS IN THE CLASS A COMMON STOCK PURSUANT TO EXEMPTIONS FROM RULES 10B-6, 10B-7, AND 10B-8 UNDER THE SECURITIES EXCHANGE ACT OF 1934. ------------------------ i 7 CERTAIN DEFINITIONS AND MARKET AND INDUSTRY DATA The terms "broadcast cash flow" and "EBITDA" are referred to in various places in this Prospectus. Broadcast cash flow consists of operating income plus depreciation and amortization and corporate general and administrative expenses. EBITDA consists of operating income plus depreciation and amortization. Although broadcast cash flow and EBITDA are not measures of performance calculated in accordance with generally accepted accounting principles ("GAAP"), management believes that broadcast cash flow is useful to a prospective investor because it is a measure widely used in the radio broadcasting industry to evaluate a broadcast company's operating performance and that EBITDA is generally accepted as providing useful information regarding a company's ability to service and/or incur debt. Neither broadcast cash flow nor EBITDA should be considered in isolation or as a substitute for net income, cash flows from operating activities and other income and cash flow statement data prepared in accordance with GAAP, or as a measure of liquidity or profitability. Unless otherwise indicated herein, (i) market ranking by radio advertising revenue, radio market advertising revenue and radio market advertising data used to calculate compounded annual growth rate ("CAGR") have been obtained from Duncan's Radio Market Guide (1996 ed.) ("Duncan's") compiled by Duncan's American Radio, Inc.; (ii) total industry listener and revenue levels have been obtained from the Radio Advertising Bureau ("RAB"); (iii) all audience share data and audience rankings, including ranking by population, except where specifically stated to the contrary, have been derived from surveys of Adults 25 to 54, listening Monday through Sunday, 6 a.m. to 12 midnight, and are based on the average of the Fall, Winter, Spring and Summer Market Reports (each an "Arbitron Market Report") ending in the year presented or the four most recent Arbitron Market Reports, as reported by Arbitron, Radio Market Reports, Metro or Target Audience Trends, The Arbitron Company ("Arbitron"); (iv) revenue share data in each market presented have been obtained from the Miller, Kaplan Market Revenue Report (published monthly), a publication of Miller, Kaplan, Arase & Co., Certified Public Accountants ("Miller Kaplan") or The Hungerford Market Report, a publication of Hungerford, Aldrin, Nichols & Carter Certified Public Accountants ("Hungerford"); (v) combined radio station group revenue share and combined radio station group revenue rank in each market presented are estimates by the Company that have been derived from Miller Kaplan, Duncan's and the American Radio Guide compiled by Duncan's American Radio, Inc. ("American Radio Guide") (to management's knowledge, there is no definitive, independent source for radio station group share and radio station group rank otherwise available.); (vi) percentage of national and local radio revenues per market have been obtained from Investing in Radio 1996 Market Report, a publication of Broadcasting Investor Analysts ("BIA"); and (vii) number of viable stations per market has been obtained from Duncan's; Duncan's defines "viable stations" as stations which are active and viable competitors for advertising dollars in the market. If Duncan's assigned a 1/2 ranking to a viable station, the total number of viable stations was rounded up to the nearest station. Each of Duncan's, RAB, Arbitron, Miller Kaplan, Hungerford, BIA and American Radio Guide compiles its audience share, revenue share and other statistical data, as the case may be, under procedures and methodologies which are described, and which have the limitations provided, in its respective reports or guides. All such information is provided herein subject to those limitations. The terms local marketing agreement ("LMA") and joint sales agreement ("JSA") are referred to in various places in this Prospectus. An LMA refers to an agreement under which a radio station agrees to provide, on a cooperative basis, the programming, sales, marketing and similar services for a different radio station. A JSA refers to an agreement, similar to an LMA, under which a radio station agrees to provide the sales and marketing services for another station while the owner of such other radio station provides the programming for such other radio station. The term "duopoly," as used in various places in this Prospectus, refers to the ownership of two or more AM or two or more FM radio stations in the same geographic market. A station or station group's power ratio is defined as such station or station group's revenue market share divided by audience market share. ii 8 PROSPECTUS SUMMARY The following information is qualified in its entirety by the more detailed information and financial statements appearing elsewhere in this Prospectus. As indicated, the information with respect to Cox Radio contained in this Prospectus, other than the historical financial data, gives effect to the pending acquisition (the "NewCity Acquisition") by Cox Radio of NewCity Communications, Inc. ("NewCity"), as well as certain other planned acquisitions and dispositions (together with the NewCity Acquisition, the "Pending Transactions"). See "Pending Transactions." Consummation of each of the Pending Transactions is subject to certain conditions, including the approval of the Federal Communications Commission ("FCC"); there can be no assurance that such approval will be obtained or that other required conditions will be satisfied or waived. See "Risk Factors." Unless otherwise indicated, the information in this Prospectus does not give effect to the exercise of the Underwriters' over-allotment option described herein under "Underwriting." THE COMPANY Cox Radio, upon completion of the Pending Transactions, will be one of the ten largest radio broadcasting companies in the United States, based on both net revenues and number of stations. Cox Radio will own or operate, or provide sales and marketing services for, 40 radio stations (26 FM and 14 AM) clustered in 12 markets, including 18 stations to be acquired from NewCity. On a pro forma basis for 1995, Cox Radio will be the number one radio station group ranked by revenue share and audience share in five of its 12 markets. On a pro forma basis, Cox Radio would have generated net revenue of $172 million and broadcast cash flow of $49 million during the twelve month period ending March 31, 1996. Cox Radio, as part of CEI, was a pioneer in radio broadcasting, building its first station in 1934, acquiring its flagship station, WSB-AM (Atlanta), in 1939 and launching its first FM station, WSB-FM (Atlanta), in 1948. Cox Radio seeks to maximize the revenues and broadcast cash flow of its radio stations by operating and developing clusters of stations in demographically attractive and rapidly growing markets, including major markets such as Los Angeles and Sunbelt markets such as Atlanta, Miami, Tampa, Orlando, San Antonio and Birmingham. During the past five years, the 12 markets in which the Company's stations will operate have demonstrated, on an aggregate basis, greater radio advertising revenue growth than the U.S. radio industry as a whole. The Pending Transactions will enhance the clustering of the Company's radio stations; Cox Radio will operate three or more stations in nine of its 12 markets, and a total of 20 of the Company's 40 stations will be clustered in four markets. In addition, the NewCity Acquisition will create a platform for future strategic acquisitions to further cluster radio stations in the Company's markets. As a result of the Company's management, programming and sales efforts, the Company's radio stations are characterized by strong ratings and above average power ratios. In addition, Cox Radio has a track record of acquiring, repositioning and improving the operating performance of previously underperforming stations. Cox Radio's senior operating management, together with the NewCity senior operating management which will join Cox Radio as part of the NewCity Acquisition, will be comprised of six individuals with an average of over 23 years of experience in the radio broadcasting industry, including an average of over 14 years with their respective organizations. The Company believes that this experienced senior management team will be well positioned to manage larger radio station clusters and take advantage of new opportunities arising in the U.S. radio broadcasting industry. The following table sets forth certain information with respect to Cox Radio and its markets:
PRO FORMA COMPANY DATA MARKET DATA ---------------------------------------------------------- ------------------------------ 1990 - NUMBER 1995 COMBINED STATION GROUP 1995 1995 OF ------------------------------------------ RADIO 1995 RADIO STATIONS REVENUE REVENUE AUDIENCE MARKET ARBITRON MARKET ------------ MARKET MARKET MARKET POWER REVENUE MARKET REVENUE MARKET FM AM RANK SHARE SHARE(1) RATIO RANK RANK CAGR - ---------------------------------- --- --- -------- -------- -------- ------ ------- -------- ------- Los Angeles....................... 2 1 4 10.9% 8.8 1.24 1 2 2.7% Atlanta........................... 2 2 1 21.3% 15.9 1.34 10 12 8.3% Miami............................. 2 -- 3 11.3% 8.5 1.33 12 11 5.9% Tampa............................. 2 2 4 11.9% 13.0 0.92 21 21 6.1% Orlando........................... 4 3 1 30.7% 28.5 1.08 26 39 6.3% San Antonio....................... 2 1 4 14.3% 12.8 1.12 29 34 7.6% Louisville........................ 3 -- 5 8.0% 7.0 1.14 45 49 5.8% Birmingham........................ 2 1 1 32.5% 19.1 1.70 51 55 4.9% Dayton............................ 1 1 2 25.5% 19.0 1.34 55 52 4.7% Tulsa............................. 2 1 1 35.5% 26.4 1.34 56 60 7.4% Bridgeport........................ 1 -- 3 21.6% 12.3 1.76 58 111 5.1% Syracuse.......................... 3 2 1 55.3% 34.9 1.58 71 68 0.4%
- --------------- (1) Audience share data based upon all Persons 12+. 1 9 The Company's stations are diversified in terms of format, target audience, geographic location and stage of development. Management believes that a number of the Company's stations have significant growth opportunities or turnaround potential and can therefore be characterized as developing stations. Cox Radio believes these stations can achieve significant broadcast cash flow growth by employing the Company's operating strategy. Management believes that its mix of stations in different stages of development enables it to maximize the Company's growth potential. OPERATING STRATEGY Cox Radio operates its stations in clusters to (i) enhance net revenue growth by increasing the appeal of the Company's radio stations to advertisers and enabling such stations to compete more effectively with other forms of advertising and (ii) achieve operating efficiencies by consolidating broadcast facilities, eliminating duplicative positions in management and production and reducing overhead expenses. In addition, Cox Radio has demonstrated an ability to acquire underperforming stations and develop them into ratings and revenue leaders. This is achieved through the Company's management philosophy which emphasizes (i) market research and targeted programming; (ii) a customer-focused selling strategy; and (iii) marketing and promotional activities. This management philosophy is designed and coordinated by Cox Radio's experienced senior operating management and implemented on a local level by the Company's station managers. Cox Radio invests significant resources to identify and train local managers who are given the responsibility for day-to-day operations of the stations and the flexibility to develop policies that will improve station performance and establish long-term relationships with advertisers. ACQUISITION STRATEGY During the last several years, the Company has implemented its clustering strategy through the acquisition of radio stations in several of its existing markets, and it intends to continue to make acquisitions in the 12 markets in which it will operate following the completion of the Pending Transactions. In the past, the Company has primarily acquired underperforming stations. Cox Radio may also make opportunistic acquisitions in additional markets in which the Company believes that it can cost-effectively achieve a leading position in terms of audience and revenue share. In evaluating acquisition opportunities in additional markets, Cox Radio intends to focus primarily on demographically attractive markets, such as those in the Sunbelt, and markets ranked between ten and 60 in terms of radio advertising revenues. The Company believes that such markets offer the greatest potential for growth relative to the cost of entry. Management also believes that Cox Radio will have the financial resources and management expertise to continue to pursue its acquisition strategy. PENDING TRANSACTIONS Within the last six months, Cox Radio has entered into the following transactions: NEWCITY ACQUISITION In July 1996, Cox Radio agreed to acquire NewCity for an aggregate consideration of approximately $253 million, consisting of approximately $167 million in cash and approximately $86 million in assumption of NewCity debt. The NewCity Acquisition will provide Cox Radio with an additional 18 stations (12 FM and 6 AM): 14 stations in five new markets (Birmingham, Bridgeport, Orlando, San Antonio and Tulsa) and four stations in two existing markets (Atlanta and Syracuse). Three of the five new markets are in the Sunbelt, a region which the Company believes will, over the next several years, demonstrate greater radio advertising revenue growth than the U.S. radio industry as a whole. The acquisition of three radio stations in Syracuse will provide Cox Radio with five stations (three FM and two AM) and a 55% radio revenue share in that market, and the acquisition of four radio stations in Orlando, together with the three stations acquired in the Orlando Acquisition (see below), will provide Cox Radio with seven stations (four FM and three AM) and a 31% radio revenue share in that market. The Company expects NewCity's management group to join Cox Radio, 2 10 providing continuity and management depth to the combined organization. Cox Radio expects to consummate the NewCity Acquisition in the first half of 1997. ORLANDO ACQUISITION In July 1996, in order to expand its cluster of Orlando stations, Cox Radio agreed to exchange its two Chicago radio stations for three Orlando stations (the "Orlando Acquisition") and approximately $20 million in cash. Cox Radio expects to consummate the Orlando Acquisition in the first half of 1997. LOUISVILLE ACQUISITION In June 1996, Cox Radio agreed to acquire one Louisville FM station for $2.5 million in cash (the "Louisville Acquisition"), which will provide Cox Radio with its third FM station and an 8% revenue share in that market. Cox Radio expects to consummate the Louisville Acquisition in the fourth quarter of 1996. MIAMI DISPOSITION In April 1996, Cox Radio agreed to sell its AM station in Miami for $13 million in cash (the "Miami Disposition"). Cox Radio expects to consummate the Miami Disposition in the fourth quarter of 1996. TAMPA ACQUISITION In July 1996, Cox Radio decided to exercise its option to purchase one AM station in Tampa for $1.5 million comprised of $0.8 million in cash and the forgiveness of $0.7 million in amounts due to Cox Radio (the "Tampa Acquisition"). RELATIONSHIP WITH COX ENTERPRISES, INC. Cox Radio is currently an indirect, wholly-owned subsidiary of CEI. CEI, a privately-held corporation headquartered in Atlanta, Georgia, is one of the largest media companies in the United States, with consolidated 1995 revenues of approximately $4 billion. CEI, which has a 98-year history in the media and communications industry and a 62-year history in the radio broadcasting business, publishes 18 daily newspapers, owns and operates six television stations and owns approximately 75% of Cox Communications, Inc. ("CCI"), a publicly-traded broadband communications company (NYSE: COX) with approximately 3.3 million cable television customers. CEI is also the world's largest operator of auto auctions through Manheim Auctions. Immediately prior to the closing of the Offerings, all of CEI's U.S. radio operations will be transferred to Cox Radio (the "Cox Radio Consolidation") and Cox Radio will assume several notes in favor of CEI in the amount of $107.3 million (the "CEI Notes"). Cox Radio will apply $107.3 million of the net proceeds of the Offerings to discharge completely all amounts owed under the CEI Notes. See "Use of Proceeds" and "Certain Relationships and Related Transactions." Upon completion of the Offerings, CEI will own approximately % of the outstanding Common Stock of Cox Radio and % of the voting power of Cox Radio. The principal executive offices of Cox Radio are located at 1400 Lake Hearn Drive, N.E., Atlanta, Georgia 30319 and the Company's telephone number is (404) 843-5000. 3 11 THE OFFERINGS Class A Common Stock offered: U.S. Offering............................... shares International Offering...................... shares Total............................... shares Common Stock to be outstanding after the Offerings: Class A Common Stock(1)..................... shares Class B Common Stock........................ shares Total(1)............................ shares Voting Rights................................. There will be two classes of Common Stock outstanding after the Offerings: Class A Common Stock and Class B Common Stock. Except with respect to voting and conversion, the rights of holders of Class A Common Stock and Class B Common Stock are identical. Each share of Class A Common Stock is entitled to one vote and each share of Class B Common Stock is entitled to ten votes. Class A Common Stock and Class B Common Stock generally vote as a single class with respect to all matters submitted to a vote of stockholders. Each share of Class B Common Stock is convertible into one share of Class A Common Stock at the option of the holder. See "Description of Capital Stock." Use of Proceeds............................... Cox Radio expects to use the net proceeds from the Offerings to repay the CEI Notes, to partially fund the NewCity Acquisition and for general corporate purposes. In order to consummate the NewCity Acquisition, Cox Radio will be required to incur indebtedness. See "Use of Proceeds." Proposed Symbol..................... " "
- --------------- (1) If the Underwriters' over-allotment option were exercised in full, shares of Class A Common Stock would be outstanding after the Offerings. See "Underwriting" and "Description of Capital Stock." Includes shares of restricted stock to be issued to management at the effective time of the Offerings. Does not include shares of Class A Common Stock reserved for issuance under Cox Radio's Long-Term Incentive Plan, Stock Purchase Plan and Directors Restricted Stock Plan (as defined herein), of which shares will be issuable upon exercise of options granted at the effective time of the Offerings at an exercise price per share equal to the initial public offering price. See "Management -- Long-Term Incentive Plan." 4 12 SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION The following pro forma financial data are derived from the Unaudited Pro Forma Combined Statements of Operations and Balance Sheet (the "Pro Forma Financial Data") included elsewhere in this Prospectus. The pro forma combined statements of operations data give effect to the Transactions (as defined herein) as if they had occurred as of January 1, 1995 and the pro forma combined balance sheet data give effect to the Transactions (other than the Prior Louisville Acquisition) as if they had occurred as of March 31, 1996. The Transactions include (i) the acquisition of WRKA-FM and WRVI-FM in Louisville, which were acquired by Cox Radio in January 1996 (the "Prior Louisville Acquisition"); (ii) the acquisition of WHEN-AM and WWHT-FM in Syracuse, which were acquired by Cox Radio in June 1996 (the "Prior Syracuse Acquisition"); (iii) the Orlando Acquisition, the Louisville Acquisition and the Miami Disposition; (iv) the Offerings; and (v) the NewCity Acquisition. The Pro Forma Financial Data do not purport to represent what Cox Radio's results of operations or financial condition would actually have been had the Transactions in fact occurred on such dates or to project Cox Radio's results of operations or financial condition for any future period or at any future date. The Summary Unaudited Pro Forma Financial Information is based on certain assumptions and adjustments described in the Notes to the Unaudited Pro Forma Combined Statements of Operations and Balance Sheet and should be read in conjunction therewith. See also "Management's Discussion and Analysis of the Pro Forma Combined Results of Operations," "Management's Discussion and Analysis of Financial Condition and Results of Operations of Cox Radio," "Management's Discussion and Analysis of Financial Condition and Results of Operations of NewCity," and the Consolidated Financial Statements for each of Cox Radio and NewCity included elsewhere in this Prospectus. Consummation of each of the Pending Transactions is subject to certain conditions, including the approval of the FCC; there can be no assurance that such approval will be obtained or that other required conditions will be satisfied or waived.
PRO FORMA --------------------------------- YEAR ENDED THREE MONTHS DECEMBER 31, ENDED MARCH 31, ------------ ---------------- 1995 1995 1996 ------------ ----- ------ (DOLLARS IN MILLIONS) STATEMENTS OF OPERATIONS DATA: Net revenues(1)............................................. $167.1 $35.9 $ 40.6 Station operating expenses.................................. 120.0 26.8 29.5 Corporate general and administrative expenses............... 4.4 1.1 1.2 Depreciation and amortization............................... 15.4 3.6 3.9 ------------ ----- ------ Operating income............................................ 27.3 4.4 6.0 Interest expense............................................ 20.7 5.0 5.3 Net income (loss)........................................... 1.5 (1.3) (0.3) Net income (loss) per share................................. Number of shares outstanding................................ OTHER OPERATING AND FINANCIAL DATA: Broadcast cash flow(2)...................................... $ 47.1 $ 9.1 $ 11.1 Broadcast cash flow margin(2)............................... 28.2% 25.3% 27.3% EBITDA(2)................................................... $ 42.7 $ 8.0 $ 9.9 After-tax cash flow(2)...................................... 16.9 2.3 3.6 Net debt to EBITDA(3)....................................... -- -- 5.1x BALANCE SHEET DATA (end of period): Cash and cash equivalents................................... $ -- $ -- $ 34.8(4) Intangible assets, net...................................... -- -- 379.4 Total assets................................................ -- -- 495.8 Total debt.................................................. -- -- 260.3 Shareholders' equity........................................ -- -- 200.5
5 13 - --------------- (1) Total revenues less advertising agency commissions. (2) "Broadcast cash flow" consists of operating income plus depreciation and amortization and corporate general and administrative expenses. "Broadcast cash flow margin" is broadcast cash flow as a percentage of net revenues. "EBITDA" is operating income plus depreciation and amortization. "After-tax cash flow" is income (loss) before extraordinary items, plus depreciation and amortization. Although broadcast cash flow, broadcast cash flow margin, EBITDA and after-tax cash flow are not recognized under GAAP, they are accepted by the broadcasting industry as generally recognized measures of performance and are used by analysts who report publicly on the condition and performance of broadcast companies. For the foregoing reasons, the Company believes that these measures are useful to investors. However, investors should not consider these measures to be an alternative to operating income as determined in accordance with GAAP, an alternative to cash flows from operating activities (as a measure of liquidity) or an indicator of the Company's performance under GAAP. (3) For purposes of this calculation, EBITDA is based on pro forma results for the twelve month period ending March 31, 1996. Net debt represents total debt less cash and cash equivalents (including restricted cash). If the Underwriters' over-allotment option is exercised in full, net debt would be $208.5 million and the net debt to EBITDA ratio would be 4.7x. (4) Includes restricted cash of $32.5 million, representing the net proceeds from the Miami Disposition and Orlando Acquisition which, for tax planning purposes, may only be used for the purchase of additional radio properties. See "Unaudited Pro Forma Combined Financial Data." 6 14 SUMMARY HISTORICAL FINANCIAL DATA The following sets forth summary historical financial data for Cox Radio and NewCity for the three years ended December 31, 1993, 1994 and 1995 and the three months ended March 31, 1995 and 1996. The comparability of the historical consolidated financial data reflected herein has been significantly impacted by acquisitions and dispositions. The information presented below is qualified in its entirety by, and should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations of Cox Radio," "Management's Discussion and Analysis of Financial Condition and Results of Operations of NewCity," and the Consolidated Financial Statements for each of Cox Radio and NewCity included elsewhere in this Prospectus.
COX RADIO ------------------------------------------------- THREE MONTHS YEAR ENDED DECEMBER 31, ENDED MARCH 31, ----------------------------- --------------- 1993 1994 1995 1995 1996 ----- ------- ------- ----- ----- (DOLLARS IN MILLIONS) STATEMENTS OF OPERATIONS DATA: Net revenues(1)................................ $95.0 $111.5 $123.6 $25.9 $29.6 Station operating expenses..................... 67.9 76.3 90.0 19.3 21.8 Corporate general and administrative expenses(2)................................. 2.5 2.7 5.9 0.9 1.1 Depreciation and amortization.................. 7.3 6.9 7.2 1.8 2.0 ----- ------- ------- ----- ----- Operating income............................... 17.3 25.6 20.5 3.9 4.7 Net income (loss).............................. (1.1)(3) 11.2 8.2 1.3 1.8 OTHER OPERATING DATA: Broadcast cash flow(4)......................... $27.1 $ 35.2 $ 33.6 (5) $ 6.6 $ 7.8 Broadcast cash flow margin(4).................. 28.5% 31.6 % 27.2 % 25.5% 26.4% EBITDA(4)...................................... $24.6 $ 32.5 $ 27.7 (5) $ 5.7 $ 6.7 After-tax cash flow(4)......................... 13.8 18.1 15.4 3.1 3.8 Number of stations owned or operated or for which services are provided(6).............. 15 16 20 16 20
NEWCITY --------------------------------------------- THREE MONTHS YEAR ENDED DECEMBER 31, ENDED MARCH 31, ------------------------- --------------- 1993 1994 1995 1995 1996 ----- ----- ----- ----- ----- (DOLLARS IN MILLIONS) STATEMENTS OF OPERATIONS DATA: Net revenues(1).................................. $53.3 $52.7(7) $55.6 $12.6 $13.2 Station operating expenses....................... 36.8 36.9 40.7 9.6 9.5 Corporate general and administrative expenses.... 1.9 1.8 1.7 0.5 0.5 Depreciation and amortization.................... 3.8 3.1 3.5 0.7 0.8 ----- ----- ----- ----- ----- Operating income................................. 10.8 10.9 9.7 1.8 2.4 Net income (loss)................................ 11.0(8) 2.1 (0.4) (0.7) (0.3) OTHER OPERATING DATA: Broadcast cash flow(4)........................... $16.5 $15.8(7) $14.9(9) $ 3.0 $ 3.7 Broadcast cash flow margin(4).................... 31.0% 30.0% 26.8% 23.8% 28.0% EBITDA(4)........................................ $14.6 $14.0(7) $13.2(9) $ 2.5 $ 3.2 After-tax cash flow(4)........................... 16.9 5.3 3.1 -- 0.5 Number of stations owned or operated or for which services are provided(6)...................... 14 17 17 17 17
7 15 - --------------- (1) Total revenues less advertising agency commissions. (2) As described in Note 9 to the Consolidated Financial Statements of Cox Radio, certain of Cox Radio's executives participate in CEI's stock-based compensation plan (the "Unit Appreciation Plan" or "UAP"). Because CEI and Cox Radio are private companies, the benefits under the UAP are generally payable in cash. This cash payment option has resulted in charges to compensation expense of $0.9 million, $0.8 million and $1.6 million for the years ended December 31, 1993, 1994 and 1995, respectively, and $0.4 million and $0.6 million for the three months ended March 31, 1995 and 1996, respectively. This compensation expense is included in historical corporate general and administrative expenses. Public companies traditionally implement stock award plans that provide for the issuance of stock to participants and do not result in compensation expense under applicable accounting standards. The Company intends to implement such a plan in 1996 and, therefore, Cox Radio does not expect to incur this expense in future periods. See "Management -- Long-Term Incentive Plan." In addition, year ended December 31, 1995 corporate general and administrative expenses include a nonrecurring corporate charge. (3) Includes a $7.6 million noncash charge for the cumulative effect of accounting changes. See further discussion in Notes 2, 7 and 8 to the Consolidated Financial Statements of Cox Radio. (4) "Broadcast cash flow" consists of operating income plus depreciation and amortization and corporate general and administrative expenses. "Broadcast cash flow margin" is broadcast cash flow as a percentage of net revenues. "EBITDA" is operating income plus depreciation and amortization. "After-tax cash flow" is income (loss) before extraordinary items, plus depreciation and amortization. Although broadcast cash flow, broadcast cash flow margin, EBITDA and after-tax cash flow are not recognized under GAAP, they are accepted by the broadcasting industry as generally recognized measures of performance and are used by analysts who report publicly on the condition and performance of broadcast companies. For the foregoing reasons, the Company believes that these measures are useful to investors. However, investors should not consider these measures to be an alternative to operating income as determined in accordance with GAAP, an alternative to cash flows from operating activities (as a measure of liquidity) or an indicator of the Company's performance under GAAP. (5) Declines in broadcast cash flow and EBITDA from the prior year are due mainly to the impact of the baseball strike on advertiser spending, the cost of sports programming rights in Atlanta, start-up costs related to acquisitions or LMA's consummated in late 1994 and early 1995 and a nonrecurring corporate charge in 1995. See further discussion in "Management's Discussion and Analysis of Financial Condition and Results of Operations of Cox Radio." (6) For the years ended December 31, 1994 and 1995 and the three months ended March 31, 1995 and 1996, WJZF-FM (Atlanta) is included in Cox Radio's number of stations owned or operated or for which sales and marketing services are provided because it was operated by Cox Radio during those periods under an LMA agreement with NewCity. (7) Declines in net revenues, broadcast cash flow and EBITDA from 1993 are due mainly to the sale of WYAY-FM (Atlanta) and the transfer of the operations of WJZF-FM (Atlanta) to Cox Radio pursuant to an LMA. See further discussion in "Management's Discussion and Analysis of Financial Condition and Results of Operations of NewCity." (8) Includes a $15.0 million pre-tax gain on the sale of broadcast property assets. See further discussion in "Management's Discussion and Analysis of Financial Condition and Results of Operations of NewCity." (9) Declines in broadcast cash flow and EBITDA from 1994 are due mainly to the losses incurred from the results of developing stations in Tulsa (KJSR-FM) and Orlando (WZKD-AM) that began operating in January 1995. See further discussion in "Management's Discussion and Analysis of Financial Condition and Results of Operations of NewCity." 8 16 RISK FACTORS Prospective investors should carefully consider the following risk factors, in addition to the other information contained elsewhere in this Prospectus, prior to making an investment in the Class A Common Stock. FAILURE TO CONSUMMATE THE PENDING TRANSACTIONS Although Cox Radio has entered into definitive contracts regarding the NewCity Acquisition and the other Pending Transactions, there can be no assurance that any of the Pending Transactions will be consummated. The consummation of each of the Pending Transactions is subject to certain closing conditions, including filings with the U.S. Department of Justice ("DOJ") and the Federal Trade Commission ("FTC") pursuant to the Hart-Scott-Rodino Act ("HSR") and the receipt of FCC approval. There can be no assurance that FCC approval will be obtained or that the other closing conditions to any of the Pending Transactions will be satisfied or waived. Since CEI owns a television station in Orlando, the Company must obtain waivers of the FCC's radio-television cross-ownership rules in order to complete the NewCity Acquisition insofar as it pertains to NewCity's stations in Orlando and the Orlando Acquisition. Although the Company expects to obtain such waivers, there can be no assurance that such waivers will be granted. In the absence of permanent waivers, the Company will request, and the Company would expect the FCC to grant, temporary waivers of these cross-ownership rules on the condition that Cox Radio divest its ownership of one or more of its radio stations in Orlando within a six-to-eighteen month period following the NewCity Acquisition and the Orlando Acquisition. Since CEI also owns a television station and a newspaper in Atlanta, the Company also must obtain waivers of the FCC's radio-television and radio-newspaper cross-ownership rules in order to complete the NewCity Acquisition as it pertains to NewCity's station in Atlanta. Although Cox Radio may request permanent waivers of such cross-ownership rules, there can be no assurance that such waivers will be granted. In the absence of permanent waivers, the Company will request, and the Company would expect the FCC to grant, temporary waivers of these cross-ownership rules on the condition that Cox Radio divest its ownership of the NewCity Atlanta station within a six-to-eighteen month period following the closing of the NewCity Acquisition. Obtaining the FCC rule waivers, or any further inquiry from the FTC or the DOJ, could delay or prevent consummation of the NewCity Acquisition and the Orlando Acquisition. If any Pending Transaction is not consummated, there can be no assurance that Cox Radio will be able to enter into comparable transactions. Additionally, if the requisite approval from the FCC is obtained, Cox Radio may consummate the Pending Transactions before such approval becomes "final" (that is, before the close of the time period within which aggrieved parties may petition the FCC to, or the FCC may on its own motion, reconsider its consent). If Cox Radio consummates any of the Pending Transactions before the FCC consent becomes "final", and the FCC reconsiders its consent within the applicable time period, it is possible that the FCC would rescind its consent of the Pending Transactions and require the parties in effect to "unwind" part or all of the transaction. Cox Radio is unable to predict whether, if FCC approval for the Pending Transactions is received, the FCC would reconsider its approval or the consequences thereof. However, if FCC approval for the Pending Transactions is received, Cox Radio believes the possibility of the FCC requiring Cox Radio to unwind part or all of the Pending Transactions would be remote, and Cox Radio presently knows no reason why the FCC would take such an action. If part or all of the Pending Transactions were required to be unwound, there can be no assurance as to the effect upon Cox Radio. RISKS ASSOCIATED WITH ACQUISITION STRATEGY In addition to the Pending Transactions, Cox Radio intends to continue to evaluate the acquisition of additional radio stations or radio station groups. Any such acquisition will be subject to FCC approval and FCC limits on the number and location of broadcasting properties that any one person or entity may own. In addition, Cox Radio competes and will continue to compete with many other buyers for the acquisition of 9 17 radio stations. Some of those competitors have greater financial resources than Cox Radio. As a result of these and other factors, there can be no assurance that future acquisitions will be available on attractive terms. While management expects to realize certain operating synergies and cost savings as a result of the Pending Transactions and any future acquisition, there can be no assurance that such synergies and savings will be achieved, that the integration of Cox Radio and new stations or management groups can be accomplished successfully or on a timely basis or that the Company's operating strategy can be implemented. In addition, as a result of the Pending Transactions, management will be required to operate substantially larger radio station groups in certain markets. As a result, the Pending Transactions and any future acquisition may have an adverse affect on Cox Radio's financial position and results of operations. IMPORTANCE OF LOS ANGELES AND ATLANTA RADIO STATIONS In 1995, the Company's three radio stations in Los Angeles and four radio stations in Atlanta generated approximately 35% and 25%, respectively, of Cox Radio's net revenues. On a pro forma basis after giving effect to the Pending Transactions, such radio stations in Los Angeles and Atlanta would have generated approximately 26% and 18%, respectively, of Cox Radio's net revenues in 1995. A significant decline in net revenues from the Company's stations in these markets, as a result of a ratings decline or otherwise, could have a material adverse effect on Cox Radio's financial position and results of operations. COMPETITION Radio broadcasting is a highly competitive business. Each of the Company's radio stations competes for audience share and advertising revenue directly with other radio stations, as well as with other electronic and print media within its respective market. There are typically other well-capitalized firms competing in the same geographic markets as Cox Radio. The financial success of each of the Company's radio stations is dependent principally upon its share of the overall advertising revenue within its geographic market, its promotional and other expenses incurred to obtain that revenue and the economic strength of its geographic market. Radio advertising revenues are, in turn, highly dependent upon audience share. Other stations may change programming formats to compete directly with the Company's stations for listeners and advertisers or launch aggressive promotional campaigns in support of already existing competitive formats. If a competitor, particularly one with substantial financial resources, were to attempt to compete in either of these fashions, ratings at the Company's affected station could be negatively impacted, resulting in lower net revenues. Radio broadcasting is also subject to competition from electronic and print media. Potential advertisers can substitute advertising through broadcast television, cable television systems (which can offer concurrent exposure on a number of cable networks to enlarge the potential audience), daily, weekly, and free-distribution newspapers, other print media, direct mail, and on-line computer services for radio advertising. Competing media commonly target the customers of their competitors, and advertisers regularly shift dollars from radio to these competing media and vice versa. Accordingly, there can be no assurance that any of the Company's radio stations will be able to maintain or increase its current audience share and advertising revenue share. Radio broadcasting is also subject to competition from new media technologies that are being developed or introduced, such as the delivery of audio programming by cable television systems or the introduction of digital audio broadcasting ("DAB"). DAB may deliver multi-channel, multi-format digital radio services with sound quality equivalent to compact discs by satellite to nationwide and regional audiences. Cox Radio cannot predict the effect, if any, that any such new technologies may have generally on the radio broadcasting industry as a whole or on the Company's radio stations. RADIO BROADCASTING INDUSTRY AND ECONOMIC CONDITIONS The profitability of the Company's radio stations is subject to various factors that influence the radio broadcasting industry as a whole. The Company's radio stations may be affected by numerous factors, including changes in audience tastes, priorities of advertisers, new laws, governmental regulations and policies, 10 18 changes in broadcast technical requirements, technological changes and proposals to eliminate the tax deductibility of expenses incurred by advertisers. Cox Radio cannot predict which, if any, of these or other factors might have a significant impact on the radio broadcasting industry in the future, nor can it predict what impact, if any, the occurrence of these or other events might have on Cox Radio's operations. Generally, advertising tends to decline during economic recession or downturn. Consequently, Cox Radio's advertising revenue is likely to be adversely affected by a recession or downturn in the United States economy, the economy of an individual geographic market in which the Company owns or operates radio stations, or provides sales and marketing services for, or other events or circumstances that adversely affect advertising activity. GOVERNMENT REGULATION OF RADIO BROADCASTING INDUSTRY The radio broadcasting industry is subject to extensive and changing regulation. Among other things, the Communications Act of 1934, as amended (the "Communications Act") and FCC rules and policies limit the number of stations that one entity can own in a given market. The Communications Act and FCC rules and policies also require FCC approval for transfers of control of licensees and assignments of FCC licenses. The filing of petitions or complaints against Cox Radio or other FCC licensees could result in the FCC delaying the grant of, or refusing to grant, its consent to the assignment of licenses to or from an FCC licensee or the transfer of control of an FCC licensee. In certain circumstances, the Communications Act and FCC rules will operate to impose limitations on alien ownership and voting of the Common Stock. There can be no assurance that there will not be changes in the current regulatory scheme, the imposition of additional regulations or the creation of new regulatory agencies, which changes could restrict or curtail the ability of Cox Radio to acquire, operate and dispose of stations or, in general, to compete profitably with other operators of radio and other media properties. Moreover, there can be no assurance that there will not be other regulatory changes, including aspects of deregulation, that will result in a decline in the value of the stations operated by Cox Radio or adversely affect Cox Radio's competitive position. See "Business -- Federal Regulation of Radio Broadcasting." Each of the Company's radio stations operates pursuant to one or more licenses issued by the FCC that presently have a maximum term of seven years. The Company's licenses expire at various times from February 1, 1996 to April 1, 2003. Although Cox Radio may apply to renew these licenses, third parties may challenge the Company's renewal applications. While Cox Radio is not aware of facts or circumstances that would prevent the Company from having its current licenses renewed, there can be no assurance that the licenses will be renewed. Failure to obtain the renewal of any of Cox Radio's broadcast licenses or to obtain FCC approval for an assignment or transfer to Cox Radio of a license in connection with a radio station acquisition may have a material adverse effect on the Company's business and operations. In addition, if Cox Radio or any of its officers, Directors or significant stockholders materially violates the FCC's rules and regulations or the Communications Act, is convicted of a felony or is found to have engaged in unlawful anticompetitive conduct or fraud upon another government agency, the FCC may, in response to a petition from a third party or on its own initiative, in its discretion, commence a proceeding to impose sanctions upon Cox Radio which could involve the imposition of monetary penalties, the revocation of Cox Radio's broadcast licenses or other sanctions. If the FCC were to issue an order denying a license renewal application or revoking a license, Cox Radio would be required to cease operating the applicable radio station only after Cox Radio had exhausted all rights to administrative and judicial review without success. CONTROL BY CEI; POTENTIAL CONFLICTS OF INTEREST Prior to the Offerings, CEI, through wholly-owned subsidiaries, beneficially owned 100% of the outstanding Common Stock and 100% of the voting power of Cox Radio, allowing CEI to control all actions taken by Cox Radio. After giving effect to the Offerings, CEI, through wholly-owned subsidiaries, will own approximately % of the outstanding Common Stock and % of the voting power of Cox Radio. As a result, CEI will be able to elect all the members of the Board of Directors of Cox Radio (the "Cox Radio Board") and effect other transactions without the approval of Cox Radio's public stockholders. This voting control may have the effect of discouraging certain types of transactions involving an actual or potential 11 19 change of control of Cox Radio, including transactions in which the holders of Class A Common Stock might otherwise receive a premium for their shares over the then-current market prices, because the consummation of any such change of control would require the consent of CEI. The interests of CEI, which operates businesses in other industries, including television broadcasting, broadband communications, auto auctions and newspapers, may from time to time diverge from the interests of Cox Radio. Conflicts of interest between Cox Radio and CEI could arise with respect to business dealings between them, including potential acquisitions of businesses or properties, the issuance of additional securities, the election of new or additional members of the Cox Radio Board and the payment of dividends by Cox Radio. Cox Radio will form an audit committee of the Cox Radio Board which will consist of independent directors and which will address any potential conflicts of interest that may arise between the Company and CEI. There can be no assurance that any conflicts of interest will be resolved in favor of Cox Radio. DEPENDENCE ON KEY PERSONNEL Cox Radio's business depends upon the continued efforts, abilities and expertise of its executive officers and other key employees, including Robert F. Neil and, subsequent to the consummation of the NewCity Acquisition, Richard A. Ferguson. The loss of the services of any executive officer or other key employee could have a material adverse effect on Cox Radio's financial condition and results of operations. Although there can be no assurance that the Company will be successful in retaining any executive officer or other key employee, the Company's incentive arrangements have been structured to encourage such executive officers and other key employees to remain with the Company. RESTRICTIONS IMPOSED BY NEWCITY DEBT NewCity is, and subsequent to the consummation of the NewCity Acquisition, will continue to be, subject to certain restrictions pursuant to the terms of its 11.375% Senior Subordinated Notes due 2003 (the "NewCity Notes"). See "Description of Indebtedness -- NewCity Notes." Such restrictions could limit NewCity's ability to declare dividends or to incur additional debt. In addition, the change of control contemplated pursuant to the NewCity Acquisition will trigger an obligation on the part of NewCity to offer to repurchase the NewCity Notes at 101% of the principal amount thereof plus accrued and unpaid interest to the date of any such repurchase. If NewCity is required to repurchase any of the NewCity Notes, the Company expects to fund such repurchase through debt financing, including bank financing. SHARES ELIGIBLE FOR FUTURE SALE All outstanding shares of Class A Common Stock other than shares issued in the Offerings, are "restricted securities" as that term is defined in Rule 144 ("Rule 144") under the Securities Act. The Company, its directors, CEI and certain officers of the Company, who will directly or indirectly own shares of Class A Common Stock upon completion of the Offering, have agreed not to, directly or indirectly, offer for sale, sell or otherwise dispose of, or announce the offering of, any shares of Class A Common Stock or any securities convertible into or exercisable or exchangeable for Class A Common Stock for a period of 180 days after the date of this Prospectus without the prior written consent of Lehman Brothers Inc. No prediction can be made as to the effect, if any, that sales of shares of Class A Common Stock or the availability of shares for sale will have on the market price of the Class A Common Stock. Nevertheless, sales of significant numbers of shares of Class A Common Stock in the public market could adversely affect the market price of the Class A Common Stock and could impair the Company's ability to raise capital through an offering of its equity securities. See "Shares Eligible for Future Sale" and "Underwriting." NO PRIOR PUBLIC MARKET Prior to the Offerings, there has been no public market for the Class A Common Stock and there can be no assurance that an active public market will develop or, if one does develop, that it will be maintained. The initial public offering price for the Class A Common Stock will be determined by negotiations among Cox 12 20 Radio and the representatives of the Underwriters based upon the consideration of certain factors set forth herein under "Underwriting." There can be no assurance that the initial public offering price will correspond to the price at which the Class A Common Stock will trade in the public market subsequent to the Offerings. Market conditions in the radio industry may have an adverse impact on the market price of the Class A Common Stock. Furthermore, the stock market typically experiences volatility that affects the market price of companies' securities in ways often unrelated to the operating performance of such companies. These market fluctuations may adversely affect the market price of the Class A Common Stock. DILUTION Persons purchasing shares of Class A Common Stock in the Offerings will sustain immediate dilution in net tangible book value per share. See "Dilution." 13 21 USE OF PROCEEDS The net proceeds from the sale of the shares of Class A Common Stock offered hereby are estimated to be approximately $ million ($ million if the Underwriters' over-allotment option is exercised in full), assuming an initial public offering price of $ per share (the midpoint of the currently anticipated range of the initial public offering price set forth on the cover page of this Prospectus), and after deducting the underwriting discount and estimated offering expenses. Cox Radio intends to use approximately $107 million of such net proceeds to repay all amounts then outstanding under the CEI Notes. The balance of the net proceeds will be available for general corporate purposes and acquisitions, including to partially fund the NewCity Acquisition. Although Cox Radio is repaying indebtedness with the net proceeds of the Offerings, Cox Radio will be required to borrow approximately $166 million to consummate the NewCity Acquisition. Cox Radio expects to be able to obtain the required loan from a syndicate of banks. If such bank financing is not available, the required funds will be loaned by CEI to Cox Radio at market rates. The CEI Notes bear interest at a variable rate of interest equal to the prime rate (as reported by Chase Manhattan Bank, N.A.) plus 1.5% (9.75% as of June 30, 1996) and are repayable in full on December 31, 2005. Borrowings under the CEI Notes relate to operations and acquisitions, including the Prior Syracuse Acquisition and the Louisville Acquisition. See "Certain Relationships and Related Transactions" and "Description of Indebtedness." DIVIDEND POLICY Cox Radio currently intends to retain any future earnings for use in the development and operation of its business. Accordingly, Cox Radio does not expect to pay cash dividends in the foreseeable future. 14 22 DILUTION The net tangible book value (deficit) of Cox Radio's Common Stock as of , 1996 was $ or approximately $ per share. "Net tangible book value (deficit)" per share represents the amount of Cox Radio's tangible assets less total liabilities, divided by shares of Common Stock outstanding. Net tangible book value dilution per share represents the difference between the amount per share paid by purchasers of shares of Class A Common Stock in the Offerings and the as adjusted net tangible book value per share of Class A Common Stock immediately after completion of the Offerings. After giving effect to the sale of shares of Class A Common Stock in the Offerings at an assumed initial public offering price of $ per share (the midpoint of the currently anticipated range of the initial public offering price set forth on the cover page of this Prospectus) and the application of the estimated net proceeds therefrom, the as adjusted net tangible book value of Cox Radio as of , 1996 would have been $ million, or $ per share of Class A Common Stock. This represents an immediate increase in net tangible book value of $ per share to existing stockholders and an immediate dilution in net tangible book value of $ per share to purchasers of Class A Common Stock in the Offerings as illustrated in the following table: Assumed initial public offering price per share.................. $ Net tangible book value (deficit) per share at ...... $ Increase per share to existing stockholders attributable to sale of shares to new investors............................. ------- As adjusted net tangible book value per share after the Offerings...................................................... ------- Net tangible book value dilution per share to new investors(1)... $ =======
The following table sets forth, on an adjusted basis as of , 1996, the difference between the existing shareholders and the purchasers of shares in the Offerings at an assumed initial public offering price of $ per share (the midpoint of the currently anticipated range of the initial public offering price set forth on the cover page of this Prospectus) with respect to the number of shares of Common Stock purchased from Cox Radio, the total consideration paid and the average price per share paid:
AVERAGE SHARES PURCHASED TOTAL CONSIDERATION PRICE ------------------- -------------------- PER NUMBER PERCENT AMOUNT PERCENT SHARE ------- ------- -------- ------- -------- Existing stockholders.................... New investors(1)......................... Total..........................
- --------------- (1) If the Underwriters' over-allotment option were exercised in full, shares of Class A Common Stock would be outstanding after the Offerings. See "Underwriting" and "Description of Capital Stock." Includes shares of restricted stock to be issued to management at the effective time of the Offerings. Does not include shares of Class A Common Stock reserved for issuance under Cox Radio's Long-Term Incentive Plan, Stock Purchase Plan and Directors Restricted Stock Plan (as defined herein), of which shares will be issuable upon exercise of options granted at the effective time of the Offerings at an exercise price per share equal to the initial public offering price. See "Management -- Long-Term Incentive Plan." 15 23 CAPITALIZATION The following table sets forth the capitalization of Cox Radio at March 31, 1996 (i) on an historical basis (including the Prior Louisville Acquisition); (ii) on a pro forma basis after giving effect to the Prior Syracuse Acquisition and the Pending Transactions (exclusive of the NewCity Acquisition); (iii) on a pro forma basis after giving effect to the Prior Syracuse Acquisition, the Pending Transactions (exclusive of the NewCity Acquisition) and the Offerings; and (iv) on a pro forma basis after giving effect to the Transactions (other than the Prior Louisville Acquisition). This table should be read in conjunction with the Unaudited Pro Forma Combined Financial Data and the Consolidated Financial Statements of each of Cox Radio and NewCity included elsewhere in this Prospectus.
MARCH 31, 1996 ----------------------------------------------------------------------- PRO FORMA FOR THE PRIOR SYRACUSE PRO FORMA FOR THE ACQUISITION AND PRIOR SYRACUSE THE PENDING ACQUISITION, THE TRANSACTIONS PENDING TRANSACTIONS (EXCLUSIVE OF THE (EXCLUSIVE OF THE PRO FORMA HISTORICAL NEWCITY NEWCITY ACQUISITION) FOR THE COX RADIO ACQUISITION) AND THE OFFERINGS(1) TRANSACTIONS ------------- ----------------- -------------------- ------------ (DOLLARS IN THOUSANDS) Cash and cash equivalents............... $ 2,052 $ 34,552(2) $ 36,302(2) $ 34,844(2) ========== ============ =============== ========= Amounts due to CEI...................... $ 126,936 $ 134,186 $ -- $ -- Long-term debt (including current maturities)........................... -- -- -- 260,250 Shareholders' equity: Preferred Stock, $1.00 par value; 5,000,000 shares authorized........ -- -- -- -- Common Stock.......................... 1 1 -- -- Class A Common Stock, $1.00 par value; 70,000,000 shares authorized, shares issued and outstanding........... -- -- Class B Common Stock, $1.00 par value; 45,000,000 shares authorized, shares issued and outstanding........... -- -- Additional paid-in capital............ 90,947 90,947 226,884 226,884 Deficit in retained earnings.......... (41,966) (26,414) (26,414) (26,414) ------------- ----------------- ----------- ------------ Total shareholders' equity.... 48,982 64,534 200,470 200,470 ------------- ----------------- ----------- ------------ Total capitalization.......... $ 175,918 $ 198,720 $200,470 $460,720 ========== ============ =============== =========
- --------------- (1) Includes adjustments to reflect a $26.9 million capital contribution by CEI as of June 30, 1996, in the form of the forgiveness of indebtedness owed to CEI. See "Certain Relationships and Related Transactions." (2) Includes restricted cash of $32.5 million, representing the net proceeds from the Miami Disposition and Orlando Acquisition which, for tax planning purposes, may only be used for the purchase of additional radio properties. See "Unaudited Pro Forma Combined Financial Data." 16 24 UNAUDITED PRO FORMA COMBINED FINANCIAL DATA The following unaudited pro forma combined financial data (the "Pro Forma Financial Data") are based on the historical Consolidated Financial Statements of Cox Radio included elsewhere in this Prospectus, adjusted to give pro forma effect to the Transactions. The Transactions include (i) the Prior Louisville Acquisition (consummated in January 1996) and the Prior Syracuse Acquisition (consummated in June 1996); (ii) the Orlando Acquisition, the Louisville Acquisition and the Miami Disposition; (iii) the Offerings; and (iv) the NewCity Acquisition. The Unaudited Pro Forma Statements of Operations give effect to the Transactions as if they had occurred as of January 1, 1995 and the Unaudited Pro Forma Combined Balance Sheet gives effect to the Transactions (other than the Prior Louisville Acquisition) as if they had occurred as of March 31, 1996. The Transactions and the related adjustments are described in the accompanying notes. The Pro Forma Financial Data should be read in conjunction with the historical Consolidated Financial Statements for each of Cox Radio and NewCity included elsewhere in this Prospectus, "Management's Discussion and Analysis of Financial Condition and Results of Operations of Cox Radio" and "Management's Discussion and Analysis of Financial Condition and Results of Operations of NewCity." The pro forma information with respect to the NewCity Acquisition is based on the historical financial statements of NewCity included elsewhere in this Prospectus. The NewCity Acquisition is accounted for under the purchase method of accounting. The total purchase price is allocated to the tangible and identifiable intangible assets and liabilities of the acquired business based upon Cox Radio's preliminary estimates of their fair value, with the remainder allocated to goodwill. The allocation of purchase price is subject to revision when additional information concerning asset and liability valuations is obtained. The Pro Forma Financial Data do not purport to represent what Cox Radio's results of operations or financial condition would actually have been had the Transactions occurred on such dates or to project Cox Radio's results of operations or financial condition for any future period or at any future date. Consummation of each of the Pending Transactions is subject to certain conditions, including the approval of the FCC; there can be no assurance that such approval will be obtained or that other required conditions will be satisfied or waived. See "Risk Factors." 17 25 COX RADIO, INC. UNAUDITED PRO FORMA COMBINED BALANCE SHEET MARCH 31, 1996
PRO FORMA FOR PRO FORMA PRO FORMA FOR THE PRIOR ADJUSTMENTS FOR THE PRIOR SYRACUSE THE PRIOR SYRACUSE ACQUISITION, SYRACUSE ACQUISITION THE PENDING ACQUISITION AND AND THE TRANSACTIONS THE PENDING PENDING (EXCLUSIVE OF TRANSACTIONS TRANSACTIONS PRO FORMA THE NEWCITY (EXCLUSIVE OF (EXCLUSIVE OF ADJUSTMENTS ACQUISITION) HISTORICAL THE NEWCITY THE NEWCITY FOR THE AND THE HISTORICAL COX RADIO ACQUISITION)(1) ACQUISITION) OFFERINGS(2) OFFERINGS NEWCITY ----------- --------------- ------------- ------------ ------------- ---------- (DOLLARS IN THOUSANDS) ASSETS CURRENT ASSETS: Cash and cash equivalents... $ 2,052 $ -- $ 2,052 $ 120,000 $ 3,802 $ 292 (11,000) (107,250) Restricted cash.......... -- 12,750(a) 32,500 -- 32,500 -- 19,750(b) Accounts and notes receivable, less allowance for doubtful accounts...... 25,105 -- 25,105 -- 25,105 9,816 Prepaid expenses and other current assets........ 5,296 -- 5,296 -- 5,296 2,958 ---------- ------- ----------- ---------- ----------- -------- Total current assets.... 32,453 32,500 64,953 1,750 66,703 13,066 ---------- ------- ----------- ---------- ----------- -------- Plant and equipment, net............. 29,087 (2,041)(c) 27,046 -- 27,046 9,992 Intangible assets, net..... 132,965 1,874(c) 134,839 -- 134,839 59,540 Other assets..... 1,175 -- 1,175 -- 1,175 178 ---------- ------- ----------- ---------- ----------- -------- Total Assets.... $ 195,680 $32,333 $ 228,013 $ 1,750 $ 229,763 $ 82,776 ========== ======= =========== ========== =========== ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt.......... $ -- $ -- $ -- $ -- $ -- $ 1,450 Accounts payable and accrued expenses...... 10,740 -- 10,740 -- 10,740 6,372 Income taxes payable....... 1,694 -- 1,694 -- 1,694 954 Other current liabilities... 1,021 -- 1,021 -- 1,021 1,930 ---------- ------- ----------- ---------- ----------- -------- Total current liabilities... 13,455 -- 13,455 -- 13,455 10,706 ---------- ------- ----------- ---------- ----------- -------- Long-term debt... -- -- -- -- -- 84,347 Amounts due to Cox Enterprises, Inc............. 126,936 4,650(d) 134,186 (134,186) -- -- 2,600(e) Deferred income taxes........... 6,307 9,531(f) 15,838 -- 15,838 -- ---------- ------- ----------- ---------- ----------- -------- Total liabilities... 146,698 16,781 163,479 (134,186) 29,293 95,053 ---------- ------- ----------- ---------- ----------- -------- Redeemable preferred stock........... -- -- -- -- -- 11,598 SHAREHOLDERS' EQUITY: Preferred stock, $1.00 par value; 5,000,000 shares authorized...... -- -- -- -- -- -- Common Stock..... 1 -- 1 -- -- 5 Class A Common Stock, $1.00 par value; 70,000,000 shares authorized; shares outstanding..... -- -- -- Class B Common Stock, $1.00 par value; 45,000,000 shares authorized; shares outstanding..... -- -- -- Additional paid-in capital......... 90,947 -- 90,947 109,000 226,884 -- 26,936 Deficit in retained earnings........ (41,966) 15,552(f) (26,414) -- (26,414) (23,240) Note receivable from shareholders.... -- -- -- -- -- (640) ---------- ------- ----------- ---------- ----------- -------- Total shareholders' equity.... 48,982 15,552 64,534 135,936 200,470 (23,875) ---------- ------- ----------- ---------- ----------- -------- Total Liabilities and Shareholders' Equity.... $ 195,680 $32,333 $ 228,013 $ 1,750 $ 229,763 $ 82,776 ========== ======= =========== ========== =========== ======== PRO FORMA ADJUSTMENTS FOR PRO FORMA NEWCITY FOR ACQUISITION(3) TRANSACTIONS --------------- ------------ CURRENT ASSETS: Cash and cash equivalents... $ (1,750) (a) $ 2,344 Restricted cash.......... -- 32,500 Accounts and notes receivable, less allowance for doubtful accounts...... -- 34,921 Prepaid expenses and other current assets........ -- 8,254 -------- -------- Total current assets.... (1,750) 78,019 -------- -------- Plant and equipment, net............. -- 37,038 Intangible assets, net..... 185,060 (b) 379,439 Other assets..... -- 1,353 -------- -------- Total Assets.... $ 183,310 $495,849 ======== ======== CURRENT LIABILITIES: Current portion of long-term debt.......... $ -- $ 1,450 Accounts payable and accrued expenses...... -- 17,112 Income taxes payable....... -- 2,648 Other current liabilities... -- 2,951 -------- -------- Total current liabilities... -- 24,161 -------- -------- Long-term debt... 165,453 (c) 258,800 9,000 (b) Amounts due to Cox Enterprises, Inc............. -- -- Deferred income taxes........... (3,420) (b) 12,418 -------- -------- Total liabilities... 171,033 295,379 -------- -------- Redeemable preferred stock........... (11,598)(d) -- SHAREHOLDERS' EQUITY: Preferred stock, $1.00 par value; 5,000,000 shares authorized...... -- -- Common Stock..... (5)(d) -- Class A Common Stock, $1.00 par value; 70,000,000 shares authorized; shares outstanding..... Class B Common Stock, $1.00 par value; 45,000,000 shares authorized; shares outstanding..... Additional paid-in capital......... -- 226,884 Deficit in retained earnings........ 23,240 (d) (26,414) Note receivable from shareholders.... 640 (d) -- -------- -------- Total shareholders' equity.... 23,875 200,470 -------- -------- Total Liabilities and Shareholders' Equity.... $ 183,310 $495,849 ======== ========
18 26 NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET (1) To reflect the pro forma effect of the Prior Syracuse Acquisition and the Pending Transactions (exclusive of the NewCity Acquisition): (a) To reflect the pending sale of WIOD-AM (Miami) pursuant to an April 1996 asset purchase agreement for $13.0 million less estimated fees and expenses (the Miami Disposition). Use of the cash proceeds from the sale is restricted for the purchase of additional radio stations due to tax considerations. The sale is expected to close in the last quarter of 1996. See also (c) below. (b) To reflect the proceeds (net of related expenses) from the pending exchange of WCKG-FM and WYSY-FM (Chicago) for WHOO-AM, WHTQ-FM and WMMO-FM (Orlando) and approximately $20.0 million in cash, subject to certain adjustments, pursuant to a July 1996 asset exchange agreement (the Orlando Acquisition). Use of the cash proceeds from the sale is restricted for the purchase of additional radio stations due to tax considerations. The transaction is expected to close in the first half of 1997. See also (c) below. (c) To reflect the net effect on net plant and equipment and intangibles of the Miami Disposition, the Orlando Acquisition, the Prior Syracuse Acquisition and the Louisville Acquisition:
NET PLANT AND EQUIPMENT INTANGIBLES TOTAL ------------- ----------- -------- (DOLLARS IN THOUSANDS) Stations acquired: Syracuse.............................................. $ 532 $ 4,118 $ 4,650 Louisville............................................ -- 2,600 2,600 Orlando............................................... 3,551 16,699 20,250 Stations disposed of: Miami................................................. (4,714) (5,949) (10,663) Chicago............................................... (1,410) (15,594) (17,004) ------------- ----------- -------- $(2,041) $ 1,874 $ (167) ============= ========== ========
Given the significant monetary consideration to be received, the sale of the Chicago stations and the purchase of the Orlando stations (Orlando Acquisition) will be recorded at fair value. (d) To reflect the acquisition of WHEN-AM and WWHT-FM (Syracuse) in June 1996 for $4.5 million plus estimated acquisition costs (the Prior Syracuse Acquisition). The Prior Syracuse Acquisition was financed through the Acquisition Notes. See purchase price allocation at (c) above. (e) To reflect the pending acquisition of WXNU-FM (Louisville) pursuant to a June 1996 asset purchase agreement for $2.5 million plus estimated acquisition costs (the Louisville Acquisition). The acquisition is expected to close in the last quarter of 1996, and will be financed through the Acquisition Notes. See purchase price allocation at (c) above. (f) To reflect the estimated financial reporting gains and related deferred taxes to be recorded on the Miami Disposition and Orlando Acquisition (in thousands): Net cash proceeds........................................................................ $ 32,500 Estimated fair value of Orlando.......................................................... 20,250 -------- Total consideration received..................................................... 52,750 Less net carrying amount of assets: Plant and equipment.................................................................... (6,124) Intangibles............................................................................ (21,543) -------- Pre-tax gain............................................................................. 25,083 Less related taxes....................................................................... (9,531) -------- Net after-tax gain............................................................... $ 15,552 ========
(2) To reflect the proceeds of the Offerings of $120.0 million, the estimated costs associated with the Offerings of $11.0 million and the repayment of $107.3 million owed to CEI under the CEI Notes. Also reflects a $26.9 million capital contribution by CEI as of June 30, 1996, in the form of forgiveness of indebtedness owed to CEI. See "Certain Relationships and Related Transactions." 19 27 NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET -- (CONTINUED) (3) To reflect the adjustments to record the NewCity Acquisition and the application of purchase accounting to the accounts of NewCity, as follows: (a) To reflect the partial funding of the NewCity Acquisition with an estimated $1.8 million in net proceeds remaining from the Offerings. See (c) below. (b) To record the excess of the NewCity purchase price over the fair value of tangible assets acquired and liabilities assumed (in thousands): Purchase price plus net liabilities assumed: Cash (including estimated working capital adjustment of $2,000)............................ $166,203 Assumption of NewCity debt................................................................. 85,797 Acquisition and other related costs........................................................ 1,000 -------- Total................................................................................ 253,000 Estimated fair value of tangible assets acquired and liabilities assumed: Plant and equipment...................................................................... (9,992) Long-term debt premium................................................................... 9,000 Deferred tax asset....................................................................... (3,420) Other working capital accounts........................................................... (3,988) -------- (8,400) -------- Excess of purchase price over tangible assets acquired and liabilities assumed............. 244,600 -------- Less previously recorded intangibles....................................................... (59,540) -------- Pro forma adjustment to intangibles.................................................. $185,060 ========
Purchase accounting requires the fair valuation of $75 million aggregate principal amount of NewCity's 11.375% Senior Subordinated Notes due 2003, which is estimated to be $84 million based on market rates and assuming the notes are redeemed on November 1, 1998 at a redemption price of 104.266%. The debt premium gives rise to a deferred tax asset of $3.4 million at an effective tax rate of 38%. (c) To reflect the partial financing of the NewCity Acquisition with $165.5 million in borrowings under a new bank credit facility to be negotiated prior to the consummation of the acquisition. (d) To reflect the elimination of the redeemable preferred stock and the historical equity accounts of NewCity. 20 28 COX RADIO, INC. UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995 ------------------------------------------------------------------------------ PRO FORMA ADJUSTMENTS PRO FORMA FOR FOR THE PRIOR THE PRIOR SYRACUSE SYRACUSE ACQUISITION AND ACQUISITION THE PENDING AND THE PRO FORMA TRANSACTIONS PENDING ADJUSTMENTS FOR PRO FORMA FOR (EXCLUSIVE TRANSACTIONS THE PRIOR THE PRIOR OF THE (EXCLUSIVE OF HISTORICAL LOUISVILLE LOUISVILLE NEWCITY THE NEWCITY COX RADIO ACQUISITION(1) ACQUISITION ACQUISITION)(2) ACQUISITION) ---------- --------------- ------------- --------------- ------------- (DOLLARS IN THOUSANDS) Net revenues................................. $ 123,572 $ 2,498 $ 126,070 $ (18,850) $ 107,220 Costs and expenses: Operating.................................. 41,831 489 42,320 (8,967) 33,353 Selling, general and administrative........ 48,131 1,271 49,402 (9,780) 39,622 Corporate general and administrative....... 5,853 -- 5,853 -- 5,853 Depreciation and amortization.............. 7,247 632 7,879 (456) 7,423 ---------- ------- ------------- --------------- ------------- Operating income............................. 20,510 106 20,616 353 20,969 Interest expense............................. (5,974) -- (5,974) 1,212 (11,047) (6,285)(3) Other, net................................... (147) (6) (153) 85 (68) ---------- ------- ------------- --------------- ------------- Income (loss) before income taxes............ 14,389 100 14,489 (4,635) 9,854 Income taxes(10)............................. 6,226 38 6,264 (1,761) 4,503 ---------- ------- ------------- --------------- ------------- Net income (loss)............................ $ 8,163 $ 62 $ 8,225 $ (2,874) $ 5,351 ========= ============ =========== ============ ==========
YEAR ENDED DECEMBER 31, 1995 ------------------------------------------------------------------------------------------------------ PRO FORMA PRO FORMA FOR THE PRIOR FOR THE PRIOR SYRACUSE SYRACUSE ACQUISITION, ACQUISITION AND THE OFFERINGS THE PENDING AND THE PENDING TRANSACTIONS PRO FORMA TRANSACTIONS PRO FORMA (EXCLUSIVE OF ADJUSTMENTS (EXCLUSIVE OF ADJUSTMENTS THE NEWCITY FOR THE THE NEWCITY HISTORICAL FOR NEWCITY PRO FORMA FOR ACQUISITION) OFFERINGS ACQUISITION) NEWCITY ACQUISITION(4) TRANSACTIONS --------------- ----------- --------------- ---------- -------------- ---------------- (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) Net revenues............. $ 107,220 $ -- $ 107,220 $ 55,636 $ 4,230 $167,086 Costs and expenses: Operating.............. 33,353 -- 33,353 20,059 2,316 55,728 Selling, general and administrative....... 39,622 -- 39,622 20,654 3,990 64,266 Corporate general and administrative....... 5,853 (3,646)(5) 2,207 1,745 418 4,370 Depreciation and amortization......... 7,423 -- 7,423 3,510 4,461(6) 15,394 --------------- ----------- --------------- ---------- -------------- ---------------- Operating income......... 20,969 3,646 24,615 9,668 (6,955) 27,328 Interest expense......... (11,047) 11,047(7) -- (9,817) (11,582)(8) (20,668) 731(9) Other, net............... (68) -- (68) -- (49) (117) --------------- ----------- --------------- ---------- -------------- ---------------- Income (loss) before income taxes........... 9,854 14,693 24,547 (149) (17,855) 6,543 Income taxes(10)......... 4,503 5,583 10,086 249 (5,322) 5,013 --------------- ----------- --------------- ---------- -------------- ---------------- Net income (loss)........ $ 5,351 $ 9,110 $ 14,461 $ (398) $(12,533) $ 1,530 ============ ========== ============ ======== ============ ============= Pro forma per share data: Earnings per share..... $ ============= Average shares outstanding.......... =============
21 29 COX RADIO, INC. UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 --------------------------------------------------------------------------------- PRO FORMA ADJUSTMENTS FOR THE PRIOR PRO FORMA SYRACUSE FOR THE PRIOR ACQUISITION AND SYRACUSE THE PENDING ACQUISITION AND PRO FORMA TRANSACTIONS THE PENDING ADJUSTMENTS FOR PRO FORMA FOR (EXCLUSIVE OF TRANSACTIONS THE PRIOR THE PRIOR THE (EXCLUSIVE OF HISTORICAL LOUISVILLE LOUISVILLE NEWCITY THE NEWCITY COX RADIO ACQUISITION(1) ACQUISITION ACQUISITION)(2) ACQUISITION) ---------- --------------- ------------- --------------- ---------------- (DOLLARS IN THOUSANDS) Net revenues............................... $ 29,568 $ -- $ 29,568 $ (3,303) $ 26,265 Costs and expenses: Operating................................ 9,440 -- 9,440 (1,360) 8,080 Selling, general and administrative...... 12,343 -- 12,343 (2,104) 10,239 Corporate general and administrative..... 1,103 -- 1,103 -- 1,103 Depreciation and amortization............ 1,982 -- 1,982 1 1,983 ---------- ------- ------------- --------------- -------- Operating income........................... 4,700 -- 4,700 160 4,860 Interest expense........................... (1,467) -- (1,467) 292 (2,815) (1,640)(3) Other, net................................. (96) -- (96) -- (96) ---------- ------- ------------- --------------- -------- Income (loss) before income taxes.......... 3,137 -- 3,137 (1,188) 1,949 Income taxes(10)........................... 1,325 -- 1,325 (451) 874 ---------- ------- ------------- --------------- -------- Net income (loss).......................... $ 1,812 $ -- $ 1,812 $ (737) $ 1,075 ========= ============ =========== ============ ============
THREE MONTHS ENDED MARCH 31, 1996 ------------------------------------------------------------------------------------------------------ PRO FORMA PRO FORMA FOR THE PRIOR FOR THE PRIOR SYRACUSE SYRACUSE ACQUISITION, THE ACQUISITION AND OFFERINGS AND THE THE PENDING PENDING TRANSACTIONS PRO FORMA TRANSACTIONS PRO FORMA (EXCLUSIVE OF ADJUSTMENTS (EXCLUSIVE OF THE ADJUSTMENTS THE NEWCITY FOR THE NEWCITY HISTORICAL FOR NEWCITY PRO FORMA FOR ACQUISITION) OFFERINGS ACQUISITION) NEWCITY ACQUISITION(4) TRANSACTIONS ----------------- ----------- ----------------- ---------- -------------- -------------- (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) Net revenues............. $26,265 $ -- $ 26,265 $ 13,157 $ 1,186 $ 40,608 Costs and expenses: Operating.............. 8,080 -- 8,080 4,163 614 12,857 Selling, general and administrative....... 10,239 -- 10,239 5,303 1,078 16,620 Corporate general and administrative....... 1,103 (562)(5) 541 487 166 1,194 Depreciation and amortization......... 1,983 -- 1,983 817 1,145(6) 3,945 -------- ----------- ----------------- ---------- -------------- -------------- Operating income......... 4,860 562 5,422 2,387 (1,817) 5,992 Interest expense......... (2,815) 2,815(7) -- (2,564) (2,895)(8) (5,276) 183(9) Other, net............... (96) -- (96) -- -- (96) -------- ----------- ----------------- ---------- -------------- -------------- Income (loss) before income taxes........... 1,949 3,377 5,326 (177) (4,529) 620 Income taxes(10)......... 874 1,283 2,157 112 (1,356) 913 -------- ----------- ----------------- ---------- -------------- -------------- Net income (loss)........ $ 1,075 $ 2,094 $ 3,169 $ (289) $ (3,173) $ (293) ============= ========== ============= ======== ============ ============ Pro forma per share data: Earnings per share..... $ ============ Average shares outstanding.......... ============
22 30 COX RADIO, INC. UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995 ---------------------------------------------------------------------------------- PRO FORMA ADJUSTMENTS FOR THE PRIOR PRO FORMA SYRACUSE FOR THE PRIOR ACQUISITION AND SYRACUSE THE PENDING ACQUISITION AND PRO FORMA TRANSACTIONS THE PENDING ADJUSTMENTS FOR PRO FORMA FOR (EXCLUSIVE TRANSACTIONS THE PRIOR THE PRIOR OF THE (EXCLUSIVE OF HISTORICAL LOUISVILLE LOUISVILLE NEWCITY THE NEWCITY COX RADIO ACQUISITION(1) ACQUISITION ACQUISITION)(2) ACQUISITION) ---------- --------------- ------------- --------------- ----------------- (DOLLARS IN THOUSANDS) Net revenues............................. $ 25,856 $ 478 $ 26,334 $ (3,788) $22,546 Costs and expenses: Operating.............................. 8,150 142 8,292 (1,861) 6,431 Selling, general and administrative.... 11,130 297 11,427 (2,320) 9,107 Corporate general and administrative... 879 -- 879 -- 879 Depreciation and amortization.......... 1,841 158 1,999 (262) 1,737 ---------- ------- ------------- --------------- -------- Operating income......................... 3,856 (119) 3,737 655 4,392 Interest expense......................... (1,427) -- (1,427) 288 (2,681) (1,542)(3) Other, net............................... (45) (17) (62) -- (62) ---------- ------- ------------- --------------- -------- Income (loss) before income taxes........ 2,384 (136) 2,248 (599) 1,649 Income taxes(10)......................... 1,120 (52) 1,068 (228) 840 ---------- ------- ------------- --------------- -------- Net income (loss)........................ $ 1,264 $ (84) $ 1,180 $ (371) $ 809 ========= ============ =========== ============ ===============
THREE MONTHS ENDED MARCH 31, 1995 ---------------------------------------------------------------------------------------------------------- PRO FORMA PRO FORMA FOR THE PRIOR FOR THE PRIOR SYRACUSE SYRACUSE ACQUISITION, THE ACQUISITION AND OFFERINGS AND THE THE PENDING PENDING TRANSACTIONS PRO FORMA TRANSACTIONS PRO FORMA (EXCLUSIVE OF ADJUSTMENTS (EXCLUSIVE OF THE ADJUSTMENTS THE NEWCITY FOR THE NEWCITY HISTORICAL FOR NEWCITY PRO FORMA FOR ACQUISITION) OFFERINGS ACQUISITION) NEWCITY ACQUISITION(4) TRANSACTIONS ----------------- ----------- ------------------- ---------- -------------- ---------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Net revenues......... $22,546 $ -- $ 22,546 $ 12,645 $ 672 $ 35,863 Costs and expenses: Operating.......... 6,431 -- 6,431 4,193 591 11,215 Selling, general and administrative... 9,107 -- 9,107 5,446 984 15,537 Corporate general and administrative... 879 (412)(5) 467 531 104 1,102 Depreciation and amortization..... 1,737 -- 1,737 724 1,191(6) 3,652 -------- ----------- ---------- ---------- -------------- ---------------- Operating income..... 4,392 412 4,804 1,751 (2,198) 4,357 Interest expense..... (2,681) 2,681(7) -- (2,288) (2,895)(8) (5,000) 183(9) Other, net........... (62) -- (62) -- -- (62) -------- ----------- ---------- ---------- -------------- ---------------- Income (loss) before income taxes....... 1,649 3,093 4,742 (537) (4,910) (705) Income taxes(10)..... 840 1,176 2,016 124 (1,500) 640 -------- ----------- ---------- ---------- -------------- ---------------- Net income (loss).... $ 809 $ 1,917 $ 2,726 $ (661) $ (3,410) $ (1,345) ============= ========== ============== ======== ============ ============= Pro forma per share data: Earnings per share............ $ ============= Average shares outstanding...... =============
23 31 NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS (1) To reflect the pro forma effect of the operations of WRKA-FM and WRVI-FM (Louisville) (Prior Louisville Acquisition), which were acquired in January 1996, as if such acquisitions were consummated as of January 1, 1995. Since the acquisition took place in early January 1996, no pro forma adjustments for historical operations were made for the three months ended March 31, 1996 due to immateriality. In addition, no pro forma adjustment was made for interest expense as the purchase was financed through non-interest bearing intercompany advances from CEI. Pro forma adjustments have been made for depreciation and amortization resulting from the allocation of the $8.7 million purchase price. The pro forma adjustments for the Prior Louisville Acquisition are as follows:
PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA ---------- ----------- --------- (DOLLARS IN THOUSANDS) Year ended December 31, 1995: Net revenues.............................................................. $2,498 $ -- $ 2,498 Costs and expenses: Operating............................................................... 489 -- 489 Selling, general and administrative..................................... 1,271 -- 1,271 Depreciation and amortization........................................... 349 283 632 Other, net................................................................ (6) -- (6) Three months ended March 31, 1995: Net revenues.............................................................. 478 -- 478 Costs and expenses: Operating............................................................... 142 -- 142 Selling, general and administrative..................................... 297 -- 297 Depreciation and amortization........................................... 99 59 158 Other, net................................................................ (17) -- (17)
No pro forma adjustments have been made for KACE-FM (Los Angeles), acquired in August 1995, as the station was operated by the Company pursuant to an LMA since August 1994. In addition, no pro forma adjustments have been made for WCNN-AM (Atlanta), operated by the Company pursuant to an LMA since April 1995, due to immateriality. No pro forma adjustments have been made for the Tampa Acquisition as WFNS-AM has been operated under a JSA since June 1995 and due to immateriality. 24 32 NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS -- (CONTINUED) (2) To reflect the pro forma effect of the Prior Syracuse Acquisition and the Pending Transactions (exclusive of the NewCity Acquisition). Pro forma adjustments have been made for depreciation and amortization resulting from purchase price allocations for the acquisition of WHEN-AM and WWHT-FM (Prior Syracuse Acquisition) and the acquisition of WHOO-AM, WHTQ-FM, and WMMO-FM (Orlando Acquisition). In addition, adjustments have been made to reflect the estimated fees associated with LMAs with NewCity for the operation of the Syracuse and Orlando stations. The pro forma adjustments are set forth as follows:
DISPOSITIONS ACQUISITIONS TOTAL -------------------- -------------------- PRO FORMA MIAMI CHICAGO ORLANDO SYRACUSE ADJUSTMENTS ------- -------- ------- -------- ----------- (DOLLARS IN THOUSANDS) Year ended December 31, 1995: Net Revenues....................................... $(7,723) $(13,227) $1,500 $600 $ (18,850) Costs and expenses: Operating........................................ (5,630) (3,337) -- -- (8,967) Selling, general and administrative.............. (3,142) (6,638) -- -- (9,780) Depreciation and amortization.................... (443) (1,093) 895 185 (456) Interest........................................... 285 927 -- -- 1,212 Other, net......................................... 31 54 -- -- 85 Three months ended March 31, 1996: Net Revenues....................................... $(1,589) $ (2,239) $ 375 $150 $ (3,303) Costs and expenses: Operating........................................ (696) (664) -- -- (1,360) Selling, general and administrative.............. (679) (1,425) -- -- (2,104) Depreciation and amortization.................... (109) (192) 254 48 1 Interest........................................... 68 224 -- -- 292 Three months ended March 31, 1995: Net Revenues....................................... $(1,322) $ (2,991) $ 375 $150 $ (3,788) Costs and expenses: Operating........................................ (1,063) (798) -- -- (1,861) Selling, general and administrative.............. (724) (1,596) -- -- (2,320) Depreciation and amortization.................... (109) (355) 156 46 (262) Interest........................................... 67 221 -- -- 288
The pro forma results do not include the estimated nonrecurring after-tax gains of $15.6 million from the Miami Disposition and the Orlando Acquisition described in Note 1 to the Unaudited Pro Forma Combined Balance Sheet. (3) To reflect that, of the $134.2 million owed by Cox Radio to CEI as of June 30, 1996, $26.9 million was contributed by CEI to the capital of Cox Radio and the remaining $107.3 million was evidenced by the CEI Notes. See "Business -- Organizational History." The CEI Notes bear interest at the prime rate (as reported by Chase Manhattan Bank, N.A.) plus 1.5%. Pro forma adjustments to interest expense were $6.3 million, $1.6 million and $1.5 million for the year ended December 31, 1995, and the three months ended March 31, 1996 and 1995, respectively. The assumed interest rates were 10.3%, 10.5% and 10.0% for the year ended December 31, 1995, and the three months ended March 31, 1996 and 1995, respectively. 25 33 NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS -- (CONTINUED) (4) To reflect the effect of the historical operations of the Syracuse and the Orlando stations which are being operated by NewCity pursuant to LMAs prior to the NewCity Acquisition, and the corresponding elimination of LMA fees paid by NewCity to the Company. The pro forma adjustments are set forth as follows:
HISTORICAL TOTAL ------------------ ELIMINATION PRO FORMA ORLANDO SYRACUSE OF LMA FEES ADJUSTMENTS ------- -------- ----------- ----------- (DOLLARS IN THOUSANDS) Year ended December 31, 1995: Net Revenues................................................ $5,632 $698 $(2,100) $ 4,230 Cost and expenses: Operating................................................. 1,488 828 -- 2,316 Selling, general and administrative....................... 3,281 709 -- 3,990 Corporate general and administrative...................... 418 -- -- 418 Other, net.................................................. (39) (10) -- (49) Three months ended March 31, 1996: Net Revenues................................................ $1,570 $141 $ (525) $ 1,186 Costs and expenses: Operating................................................. 448 166 -- 614 Selling, general and administrative....................... 931 147 -- 1,078 Corporate general and administrative...................... 166 -- -- 166 Three months ended March 31, 1995: Net Revenues................................................ $1,050 $147 $ (525) $ 672 Costs and expenses: Operating................................................. 390 201 -- 591 Selling, general and administrative....................... 810 174 -- 984 Corporate general and administrative...................... 104 -- -- 104
(5) To eliminate compensation expense historically allocated to Cox Radio by CEI under the Unit Appreciation Plan, which was included in corporate general and administrative expenses. As a result of the Offerings, Cox Radio expects to implement a Long-Term Incentive Plan in 1996 that provides for the issuance of stock to participants that will not result in compensation expense under applicable accounting standards. Therefore, going forward, Cox Radio does not expect to incur this expense in future periods. See "Management -- Cox Enterprises, Inc. Unit Appreciation Plan" and "Long-Term Incentive Plan." Also reflects the elimination of a nonrecurring corporate charge for the year ended December 31, 1995. (6) To record additional amortization expense related to approximately $244.6 million in intangibles arising from the NewCity Acquisition, net of the amount of amortization previously recorded in the historical financial statements of NewCity. (7) To adjust interest expense resulting from the repayment of the CEI Notes from a portion of the net proceeds of the Offerings. See "Use of Proceeds" and "Certain Relationships and Related Transactions." The net reduction in interest expense was limited to Cox Radio's pro forma interest expense recorded prior to the Offerings. (8) To adjust interest expense to reflect borrowings of approximately $165.5 million under a bank credit facility to be entered into to finance a portion of the NewCity Acquisition, at an estimated interest rate under the facility of 7% for all periods presented. A fluctuation of 0.25% in the estimated interest rate would impact interest expense by $0.4 million and $0.1 million for the year and three month periods, respectively. (9) To adjust interest expense to reflect the amortization of the debt premium as a result of recording the NewCity debt at fair value. See Note 3 to Unaudited Pro Forma Combined Balance Sheet. (10) An effective tax rate of 38% was used to calculate the adjustments reflected in Notes 1 through 5 and 7 through 9. No tax effect is reflected for the adjustment in Note 6 because the amortization of intangibles arising from the NewCity Acquisition is not deductible for tax purposes. 26 34 SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA COX RADIO The following selected financial data are derived from the Consolidated Financial Statements of Cox Radio. The data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations of Cox Radio" and the Consolidated Financial Statements of Cox Radio included elsewhere in this Prospectus. The statement of operations data and other operating and financial data for the years ended December 31, 1993, 1994 and 1995 and the balance sheet data as of December 31, 1994 and 1995 have been derived from audited consolidated financial statements of Cox Radio. The statement of operations data and other operating and financial data for the years ended December 31, 1991 and 1992 and the three months ended March 31, 1995 and 1996 and the balance sheet data as of December 31, 1991, 1992 and 1993 and as of March 31, 1995 and 1996 have been derived from unaudited Consolidated Financial Statements of Cox Radio, which, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of financial position at such dates and results of operations for such periods. Operating results for the three months ended March 31, 1996 are not necessarily indicative of the results that may be expected for the entire year ended December 31, 1996.
THREE MONTHS YEAR ENDED DECEMBER 31, ENDED MARCH 31, -------------------------------------------------- ----------------- 1991 1992 1993 1994 1995 1995 1996 ------ ------ ------ ------ ------ ------ ------ (DOLLARS IN MILLIONS) STATEMENT OF OPERATIONS DATA: Net revenues(1).................... $ 98.1 $ 97.7 $ 95.0 $111.5 $123.6 $ 25.9 $ 29.6 Station operating expenses......... 73.9 70.9 67.9 76.3 90.0 19.3 21.8 Corporate general and administrative expenses(2)....... 2.0 2.2 2.5 2.7 5.9 0.9 1.1 Depreciation and amortization...... 8.3 7.5 7.3 6.9 7.2 1.8 2.0 ------ ------ ------ ------ ------ ------ ------ Operating income................... 13.9 17.1 17.3 25.6 20.5 3.9 4.7 Interest expense................... 10.0 7.7 5.6 5.2 6.0 1.4 1.5 Net income (loss).................. 1.1 4.2 (1.1)(3) 11.2 8.2 1.3 1.8 OTHER OPERATING DATA: Broadcast cash flow(4)............. $ 24.2 $ 26.8 $ 27.1 $ 35.2 $ 33.6(5) $ 6.6 $ 7.8 Broadcast cash flow margin(4)...... 24.7% 27.4% 28.5% 31.6% 27.2% 25.5% 26.4% EBITDA(4).......................... $ 22.2 $ 24.6 $ 24.6 $ 32.5 $ 27.7(5) $ 5.7 $ 6.7 After-tax cash flow(4)............. 9.4 11.7 13.8 18.1 15.4 3.1 3.8 BALANCE SHEET DATA (END OF PERIOD): Cash and cash equivalents.......... $ 0.6 $ 1.1 $ 1.7 $ 1.9 $ 1.7 $ 2.1 $ 2.1 Intangible assets, net............. 119.2 113.9 114.2 120.1 126.8 118.8 133.0 Total assets....................... 172.8 165.2 168.3 180.0 191.8 174.4 195.7 Total debt (including amounts due to CEI).......................... 66.9 86.2 89.7 120.5 126.1 115.3 126.9 Shareholder's equity............... 95.4 70.3 64.2 40.4 47.2 41.7 49.0
- --------------- (1) Total revenues less advertising agency commissions. (2) As described in Note 9 to the Consolidated Financial Statements of Cox Radio, certain of Cox Radio's executives participate in CEI's UAP. Because CEI and Cox Radio are private companies, the benefits under the UAP are generally payable in cash. This cash payment option has resulted in charges to compensation expense of $0.2 million, $0.4 million, $0.9 million, $0.8 million, and $1.6 million for the years ended December 31, 1991, 1992, 1993, 1994 and 1995, respectively, and $0.4 million and $0.6 million for the three months ended March 31, 1995 and 1996, respectively. This compensation expense is included in historical corporate general and administrative expenses. Public companies traditionally implement stock award plans that provide for the issuance of stock to participants and do not result in compensation expense under applicable accounting standards. The Company intends to implement such a plan in 1996 and, therefore, Cox Radio does not expect to incur this expense in future periods. See "Management -- Long-Term Incentive Plan." In addition, year ended December 31, 1995 corporate general and administrative expenses include a nonrecurring corporate charge. (3) Includes a $7.6 million noncash charge for the cumulative effect of accounting changes. See further discussion in Notes 2, 7 and 8 to the Consolidated Financial Statements of Cox Radio. (4) "Broadcast cash flow" consists of operating income plus depreciation and amortization and corporate general and administrative expenses. "Broadcast cash flow margin" is broadcast cash flow as a percentage of net revenues. "EBITDA" is operating income plus 27 35 depreciation and amortization. "After-tax cash flow" is income (loss) before extraordinary items plus depreciation and amortization. Although broadcast cash flow, broadcast cash flow margin, EBITDA and after-tax cash flow are not recognized under GAAP, they are accepted by the broadcasting industry as generally recognized measures of performance and are used by analysts who report publicly on the condition and performance of broadcast companies. For the foregoing reasons, the Company believes that these measures are useful to investors. However, investors should not consider these measures to be an alternative to operating income as determined in accordance with GAAP, an alternative to cash flows from operating activities (as a measure of liquidity) or an indicator of the Company's performance under GAAP. (5) Declines in broadcast cash flow and EBITDA from the prior year are due mainly to the impact of the baseball strike on advertiser spending, the cost of sports programming rights in Atlanta, start-up costs related to acquisitions or LMA's consummated in late 1994 and early 1995 and a nonrecurring corporate charge in 1995. See further discussion in "Management's Discussion and Analysis of Financial Condition and Results of Operations of Cox Radio." 28 36 NEWCITY The following selected financial data are derived from the Consolidated Financial Statements of NewCity. The data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations of NewCity" and the Consolidated Financial Statements of NewCity included elsewhere in this Prospectus. Period to period comparisons of NewCity's historical financial statements are not necessarily meaningful due to the disposition or acquisition of certain of NewCity's radio stations and the use of LMAs.
THREE MONTHS YEAR ENDED DECEMBER 31, ENDED MARCH 31, -------------------------------------------------- ----------------- 1991 1992 1993 1994 1995 1995 1996 ------ ------ ------ ------ ------ ------ ------ (DOLLARS IN MILLIONS) STATEMENT OF OPERATIONS DATA: Net revenues(1)...................... $ 46.0 $ 49.4 $ 53.3 $ 52.7(2) $ 55.6 $ 12.6 $ 13.2 Station operating expenses........... 32.9 34.7 36.8 36.9 40.7 9.6 9.5 Corporate general and administrative expenses........................... 1.9 1.8 1.9 1.8 1.7 0.5 0.5 Depreciation and amortization........ 4.0 3.9 3.8 3.1 3.5 0.7 0.8 ------ ------ ------ ------ ------ ------ ------ Operating income..................... 7.2 9.0 10.8 10.9 9.7 1.8 2.4 Interest expense..................... 11.9 11.8 11.6 10.1 9.8 2.3 2.6 Gain on sale of broadcasting assets............................. -- -- 15.0(3) 1.6(4) -- -- -- Income (loss) before extraordinary item............................... (4.7) (2.9) 13.1 2.2 (0.4) (0.7) (0.3) Extraordinary item................... -- -- (2.0)(5) (0.2)(6) -- -- -- ------ ------ ------ ------ ------ ------ ------ Net income (loss).................... (4.7) (2.9) 11.0(3) 2.1 (0.4) (0.7) (0.3) ====== ====== ====== ====== ====== ====== ====== OTHER OPERATING AND FINANCIAL DATA: Broadcast cash flow(7)............... $ 13.1 $ 14.7 $ 16.5 $ 15.8(2) $ 14.9(8) $ 3.0 $ 3.7 Broadcast cash flow margin(7)........ 28.5% 29.8% 31.0% 30.0% 26.8% 23.8% 28.0% EBITDA(7)............................ $ 11.2 $ 12.9 $ 14.6 $ 14.0(2) $ 13.2(8)) $ 2.5 $ 3.2 After-tax cash flow(7)............... (0.7) 1.0 16.9 5.3 3.1 -- 0.5 BALANCE SHEET DATA (END OF PERIOD): Cash and cash equivalents............ $ 2.3 $ 2.8 $ 2.4 $ 0.2 $ 0.2 $ 0.7 $ 0.3 Intangible assets, net............... 58.4 46.8 53.8 51.8 60.1 54.7 59.5 Total assets......................... 81.0 80.4 84.3 72.4 81.9 77.0 82.8 Total debt........................... 90.3 91.4 87.6 76.0 87.0 78.5 85.8 Redeemable preferred stock........... 12.2 14.1 10.4 10.3 11.3 10.6 11.6 ------ ------ ------ ------ ------ ------ ------ Total debt and redeemable preferred stock.............................. 102.5 105.5 98.0 86.3 98.3 89.1 97.4 Stockholders' deficiency(9).......... (27.0) (31.8) (22.8) (21.9) (23.3) (22.8) (23.9)
- --------------- (1) Total revenues less advertising agency commissions. (2) Declines in net revenues, broadcast cash flow and EBITDA from 1993 are due mainly to the sale of the Atlanta stations (WJZF-FM and WYAY-FM). See further discussion in "Management's Discussion and Analysis of Financial Condition and Results of Operations of NewCity." (3) As a result of the sale of the assets of WYAY-FM (Atlanta) during 1993, NewCity recorded a gain of $15.0 million for financial reporting purposes equal to the difference between the contract selling price less all related selling expenses and the net carrying value of the assets sold in August 1993. A substantial portion of the assets sold was comprised of intangibles and plant and equipment. (4) As a result of the "Option Payment" received during 1994 in connection with WJZF-FM (Atlanta), NewCity recorded a gain of $1.6 million for financial reporting purposes. See "Management's Discussion and Analysis of Financial Condition and Results of Operations of NewCity." (5) NewCity recorded an extraordinary loss of $2.0 million related to its November 1993 refinancing during the year ended December 31, 1993. The components of the extraordinary loss include prepayment penalties of $0.4 million and $0.6 million related to the early retirement of its insurance company term notes payable and its $6.0 million subordinated notes payable to Investors, (see Note 6 to the Consolidated Financial Statements of NewCity), respectively. In addition, the extraordinary loss includes $0.6 million related to the write-off of unamortized deferred financing costs and $0.4 million due to the recognition of a liability in an amount equal to the present value of future payments due on existing interest rate swap agreements that expired in April and June 1994. See Note 2 to the Consolidated Financial Statements of NewCity. (6) During the year ended December 31, 1994, NewCity recorded an extraordinary loss of $0.2 million in connection with the early retirement of its 25% junior subordinated notes payable due December 31, 2005. Such loss was due to the write off of unamortized deferred financing costs. 29 37 (7) "Broadcast cash flow" consists of operating income plus depreciation and amortization and corporate general and administrative expenses. "Broadcast cash flow margin" is broadcast cash flow as a percentage of net revenues. "EBITDA" is operating income plus depreciation and amortization. "After-tax cash flow" is income (loss) before extraordinary items, plus depreciation and amortization. Although broadcast cash flow, broadcast cash flow margin, EBITDA and after-tax cash flow are not recognized under GAAP, they are accepted by the broadcast industry as generally recognized measures of performance and are used by analysts who report publicly on the condition and performance of broadcast companies. For the foregoing reasons, NewCity believes that these measures are useful to investors. However, investors should not consider these measures to be an alternative to operating income as determined in accordance with GAAP, an alternative to cash flows from operating activities (as a measure of liquidity) or an indicator of NewCity's performance under GAAP. (8) Declines in broadcast cash flow and EBITDA from 1994 are due mainly to the losses incurred from the results of developing stations in Tulsa (KJSR-FM) and Orlando (WZKD-AM) that began operating in January 1995. See further discussion in "Management's Discussion and Analysis of Financial Condition and Results of Operations of NewCity." (9) No cash dividends were declared or paid on NewCity's common stock during any of these periods. 30 38 MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE PRO FORMA COMBINED RESULTS OF OPERATIONS The following sets forth summary unaudited pro forma combined financial information for Cox Radio for the year ended December 31, 1995 and the three months ended March 31, 1995 and 1996. The summary unaudited pro forma financial information is based on certain assumptions and adjustments described in the Notes to the Unaudited Pro Forma Combined Statements of Operations and should be read in conjunction therewith. See "Management's Discussion and Analysis of Financial Condition and Results of Operations of Cox Radio," "Management's Discussion and Analysis of Financial Condition and Results of Operations of NewCity," "Selected Historical Consolidated Financial Data," and the Consolidated Financial Statements for each of Cox Radio and NewCity.
PRO FORMA FOR THE TRANSACTIONS ------------------- THREE MONTHS YEAR ENDED ENDED MARCH 31, DECEMBER 31, ------------------- 1995 1995 1996 ------------ ------- ------- (DOLLARS IN THOUSANDS) STATEMENTS OF OPERATIONS DATA: Net revenues............................................... $167,086 $35,863 $40,608 Station operating expenses................................. 119,994 26,752 29,477 Corporate general and administrative expenses.............. 4,370 1,102 1,194 Depreciation and amortization.............................. 15,394 3,652 3,945 ------------ ------- ------- Operating income........................................... 27,328 4,357 5,992 Interest expense........................................... 20,668 5,000 5,276 Net income (loss).......................................... 1,530 (1,345) (293) OTHER OPERATING DATA: Broadcast cash flow(1)..................................... $ 47,092 $ 9,111 $11,131 Broadcast cash flow margin(1).............................. 28.2% 25.4% 27.4% EBITDA(1).................................................. $ 42,722 $ 8,009 $ 9,937 After-tax cash flow(1)..................................... 16,924 2,307 3,652
- --------------- (1)See Note 4 in "Selected Historical Consolidated Financial Data -- Cox Radio" for definitions. RESULTS OF OPERATIONS Cox Radio, upon completion of the Transactions, will own or operate, or provide sales and marketing services for, 40 radio stations (26 FM and 14 AM) clustered in 12 markets. The summary unaudited pro forma combined financial information presented herein does not purport to represent what Cox Radio's results of operations would actually have been had the Transactions occurred on January 1, 1995 or to project Cox Radio's results of operations for any future period. The following analysis is intended only as a comparison of the pro forma results of operations for the three months ended March 31, 1995 and 1996 as presented in "Unaudited Pro Forma Combined Financial Data." THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1995 Net Revenues. Net revenues for the three months ended March 31, 1996 increased $4.7 million to $40.6 million, a 13% increase over the comparable period in 1995. The increase was due generally to growth in market share and advertising rate increases throughout the Company's markets and included $1.2 million at WSB-AM (Atlanta) due to pre-Olympic advertising and increased sports programming revenues, $1.1 million at the Company's Los Angeles stations primarily reflecting a rebound in listenership subsequent to the completion of the O.J. Simpson trial and $1.0 million at the Company's Orlando stations reflecting a strong local economy. Station Operating Expenses. Station operating expenses increased $2.7 million to $29.5 million, an increase of 10% over the comparable period in 1995. Higher sports programming costs in Atlanta and selling expenses related to higher revenues throughout the Company contributed to the increase. 31 39 Broadcast Cash Flow. Broadcast cash flow for the three months ended March 31, 1996 increased $2.0 million to $11.1 million, an increase of 22% over the comparable period in 1995. In addition, the broadcast cash flow margin increased to 27.4% for the three months ended March 31, 1996 from 25.4% for the comparable period in 1995. Such increases resulted primarily from improvements in net revenues over station operating expenses at the Company's Los Angeles and Orlando Stations. Corporate General and Administrative Expenses. Corporate general and administrative expenses increased $0.1 million to $1.2 million, an increase of 8% over the comparable period in 1995. Operating Income. Operating income for the three months ended March 31, 1996 increased $1.6 million to $6.0 million, a 38% increase over the comparable period of 1995. In addition, the operating margin increased to 14.8% for the three months ended March 31, 1996 from 12.1% for the comparable period of 1995. Net Income (Loss). Net loss for the three months ended March 31, 1996 decreased $1.1 million to $0.3 million from the first quarter of 1995 primarily for the reasons noted above. Specific factors which are expected to affect the future operating results of the Company are discussed below. ACQUISITIONS Within the last six months, in response to the removal of certain station ownership restrictions in the 1996 Act, the Company has acquired or contracted to acquire 27 radio stations for approximately $290 million to substantially increase its station portfolio. In particular, upon the consummation of the NewCity Acquisition, the Company will acquire 18 radio stations which will enhance the Company's existing station group clusters and provide a platform for the establishment of new station group clusters. The consummation of these acquisitions will have a material effect on the Company's results of operations and will limit the comparability of the Company's historical results. As acquired stations are integrated into the Company, management expects to achieve certain cost savings, revenue enhancements and broadcast cash flow growth as a result of (i) the creation of station group clusters and (ii) the development of underperforming stations. CREATION OF CLUSTERS Management expects that the creation and operation of station clusters will result in (i) revenue growth by increasing the appeal of the Company's stations to advertisers and enabling such stations to compete more effectively with other forms of advertising and (ii) efficiencies by consolidating broadcast facilities, eliminating duplicative positions in management and production and reducing overhead expenses. Upon the consummation of the acquisitions, the Company will have created station clusters in several of its markets including seven stations in Orlando, five in Syracuse and three or more in nine of its 12 markets. Management believes that the Company's future operating results should reflect the benefits of the Company's clustering strategy. DEVELOPMENT OF UNDERPERFORMING STATIONS Management believes that a number of the Company's stations, including several in the group to be acquired, can be characterized as underperforming stations which can achieve broadcast cash flow growth through application of Cox Radio's operating strategy. The operation of underperforming stations will initially require the Company to incur development costs; thereafter, management intends to develop these stations into ratings leaders to improve revenue and broadcast cash flow. Management has historically demonstrated its ability to acquire underperforming stations and develop them into ratings and revenue leaders. See "Business -- Operating Strategy-Develop Underperforming Stations." 32 40 DIVESTITURE OF NON-STRATEGIC PROPERTIES Although the Company expects to concentrate on identifying and acquiring radio stations that fit its acquisition strategy, it has contracted to dispose of certain existing stations. In the Orlando Acquisition, the Company has agreed to exchange its two stations in Chicago for approximately $20 million in cash, and three stations in Orlando, a market in which management believes it is cost effective to cluster. In the Miami Disposition, the Company has agreed to sell an underperforming AM station for approximately $13 million in cash. For tax purposes, the Company will account for the Orlando Acquisition and Miami Disposition as like-kind exchanges. Tax rules will allow the Company to defer the taxable gain on these transactions upon the reinvestment of the $32.5 million in net proceeds in qualifying future acquisitions (other than the Pending Transactions). The Company has not yet identified the properties to be acquired. 33 41 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF COX RADIO GENERAL Cox Radio is a leading national radio broadcasting company whose business is devoted exclusively to operating, acquiring and developing radio stations located throughout the United States. Prior to the Offerings, CEI and certain of its subsidiaries will transfer ownership of their U.S. radio broadcast properties to Cox Radio (the "Cox Radio Consolidation"). CEI's historical basis in the assets and liabilities of the operations will be carried over to Cox Radio. The Consolidated Financial Statements of Cox Radio represent the operations of the radio stations currently owned or operated or to which sales and marketing services were provided in connection with CEI's radio broadcasting operations. The historical consolidated financial statements do not necessarily reflect the results of operations or financial position that would have existed had Cox Radio been an independent company. The primary source of the Company's revenues is the sale of advertising time to local and national advertisers. Historically, approximately three quarters of the Company's revenues were generated from local advertising which is sold by each station's sales staff. The Company's most significant station operating expenses are employees' salaries and benefits, commissions, programming expenses and advertising and promotional expenditures. The Company's revenues are primarily affected by the advertising rates charged by its radio stations for advertising time. The Company's advertising rates are in large part based on a station's ability to attract audiences in the demographic groups targeted by its advertisers, as measured principally by Arbitron Radio Market Reports. The Company's revenues vary throughout the year. As is typical in the radio broadcasting industry, the Company's first calendar quarter generally produces the lowest revenues for the year, and the second and fourth calendar quarters generally produce higher revenues. The Company's operating results in any period may be affected by advertising and promotional expenses that do not necessarily produce commensurate revenues until the impact of the advertising and promotion is realized in future periods. ACQUISITIONS AND DISPOSITIONS During the past several years, the Company has actively managed its portfolio of radio stations through selected acquisitions, dispositions and swaps, as well as through the use of LMAs and JSAs. Specific transactions entered into by the Company during the past three years are discussed below. In December 1993, the Company acquired WYSY-FM (Chicago) for $9.4 million. Also in December 1993, Cox Radio exchanged KLRX-FM (Dallas) for WYNF-FM (Tampa) and approximately $4.7 million. Subsequent to the exchange, the Company switched the dial position of WYNF-FM with its existing Tampa station, WWRM-FM, and changed WYNF-FM's call letters to WCOF-FM. In January 1994, the Company entered into an LMA to operate WJZF-FM (Atlanta). Subsequently, in September 1994, the Company paid $9.4 million for an option to purchase substantially all of the station's assets. In August 1994, the Company began operating KACE-FM (Los Angeles) under an LMA until the station was acquired in August 1995 for $11.7 million. In April 1995, Cox Radio entered into an LMA to operate WCNN-AM (Atlanta). In June 1995, Cox Radio entered into a JSA with WFNS-AM (Tampa) and, in July 1996, decided to exercise its option to purchase WFNS-AM for $1.5 million, consisting of $0.8 million in cash and the forgiveness of $0.7 million in amounts due to Cox Radio. In January 1996, Cox Radio completed the acquisition of two stations in Louisville, WRKA-FM and WRVI-FM, for $8.7 million (the Prior Louisville Acquisition). In April 1996, the Company agreed to sell WIOD-AM (Miami) for approximately $13.0 million (the Miami Disposition). This transaction is expected to close during the last quarter of 1996. In June 1996, the Company acquired WHEN-AM and WWHT-FM 34 42 (Syracuse) for $4.5 million (the Prior Syracuse Acquisition). The Syracuse stations are operated by NewCity under an LMA. In June 1996, the Company agreed to purchase WXNU-FM (Louisville) for $2.5 million (the Louisville Acquisition). In July 1996, the Company agreed to exchange its two Chicago stations, WCKG-FM and WYSY-FM, for three stations in Orlando, WHOO-AM, WHTQ-FM and WMMO-FM, and approximately $20 million (the Orlando Acquisition). The Orlando stations are operated by NewCity under an LMA. The exchange is expected to be consummated in the first half of 1997. For tax purposes, the Company will account for the Orlando Acquisition and the Miami Disposition as like-kind exchanges. Tax rules will allow the Company to defer the related tax gains on these transactions upon the investment of the $32.5 million in net proceeds in qualifying future acquisitions (other than the Pending Transactions). In July 1996, the Company agreed to acquire NewCity for an aggregate consideration of $253 million, subject to certain working capital adjustments, consisting of approximately $167 million in cash and approximately $86 million in the assumption of NewCity debt (the NewCity Acquisition). The NewCity Acquisition is expected to close in the first half of 1997. RESULTS OF OPERATIONS This discussion should be read in conjunction with the accompanying audited and unaudited Consolidated Financial Statements of Cox Radio. The results of operations for Cox Radio represent the operations of the radio stations currently owned or operated or to which sales and marketing services were provided in connection with CEI's radio broadcasting operations. The historical financial statements do not necessarily reflect the results of operations or financial position that would have been reported had Cox Radio been an independent company. As a result of the acquisition activity discussed above, the Company's historical financial statements are not directly comparable from period to period. The following table summarizes Cox Radio's financial results as reflected in the historical financial statements included elsewhere herein, and other operating data:
THREE MONTHS YEAR ENDED DECEMBER 31, ENDED MARCH 31, ------------------------------- ----------------- 1993 1994 1995 1995 1996 ------- -------- -------- ------- ------- (DOLLARS IN THOUSANDS) STATEMENTS OF OPERATIONS DATA: Net revenues................................ $94,950 $111,535 $123,572 $25,856 $29,568 Station operating expenses.................. 67,948 76,314 89,962 19,280 21,783 Corporate general and administrative expenses(1).............................. 2,522 2,667 5,853 879 1,103 Depreciation and amortization............... 7,224 6,995 7,247 1,841 1,982 ------- -------- -------- ------- ------- Operating income............................ 17,256 25,559 20,510 3,856 4,700 Interest expense............................ 5,590 5,229 5,974 1,427 1,467 Net income (loss)........................... (1,101)(2) 11,207 8,163 1,264 1,812 OTHER OPERATING DATA: Broadcast cash flow(3)...................... $27,002 $ 35,221 $ 33,610 $ 6,576 $ 7,785 Broadcast cash flow margin(3)............... 28.4% 31.6% 27.2% 25.4% 26.3% EBITDA(3)................................... $24,480 $ 32,554 $ 27,757 $ 5,697 $ 6,682 After-tax cash flow(3)...................... 13,715 18,202 15,410 3,105 3,794
- --------------- (1) As described in Note 9 to the Consolidated Financial Statements of Cox Radio, certain of Cox Radio's executives participate in CEI's UAP. Because CEI and Cox Radio are private companies, the benefits under the UAP are generally payable in cash. This cash payment option has resulted in charges to compensation expense of $0.9 million, $0.8 million and $1.6 million for the years ended December 31, 1993, 1994 and 1995, respectively, and $0.4 million and $0.6 million for the three months ended March 31, 1995 and 1996, respectively. This compensation expense is included in historical corporate general and administrative expenses. Public companies traditionally implement stock award plans that provide for the issuance of stock to participants and do not result in compensation expense under applicable accounting standards. The Company intends to implement such a plan in 1996 and, therefore does not expect to incur this expense in future periods. See "Management -- Long-Term Incentive Plan." In addition, year ended December 31, 1995 corporate general and administrative expenses include a nonrecurring corporate charge. (2) Includes a $7.6 million noncash charge for the cumulative effect of accounting changes. See further discussion in Notes 2, 7 and 8 to the Consolidated Financial Statements of Cox Radio. (3) See Note 4 in "Selected Historical Consolidated Financial Data -- Cox Radio" for definitions. 35 43 THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1995 Net Revenues. Net revenues for the three months ended March 31, 1996 increased $3.7 million to $29.6 million, a 14% increase over the comparable period in 1995. The increase was due to higher ratings at the Company's existing stations as well as an increase in the number of stations owned or operated. The increase at individual stations included $1.2 million at WSB-AM (Atlanta) due to ratings increases, pre-Olympic advertising and increased sports programming revenues, $0.5 million at KFI-AM (Los Angeles) reflecting a rebound in listenership subsequent to the completion of the O.J. Simpson trial, and $1.6 million related to the operations of WCNN-AM (Atlanta), WFNS-AM (Tampa) and Louisville stations, WRKA-FM and WRVI-FM, which were initially included in the Company's operations after March 31, 1995. On a "same station" basis (reflecting results from stations operated for the three months ended March 31 in both 1996 and 1995), net revenues increased $2.1 million to $28.0 million, an increase of 8% over the three months ended March 31, 1995. Station Operating Expenses. Station operating expenses increased $2.5 million to $21.8 million, an increase of 13% over the comparable period in 1995. Approximately $2.0 million of the increase was attributable to the operations of WCNN-AM, WFNS-AM, WRKA-FM and WRVI-FM. Higher sports programming costs in Atlanta and selling expenses related to higher revenues throughout the Company also contributed to the increase. On a "same station" basis, station operating expenses increased $0.5 million to $19.8 million, an increase of 2% over the first quarter of 1995. Broadcast Cash Flow. Broadcast cash flow increased $1.2 million to $7.8 million, an 18% increase over the comparable period in 1995. On a "same station" basis, broadcast cash flow increased by $1.6 million to $8.2 million, an increase of 24% over the comparable period in 1995. Such increases resulted primarily from improvements in net revenues over station operating expenses at WSB-AM and KFI-AM as discussed above. Corporate General and Administrative Expenses. Corporate general and administrative expenses increased $0.2 million to $1.1 million primarily due to an increase in CEI's Unit Appreciation Plan ("UAP") expense. Operating Income. Operating income increased $0.8 million to $4.7 million, an increase of 22% over the first quarter of 1995 for the reasons noted above. Interest Expense. Interest expense for the three months ended March 31, 1996 remained substantially the same as the comparable period in 1995. Net Income. Net income increased by $0.5 million to $1.8 million in 1995, an increase of 43% over the comparable period in 1995, for the reasons noted above. YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994 Net Revenues. Net revenues increased $12.0 million to $123.6 million in 1995, an increase of 11% over the prior year. Favorable ratings driven by Atlanta sports programming, an improved advertising economy and an increase in the number of stations owned or operated in existing station groups all contributed to the increase. In Atlanta, net revenues increases of $8.8 million were due primarily to the acquisition by WSB-AM of broadcast rights for the Atlanta Braves and the Atlanta Hawks and the addition of the operations of WCNN-AM. In Los Angeles, a $1.6 million increase in net revenues reflected continued strong performance by KOST-FM and the operation of KACE-FM for a full year, offset by the effects of a temporary decline in audience share at KFI-AM during the O.J. Simpson trial. The remaining stations combined contributed an increase in net revenues of $1.6 million despite a $1.8 million decrease in revenues at WIOD-AM (Miami). The Company has contracted to sell WIOD-AM. That transaction is expected to close in the fourth quarter of 1996. On a "same station" basis (reflecting results from stations operated for the entire twelve months in both 1995 and 1994), net revenues increased $8.0 million to $118.8 million, an increase of 7% over 1994. Station Operating Expenses. Station operating expenses increased $13.6 million to $90.0 million, an increase of 18% over the prior year. Significant components of the increase include $6.3 million for the acquisition of broadcast rights for the Atlanta Braves and the Atlanta Hawks, $2.0 million of programming, 36 44 sales and other operating expenses resulting from a full year of operations at KACE-FM and $2.6 million of station operating expenses incurred at WCNN-AM which has been operated under an LMA since April 1995. Higher selling costs associated with revenue increases posted by the Company's existing stations also contributed to the increase in station operating expenses. On a "same station" basis, station operating expenses increased $8.5 million to $84.0 million, an increase of 11% over 1994. Broadcast Cash Flow. Broadcast cash flow decreased $1.6 million to $33.6 million, a decrease of 5% from the prior year, primarily attributable to the operations of WCNN-AM discussed above. On a "same station" basis, broadcast cash flow decreased $0.5 million to $34.8 million, a decrease of 1% over the prior year, primarily attributable to the operations of the Company's Atlanta radio stations, exclusive of WCNN-AM. Corporate General and Administrative Expenses. Corporate general and administrative expenses increased $3.2 million to $5.9 million principally due to a $0.8 million increase in UAP expense and a non-recurring corporate charge. Operating Income. Operating income decreased $5.0 million to $20.5 million, a 20% decrease from 1994, for the reasons discussed above. Interest Expense. Interest expense increased $0.7 million to $6.0 million in 1995, a 14% increase over the prior year due to an increase in interest rates during 1995. Net Income. Net income decreased $3.0 million from 1994 to $8.2 million in 1995, due to the operational changes and the nonrecurring corporate charge discussed above. YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993 Net Revenues. Net revenues increased 17% to $111.5 million in 1994, a $16.6 million increase over the prior year. The net revenue gains were the result of an increase in the number of stations owned or operated during 1994 and improved advertising rates. In Atlanta, an increase of net revenues of $4.5 million was attributable to WJZF-FM, operated under an LMA agreement beginning in January 1994, and improved ratings resulting from programming changes at WSB-AM. In Chicago, an increase of net revenues of $6.3 million included $4.9 million attributable to a full year of operations of WYSY-FM, which was acquired in December 1993. In Los Angeles, net revenues growth of $3.3 million resulted from higher ratings at KOST-FM and KFI-AM and the addition of KACE-FM, operated under an LMA beginning in August 1994. All other markets posted a net revenues increase of $2.5 million in 1994. On a "same station" basis (reflecting results from stations operated for the entire twelve months in both 1994 and 1993), net revenues increased $8.4 million to $100.8 million, an increase of 9% over 1993. Station Operating Expenses. Station operating expenses increased $8.4 million to $76.3 million, an increase of 12% over the prior year. This increase was due to increased costs associated with the operation and promotion of additional stations ($4.8 million for WJZF-FM, KACE-FM, and WYSY-FM), additional programming and promotional costs across all other stations, as well as increased sales commissions resulting from the Company's revenue growth. On a "same station" basis, station operating expenses increased $4.8 million to $69.5 million, an increase of 7% over 1994. Broadcast Cash Flow. Broadcast cash flow increased $8.2 million to $35.2 million, an increase of 30% over the prior year. On a "same station" basis, broadcast cash flow increased $3.6 million to $31.3 million, an increase of 13% over the prior year. Such increases resulted primarily from the operations of WJZF-FM, WYSY-FM and, on a same station basis, the Company's Los Angeles radio stations. Corporate General and Administrative Expenses. Corporate general and administrative expenses increased $0.1 million over the prior year. Operating Income. Operating income increased $8.3 million to $25.6 million, a 48% increase over 1993, for the reasons discussed above. 37 45 Interest Expense. Interest expense decreased $0.4 million in 1994 to $5.2 million, a 6% decrease from the prior year, primarily as a result of a $4.6 million reduction in notes payable to CEI during 1994. Net Income. Net income was $11.2 million in 1994, a $12.3 million increase over 1993 due to the operational changes discussed above and the impact of the noncash, nonrecurring cumulative effect of accounting changes of $7.6 million recorded in 1993. LIQUIDITY AND CAPITAL RESOURCES The Company's primary source of liquidity is cash provided by operations. Cash requirements have been funded by Cox Radio's operating activities and historically, as needed, through intercompany advances from CEI. CEI continues to perform day-to-day cash management services for Cox Radio. See "Description of Indebtedness" and "Certain Relationships and Related Transactions." Cox Radio will be required to borrow approximately $166 million to consummate the NewCity Acquisition. Although Cox expects to be able to obtain the required loan from a syndicate of banks, if such bank financing is not available, the required funds will be loaned by CEI to Cox Radio at market rates. Future cash requirements are expected to include capital expenditures, principal and interest payments on indebtedness and funds for acquisitions. The Company expects its operations to generate sufficient cash to meet its capital expenditures and debt service requirements. Additional cash requirements, including funds for pending or other acquisitions, will be funded by various sources, including the proceeds from the Offerings, bank financing and, if or when appropriate, other issuances of Company securities. Selected statements of cash flow and operations data are summarized as follows:
THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, --------------------------- ---------------- 1993 1994 1995 1995 1996 ------- ------- ------- ------- ------ (DOLLARS IN THOUSANDS) Net cash provided by operating activities.............................. $11,429 $13,881 $13,211 $ 8,683 $9,447 Net cash used in investing activities (including acquisitions)................ 6,053 12,292 17,342 688 9,185 Net cash provided by (used in) financing activities.............................. (4,776) (1,420) 3,925 (7,828) 99 Broadcast cash flow....................... 27,002 35,221 33,610 6,576 7,785 Interest expense.......................... 5,590 5,229 5,974 1,427 1,467 Income taxes.............................. 6,048 8,863 6,226 1,120 1,325 Capital expenditures...................... 1,065 2,705 4,073 680 442
The Company has contractual commitments for sports programming and on-air personality of $9.2 million, $9.7 million, $10.1 million and $9.0 million for 1996, 1997, 1998 and 1999, which are expected to be funded through operations. IMPACT OF INFLATION The impact of inflation on the Company's operations has not been significant to date. However, there can be no assurance that a high rate of inflation in the future would not have an adverse impact on the Company's operating results. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In March 1995, SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of," was issued. This Statement requires that long-lived assets and certain intangibles be reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, with any impairment losses being reported in the period in which the recognition 38 46 criteria are first applied based on the fair value of the asset. Long-lived assets and certain intangibles to be disposed of are required to be reported at the lower of carrying amount or fair value less cost to sell. Cox Radio adopted SFAS No. 121 in the first quarter of 1996. Adoption of SFAS No. 121 did not have a material impact on the Company's financial statements. In October 1995, SFAS No. 123, "Accounting for Stock-Based Compensation," was issued. The adoption of the new recognition provisions for stock-based compensation expense included in SFAS No. 123 is optional; however, the pro forma effects on net income and earnings per share had the new recognition provisions been elected is required to be disclosed in the financial statements. Cox Radio will continue to follow the requirements of APB No. 25, "Accounting for Stock Issued to Employees" in its accounting for employee stock options; therefore, no impact on the Company's financial position and results of operations is expected. Cox Radio will provide the new disclosure requirements under SFAS No. 123 in the annual financial statements for the year ending December 31, 1996. UNAUDITED QUARTERLY FINANCIAL INFORMATION The following table sets forth selected quarterly financial information for Cox Radio. This information is derived from unaudited financial statements of Cox Radio and includes, in the opinion of management, all normal and recurring adjustments that management considers necessary for a fair presentation of the results for such periods. The operating results for any quarter are not necessarily indicative of results for any future period.
1ST 2ND 3RD 4TH QUARTER QUARTER QUARTER QUARTER ------- ------- ------- ------- (DOLLARS IN THOUSANDS) 1994 Net revenues............................................ $21,608 $27,546 $29,907 $32,474 Corporate general and administrative expenses........... 638 632 659 738 Depreciation and amortization........................... 1,709 1,731 1,744 1,811 Operating income........................................ 3,036 6,275 9,641 6,607 Net income.............................................. 641 3,034 4,613 2,919 1995 Net revenues............................................ $25,856 $32,695 $31,402 $33,619 Corporate general and administrative expenses........... 879 994 2,979(1) 1,001 Depreciation and amortization........................... 1,841 1,874 1,768 1,764 Operating income........................................ 3,856 6,098 3,610 6,946 Net income.............................................. 1,264 2,532 1,355 3,012 1996 Net revenues............................................ $29,568 Corporate general and administrative expenses........... 1,103 Depreciation and amortization........................... 1,982 Operating income........................................ 4,700 Net income.............................................. 1,812
- --------------- (1) Includes a nonrecurring corporate charge. 39 47 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF NEWCITY GENERAL NewCity's financial results depend on a number of factors, including the strength of the national economy and the local economies of NewCity's served markets, local market competition from other radio stations and other advertising media, government regulation and policies and NewCity's ability to provide popular programming. NewCity's revenues depend directly on the advertising rates that its stations are able to charge, and those in turn depend on the stations' ability to attract audiences in the demographic groups targeted by its advertisers, as measured principally by Arbitron. NewCity monitors the popularity of the formats it employs through the regular use of market research and takes other steps to develop strong listener loyalty. Advertising contracts are generally short-term. Most of NewCity's revenue is generated from local advertising, which is sold primarily by a station's sales staff. For the years ended December 31, 1993, 1994 and 1995, and the three months ended March 31, 1996, approximately 66.1%, 66.5%, 68.2%, and 68.0% respectively, of NewCity's total revenues were from local advertising. To generate national advertising sales, NewCity engages Katz Radio, a subsidiary of Katz Communications, Inc., a national sales representative firm that specializes in national sales, for each of its stations. In addition, NewCity employs a national sales manager in each of its markets to maximize its national sales effort. Period to period comparisons of NewCity's historical financial statements are not necessarily meaningful due to the disposition or acquisition of certain of NewCity's radio stations and the use of LMAs. In addition, NewCity's revenues and operating income are typically lowest in the first quarter and highest in the second and fourth quarters. Seasonal revenue fluctuations are common in the radio broadcasting industry and are due primarily to fluctuations in advertising expenditures. In August 1993, NewCity sold substantially all the assets of WYAY-FM in Atlanta and in June 1993 entered into an agreement to sell WJZF-FM in Atlanta. During the years ended December 31, 1993, 1994 and 1995, WYAY-FM and WJZF-FM had aggregate net revenues of $3.7 million, $0.3 million and $0.4 million or 7%, 0.5% and 0.6% of NewCity's consolidated net revenues, respectively. RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1995 Net Revenues. Net revenues increased from $12.6 million during the three months ended March 31, 1995 to $13.2 million during the three months ended March 31, 1996, an increase of $0.5 million, or 4%. Such increase was primarily due to an increase in local broadcasting revenues of $0.6 million which was partially offset by a decrease of $0.1 million in national revenues. The overall increase in local broadcasting revenues was primarily caused by increased local revenues in the Tulsa and Orlando markets due to growth in audience share and advertising rate increases. The overall decrease in national broadcasting revenues was substantially caused by a reduction in such revenues in the Birmingham and San Antonio markets due to a decrease in audience share and reduced national advertising market activity which was partially offset by an increase in national revenues in the Syracuse market due to increased national advertising market activity. Operating Costs. Total operating costs decreased from $10.9 million during the three months ended March 31, 1995 to $10.8 million during the three months ended March 31, 1996, a decrease of $0.1 million, or 1%. Contributing to the decrease in total operating costs of $0.1 million were decreases of $30,000 in broadcasting operations costs, $0.1 million in selling, general and administrative costs and $44,000 in corporate general and administrative expenses which were partially offset by an increase in depreciation and amortization of $93,000. The decrease of $30,000 in broadcasting operations costs includes an overall reduction in marketing and promotional costs that was substantially offset by increases in certain programming and technical costs. The decrease in marketing and promotional costs resulted from strategically reduced promotional activity within most markets in response to decreased efforts by competitors. The increase in 40 48 programming and technical costs resulted from increased salaries related to certain programming personnel and additional technical costs to operate certain radio stations not owned during the three months ended March 31, 1995. Selling, General and Administrative Expenses. The reduction in selling, general and administrative expenses during the three months ended March 31, 1996 was primarily due to the elimination of lease costs related to local marketing agreements for certain radio stations that were not owned during the three months ended March 31, 1995 but that were owned during the first quarter in 1996. Partially offsetting such decrease was an increase in commissions paid as a result of increased revenues during the first quarter in 1996. Depreciation and Amortization Expense. Depreciation and amortization expense increased from $0.7 million during the three months ended March 31, 1995 to $0.8 million during the three months ended March 31, 1996, an increase of $93,000, or 13%. This increase was due to depreciation of equipment purchased or acquired subsequent to the three months ended March 31, 1995. Operating Income. Operating income increased by $0.6 million, or 36%, from $1.8 million during the three months ended March 31, 1995 to $2.4 million during the three months ended March 31, 1996. Such increase was due to the increase in net revenues of $0.5 million along with the decrease in total operating expenses of $0.1 million. EBITDA. EBITDA increased by $0.7 million, or 29%, from $2.5 million during the three months ended March 31, 1995 to $3.2 million during the three months ended March 31, 1996. Such increase was primarily due to improved EBITDA in the Tulsa, Orlando and Syracuse markets generally as a result of increased revenues. Interest Expense. Interest expense increased by $0.3 million during the first three months of 1996 compared to the same period in 1995, from $2.3 million to $2.6 million. Such increase was principally due to an increase in total outstanding indebtedness in 1996 as compared to the same period in 1995. YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994 Net Revenues. Net revenues increased from $52.7 million during the year ended December 31, 1994 to $55.6 million during the year ended December 31, 1995, an increase of $3.0 million, or 6%. Such increase was primarily caused by net revenue increases in the Tulsa, Orlando, Syracuse and Bridgeport markets. In aggregate, a substantial portion of the $3.0 million increase in net revenues was due to increased local broadcasting revenues partially offset by a minor decrease in national broadcasting revenues. Contributing significantly to the net revenue increases in the Tulsa, Orlando, Syracuse and Bridgeport markets were growth in market revenue share or advertising rate increases. In addition, net revenues attributable to a new radio station, KJSR-FM, that began operating in January 1995 caused a substantial portion of the Tulsa market net revenues increase. Operating Costs. Total operating costs increased from $41.8 million during the year ended December 31, 1994 to $46.0 million during the year ended December 31, 1995, an increase of $4.2 million, or 10%. Contributing to the increase in total operating costs of $4.2 million were increases of $2.8 million in broadcasting operations costs, $1.0 million in selling, general and administrative costs and $0.4 million in depreciation and amortization expense. The increase of $2.8 million in broadcasting operations costs was due primarily to the programming and marketing costs associated with operating two new radio stations in the Tulsa and Orlando markets, approximately $1.2 million and, additionally, marketing cost increases in the Orlando and San Antonio markets to advertise and promote new radio station programming formats or to address increased competition within the markets and in the Bridgeport market due to increased marketing efforts in response to increased competition. Also, increases in programming salaries and research expenses in most markets contributed to the overall increase in broadcasting operations costs. Selling, General and Administrative Expenses. The increase of $1.0 million in selling, general and administrative expenses was principally due to an increase of $0.9 million in such costs to operate two new radio stations in the Tulsa and Orlando markets. 41 49 Depreciation and Amortization Expense. Depreciation and amortization expense increased from $3.1 million during the year ended December 31, 1994 to $3.5 million during the year ended December 31, 1995, an increase of $0.4 million, or 14%. Such increase was primarily due to the depreciation of equipment acquired during 1995 in connection with the purchase of four radio stations. Operating Income. Operating income decreased by $1.2 million from $10.9 million during the year ended December 31, 1994 to $9.7 million for the year ended December 31, 1995. Such decrease was due to the increase in operating costs of $4.2 million partially offset by the increase in consolidated net revenues of $3.0 million. EBITDA. EBITDA decreased from $13.9 million during the year ended December 31, 1994 to $13.2 million during the year ended December 31, 1995, a decrease of $0.8 million or 6%. Excluding the EBITDA attributable to the two new radio stations that began operating in January 1995 in the Tulsa and Orlando markets, NewCity's EBITDA for the year ended December 31, 1995 would have been $14.0 million. Interest Expense. Interest expense decreased by $0.2 million during the year ended December 31, 1995 compared to the same period in 1994, from $10.1 million to $9.8 million. Such decrease was principally due to a reduction in deferred interest expense of approximately $0.7 million in 1995, resulting from the payment in September 1994 of certain 25% debt to an association of investment partnerships and individual investors (collectively, the "Investors") partially offset by an increase in total cash interest expense of approximately $0.5 million due to increased borrowings. YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993 Net Revenues. Net revenues decreased from $53.3 million during the year ended December 31, 1993 to $52.7 million during the year ended December 31, 1994, a decrease of $0.6 million, or 1%. This decrease was caused by a decrease of $3.4 million in net revenues attributable to the Atlanta radio stations sold or held for sale partially offset by an aggregate increase of $2.8 million in net revenues in all of NewCity's current markets. Primarily contributing to this increase were increases in net revenues in the Birmingham and Tulsa markets due to both growth in market revenue share and advertising rate increases. In addition, a net revenues increase in the Syracuse market, caused by a new radio station's revenue for a full year in 1994 compared to a partial year's revenues in 1993 since the radio station was not acquired until April 1993, also contributed to the aggregate net revenues increase. Excluding the Atlanta radio stations sold or held for sale, net revenues were $49.6 million during the year ended December 31, 1993 compared to $52.4 million during the year ended December 31, 1994, an increase of $2.8 million or approximately 6%. Operating Costs. Total operating costs decreased from $42.5 million during the year ended December 31, 1993 to $41.8 million during the year ended December 31, 1994, a decrease of $0.7 million, or 2%. Such decrease was due to a decrease of $3.1 million in operating costs related to the Atlanta radio stations sold or held for sale that was substantially offset by an aggregate increase of $2.3 million in costs to operate the radio stations located in all of NewCity's current markets. Contributing primarily to the aggregate increase of $2.3 million were increases of $1.4 million in broadcasting operations costs and $1.4 million in selling, general and administrative costs partially offset by a decrease in depreciation and amortization of approximately $0.3 million, excluding the Atlanta radio stations. The increase in broadcasting costs of $1.4 million was due to increases in marketing costs in most markets as a result of increased competition, increased rights fees for certain programming contracts in the Syracuse, Tulsa and Orlando markets, and increases in certain broadcasting personnel costs in most markets. Marketing and Promotional Costs. Excluding the Atlanta radio stations sold or held for sale, marketing and promotional costs for the year ended December 31, 1994 were $4.9 million, approximately 26% greater than those incurred for the year ended December 31, 1993, which were $3.9 million. Selling, General and Administrative Expenses. Excluding the Atlanta radio stations, the increase in selling, general and administrative expenses during the year ended December 31, 1994 of $1.4 million, was substantially due to increased commissions paid as a result of the aggregate growth in net revenues, additional salaries, selling and administrative expenses incurred to operate a new radio station in the Syracuse market 42 50 that was not part of NewCity's operations until April 1993, increased salaries and administrative expenses of approximately $250,000 to operate a new research division in 1994 that did not exist during most of 1993, increased employee health insurance costs and a general increase in employee compensation. Depreciation and Amortization Expense. Depreciation and amortization expense decreased from $3.9 million during the year ended December 31, 1993 to $3.1 million during the year ended December 31, 1994, a decrease of $0.8 million. Such decrease was principally due to a reduction of $0.5 million in depreciation and amortization related to the Atlanta radio stations sold or held for sale. The remaining reduction was caused by certain equipment that became fully depreciated during 1994. EBITDA. EBITDA decreased from $14.6 million during the year ended December 31, 1993 to $13.9 million during the year ended December 31, 1994, a decrease of $0.7 million, or approximately 5%. Excluding the Atlanta radio stations, EBITDA was $13.7 million during the year ended December 31, 1993 and $13.9 million during the year ended December 31, 1994, an increase of $0.2 million, or 1%. Interest Expense. Interest expense decreased by $1.6 million, or 14%, during the year ended December 31, 1994 compared to the same period in 1993, from $11.6 million to $10.1 million. Such decrease was principally due to NewCity's major refinancing of its total indebtedness in 1993 which resulted in a reduction in total outstanding indebtedness in 1994 compared to 1993. See Note 2 to the Consolidated Financial Statements of NewCity. On September 20, 1994, the Company amended the WJZF-LMA (the "Amendment"). Among other items, the Amendment provided for the issuance by NewCity to Cox Radio, Inc. of an exclusive option to purchase substantially all the assets of radio station WJZF-FM (Atlanta) during the extended term of the LMA (the "Option"). In consideration for the Option, NewCity received a non-refundable cash payment of $9.1 million (the "Option Payment"). Upon the exercise of the Option, NewCity will receive additional cash consideration of $100. Because the cash proceeds received from the Option are non-refundable and such proceeds, in the opinion of management, approximated the fair market value of the assets of WJZF-FM, NewCity accounted for the economic substance of this transaction as if a sale of substantially all the assets of WJZF-FM had occurred. Accordingly, a gain of $1.6 million was recorded for financial reporting purposes equal to the difference between the Option payment received, less all related selling expenses, and the net carrying value of the assets of WJZF-FM, including all intangibles and equipment. For the year ended December 31, 1993, NewCity had a gain on sale of broadcasting assets of $15.0 million as a result of the sale of WYAY-FM. Income Tax Expense. Income tax expense decreased by $0.9 million during the year ended December 31, 1994 as compared to 1993. Such decrease is the result of federal and state income taxes associated with the gain recognized on the sale of WYAY-FM (Atlanta) in 1993 while in 1994 the gain recognized on the sale of WJZF-FM resulted in no federal or state income taxes for income tax purposes because of differences in book and tax asset bases. See Note 11 to the Consolidated Financial Statements of NewCity. Extraordinary Loss. During the year ended December 31, 1994, NewCity recorded an extraordinary loss of $0.2 million which was caused by the write-off of unamortized income financing costs related to the Junior Notes. During the year ended December 31, 1993, the $2.0 million loss was incurred in connection with the early extinguishment of debt to Investors. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In March 1995, SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of," was issued. This Statement requires that long-lived assets and certain intangibles be reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, with any impairment losses being reported in the period in which the recognition criteria are first applied based on the fair value of the asset. Long-lived assets and certain intangibles to be disposed of are required to be reported at the lower of carrying amount or fair value less cost to sell. NewCity adopted SFAS No. 121 in the first quarter of 1996. Adoption of SFAS No. 121 did not have a material impact on the Company's financial statements. 43 51 BUSINESS Cox Radio, upon completion of the Pending Transactions, will be one of the ten largest radio broadcasting companies in the United States, based on both net revenues and number of stations. Cox Radio will own or operate, or provide sales and marketing services for, 40 radio stations (26 FM and 14 AM) clustered in 12 markets, including 18 stations to be acquired from NewCity. On a pro forma basis for 1995, Cox Radio will be the number one radio station group ranked by revenue share and audience share in five of its 12 markets. On a pro forma basis, Cox Radio would have generated net revenue of $172 million and broadcast cash flow of $49 million during the twelve month period ending March 31, 1996. Cox Radio, as part of CEI, was a pioneer in radio broadcasting, building its first station in 1934, acquiring its flagship station, WSB-AM (Atlanta), in 1939 and launching its first FM station, WSB-FM (Atlanta), in 1948. Cox Radio seeks to maximize the revenues and broadcast cash flow of its radio stations by operating and developing clusters of stations in demographically attractive and rapidly growing markets, including major markets such as Los Angeles and Sunbelt markets such as Atlanta, Miami, Tampa, Orlando, San Antonio and Birmingham. During the past five years, the 12 markets in which the Company's stations will operate have demonstrated, on an aggregate basis, greater radio advertising revenue growth than the U.S. radio industry as a whole. The Pending Transactions will enhance the clustering of the Company's radio stations; Cox Radio will operate three or more stations in nine of its 12 markets, and a total of 20 of the Company's 40 stations will be clustered in four markets. In addition, the NewCity Acquisition will create a platform for future strategic acquisitions to further cluster radio stations in the Company's markets. As a result of the Company's management, programming and sales efforts, the Company's radio stations are characterized by strong ratings and above average power ratios. In addition, Cox Radio has a track record of acquiring, repositioning and improving the operating performance of previously underperforming stations. Cox Radio's senior operating management, together with the NewCity senior operating management which will join Cox Radio as part of the NewCity Acquisition, will be comprised of six individuals with an average of over 23 years of experience in the radio broadcasting industry, including an average of over 14 years with their respective organizations. The Company believes that this experienced senior management team will be well positioned to manage larger radio station clusters and take advantage of new opportunities arising in the U.S. radio broadcasting industry. 44 52 The following table summarizes certain information relating to the Company's radio stations, assuming the consummation of the Pending Transactions:
1995 AUDIENCE RADIO 1995 SHARE IN MARKET AND MARKET ARBITRON TARGET TARGET STATION CALL REVENUE MARKET DEMOGRAPHIC DEMOGRAPHIC LETTERS(1) FORMAT RANK(2) RANK(3) GROUP GROUP - ------------ --------------------------- ------- -------- ---------------- ----------- LOS ANGELES 1 2 KFI-AM Talk Adults 35-54(4) 5.8 KOST-FM Adult Contemporary Women 25-44(4) 5.1 KACE-FM R&B Oldies African American 11.7 Adults 35-54 ATLANTA 10 12 WSB-AM News/Talk Adults 35-64 8.8 WSB-FM Adult Contemporary Women 25-54 7.7 WJZF-FM(5) Jazz Men 25-54 4.3 WCNN-AM(6) Sports/Talk Men 25-54 2.2 MIAMI 12 11 WFLC-FM Hot Adult Contemporary Adults 25-54 4.9 WHQT-FM Urban Adult Contemporary Adults 25-54 6.2 TAMPA 21 21 WWRM-FM Soft Adult Contemporary Women 35-54(4) 9.0 WCOF-FM 70's Oldies Adults 25-44(4) 5.5 WSUN-AM Sports/Talk Men 25-54 3.8 WFNS-AM(7) Sports/Talk Men 25-54 1.4 ORLANDO 26 39 WDBO-AM(5) News/Talk Adults 35-64 7.6 WWKA-FM(5) Country Adults 25-54 8.5 WCFB-FM(5) Rhythmic Adult Contemporary Women 25-54 5.4 WZKD-AM(5) Kids Radio Children 3-11 -- WHOO-AM(8) Standards Adults 55+ 12.8 WHTQ-FM(8) Classic Rock Men 25-54 6.7 WMMO-FM(8) Rock Adult Contemporary Adults 25-54 6.5 SAN ANTONIO 29 34 KCYY-FM(5) Country Adults 25-54 7.2 KKYX-AM(5) Classic Country Adults 35-64 2.9 KCJZ-FM(5) Jazz Adults 25-54 5.3 LOUISVILLE 45 49 WRKA-FM Oldies Adults 35-54(4) 6.7 WRVI-FM Rock Adult Adults 25-49 1.8 (9) WXNU-FM(10) Contemporary Alternative Adults 18-34 3.9 1995 1995 COMBINED COMBINED STATION STATION GROUP GROUP MARKET AND TARGET REVENUE REVENUE STATION CALL DEMOGRAPHIC MARKET MARKET LETTERS(1) RANK RANK SHARE - ------------ ----------- -------- -------- LOS ANGELES 4 10.9 % KFI-AM 1 KOST-FM 2 KACE-FM 2 ATLANTA 1 21.3 % WSB-AM 2 WSB-FM 5 WJZF-FM(5) 10 WCNN-AM(6) 17 MIAMI 3 11.3 % WFLC-FM 4 WHQT-FM 2 TAMPA 4 11.9 % WWRM-FM 1 WCOF-FM 10 WSUN-AM 14 WFNS-AM(7) 16 ORLANDO 1 30.7 % WDBO-AM(5) 4 WWKA-FM(5) 2 WCFB-FM(5) 8 WZKD-AM(5) -- WHOO-AM(8) 2 WHTQ-FM(8) 5 WMMO-FM(8) 6 SAN ANTONIO 4 14.3 % KCYY-FM(5) 2 KKYX-AM(5) 14 KCJZ-FM(5) 9 LOUISVILLE 5 8.0 % WRKA-FM 4 WRVI-FM 14 (9) WXNU-FM(10) 10
45 53
1995 AUDIENCE RADIO 1995 SHARE IN MARKET AND MARKET ARBITRON TARGET TARGET STATION CALL REVENUE MARKET DEMOGRAPHIC DEMOGRAPHIC LETTERS(1) FORMAT RANK(2) RANK(3) GROUP GROUP - ------------ ------------------ ------- -------- ------------ ----------- BIRMINGHAM 51 55 WZZK-FM(5) Country Adults 25-54 14.1 WZZK-AM(5) Country Adults 25-54 N.A. (11) WODL-FM(5) Oldies Adults 25-54 8.0 DAYTON 55 52 WHIO-AM News/Talk Adults 35-64 6.3 WHKO-FM Country Adults 25-54 14.9 TULSA 56 60 KRMG-AM(5) News/Talk Adults 25-54 6.5 KWEN-FM(5) Country Adults 25-54 13.1 KJSR-FM(5) 70's Oldies Adults 25-54 8.5 BRIDGEPORT 58 111 WEZN-FM(5) Adult Contemporary Adults 25-54 14.3 (12) SYRACUSE 71 68 WSYR-AM(5) News/Talk Adults 35-64 11.6 WYYY-FM(5) Adult Contemporary Adults 25-54 12.4 WBBS-FM(5) Country Adults 25-54 9.7 WHEN-AM Sports/Talk Men 25-54 3.4 WWHT-FM Adult Hit Radio Women 18-34 3.6 1995 1995 COMBINED COMBINED STATION STATION GROUP GROUP MARKET AND TARGET REVENUE REVENUE STATION CALL DEMOGRAPHIC MARKET MARKET LETTERS(1) RANK RANK SHARE - ------------ ----------- -------- -------- BIRMINGHAM 1 32.5 % WZZK-FM(5) 1 WZZK-AM(5) N.A. (11) WODL-FM(5) 5 DAYTON 2 25.5 % WHIO-AM 4 WHKO-FM 1 TULSA 1 35.5 % KRMG-AM(5) 5 KWEN-FM(5) 1 KJSR-FM(5) 4 BRIDGEPORT 3 21.6 % WEZN-FM(5) 1 (12) SYRACUSE 1 55.3 % WSYR-AM(5) 1 WYYY-FM(5) 1 WBBS-FM(5) 3 WHEN-AM 10 WWHT-FM 7
- --------------- (1) Metropolitan market served; city of license may differ. (2) Ranking of the principal radio market served by the stations among all radio markets in the United States by 1995 market revenue. (3) Ranks assigned by Arbitron based on 12+ population in the market. (4) Arbitron does not report the audience share on these specific target audiences. Therefore, the closest representative target audience shares and rankings were used. (5) Station to be acquired pursuant to the NewCity Acquisition. (6) Station operated by Cox Radio pursuant to an LMA. (7) Advertising time on WFNS-AM is sold and marketed by Cox Radio pursuant to a JSA. Station to be acquired pursuant to the Tampa Acquisition. (8) Station to be acquired pursuant to the Orlando Acquisition. (9) Broadcasting on WRVI-FM began in January 1996. Accordingly, audience share and audience rank are based only on the Winter 1996 Arbitron Market Report. (10) Station to be acquired pursuant to the Louisville Acquisition. (11) Audience share and audience rank information for WZZK-AM and WZZK-FM are combined because the stations are simulcast. (12) Audience share and rank data is based only on Arbitron Market Reports for Spring 1995 and Fall 1995 because Arbitron does not produce Summer and Winter Arbitron Market Reports for the Bridgeport/Fairfield County market. 46 54 The Company's stations are diversified in terms of format, target audience, geographic location and stage of development. Management believes that a number of the Company's stations have significant growth opportunities or turnaround potential and can therefore be characterized as developing stations. Cox Radio believes these stations can achieve significant broadcast cash flow growth by employing the Company's operating strategy. Management believes that its mix of stations in different stages of development enables it to maximize the Company's growth potential. OPERATING STRATEGY The following is a description of the key elements of the Company's operating strategy: Cluster Stations Cox Radio operates its stations in clusters to (i) enhance net revenues growth by increasing the appeal of the Company's stations to advertisers and enabling such stations to compete more effectively with other forms of advertising and (ii) achieve operating efficiencies by consolidating broadcast facilities, eliminating duplicative positions in management and production and reducing overhead expenses. Management believes that operating several radio stations in each of its markets will enable its sales teams to offer advertisers more attractive advertising packages. Furthermore, as radio groups achieve significant audience share, they can deliver to advertisers the audience reach that historically only television and newspapers could offer, with the added benefit of frequent exposure to advertisers' potential customers. Management believes that the Company's clusters of stations, and their corresponding audience share, provide opportunities to capture an increased share of total advertising revenue in each of its markets. Develop Underperforming Stations The Company's management has demonstrated its ability to acquire underperforming radio stations and develop them into consistent ratings and revenue leaders. The following illustrates certain past successes of both Cox Radio and NewCity in developing underperforming stations: In Miami, Cox Radio acquired WHQT-FM in late 1993 in exchange for its only Charlotte station to further cluster its Miami station group. At the time of the acquisition, WHQT-FM was ranked eighth in the market with a 4.3 audience share among Adults 25-54. Cox Radio instituted its research, programming, and marketing strategy and modified the station's format, installing a morning show and more focused music programming. The station achieved a 5.8 audience share among Adults 25-54 in the Summer 1994 Arbitron Market Report, improving its rank from eighth to second. The station has consistently been a ratings leader, finishing in the top three among Adults 25-54 since the Winter 1995 Arbitron Market Report, and capturing the number one audience share among Adults 25-54 in the Fall 1995 and Winter 1996 Arbitron Market Reports. Furthermore, as a result of this increase in ratings, Cox Radio significantly increased the station's broadcast cash flow margins. In Tampa, Cox Radio acquired WYNF-FM in 1993 in exchange for its only Dallas radio station to further cluster its Tampa station group. After reevaluating its market position, Cox Radio switched WYNF-FM's dial position with Cox Radio's existing Tampa station, WWRM-FM, changed WYNF-FM's call letters to WCOF-FM and installed its 70's Oldies format, one of the first in the United States. This transaction enhanced Cox Radio's presence in the market. At the time of the acquisition, WCOF-FM had a 1.3 audience share among Adults 25-54 and ranked thirteenth in the market. After the format change, WCOF-FM debuted with a 7.3 audience share among Adults 25-54 in the Fall 1993 Arbitron Market Report, ranking sixth in the market. The station was ranked eighth and had a 5.5 audience share among Adults 25-54 in the Winter 1996 Arbitron Market Report. In addition, the new dial position helped WWRM-FM reach a larger audience within the Women 35-64 demographic (which is representative of WWRM-FM's target demographic, Women 35-54), resulting in a 6.3 audience share and number six rank in the Fall 1993 Arbitron Market Report. In the Winter 1996 Arbitron Market Report, WWRM-FM had an 8.5 audience share and was ranked second. 47 55 In Los Angeles, Cox Radio entered into an LMA in August 1994 to operate KACE-FM and acquired the station in August 1995. The station has a limited signal that covers only a portion of the Southern California market. At the time of the acquisition, KACE-FM was the thirty-eighth ranked station with a 0.4 audience share among Adults 25-54, and ranked last among stations targeting African American adults. Cox Radio changed the format of the station to Rhythm and Blues Oldies in late 1994. The station subsequently achieved a 1.4 audience share among Adults 25-54 in the Spring 1995 Arbitron Market Report, ranking twenty-sixth. In the Winter 1996 Arbitron Market Report, the station achieved a 1.4 audience share among Adults 25-54, and ranked second in its target demographic of African American Adults 35-54 for the entire Los Angeles market despite its signal limitations. In Birmingham, NewCity purchased WZZK-FM in August 1980. When acquired, the station was a low-rated automated Country station. In a six-month period, NewCity hired a new staff, installed a Contemporary Country format and moved the station to new facilities. In the Spring 1981 Arbitron Market Report, WZZK-FM ranked first among Persons 12+ and Adults 25-54 and, with the exception of only a few rating periods, has maintained that rank for the past 15 years. In Syracuse, NewCity acquired a third station in the market, WBBS-FM, in August 1993. NewCity immediately installed a Country format. In its first complete Arbitron Market Report as a Country station, WBBS-FM increased its audience share among Adults 25-54 from 6.3 to 8.0. Over the last six Arbitron Market Reports, the station has consistently achieved an audience share above 8.2 and has had an average audience share of 9.6 among Adults 25-54. In the Winter 1996 Arbitron Market Report, WBBS-FM ranked first among Adults 25-54 with an audience share of 11.6. In Tulsa, NewCity entered into an LMA in January 1995 to operate KJSR-FM. NewCity immediately replaced the station's low-rated Country format with a popular 70's format and renamed the station. In its first Arbitron Market Report using the new format, the station achieved a 9.0 audience share, ranking third among Adults 25-54. In the Winter 1996 Arbitron Market Report, the station ranked second with a 9.9 audience share among Adults 25-54. In May 1995, NewCity acquired the station. In Orlando, NewCity entered into an LMA in August 1992 to operate WCFB-FM and acquired the station in May 1995, NewCity then renamed the station and changed its format from Country to Rhythmic Adult Contemporary. Rhythmic Adult Contemporary is a unique format designed by NewCity specifically for the Orlando market. WCFB-FM's ratings have improved among Adults 25-54 in each succeeding Arbitron Market Report and the station ranked ninth with a 5.3 audience share in the Winter 1996 Arbitron Market Report. The Company's historic margins reflect the acquisition and continued development of underperforming stations, as well as the fact that increases in net revenue are typically realized subsequent to increases in audience share. Management believes that a number of the Company's stations have significant growth opportunities or turnaround potential and can therefore be characterized as developing stations. Implement the Company's Management Philosophy The Company's local station operations are supported by a lean corporate staff which employs a management philosophy emphasizing (i) market research and targeted programming; (ii) a customer-focused selling strategy; and (iii) marketing and promotional activities. Market Research and Targeted Programming. Cox Radio's research, programming and marketing strategy combines extensive research with an assessment of competitors' vulnerabilities and market dynamics in order to identify specific audience opportunities within each market. Cox Radio also retains consultants and research organizations to continually evaluate listener preferences. Using this information, Cox Radio tailors the programming, marketing and promotions of each Cox Radio station to maximize its appeal to its target audience. Cox Radio's disciplined application of market research enables each of its stations to be responsive to the changing preferences of its targeted listeners. This approach focuses on the needs of the listener and its community and is designed to improve ratings and maximize the impact of advertising for the Company's customers. 48 56 Through its research, programming and marketing, Cox Radio also seeks to create a distinct and marketable local identity for each of its stations in order to enhance audience share and listener loyalty and to protect against direct format competition. To achieve this objective, the Company employs and promotes distinct high-profile on-air personalities and local sports programming at many of its stations. For example, the Company broadcasts (i) "Dr. Laura," which originates at one of the Company's stations in Los Angeles, in Atlanta, Dayton, Los Angeles, Syracuse, Tulsa and, beginning in September 1996, Orlando; (ii) "Rush Limbaugh" in Atlanta, Los Angeles, Orlando, Syracuse and Tulsa; (iii) the 1995 World Champion Atlanta Braves in Atlanta and Tampa; and (iv) the Orlando Magic in Orlando and Tampa. Customer-Focused Selling Strategy. The Company has implemented a unique, customer-focused approach to selling advertising known as the Consultative Selling System. The Company's sales personnel are trained to approach each advertiser with a view towards solving the marketing needs of the customer. In this regard, the sales staff consults with customers, attempts to understand their business goals and offers comprehensive marketing solutions, including the use of radio advertising. Instead of merely selling station advertising time, the Company's sales personnel are encouraged to develop innovative marketing strategies for the station's advertising customers. Cox Radio's local sales strategy is determined by station managers based on the individual needs of a given market. The Company generally utilizes a separate sales force for each station. However, in certain markets, the Company has created a combined sales force for several stations. For example, in Atlanta, Cox Radio's sales force for WSB-AM, WSB-FM and WCNN-AM is organized along product lines and divided into sports, FM and AM product teams. This structure allows each individual sales person to specialize in specific demographic targets, thus catering more closely to the needs of an advertiser, and to deliver to its advertisers an entire demographic group. In Los Angeles, the Company has a separate sales force for KFI-AM, but a combined sales force for KOST-FM and KACE-FM, which target a different demographic group than KFI-AM. Marketing and Promotional Activities. The Company's stations regularly engage in significant local promotional activities, including advertising on local television and in local print media, participating in telemarketing and direct mailings and sponsoring contests, concerts and events. Special events may include charitable athletic events (such as a paralympic basketball challenge), events centered around a major local occasion (such as an Olympic t-shirt auction in Atlanta or golf tournament in connection with the Kentucky Derby) or local ethnic group (such as a Haitian American Cultural Festival in Miami) and special community or family events (such as arts festivals, job fairs and family expos). Cox Radio also engages in joint promotional activities with other media in their markets to further leverage their promotional spending. These promotional efforts help the Company's stations add new listeners and increase the amount of time spent listening to the stations. Leverage Senior Operating Management Team Cox Radio's senior operating management, together with the NewCity senior operating management, which will join Cox Radio as part of the NewCity Acquisition, will be comprised of six individuals with an average of over 23 years of experience in the radio broadcasting industry, including an average of over 14 years with their respective organizations. Management believes that these two management teams share a common operating philosophy, which will facilitate the integration of the two companies. A significant portion of the compensation of each member of the senior operating management team is linked to the Company's operating results and each will participate in the Company's Long-Term Incentive Plan. See "Management -- Long-Term Incentive Plan." Cultivate Strong Local Management Teams The Company places great importance on the hiring and development of strong local management teams and has been successful in retaining experienced management teams that have strong ties to their communities and customers. The general managers of Cox Radio and NewCity have been with their 49 57 respective organizations for an average of 11 years; Program Directors an average of four years and Chief Engineers/Technical Directors an average of 12 years. The Company invests significant resources in identifying and training employees to create a talented team of managers at all levels of station operations. These resources include: (i) Gallup/SRI, which helps the Company identify and select talented individuals for management and sales positions; (ii) NewCity Associates, an independent sales and management training company initially created by NewCity, which trains and develops managers and sales executives; and (iii) a program of seminars conducted by the Company's senior operating management and outside consultants. Local managers are empowered to run the day-to-day operations of their stations and to develop and implement policies that will improve station performance and establish long-term relationships with listeners and advertisers. A significant portion of the compensation of each local station manager is dependent upon the financial performance of the station that he manages and certain of the station managers will participate in the Company's Long-Term Incentive Plan. See "Management -- Long-Term Incentive Plan." ACQUISITION STRATEGY During the last several years, the Company has implemented its clustering strategy through the acquisition of radio stations in several of its existing markets. Management believes that recent changes in federal regulations will allow Cox Radio to continue to pursue its acquisition strategy. The Telecommunications Act of 1996 (the "1996 Act") removed the limit on the number of radio stations an operator may own nationwide and increased the number of radio stations an operator may own in a single market. As a result of this legislation, the competitive landscape in the radio broadcasting industry is changing. Management believes that larger, well-capitalized companies with experienced management, such as Cox Radio, will be best positioned to take advantage of this changing environment. Management considers the following factors when making an acquisition. Market Selection Considerations. Cox Radio intends to continue to acquire additional radio stations in the 12 markets in which it will operate following the completion of the Pending Transactions. In the past, the Company has primarily acquired underperforming stations. Cox Radio may also make opportunistic acquisitions in additional markets in which the Company believes that it can cost-effectively achieve a leading position in terms of audience and revenue share. In evaluating acquisition opportunities in additional markets, Cox Radio intends to focus primarily on demographically attractive markets, such as those in the Sunbelt, and markets ranked between ten and 60 in terms of radio advertising revenues. Management believes that such markets offer the greatest potential for growth relative to the cost of entry. Management also believes that Cox Radio will have the financial resources and management expertise to continue to pursue its acquisition strategy. Certain future acquisitions may be limited by the multiple and cross-ownership rules of the FCC. See "Federal Regulation of Broadcasting -- Ownership Matters" and "-- Recent Changes." Station Considerations. Cox Radio expects to concentrate on acquiring radio stations that offer, through application of Cox Radio's operating philosophy, the potential for improvement in the station's performance, particularly its broadcast cash flow. Such stations may be in various stages of development, presenting Cox Radio with an opportunity to apply its management techniques and to enhance asset value. In evaluating potential acquisitions, the Company considers the strength of a station's broadcast signal. A powerful broadcast signal enhances delivery range and clarity, thereby influencing listener preference and loyalty. Cox Radio also assesses the strategic fit of an acquisition with its existing clusters of radio stations. When entering a new market, Cox Radio expects to acquire a "platform" upon which to expand its portfolio of stations and to build a leading cluster of stations. Cox Radio believes that the NewCity Acquisition will create such a platform in several markets for the pursuit of its acquisition strategy. STATION OPERATIONS The Company's stations, including the stations to be acquired in the Pending Transactions, are located in markets which, during the last five years, have demonstrated, in the aggregate, greater radio advertising revenue growth than the U.S. radio industry as a whole. These markets include six Sunbelt markets and four 50 58 markets which management believes have a disproportionately small number of stations relative to the size of the potential market audience. In most of its markets, radio captures a small percentage of the total advertising dollars spent, with local advertisers accounting for the majority of the spending. Clustering creates an opportunity to increase radio's share of a market's advertising revenues. The following table sets forth certain information relating to each of the markets in which the Company's stations operate or will operate:
RADIO 1995 MARKET RADIO NUMBER OF RADIO 1995 REVENUES(4) MARKET REVENUE VIABLE PRO FORMA MARKET ARBITRON ---------------- CAGR(1) STATIONS(1) NUMBER OF REVENUE MARKET % % ----------------- --------- COMPANY MARKET RANK(1) RANK(2) NATIONAL LOCAL 1990-95 1995-99 FM AM STATIONS(5) - ---------------------------------- ------- ------- -------- ----- ------- ------- --- --- --------- Los Angeles....................... 1 2 28% 72% 2.7% 5.1% 21 11 3 Atlanta........................... 10 12 28 72 8.3 7.4% 14 2 4 Miami............................. 12 11 27 73 5.9 5.5% 18 6 2 Tampa............................. 21 21 25 75 6.1 5.9% 14 4 4 Orlando........................... 26 39 30 70 6.3 5.6% 13 2 7 San Antonio....................... 29 34 22 78 7.6 5.9% 13 6 3 Louisville........................ 45 49 13 87 5.8 5.5% 13 2 3 Birmingham........................ 51 55 20 80 4.9 5.3% 10 5 3 Dayton............................ 55 52 15 85 4.7 4.9% 11 2 2 Tulsa............................. 56 60 17 83 7.4 6.1% 13 3 3 Bridgeport........................ 58 111 20 80 5.1 5.0% 4 (4) 2 (4) 1 Syracuse.......................... 71 68 30 70 0.4 5.0% 9 3 5
- --------------- (1) Source, Duncan's. (2) Ranks assigned by Arbitron based on 12+ population in the market. (3) Source, Duncan's. Includes television, radio, newspaper, outdoor and cable. (4) Source, BIA. (5) Assumes consummation of all Pending Transactions. As a result of the Company's management, programming and sales efforts, the Company's radio stations are characterized by strong ratings and above average power ratios. A third of the Company's stations are ranked first or second in terms of audience share in their target demographic groups. In five of the Company's markets, the Company's station groups ranked number one with respect to combined station revenue market share. The section below describes the Company's stations and selected audience and revenue share on a market-by-market basis. 51 59 LOS ANGELES, CALIFORNIA Market Revenue Rank: 1 - KFI-AM (Talk), KOST-FM (Adult Contemporary), KACE-FM (Rhythm & Blues Oldies). Los Angeles is the largest radio revenue market in the United States based on 1995 radio advertising revenue of $476.2 million, a 4.1% increase from 1994 . KFI-AM, which is a 50,000 watt "clear channel" station (the strongest AM signal permitted by the FCC) has a Talk plus news format with its talk programming designed to be informative and stimulating and to focus on everyday issues. KFI-AM originates the syndicated talk show host "Dr. Laura," carries the popular "Rush Limbaugh" show and is the leading Talk station in Los Angeles. KOST-FM, which plays Adult Contemporary music and targets Women 25-44, has maintained the same music format for over 13 years and is currently the number one rated English-speaking music station with women over the age of 18 in Los Angeles. KOST-FM employs extensive marketing research to determine listening preferences within the Adult Contemporary music category and, as a result, has finished ahead of all other Adult Contemporary stations in Los Angeles with Persons 12+ for 54 consecutive ratings books. KACE-FM, which was operated under an LMA beginning in August 1994 and was purchased in August 1995, is the only Rhythm and Blues Oldies radio station in Los Angeles and, through promotions and community activities, maintains close ties with the African American community. KOST-FM and KACE-FM are often sold in combination to advertisers.
1996 LATEST FOUR BOOK AVERAGE/ LATEST FIVE MONTH 1993 1994 1995 REVENUE DATA ---- ---- ---- ------------- (AUDIENCE SHARE AND RANK DATA BASED ON ADULTS 25-54) KFI-AM Audience Share...................................... 3.8 4.2 3.6 3.8 Audience Rank....................................... 7 5 9 5 KOST-FM Audience Share...................................... 5.6 4.7 4.2 4.0 Audience Rank....................................... 2 2 4 3(1) KACE-FM(2) Audience Share...................................... 0.6 0.6 1.2 1.4 Audience Rank....................................... 29 35 28 26 Combined Revenue Share................................ 10.8(3) 11.0 10.9 11.8 Combined Revenue Rank................................. 2 3 4 N.A.
- --------------- (1) Tied. (2) KACE-FM was operated by Cox Radio pursuant to an LMA beginning in August 1994 and was acquired in August 1995. (3) Excludes revenue from KACE-FM. 52 60 ATLANTA, GEORGIA Market Revenue Rank: 10 -- WSB-AM (News/Talk), WSB-FM (Adult Contemporary), WJZF-FM (Jazz), WCNN-AM (Sports/Talk). Atlanta is the tenth largest radio revenue market in the United States based on 1995 radio advertising revenue of $170.0 million, a 13.6% increase from 1994. Over the past five-year period, the Atlanta radio market has grown at a CAGR in excess of 7%. Cox Radio's station group is the leading station group in Atlanta, with strong Adult Contemporary, Jazz, News/Talk and Sports formats. The WSB call letters are a "brand name" in the market, having served Atlanta for over 73 years. WSB-AM is Atlanta's heritage AM station with a 50,000 watt "clear channel" signal. The station features the market's premier news radio operation along with popular on-air personalities such as "Dr. Laura" and the leading local talk host, Neal Boortz. WSB-AM also broadcasts the 1995 World Champion Atlanta Braves, the Atlanta Hawks and the University of Georgia Bulldogs, and WCNN-AM broadcasts the Georgia Tech Yellow Jackets. WSB-FM is the leading Adult Contemporary station in the market and has consistently been the number one or two Adult Contemporary station since 1986. WSB-FM's morning personality, Gary McKee, has been a prominent Atlanta radio personality for over 20 years. WJZF-FM has been operated by Cox under an LMA since January 1994 and, as the market's only commercial Jazz station, has established a profitable niche. Cox Radio's Atlanta stations achieved a combined 21.3% revenue share in 1995. Cox Radio's sales force for WSB-AM, WSB-FM and WCNN-AM is organized along product lines and divided into sports, FM and AM product teams. WJZF-FM is sold in combination with another Atlanta station which targets the same audience, enabling both stations to offer a more comprehensive marketing package to advertisers. This structure allows each individual sales person to specialize in specific demographic targets, catering more closely to the needs of an advertiser.
1996 LATEST FOUR BOOK AVERAGE/ LATEST FIVE MONTH 1993 1994 1995 REVENUE DATA ---- ---- ---- ------------- (AUDIENCE SHARE AND RANK DATA BASED ON ADULTS 25-54) WSB-AM Audience Share................................... 4.7 4.9 5.5 6.1 Audience Rank.................................... 11 9 6 6 WSB-FM Audience Share................................... 7.6 7.8 6.6 6.3 Audience Rank.................................... 4 3 3 5 WJZF-FM (NewCity Acquisition)(1) Audience Share................................... N.A. 3.2 3.5 3.9 Audience Rank.................................... N.A. 14 13 12 WCNN-AM(2) Audience Share................................... 0.9 1.3 1.3 1.2 Audience Rank.................................... 16 17 17 17 Combined Revenue Share............................. 16.2(3) 16.8(4) 21.3 22.1 Combined Revenue Rank.............................. 1 1 1 N.A.
- --------------- (1) Cox Radio began operating WJZF-FM pursuant to an LMA in January 1994. (2) Cox Radio began operating WCNN-AM pursuant to an LMA in April 1995. (3) Excludes revenue from WJZF-FM and WCNN-AM. (4) Excludes revenue from WCNN-AM. 53 61 MIAMI, FLORIDA Market Revenue Rank: 12 -- WFLC-FM (Hot Adult Contemporary),WHQT-FM (Urban Adult Contemporary) Miami is the twelfth largest radio revenue market in the United States based on 1995 radio advertising revenue of $141.0 million, an 8.0% increase from 1994. After completion of the Miami Disposition, Cox Radio will own two FM stations in the Miami market. WHQT-FM, which plays Urban Adult Contemporary music and targets Adults 25-54, was the number one rated English-speaking station in the Fall 1995 and Winter 1996 Arbitron Market Reports and has generated broadcast cash flow margins which are among the highest in the Company. WHQT-FM carries "Tom Joyner", the number one ranked morning drive show in the market. In addition, WHQT-FM maintains strong community ties through its participation in various community events. WFLC-FM, a music intensive Hot Adult Contemporary station which targets Adults 25-54, is often the number one rated non-ethnic format station in Miami. WHQT-FM and WFLC-FM rank second and fourth, respectively, in their target demographics.
1996 LATEST FOUR BOOK AVERAGE/ LATEST FIVE MONTH 1993 1994 1995 REVENUE DATA ---- ---- ---- ------------- (AUDIENCE SHARE AND RANK DATA BASED ON ADULTS 25-54) WHQT-FM Audience Share......................................... 4.8 5.6 5.7 6.2 Audience Rank.......................................... 5 3 3 2 WFLC-FM Audience Share......................................... 5.2 5.0 4.9 4.9 Audience Rank.......................................... 3 6 4 4 Combined Revenue Share................................... 10.8 10.9 11.3 10.9 Combined Revenue Rank.................................... 4 3 3 N.A.
54 62 TAMPA, FLORIDA Market Revenue Rank: 21 - WWRM-FM (Soft Adult Contemporary), WCOF-FM (70's Oldies), WSUN-AM (Sports/Talk), WFNS-AM (Sports/Talk). Tampa is the twenty-first largest radio revenue market in the United States based on 1995 radio advertising revenue of $78.5 million, a 7.5% increase from 1994. WWRM-FM, which plays Soft Adult Contemporary music and targets Women 35-54, ranked first in its target audience in 1995. WCOF-FM, which was one of the first stations in the United States to broadcast the 70's Oldies format, targets Adults 25-44 and was ranked tenth in its target audience in 1995. Cox Radio's AM stations, WSUN-AM and WFNS-AM, both broadcast a Sports/Talk format and carry the NHL's Tampa Bay Lightning, the Orlando Magic, the Atlanta Braves and New York Yankees. Cox Radio has sold advertising under a JSA for WFNS-AM since June 1995 and has recently exercised its option to purchase the station. The Company expects to reduce costs at its AM stations by consolidating certain operations and management functions and, in particular, eliminating significant expenses associated with certain high-cost talent contracts which expire at the end of 1996.
1996 LATEST FOUR BOOK AVERAGE/ LATEST FIVE MONTH 1993 1994 1995 REVENUE DATA ---- ---- ---- ------------- (AUDIENCE SHARE AND RANK DATA BASED ON ADULTS 25-54) WWRM-FM Audience Share......................................... 6.9 5.8 6.6 6.1 Audience Rank.......................................... 4 8 4(1) 6(1) WCOF-FM(2) Audience Share......................................... N.A. 7.8 5.9 5.5 Audience Rank.......................................... N.A. 2 9 10 WSUN-AM Audience Share......................................... 1.8 3.2 3.5 2.5 Audience Rank.......................................... 12 12 12 14 WFNS-AM (Tampa Acquisition)(3) Audience Share......................................... 0.9 1.0 1.0 0.7 Audience Rank.......................................... 13 15 17 19 Combined Revenue Share................................... 8.9(4) 13.2(5) 11.9 11.4 Combined Revenue Rank.................................... 2 3 4 N.A.
- --------------- (1) Tied. (2) WCOF-FM began operating under its current format in December 1993. (3) Cox Radio sold advertising for WFNS-AM pursuant to a JSA beginning in June 1995 and recently decided to exercise its option to acquire WFNS-AM. (4) Excludes revenue from WCOF-FM and WFNS-AM. (5) Excludes revenue from WFNS-AM. 55 63 ORLANDO, FLORIDA Market Revenue Rank: 26 - WDBO-AM (News/Talk), WWKA-FM (Country), WCFB-FM (Rhythmic Adult Contemporary), WZKD-AM (Kids Radio), WHOO-AM (Standards), WHTQ-FM (Classic Rock), WMMO-FM (Rock Adult Contemporary). Orlando is the twenty-sixth largest radio revenue market in the United States based on 1995 radio advertising revenue of $62.6 million, a 9.8% increase from 1994. Upon consummation of the Pending Transactions, the Company will own seven stations in the Orlando market which, on an aggregate basis, accounted for 30.7% of the market's 1995 radio advertising revenues. Since 1983, WWKA-FM, which plays Country music, has consistently ranked among the top three stations in terms of audience share among Adults 25-54, and has ranked number one in terms of radio revenue share since 1988. WDBO-AM is Orlando's leading News/Talk radio station, featuring a popular morning drive time show and an award-winning news operation. In addition, WDBO-AM broadcasts the Orlando Magic, "Rush Limbaugh", and recently contracted to carry "Dr. Laura." NewCity began operating WCFB-FM in 1992 under an LMA and acquired the station in May 1995. Following the acquisition, NewCity changed the format of the station from Country to a unique format that NewCity refers to as Rhythmic Adult Contemporary, resulting in improved audience and revenue share. NewCity began operating WZKD-AM, which broadcasts a unique format targeting children ages 4-11, under an LMA in December 1994, and acquired the station in March 1995. In May 1996, Cox Radio agreed to acquire WMMO-FM, WHTQ-FM and WHOO-AM (the Orlando Acquisition). Pending consummation of the Orlando Acquisition, pursuant to an agreement between Cox Radio and NewCity, NewCity provides programming, sales and marketing services to those stations under an LMA. WHOO-AM utilizes an Adult Standards format to capture the growing target market of Adults 55 and over. WMMO-FM, which is the market's only Rock Adult Contemporary station, and WHTQ-FM, which is the market's sole Classic Rock station, capture an 11.1 combined audience share among Adults 25-54.
1996 LATEST FOUR BOOK AVERAGE/ LATEST FIVE MONTH 1993 1994 1995 REVENUE DATA ---- ---- ---- ------------- (AUDIENCE SHARE AND RANK DATA BASED ON ADULTS 25-54) WDBO-AM (NewCity Acquisition) Audience Share........................................... 6.7 6.0 5.3 4.5 Audience Rank............................................ 5 6 9 11(1) WWKA-FM (NewCity Acquisition) Audience Share........................................... 9.4 7.2 7.7 8.5 Audience Rank............................................ 1 3 3 2 WCFB-FM (NewCity Acquisition)(2) Audience Share........................................... 3.9 3.0 3.1 4.5 Audience Rank............................................ 12 14 14 11 WZKD-AM (NewCity Acquisition)(3) Audience Share........................................... N.A. N.A. N.A. N.A. Audience Rank............................................ N.A. N.A. N.A. N.A. WHOO-AM (Orlando Acquisition) Audience Share........................................... 0.4 0.7 0.6 0.7 Audience Rank............................................ 19(1) 19(1) 20 20 WHTQ-FM (Orlando Acquisition) Audience Share........................................... 4.0 4.6 4.3 4.6 Audience Rank............................................ 11 13 11 10 WMMO-FM (Orlando Acquisition) Audience Share........................................... 7.5 5.8 7.5 6.5 Audience Rank............................................ 3 7 4 6 Combined Revenue Share..................................... 25.1(4) 22.0(4) 20.6(4) 21.1(4) Combined Revenue Rank...................................... 1 1 1 N.A.
- --------------- (1) Tied. (2) WCFB-FM was operated pursuant to an LMA beginning in August 1992 and was acquired in May 1995. (3) WZKD-AM was operated pursuant to an LMA beginning in December 1994 and was acquired in March 1995. WZKD-AM Audience and Revenue Share data is not reported in industry guides. (4) Excludes revenue from WZKD-AM, WHOO-AM, WHTQ-FM and WMMO-FM. 56 64 SAN ANTONIO, TEXAS Market Revenue Rank: 29 -- KCYY-FM (Country), KKYX-AM (Classic Country), KCJZ-FM (Jazz). San Antonio is the nation's twenty-ninth largest radio revenue market in the United States based on 1995 radio advertising revenue of $57.6 million, a 9.3% increase from 1994. Upon consummation of the Pending Transactions, Cox Radio will own three stations in the San Antonio market which, on an aggregate basis, accounted for 14.3% of the market's 1995 radio advertising revenues. KCYY-FM, the market's leading Country station in terms of audience share, targets Adults 25-54. KKYX-AM, the market's only Classic Country station, whose daytime signal covers all of South Texas, targets Adults 35-64. The stations are sold as a package, providing advertisers with an effective vehicle to reach the majority of country music listeners in San Antonio. KCJZ-FM, which targets Adults 25-54, recently changed its format and is the market's only commercial Jazz station.
1996 LATEST FOUR BOOK AVERAGE/ LATEST FIVE MONTH 1993 1994 1995 REVENUE DATA ---- ---- ---- ------------- (AUDIENCE SHARE AND RANK DATA BASED ON ADULTS 25-54) KCYY-FM (NewCity Acquisition) Audience Share....................................... 9.7 7.8 7.3 7.2 Audience Rank........................................ 2 3 3 2 KKYX-AM (NewCity Acquisition) Audience Share....................................... 1.6 1.8 1.6 1.3 Audience Rank........................................ 18 18 19 17 KCJZ-FM (NewCity Acquisition)(1) Audience Share....................................... 2.4 2.9 3.9 5.3 Audience Rank........................................ 11 10 10 9 Combined Revenue Share................................. 16.4 15.7 14.3 13.6 Combined Revenue Rank.................................. 3 2 4 N.A.
- --------------- (1) KCJZ-FM was operated pursuant to an LMA beginning in March 1992 and was acquired in March 1995. The station reported as KDIL-FM through the Fall 1994 Arbitron Market Report. 57 65 LOUISVILLE, KENTUCKY Market Revenue Rank: 45 -- WRKA-FM (Oldies), WRVI-FM (Rock Adult Contemporary), WXNU-FM (Contemporary Alternative). Louisville is the forty-fifth largest radio revenue market in the United States based on 1995 radio advertising revenue of $35.8 million, a 5.6% increase from 1994. Cox Radio acquired WRKA-FM and WRVI-FM in January 1996 and has an agreement to acquire a third station, WXNU-FM. WRKA-FM, which plays Oldies music and targets Adults 35-54, is currently ranked fourth in its target demographic. WRVI-FM, which plays Rock Adult Contemporary music and targets Adults 25-49, has only been in operation since December 1995. Cox Radio has agreed to acquire WXNU-FM (the Louisville Acquisition), which plays Contemporary Alternative music and targets Adults 18-34. The Company intends to sell advertising time on these three stations through a single sales force. Cox Radio's acquisitions in Louisville represent an example of the Company's acquisition strategy, whereby it purchases an underperforming station or group of stations in order to establish a platform on which to build a station cluster. Through this strategy, Cox Radio cost effectively built a significant market presence, which captured approximately 8% of the market's 1995 radio advertising revenues.
1996 LATEST FOUR BOOK AVERAGE/ LATEST FIVE MONTH 1993 1994 1995 REVENUE DATA ---- ---- ---- ------------- (AUDIENCE SHARE AND RANK DATA BASED ON ADULTS 25-54) WRKA-FM(1) Audience Share....................................... 8.6 7.1 6.6 5.9 Audience Rank........................................ 4 3 3 5 WRVI-FM(1) Audience Share....................................... N.A. N.A. N.A. 1.6(2) Audience Rank........................................ N.A. N.A. N.A. 14(2) WXNU-FM (Louisville Acquisition)(3) Audience Share....................................... N.A. 0.8 1.7 1.2 Audience Rank........................................ N.A. 17(4) 14 16 Combined Revenue Share................................. N.A. N.A. 7.9(5) 7.6 Combined Revenue Rank.................................. N.A. N.A. 5 N.A.
- --------------- (1) WRKA-FM and WRVI-FM were acquired in January 1996. (2) Broadcasting on WRVI-FM began in December 1995. Accordingly, Audience Share and Audience Rank are based only on the Winter 1996 Arbitron Market Report. (3) Reported under the call letters WQNF-FM through the Summer 1995 Arbitron Market Report. (4) Tied. (5) Excludes revenue from WXNU-FM. 58 66 BIRMINGHAM, ALABAMA Market Revenue Rank: 51 -- WZZK-FM (Country), WZZK-AM (Country), WODL-FM (Oldies). Birmingham is the fifty-first largest radio revenue market in the United States based on 1995 market radio advertising revenue of $31.4 million, a 5.0% increase from 1994. Upon consummation of the Pending Transactions, Cox Radio will own three stations which, on an aggregate basis, accounted for 32.5% of the market's 1995 radio advertising revenue. WZZK-FM shifted to its current Country format in 1980. For the past five years, WZZK-FM has ranked number one in terms of audience share among Adults 25-54 and has consistently captured over 25% of the market's revenues since 1988. WZZK-AM was acquired in 1985 and since that time has simulcast WZZK-FM's programming. Management believes that the WZZK-AM facility provides the Company with programming flexibility as opportunities arise in the Birmingham market. NewCity began operating WODL-FM under an LMA in the fall of 1992, and acquired the station in May 1993. WODL-FM, Birmingham's only Oldies station, currently ranks number five in terms of audience share and accounts for 8% of the market's radio advertising revenue.
1996 LATEST FOUR BOOK AVERAGE/ LATEST FIVE MONTH 1993 1994 1995 REVENUE DATA ---- ---- ---- ------------- (AUDIENCE SHARE AND RANK DATA BASED ON ADULTS 25-54) WZZK-AM/FM (NewCity Acquisition)(1) Audience Share......................................... 18.6 19.1 14.1 14.5 Audience Rank.......................................... 1 1 1 1 WODL-FM (NewCity Acquisition) Audience Share......................................... 8.6 6.3 7.8 8.0 Audience Rank.......................................... 4 5 5 5 Combined Revenue Share................................... 35.6 34.7 32.5 31.2 Combined Revenue Rank.................................... 1 1 1 N.A.
- --------------- (1) WZZK-AM and WZZK-FM report as a combined entity for purposes of Arbitron Market Reports. 59 67 DAYTON, OHIO Market Revenue Rank: 55 -- WHIO-AM (News/Talk), WHKO-FM (Country). Dayton is the fifty-fifth largest radio revenue market in the United States based on 1995 radio advertising revenue of $28.8 million, a 5.9% increase from 1994. Cox Radio currently owns two stations which accounted for over 25% of the market's 1995 radio advertising revenues. WHKO-FM, which plays Country music and targets Adults 25-54, consistently ranks number one in terms of audience share in its target demographic. WHIO-AM, which features a News/Talk format and targets Adults 35-64, is the leading News/Talk station in Dayton and broadcasts sports programming such as the Cincinnati Reds and the University of Dayton Flyers. The stations are very active in producing revenue from alternative sources, including production of events (Baby Fair, A Day in the Country), local print media (Home Magazine, What's Happening Magazine) and other special projects which contribute significantly to the stations' profitability.
1996 LATEST FOUR BOOK AVERAGE/ LATEST FIVE MONTH 1993 1994 1995 REVENUE DATA ---- ---- ---- ------------- (AUDIENCE SHARE AND RANK DATA BASED ON ADULTS 25-54) WHIO-AM Audience Share......................................... 4.7 4.3 4.4 4.0 Audience Rank.......................................... 8 8 9 8 WHKO-FM Audience Share......................................... 12.6 13.4 12.3 14.3 Audience Rank.......................................... 1 1 1 1 Combined Revenue Share................................... 31.2 28.8 25.5 26.8 Combined Revenue Rank.................................... 2 2 2 N.A.
60 68 TULSA, OKLAHOMA Market Revenue Rank: 56 -- KRMG-AM (News/Talk), KWEN-FM (Country), KJSR-FM (70's Oldies). Tulsa is the fifty-sixth largest radio revenue market based on 1995 radio advertising revenue of $28.7 million, a 7.1% increase from 1994. Upon consummation of the Pending Transactions, Cox Radio will own three stations in Tulsa which, on an aggregate basis, accounted for 35.5% of the market's 1995 radio advertising revenues. KRMG-AM, a full-service News/Talk station, broadcasts "Rush Limbaugh" and "Dr. Laura" and has consistently ranked among the top stations in the Tulsa market. KRMG-AM was also a recent recipient of the National Association of Broadcasters' prestigious Crystal Award for unparalleled community service. KWEN-FM, a Country station targeting Adults 25-54, has ranked number one in terms of audience share since 1988 and revenue share since 1991. NewCity began operating KJSR-FM in January 1995 under an LMA and changed its format from Country to 70's Oldies. In the Fall 1995 Arbitron Market Report, KJSR-FM ranked number two in terms of audience share among Adults 25-54. NewCity acquired KJSR-FM in May 1995.
1996 LATEST FOUR BOOK AVERAGE/ LATEST FIVE MONTH 1993 1994 1995 REVENUE DATA ---- ---- ---- ------------- (AUDIENCE SHARE AND RANK DATA BASED ON ADULTS 25-54) KRMG-AM (NewCity Acquisition) Audience Share......................................... 10.6 8.8 7.0 6.5 Audience Rank.......................................... 2 3 4 5 KWEN-FM (NewCity Acquisition) Audience Share......................................... 18.6 15.1 12.5 13.1 Audience Rank.......................................... 1 1 1 1 KJSR-FM (NewCity Acquisition)(1) Audience Share......................................... 3.1 2.7 6.5 8.5 Audience Rank.......................................... 6 6 4 4 Combined Revenue Share................................... 37.1(2) 35.5(2) 35.5 37.1 Combined Revenue Rank.................................... 1 1 1 N.A.
- --------------- (1) KJSR-FM was operated pursuant to an LMA beginning in January 1995 and was acquired in May 1995. (2) Excludes revenue from KJSR-FM. 61 69 BRIDGEPORT/FAIRFIELD COUNTY, CONNECTICUT Market Revenue Rank: 58 - WEZN-FM (Adult Contemporary). The Bridgeport/Fairfield County market is the nation's fifty-eighth largest radio revenue market based on 1995 radio advertising revenue of $27.3 million, an 11.4% increase from 1994. Fairfield County, one of the nation's most affluent regions, is a particularly attractive market to advertisers and therefore receives an above-average share of local and national media expenditures relative to its population. WEZN-FM is currently ranked number one in terms of audience share among Adults 25-54 and accounted for 21.6% of the market's 1995 radio advertising revenues. WEZN-FM also has a significant presence in adjoining New Haven County, resulting in a significant contribution to the station's advertising revenue.
1996 LATEST FOUR BOOK AVERAGE/ LATEST FIVE MONTH 1993 1994 1995 REVENUE DATA ---- ---- ---- ------------- (AUDIENCE SHARE AND RANK DATA BASED ON ADULTS 25-54) WEZN-FM (NewCity Acquisition) Audience Share(1)................................. 13.9 12.7 13.0 14.3 Audience Rank..................................... 2 2 1 1 Combined Revenue Share.............................. 24.1 22.5 21.6 22.9 Combined Revenue Rank............................... N.A. N.A. 3 N.A.
- --------------- (1) Audience share and rank data are based only on Arbitron Market Reports for the Spring and Fall Arbitron Market Reports for the related years because Arbitron does not produce Summer and Winter Arbitron Market Reports for the Bridgeport/Fairfield County market. 62 70 SYRACUSE, NEW YORK Market Revenue Rank: 71 -- WSYR-AM (News/Talk), WYYY-FM (Adult Contemporary), WBBS-FM (Country), WHEN-AM (Sports/Talk), WWHT-FM (Adult Hit Radio). Syracuse is the seventy-first largest radio revenue market based on 1995 radio advertising revenue of $19.7 million, a 2.1% increase from 1994. Upon consummation of the Pending Transactions, Cox Radio will own five radio stations in the Syracuse market which, on an aggregate basis, accounted for over 55% of the market's 1995 radio advertising revenues. NewCity entered the Syracuse market in 1982 with the acquisition of WSYR-AM and WSYR-FM. In early 1983, the Company changed the format of WSYR-FM to Adult Contemporary, and changed its call letters to WYYY-FM. With the exception of a few ratings periods, WYYY-FM has ranked number one with Adults 25-54 with respect to audience share and has ranked number one in terms of revenue share since 1988. WSYR-AM has consistently ranked among the top stations in the market in terms of audience share and currently ranks number one among Adults 35-64 its target demographic. WSYR-AM carries Syracuse University football and basketball and broadcasts both "Rush Limbaugh" and "Dr. Laura." WBBS-FM was acquired in 1993 and converted to its present Country format. WBBS-FM has consistently performed well as a Country station and is currently ranked number three in terms of audience share for Adults 25-54. Cox Radio acquired WHEN-AM and WWHT-FM (formerly WHEN-FM) in June 1996 and entered into an LMA with NewCity to operate these stations. The Company has recently changed the format of WWHT-FM from Country to Adult Hit Radio.
1996 LATEST FOUR BOOK AVERAGE/ LATEST FIVE MONTH 1993 1994 1995 REVENUE DATA ---- ---- ---- ------------- (AUDIENCE SHARE AND RANK DATA BASED ON ADULTS 25-54) WSYR-AM (NewCity Acquisition) Audience Share......................................... 7.9 8.5 7.1 6.9 Audience Rank.......................................... 4 4 6 6 WYYY-FM (NewCity Acquisition) Audience Share......................................... 12.8 14.4 14.0 12.4 Audience Rank.......................................... 1 1 1 1 WBBS-FM (NewCity Acquisition)(1) Audience Share......................................... 7.2 7.7 9.4 9.7 Audience Rank.......................................... 5 6 3 3 WHEN-AM(2) Audience Share......................................... 2.1 2.5 2.6 2.4 Audience Rank.......................................... 10 10 10 10 WWHT-FM(2) Audience Share......................................... 3.0 3.8 4.2 3.7 Audience Rank.......................................... 9 7 8 8 Combined Revenue Share................................... 45.6(3) 51.2(4) 51.7(4) 54.3(4) Combined Revenue Rank.................................... 1 1 1 N.A.
- --------------- (1) WBBS-FM was acquired in August 1993. (2) WHEN-AM and WWHT-FM were acquired by Cox Radio in June 1996. (3) Excludes revenue from WHEN-AM, WWHT-FM and WBBS-FM. (4) Excludes revenue from WHEN-AM and WWHT-FM. 63 71 ORGANIZATIONAL HISTORY Cox Radio is currently an indirect, wholly-owned subsidiary of CEI. Upon completion of the Offerings, CEI will own approximately % of the Common Stock of Cox Radio and % of the voting power of Cox Radio. Immediately prior to the closing of the Offerings, the Cox Radio Consolidation will be effected through the transfer to Cox Radio of all CEI's United States radio operations. INDUSTRY OVERVIEW The primary source of revenues for radio stations is generated from the sale of advertising time to local and national spot advertisers and national network advertisers. During the past decade, local advertising revenue as a percentage of total radio advertising revenue in a given market has ranged from approximately 72% to 87%. The growth in total radio advertising revenue tends to be fairly stable and has generally grown at a rate faster than the Gross National Product ("GNP"). With the exception of 1991, when total radio advertising revenue fell by approximately 3.1% compared to the prior year, advertising revenue has risen in each of the past 15 years more rapidly than both inflation and the GNP. Total domestic radio advertising revenue in 1995 of $11.5 billion, as reported by the RAB, was at its highest level in the industry's history. According to the RAB's Radio Marketing Guide and Fact Book for Advertisers, 1994-1995, radio reaches approximately 96% of all Americans over the age of 12 every week. More than one-half of all radio listening is done outside the home, in contrast to other advertising media, and three out of four adults are reached by car radio each week. The average listener spends approximately three hours and 20 minutes per day listening to radio. Most radio listening occurs during the morning, particularly between the time a listener wakes up and the time the listener reaches work. This "morning drive time" period reaches more than 85% of people over the age of 12 and, as a result, radio advertising sold during this period achieves premium advertising rates. Radio listeners have gradually shifted over the years from AM to FM stations. FM reception, as compared to AM, is generally clearer and provides greater tonal range and higher fidelity. In comparison to AM, FM's listener share is now in excess of 75%, despite the fact that the number of AM and FM commercial stations in the United States is approximately equal. Radio is considered an efficient, cost-effective means of reaching specifically identified demographic groups. Stations are typically classified by their on-air format, such as country, adult contemporary, oldies and news/talk. A station's format and style of presentation enables it to target certain demographics. By capturing a specific share of a market's radio listening audience, with particular concentration in a targeted demographic, a station is able to market its broadcasting time to advertisers seeking to reach a specific audience. Advertisers and stations utilize data published by audience measuring services, such as Arbitron, to estimate how many people within particular geographical markets and demographics listen to specific stations. 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 and the local competitive environment. Although the number of advertisements broadcast during a given time period may vary, the total number of advertisements broadcast on a particular station generally does not vary significantly from year to year. A station's local sales staff generates the majority of its local and regional advertising sales through direct solicitations of local advertising agencies and businesses. To generate national advertising sales, a station usually will engage a firm that specializes in soliciting radio advertising sales on a national level. National sales representatives obtain advertising principally from advertising agencies located outside the station's market and receive commissions based on the revenue from the advertising obtained. COMPETITION; CHANGES IN THE BROADCASTING INDUSTRY The radio broadcasting industry is a highly competitive business. The success of each of the Company's stations depends largely upon its audience ratings and its share of the overall advertising revenue within its market. The Company's stations compete for listeners and advertising revenue directly with other radio stations within their respective markets. Radio stations compete for listeners primarily on the basis of program content that appeals to a target demographic group. By building a strong listener base consisting of a specific demographic in each of its markets, Cox Radio is able to attract advertisers seeking to reach those listeners. Factors that are material to a station's competitive position include management experience, the station's audience share rank in its market, transmitter power, assigned frequency, audience characteristics, local 64 72 program acceptance, and the number and characteristics of other stations in the market area. Cox Radio attempts to improve its competitive position with promotional campaigns aimed at the demographics targeted by its stations and by sales efforts designed to attract advertisers. Recent changes in the law and in FCC rules and policies have increased the number of radio stations a broadcaster may own in a given market and permit, within limits, joint arrangements with other stations in the market relating to programming, advertising sales, and station operation. Management believes that radio stations that elect to take advantage of these opportunities may, in certain circumstances, have lower operating costs and may be able to offer advertisers more attractive rates and services. Although the radio broadcasting industry is highly competitive, some barriers to entry exist. The operation of a radio broadcast station requires a license from the FCC and the number of radio stations that can operate in a given market is limited by the availability of FM and AM radio frequencies allotted by the FCC to communities in that market, as well as by the FCC's multiple ownership rules, which regulate the number of stations that may be owned and controlled by a single entity. The Company's stations also compete for advertising revenue with other radio stations and with other electronic and print media. Potential advertisers can substitute advertising through broadcast television, cable television systems (which can offer concurrent exposure on a number of cable networks to enlarge the potential audience), daily, weekly, and free-distribution newspapers, other print media, direct mail, and on-line computer services for radio advertising. Competing media commonly target the customers of their competitors, and advertisers regularly shift dollars from radio to these competing media and vice versa. Accordingly, there can be no assurance that any of the Company's stations will be able to maintain or increase its current audience ratings and advertising revenue share. In addition, the radio broadcasting industry is subject to competition from new media technologies that are being developed or introduced, such as the delivery of audio programming by cable television systems, by satellite and by DAB. The delivery of information through the Internet also could create a new form of competition. The radio broadcasting industry historically has grown despite the introduction of new technologies for the delivery of entertainment and information, such as broadcast television, cable television, audio tapes and compact discs. A growing population and greater availability of radios, particularly car and portable radios, have contributed to this growth. There can be no assurance, however, that the development or introduction in the future of any new media technology will not have an adverse effect on the radio broadcasting industry. The FCC currently has before it proceedings that will permit the use of DAB to deliver audio programming, and has allocated spectrum for the provision of satellite DAB service. DAB provides a medium for the delivery by satellite or terrestrial means of multiple new, high quality audio programming formats to local and national audiences. This technology also may be used in the future by radio broadcast stations either on existing or alternate broadcasting frequencies or on new frequency bands. In addition, the FCC has authorized an additional 100 kHz of spectrum for the AM band and will soon allocate frequencies in this new band to certain existing AM station licensees. By the end of a transition period to be determined by the FCC, those licensees will be required to return to the FCC either the license for their existing AM band station or the license for the expanded AM band station. Cox Radio cannot predict what other matters might be considered in the future by the FCC, nor can it assess in advance what impact, if any, the implementation of any of these proposals or changes might have on its business. FEDERAL REGULATION OF RADIO BROADCASTING The ownership, operation and sale of radio stations, including those licensed to Cox Radio, are subject to the jurisdiction of the FCC, which acts under authority granted by the Communications Act. Among other things, the FCC assigns frequency bands for broadcasting; determines the particular frequencies, locations and operating power of stations; issues, renews and modifies station licenses; determines whether to approve changes in ownership or control of station licenses; regulates equipment used by stations; adopts and implements regulations and policies that directly or indirectly affect the ownership, operation, program content, employment practices, and business of stations; and has the power to impose penalties, including license revocations, for violations of its rules or the Communications Act. The 1996 Act, which significantly amended the Communications Act in numerous respects, dramatically changed the ground rules for competition and regulation in virtually all sectors of the telecommunications industry, including broadcasting, local and long-distance telephone services, cable television services and telecommunications equipment manufacturing. 65 73 The following is a brief summary of certain provisions of the Communications Act, as amended by the 1996 Act, and of specific FCC rules and policies. Reference should be made to the Communications Act, FCC rules and public notices and rulings of the FCC for further information concerning the nature and extent of FCC regulation of broadcast stations. License Renewal. Broadcast station licenses are subject to renewal upon application to the FCC. Under the Communications Act, radio licenses are granted by the FCC for maximum terms of seven years. The 1996 Act provides that radio licenses may be granted for a period not to exceed eight years and authorizes the FCC to prescribe the period or periods for which licenses shall be granted and renewed for particular classes of radio stations. In April 1996, the FCC issued a Notice of Proposed Rulemaking seeking comment on a proposal to extend broadcast station license terms to eight years and implementation of new license term rules. Under the Communications Act, interested parties, including members of the public, may file petitions to deny a license renewal application, but competing applications for the license will not be accepted unless the current licensee's renewal application is denied. If a petition to deny presents information from which the FCC concludes (or if the FCC concludes on its own) that there is a "substantial and material" question whether grant of the renewal application would be in the public interest under applicable rules and policy, the FCC will conduct a hearing on specified issues to determine whether renewal should be granted. The FCC is required to grant a license renewal application if (i) the licensee has served the public interest; (ii) the licensee has not engaged in any serious violations of the Communications Act or the FCC's rules and regulations; and (iii) the licensee has not engaged in any other violations that would indicate a pattern of abuse of FCC rules or the Communications Act. The FCC may deny a license renewal application only if it finds that a licensee has failed to meet this three-pronged test and that there are no mitigating circumstances to warrant grant of the license renewal for a shorter period than the full license term, or to warrant the grant of a renewal with certain conditions attached to the grant. Only in the event of such a denial of a license renewal application will the FCC accept new applications for the broadcast frequency occupied by the incumbent broadcast licensee. Also, during certain periods when a renewal application is pending (generally four months prior to expiration of the license), the transferability of the applicant's license may be restricted. Historically, Cox Radio's management has not experienced any material difficulty in obtaining renewal from the FCC of any of the broadcast licenses of stations under its control. The following table sets forth, among other things, the frequency on which each of the stations owned by Cox Radio and NewCity broadcasts, and the date on which each station's FCC license expires (a station may continue to operate beyond the expiration date if a timely filed license renewal application is pending):
HEIGHT ABOVE EXPIRATION FCC AVERAGE MARKET(1) STATION FREQUENCY DATE OF LICENSE CLASS TERRAIN POWER - -------------------------------------- ------------ --------- -------------------- ----- ------- ------------ Los Angeles........................... KFI-AM 640 kHz December 1, 1997 A N.A. 50 kw KOST-FM 103.5 MHz December 1, 1997 B 949 m 12.5 kw KACE-FM 103.9 MHz December 1, 1997 A 119 m 1.65 kw Atlanta............................... WSB-AM 750 kHz April 1, 2003 A N.A. 50 kw WSB-FM 98.5 MHz April 1, 2003 C 311 m 100 kw WJZF-FM(2) 104.1 MHz April 1, 1996(3) C1 371 m 60 kw WCNN-AM(4) 680 KHz April 1, 2003 B N.A. 50 kw day 10 kw night Miami................................. WFLC-FM 97.3 MHz February 1, 2003 C 307 100 kw WHQT-FM 105.1MHz February 1, 2003 C 307 100 kw Tampa................................. WWRM-FM 94.9 MHz February 1, 2003 C 393 m 95 kw WCOF-FM 107.3 MHz February 1, 2003 C1 189 m 100 kw WSUN-AM 620 kHz February 1, 2003 B N.A. 5 kw WFNS-AM(5) 910 kHz February 1, 2003 B N.A. 5 kw
66 74
HEIGHT ABOVE EXPIRATION FCC AVERAGE MARKET(1) STATION FREQUENCY DATE OF LICENSE CLASS TERRAIN POWER - -------------------------------------- ------------ --------- -------------------- ----- ------- ------------ Orlando............................... WDBO-AM(2) 580 kHz February 1, 2003 B N.A. 5 kw WWKA-FM(2) 92.3 MHz February 1, 1996(6) C 408 m 98 kw WCFB-FM(2) 94.5 MHz February 1, 2003 C 448 m 96 kw WZKD-AM(2) 950 kHz February 1, 2003 B N.A. 5 kw WHOO-AM(3) 990 kHz February 1, 2003 B N.A. 50 kw day 5 kw night WHTQ-FM(3) 96.5 MHz February 1, 2003 C 487 m 100 kw WMMO-FM(3) 98.9 MHz February 1, 2003 C2 134 m 38 kw San Antonio........................... KCYY-FM(2) 100.3 MHz August 1, 1997 C 300 m 98 kw KCJZ-FM(2) 106.7 MHz August 1, 1997 C 310 m 100 kw KKYX-AM(2) 680 kHz August 1, 1997 B N.A. 50 kw day 10 kw night Louisville............................ WRKA-FM 103.1 MHz August 1, 1996(6) A 95 m 6 kw WRVI-FM 94.7 MHz August 1, 1996(6) A 100 m 3 kw WXNU-FM(7) 105.9 MHz August 1, 1996(6) A 100 m 3 kw Birmingham............................ WZZK-AM(2) 610 kHz April 1, 2003 B N.A. 5 kw day 1 kw night WZZK-FM(2) 104.7 MHz April 1, 2003 C 396 m 99 kw WODL-FM(2) 106.9 MHz April 1, 2003 C 351 m 99 kw Dayton................................ WHIO-AM 1290 KHz October 1, 1996(6) B N.A. 5 kw WHKO-FM 99.1 MHz October 1, 1996(6) B 325 m 50 kw Tulsa................................. KRMG-AM(2) 740 kHz June 1, 1997 B N.A. 50 kw day 25 kw night KWEN-FM(2) 95.5 MHz June 1, 1997 C 405 m 96 kw KJSR-FM(2) 103.3 MHz June 1, 1997 C 390 m 100 kw Bridgeport............................ WEZN-FM(2) 99.9 MHz April 1, 1998 B 204 m 27.5 kw Syracuse.............................. WSYR-AM(2) 570 kHz June 1, 1998 B N.A. 5 kw WHEN-AM 620 kHz June 1, 1998 B N.A. 5 kw WYYY-FM(2) 94.5 MHz June 1, 1998 B 198 m 100 kw WBBS-FM(2) 104.7 MHz June 1, 1998 B 150 m 50 kw WWHT-FM 107.9 MHz June 1, 1998 B 152 m 50 kw
- --------------- (1) Metropolitan market served; city of license may differ. (2) Station to be acquired by Cox Radio pursuant to the NewCity Acquisition. (3) Station to be acquired by Cox Radio pursuant to the Orlando Acquisition. (4) Cox Radio provides programming to this station pursuant to an LMA. (5) Cox Radio provides sales and related services to this station through a JSA; station to be acquired pursuant to the Tampa Acquisition. (6) Cox Radio, NewCity or the current licensee of this station has filed an application with the FCC to renew such licenses. Such applications are pending FCC approval as of July 23, 1996. (7) Station to be acquired by Cox Radio pursuant to the Louisville Acquisition Ownership Matters. The Communications Act prohibits the assignment of a license or the transfer of control of a broadcast licensee without the prior approval of the FCC. In determining whether to grant or renew a broadcast license, the FCC considers a number of factors pertaining to the licensee, including compliance with the Communications Act's limitations on alien ownership, compliance with various rules limiting common ownership of broadcast, cable and newspaper properties, and the "character" of the licensee and those persons holding "attributable" interests in the licensee. Under Section 310 of the Communications Act, broadcast licenses may not be granted to or held by any foreign government, any representative of a foreign government or by any non-U.S. citizen or his representative, or by any corporation organized under the laws of any foreign government, or by any corporation of which more than one-fifth of the capital stock is owned of record or voted by non-U.S. citizens or their representatives, by a foreign government or its representatives or by any corporation organized under the laws of a foreign country. In addition, broadcast licenses may not be granted to or held by any corporation directly or indirectly controlled by any other corporation of which more than one-fourth of the capital stock is owned of 67 75 record or voted by non-U.S. citizens, their representatives, or by a foreign government or its representatives, or by any corporation organized under the laws of any foreign government, unless the FCC finds that the public interest would be served by granting such a license under such circumstances. The FCC has never to date made such a public interest finding. The foregoing restrictions in modified form apply to forms of business organizations other than corporations, including general partnerships and limited partnerships. As a result of these provisions, Cox Radio, which serves as a holding company for its various radio station licensee subsidiaries, cannot have more than 25% of its capital stock owned of record or voted by aliens or their representatives, by a foreign government or its representative or by any corporation organized under the laws of any foreign government. Recent Changes. The FCC's local radio multiple ownership rule (the "Radio Contour Overlap Rule") provides for certain limits on the number of radio stations that one entity may own in a local geographic market. These limits are as follows: (a) In a radio market with 45 or more commercial radio stations, a party may own, operate or control up to eight commercial radio stations, not more than five of which are in the same broadcast service (i.e., AM or FM); (b) In a radio market with between 30 and 44 (inclusive) commercial radio stations, a party may own, operate or control up to seven commercial radio stations, not more than four of which are in the same broadcast service (i.e., AM or FM); (c) In a radio market with between 15 and 29 (inclusive) commercial radio stations, a party may own, operate or control up to six commercial radio stations, not more than four of which are in the same broadcast service (i.e., AM or FM); and (d) In a radio market with 14 or fewer commercial radio stations, a party may own, operate or control up to five commercial radio stations, not more than three of which are in the same broadcast service (i.e., AM or FM), except that a party may not own, operate or control more than 50 percent of the stations in the market. The FCC does not regulate the number of radio stations that may be owned or controlled by one entity nationally. LMAs between two stations in the same market that involve more than fifteen percent of the brokered station's broadcast hours per week are treated as if the brokered station is owned by the brokering station for purposes of the Radio Contour Overlap Rule. Notwithstanding the limits contained in the Radio Contour Overlap Rule, the FCC has the authority to permit any person or entity to own, operate or control, or have a cognizable interest in, in a number of radio broadcast stations in excess of the rule's limits if the FCC determines that such ownership, operation, control or interest will result in an increase in the number of radio broadcast stations that are in operation. Although the 1996 Act, which granted the FCC such authority, does not explain the intent or rationale for this provision, Cox Radio believes that this exception may apply to newly-constructed stations and/or stations that have been off the air but are resuming broadcast operations. FCC rules also generally prohibit or restrict the cross-ownership, operation or control of a radio broadcast station and a television broadcast station serving the same geographic market, and of a radio broadcast station and a daily newspaper serving the same geographic market. Under these rules, absent waivers, Cox Radio would not be permitted to acquire any radio broadcast station in a geographic market in which it, or a person with an attributable interest in Cox Radio, such as CEI, now owns a television station (other than a low power television station) or a daily newspaper. The FCC's rules provide for the liberal grant of waivers of the rule prohibiting common ownership of radio and television stations in the same geographic market (the "one-to-a-market rule") for stations located in the top 25 television markets. Under the 1996 Act and upon satisfaction of certain conditions, the FCC must extend its "top-25" waiver policy to proposed station combinations in any of the top 50 markets, consistent with a determination that the combination would serve public interest, convenience and necessity. Additionally, in December 1994, the FCC initiated a rulemaking proceeding soliciting further public comment on proposals to relax further or to repeal the FCC's one-to-a-market rule. The FCC's standards for granting waivers of its radio-newspaper cross-ownership rule are more stringent, and 68 76 such standards permit waiver only in those situations where application of the rule would be unduly harsh. In 1993, Congress authorized the FCC to grant waivers of the radio-newspaper cross-ownership rule to permit cross-ownership of a radio station and a daily newspaper in a top 25 market with at least 30 independent media voices, provided the FCC finds the transaction to be in the public interest. The FCC has not yet proposed any rules to implement its authority in this regard. Because of these multiple and cross-ownership rules, a purchaser of Cox Radio's Common Stock who acquires an attributable interest in Cox Radio may violate and may cause Cox Radio to violate the FCC's ownership rules if such purchaser also has an attributable interest in other television or radio stations, or in daily newspapers, depending on the number and location of those radio or television stations or daily newspapers. Such a purchaser also may be restricted in the companies in which it may invest, to the extent that those investments give rise to an attributable interest. If an attributable stockholder of Cox Radio violates any of these ownership rules, Cox Radio may be unable to obtain from the FCC one or more authorizations needed to conduct its radio station business and may be unable to obtain FCC consents for certain future acquisitions. The FCC generally applies its ownership limits to "attributable" interests held by an individual, corporation, partnership or other association. In the case of corporations holding broadcast licenses, the interests of officers, directors and those who, directly or indirectly, have the right to vote 5% or more of the corporation's voting stock are generally deemed to be attributable, as are positions of an officer or director of a corporate parent of a broadcast licensee. Cox Radio's indirect parent, CEI, has attributable ownership interests in television stations located in Orlando, Florida; Charlotte, North Carolina; Pittsburgh, Pennsylvania; Dayton, Ohio; Atlanta, Georgia; and Oakland, California and in daily newspapers located in Scottsdale, Yuma, Tempe, Mesa, Chandler and Gilbert, Arizona; Grand Junction, Colorado; Palm Beach, Florida; Atlanta, Georgia; Greenville, North Carolina; Dayton and Springfield, Ohio; and Austin, Longview, Lufkin, Waco, and Nacogdoches, Texas. The FCC has granted its consent for CEI to acquire a television station in El Paso, Texas; the acquisition has not been consummated. CEI has a non-attributable ownership interest in a daily newspaper located in Daytona Beach, Florida. Currently, James C. Kennedy and Ben F. Love, directors of CEI, are also directors of Texas Commerce Bancshares, Inc., the holding company of Texas Commerce Bank, N.A. which, through a wholly-owned subsidiary, Gordon Holdings, Inc., owns KRZQ-FM, Tahoe City, California. Mr. Kennedy's and Mr. Love's responsibilities as directors of Texas Commerce Bancshares, Inc. do not extend to the day-to-day operations or business of the licensee of KRZQ-FM, which service area is not located in any market in which Cox Radio owns its radio stations. Paul J. Rizzo, a director of CEI, is a director of The McGraw-Hill Companies, Inc. which, through a wholly-owned subsidiary, owns and operates television stations KMGH-TV, Denver, Colorado; WRTV, Indianapolis, Indiana; KERO-TV, Bakersfield, California, and KGTV, San Diego, California. Mr. Rizzo has no involvement in the day-to-day operations and management of any of the McGraw-Hill television stations, only one of which, KERO-TV, is located in a market (Los Angeles, CA) in which Cox Radio owns its radio stations. None of the other officers, directors or 5% or greater shareholders of the voting stock of Cox Radio or of its subsidiaries has any attributable interest in any broadcast stations other than through Cox Radio and its subsidiaries. The FCC treats all partnership interests as attributable, except for those limited partnership interests that are "insulated" by the terms of the limited partnership agreement from "material involvement" in the media-related activities of the partnership under FCC policies. Stock interests held by insurance companies, mutual funds, bank trust departments and certain other passive institutional investors that hold stock for investment purposes only become attributable with the ownership of 10% or more of the stock of a corporation holding broadcast licenses. To assess whether a voting stock interest in a direct or indirect parent corporation of a broadcast licensee is attributable, the FCC uses a "multiplier" analysis in which non-controlling voting stock interests are deemed proportionally reduced at each non-controlling link in a multi-corporation ownership chain. For a person or entity with an attributable interest in a radio broadcast station, an LMA with another station in the same market creates an attributable interest in the brokered station for purposes of the FCC's Radio Contour Overlap Rule, if the agreement affects 15% or more of the brokered station's weekly broadcast hours. 69 77 In March 1992, the FCC initiated an inquiry and rulemaking proceeding in which it solicited comment on whether it should alter its ownership attribution rules by (i) raising the basic benchmark for attributing ownership in a corporate licensee from 5% to 10% of the licensee's voting stock; (ii) increasing the attribution benchmark for "passive institutional investors" in corporate licensees from 10% to 20% of the licensee's voting stock; (iii) broadening the class of investors eligible for "passive institutional investor" status to include Small Business and Minority Enterprise Small Business Investment Companies; and (iv) exempting certain widely-held limited partnership interests from attribution where each individual interest represents an insignificant percentage of total partnership equity. Cox Radio cannot predict whether any of these proposals will ultimately be adopted by the FCC. The FCC initiated a further rulemaking proceeding in December 1994 to solicit additional public comment on proposed attribution rules. Among the issues being explored in the proceeding are the following (a) whether the FCC should raise the benchmarks for determining voting stock interests to be "attributable" from 5% to 10% for those stockholders other than passive institutional investors, and from 10% to 20% for passive institutional investors; (b) whether to consider non-voting stock interests to be attributable under the multiple ownership rules (at present such interests are not attributable); (c) whether to consider generally attributable voting stock interests which account for a minority of the issued and outstanding shares of voting stock of a corporate licensee, where the majority of the corporation's voting stock is held by a single stockholder; (d) whether to relax, for attribution purposes, the FCC's insulation standards for business development companies and other widely-held limited partnerships; (e) whether to adopt an equity threshold for non-insulated limited partnerships below which a limited partner would not be considered to have an attributable interest in the partnership, regardless of that partner's insulation from day-to-day management and operations of the media enterprises of the partnership; (f) how to treat limited liability companies and other new business forms for purposes of the FCC's attribution rules; (g) the impact of limited liability companies on broadcast ownership opportunities for women and minorities; and (h) whether to adopt a new attribution policy under which the FCC would scrutinize multiple "cross interests" or other significant business relationships, which are held in combination among ostensibly arm's-length competing broadcasters in the same market, to determine whether the combined interests, which individually would not raise concerns as to potential diminution of competition and diversity of viewpoints, would nonetheless raise such concerns in light of the totality of the relationships among the parties (including, e.g., LMAs, JSAs, debt relationships, holdings of non-attributable interests, or other relationships among competing broadcasters in the same market). Furthermore, the FCC has a "cross-interest" policy that under certain circumstances could prohibit a person or entity with an attributable interest in a broadcast station or daily newspaper from having a "meaningful" non-attributable interest in another broadcast station or daily newspaper in the same local market. Among other things, "meaningful" interests could include significant equity interests (including non-voting stock, voting stock, and limited partnership interests) and significant employment positions. This policy may limit the permissible acquisitions and investments Cox Radio may make and the permissible investments a purchaser of Cox Radio's Common Stock may make or hold. If the FCC determines that a stockholder of Cox Radio has violated this cross-interest policy, Cox Radio may be unable to obtain from the FCC one or more authorizations needed to conduct its radio station business and may be unable to obtain FCC consents for certain future acquisitions. In December 1994, as part of its rulemaking proceeding soliciting public comment on various proposals to modify its broadcast attribution policies, the FCC also solicited public comment on whether to eliminate or codify the remaining aspects of the cross-interest policy with respect to significant employment positions, non-attributable equity interests and joint venture arrangements. Under the 1996 Act, the FCC is required to review all of its broadcast ownership rules every other year to determine whether the public interest dictates that such rules be repealed or modified. The 1996 Act imposes numerous requirements on the FCC to launch new inquiries and rulemaking proceedings, perhaps 80 in all, involving a multitude of telecommunications issues, including those described hereinabove that will directly affect the broadcast industry. The 1996 Act mandates that such rulemaking proceedings be completed within certain time frames, in some cases as short as six months. Programming and Operation. The Communications Act requires broadcasters to serve the "public interest." Since the late 1970s, the FCC gradually has relaxed or eliminated many of the more formalized 70 78 procedures it had developed to promote the broadcast of certain types of programming responsive to the needs of a station's community of license. However, licensees are still required to present programming that is responsive to community problems, needs and interests and to maintain certain records demonstrating such responsiveness. Complaints from listeners concerning a station's programming often will be considered by the FCC when it evaluates license renewal applications of a licensee, although such complaints may be filed at any time and generally may be considered by the FCC at any time. Stations also must follow various rules promulgated under the Communications Act that regulate, among other things, political advertising, sponsorship identifications, the advertisements of contests and lotteries, obscene and indecent broadcasts and technical operations, including limits on radio frequency radiation. In addition, broadcast licensees must develop and implement programs designed to promote equal employment opportunities for minorities and women and must submit reports to the FCC with respect to these matters annually and in connection with the station's license renewal application. Failure to observe these or other rules and policies can result in the imposition of various sanctions, including monetary forfeitures, the grant of short-term (i.e., less than the full seven-year term) renewals or, for particularly egregious violations, the denial of a license renewal application or the revocation of a license. LMAs and JSAs. Over the past several years, a significant number of radio broadcast licensees, including certain of Cox Radio's subsidiaries, have entered into LMAs and JSAs. See "Business -- Local Marketing Agreements." Under a typical LMA, separately owned and licensed radio stations agree to enter into cooperative arrangements subject to compliance with the requirements of antitrust laws and with the FCC's rules and policies. Under these types of arrangements, separately-owned stations serving a common geographic area agree to function cooperatively in terms of programming, advertising sales, etc., subject to the licensee of each station maintaining independent control over the programming and station operations of its own station. Such arrangements are an extension of the concept of "time brokerage," under which a licensee of a station sells the right to broadcast blocks of time on its station to an entity or entities which program the blocks of time and sell their own commercial advertising announcements for their own account during the time periods in question. Under a typical JSA, two separately owned radio stations serving a common service area agree to function cooperatively in terms of advertising sales only. Under such an arrangement, the licensee of one station sells the advertising time on the other licensee's station, for its own account but does not provide any programming to the other licensee's station. This arrangement is also subject to ultimate control by the latter licensee. The FCC has heretofore determined that issues of joint advertising sales should be left to antitrust enforcement and has specifically exempted LMAs from its "cross-interest" policy. Further, the FCC and the staff of the FCC's Mass Media Bureau have held that LMAs do not per se constitute a transfer of control and are not contrary to the Communications Act, provided that the licensee of the brokered station maintains complete responsibility for and control over operations of its broadcast station (including, specifically, control over station finances, personnel and programming) and complies with applicable FCC rules and with antitrust laws. However, in December 1994, as part of its rulemaking proceeding soliciting public comment on various proposals to modify its broadcast attribution policies, the FCC also solicited public comment on whether to adopt a new attribution policy under which the FCC would scrutinize multiple "cross-interests" or other significant business relationships, which are held in combination among ostensibly arm's-length competing broadcasters in the same market, to determine whether the combined interests, which individually would not raise concerns as to potential diminution of competition and diversity of viewpoints, would nonetheless raise such concerns in light of the totality of the relationships among the parties (including, e.g., LMAs, JSAs, debt relationships, holdings of non-attributable interests, or other relationships among competing broadcasters in the same market). Under certain circumstances, the FCC will consider a station brokering time on another station serving the same market to have an attributable ownership interest in the brokered station for purposes of the FCC's Radio Contour Overlap Rule. See "Business -- Regulation of Radio Broadcasting -- Ownership Matters." In particular, a broadcast station is not permitted to enter into an LMA giving it the right to program more than 15% of the broadcast time, on a weekly basis, of another local station which it could not own under the FCC's 71 79 Radio Contour Overlap Rule. A JSA where no programming is provided is not considered an attributable ownership interest under current FCC rules. The FCC's rules also prohibit a broadcast licensee from simulcasting more than 25% of its programming on another station in the same broadcast service (i.e., AM-AM or FM-FM) whether it owns both stations or operates both through an LMA where the brokered and brokering stations serve substantially the same geographic area. Proposed Changes. The Congress and the FCC have under consideration, and may in the future consider and adopt, new laws, regulations and policies regarding a wide variety of matters that could, directly or indirectly: (i) affect the operation, ownership and profitability of Cox Radio and its radio broadcast stations; (ii) result in the loss of audience share and advertising revenue of the Company's radio broadcast stations; and (iii) affect the ability of Cox Radio to acquire additional radio broadcast stations or finance such acquisitions. Such matters include, for example, changes to the license renewal process; proposals to impose spectrum use or other governmentally-imposed fees upon licensees; proposals to expand the FCC's equal employment opportunity rules and other matters relating to minority and female involvement in broadcasting; proposals to repeal or modify some or all of the FCC's multiple ownership rules and/or policies; proposals to increase the benchmarks or thresholds for attributing ownership interests in broadcast media; proposals to change rules or policies relating to political broadcasting; technical and frequency allocation matters, including those relative to the implementation of DAB on both a satellite and terrestrial basis and AM stereo broadcasting; proposals to permit expanded use of FM translator stations; proposals to restrict or prohibit the advertising of beer, wine and other alcoholic beverages on radio; changes in the FCC's cross-interest, multiple ownership, alien ownership and cross-ownership rules and policies; changes to broadcast technical requirements; proposals to allow telephone companies to deliver audio and video programming to homes through existing phone lines; proposals to limit the tax deductibility of advertising expenses by advertisers; and proposals to auction the right to use the radio broadcast spectrum to the highest bidder, instead of granting broadcast licenses and subsequent license renewals free of charge. Digital Audio Broadcasting. The FCC recently has allocated spectrum to a new technology, DAB, to deliver satellite-based audio programming to a national or regional audience and is considering regulations for a DAB service. DAB may provide a medium for the delivery by satellite or terrestrial means of multiple new audio programming formats with compact disc quality sound to local and national audiences. It is not known at this time whether this technology also may be used in the future by existing radio broadcast stations either on existing or alternate broadcast frequencies. In addition, applications by several entities currently are pending at the FCC for authority to offer multiple channels of digital, satellite-delivered S-Band aural services that could compete with conventional terrestrial radio broadcasting. These satellite radio services use technology that may permit higher sound quality than is possible with conventional AM and FM terrestrial radio broadcasting. Thus far, the FCC has not granted the pending requests for authorizations to offer satellite radio, nor has it adopted regulations for the proposed satellite radio service. A rule making proceeding is, however, pending before the FCC to adopt DAB regulations. The FCC has granted at least one applicant a waiver to begin satellite construction. Implementation of DAB would provide an additional audio programming service that could compete with the Company's radio stations for listeners, but the effect upon Cox Radio cannot be predicted. In addition, the FCC has authorized an additional 100 kHz of bandwidth for the AM band and will soon allocate frequencies in this new band to certain existing AM station licensees which seek to modify their existing AM band licenses and operate their stations on frequencies in the expanded AM band. At the end of a transition period to be determined by the FCC, those licensees will be required to return to the FCC either the license for their existing AM band station or the license for the expanded AM band station. In December 1994, the FCC initiated a rulemaking proceeding to solicit public comment on various proposals to increase minority and female ownership of mass media facilities. Specifically, the FCC sought comment on ways to refine its previous proposal to create an "incubator" program, under which existing mass media operators would share their talent, expertise and financial resources with minorities seeking to enter the mass media industry in exchange for regulatory concessions, such as relief from certain restrictions contained 72 80 in the FCC's multiple ownership rules and policies. In addition, the FCC solicited public comment on the following issues: (a) whether and how to modify the FCC's multiple ownership rules to encourage increased investment in minority-controlled and female-controlled properties; (b) whether the FCC should adopt a proposal under which if a minority or female individual or entity holds more than 50% of the voting stock of a mass media entity, then no other ownership interests in the entity would be deemed attributable, provided that the minority or female individual or entity also owns a certain minimum level of the total equity in the mass media entity; (c) whether the FCC should propose legislative changes to Congress that would provide an investment tax credit for investors in minority -- and, if necessary, female-controlled entities. The FCC also has instituted a rule making proceeding to set standards for the imposition of monetary fees on FCC licensees that violate FCC regulations. The proposed guidelines set base forfeiture amounts with upward and downward adjustment factors. For broadcast stations, the proposed base forfeitures range from $625 to $20,000 per violation or per day for a continuing violation. The Communications Act and FCC regulations limit forfeitures for broadcast stations to a maximum of $25,000 for a single violation or single day of a continuing violation, or to a cap of $250,000 for continuing violations involving a single act or failure to act. Cox Radio cannot predict what other matters might be considered in the future, nor can it judge in advance what impact, if any, the implementation of any of these proposals or changes might have on its business. SEASONALITY Seasonal revenue fluctuations are common in the radio broadcasting industry and are due primarily to fluctuations in advertising expenditures. Cox Radio's revenues and broadcast cash flows are typically lowest in the first quarter and higher in the second and fourth quarters. EMPLOYEES As of July 15, 1996 and prior to the consummation of the Pending Transactions, Cox Radio employed 377 full-time and 258 part-time employees. Of these employees, 52 were represented by American Federation of Television and Radio Announcers ("AFTRA"), two were represented by National Association of Broadcasting Employees and Technicians, AFL-CIO ("NABET") and one was represented by the International Brotherhood of Electrical Workers ("IBEW"). As of July 15, 1996, NewCity employed 421 full-time and 183 part-time employees, none of whom were represented by unions. Cox Radio considers its employee relations to be satisfactory. Cox Radio employs several on-air personalities with large audiences in their respective markets. Cox Radio enters into employment agreements with these personalities to protect its interests in those relationships that it believes to be valuable. Cox Radio does not believe that any loss of one of these personalities would have a material adverse effect on Cox Radio's financial condition or results of operations. PATENTS AND TRADEMARKS Cox Radio and NewCity both own numerous domestic trademark registrations related to the business of the Company's stations. Neither Cox Radio nor NewCity owns any patents or patent applications. Cox Radio does not believe that any of its or NewCity's trademarks are material to its business or operations. PROPERTIES AND FACILITIES Cox Radio's corporate offices are located in Atlanta, Georgia. The types of properties required to support each of the Company's radio stations include offices, studios, transmitter sites and antenna sites. The transmitter sites and antenna sites generally are located so as to provide maximum market coverage. Cox Radio owns transmitter and antenna sites in the Tampa, Miami and Los Angeles markets. Cox Radio also leases transmitter and antenna sites in the Los Angeles, Atlanta, Miami, Chicago, Tampa, Dayton, Louisville and Syracuse markets. In the markets in which it does not own transmitter and antenna sites, Cox 73 81 Radio typically leases studio and office space, although it owns its studio and office facilities in Los Angeles and Miami. Cox Radio leases studio and office facilities in Atlanta, Tampa, Dayton, Louisville, Syracuse and Chicago. Cox Radio generally considers its facilities to be suitable and of adequate sizes for its current and intended purposes. Cox Radio does not anticipate any difficulties in renewing any facility leases or in leasing additional space, if required. Cox Radio owns substantially all of its other equipment, consisting principally of transmitting antennae, transmitters, studio equipment and general office equipment. The towers, antennae and other transmission equipment used by the Company's stations are generally in good condition, although opportunities to upgrade facilities are continuously reviewed. NewCity's corporate offices are located in Bridgeport, Connecticut. The types of properties required to support each of NewCity's radio stations include offices, studios, transmitter sites and antenna sites. The transmitter sites and antenna sites generally are located so as to provide maximum market coverage. NewCity owns transmitter and antenna sites in the Orlando, San Antonio, Syracuse, Tulsa, and Atlanta markets. NewCity also leases transmitter and antenna sites in the Birmingham, Bridgeport, Orlando, San Antonio, Syracuse, and Tulsa markets. In the markets in which it does not own transmitter and antenna sites, NewCity typically leases studio and office space, although it owns its studio and office facilities in the Birmingham and Orlando markets. NewCity generally considers its facilities to be suitable and of adequate sizes for its current and intended purposes. NewCity does not anticipate any difficulties in renewing any facility leases or in leasing additional space, if required. LITIGATION Cox Radio is involved in litigation from time to time in the ordinary course of its business. In management's opinion, the litigation in which Cox Radio is currently involved, individually and in the aggregate, is not material to Cox Radio's financial condition or results of operations. In connection with the negotiation of the NewCity Acquisition, management of Cox Radio was informed of the litigation in which NewCity is involved. In the opinion of the management of Cox Radio, on the basis of such information, such NewCity litigation is not material to NewCity's financial condition or results of operation. 74 82 THE NEWCITY ACQUISITION GENERAL On July 1, 1996, Cox Radio entered into an Agreement and Plan of Merger (the "Merger Agreement") with NewCity and certain stockholders of NewCity (the "Stockholders"). Pursuant to the Merger Agreement, New Cox Radio II, Inc., a wholly-owned subsidiary of Cox Radio, will be merged with and into NewCity (the "Merger"), with NewCity continuing as the surviving corporation as a wholly-owned subsidiary of Cox Radio. The aggregate purchase price for NewCity is approximately $253 million, consisting of approximately $167 million payable in cash and approximately $86 million of existing NewCity debt. Upon payment of the consideration described above, Cox Radio will be the sole stockholder of the surviving corporation. Cox Radio will be required to borrow approximately $165.5 million to consummate the NewCity Acquisition. Cox Radio expects to be able to obtain the required loan from a syndicate of banks. See "Use of Proceeds." The Communications Act and FCC rules and policies require the prior consent of the FCC to any transfer of control of broadcast licensees and assignments of FCC licenses. There can be no assurance that Cox Radio will obtain such consents. See "Risk Factors -- Failure to Consummate the Pending Transactions" and "Business -- Federal Regulation of Radio Broadcasting." THE MERGER AGREEMENT Representations and Warranties. In the Merger Agreement, NewCity has made a number of customary representations and warranties. Such representations relate to, among other things, the corporate organization and qualifications of NewCity; the authorization, execution, delivery, performance and enforceability (subject to stockholder approval of the Merger Agreement) of the Merger Agreement; the capitalization of NewCity; the accuracy of the historical financial statements of NewCity; the conduct of the business of NewCity; the absence of undisclosed material litigation; compliance with applicable law; the absence of undisclosed liabilities; material contracts and other agreements and arrangements of NewCity; the employee benefit plans of NewCity; environmental matters; certain tax matters; certain intellectual property rights; and compliance with the requirements, rules and regulations of the FCC. Covenants. NewCity has agreed, among other things, that pending consummation of the NewCity Acquisition, NewCity will not acquire or agree to acquire any business or any corporation, partnership, joint venture, association or other business organization or division thereof, or any properties material to NewCity, except in the ordinary course of business. Conditions. The obligation of each party to effect the Merger is conditioned upon, among other things, the absence of an order or other ruling of a court of competent jurisdiction preventing the consummation of the Merger; the expiration of the waiting period applicable to the consummation of the Merger under the HSR Act; the absence of any material adverse change to the transactions contemplated by the Merger Agreement required to obtain approval under the HSR Act; and the receipt of or filing for all consents from the FCC and other third parties required with respect to the Merger. In addition, the obligation of Cox Radio to effect the Merger is conditioned upon certain other customary conditions. Termination. The Merger Agreement may be terminated at any time prior to the Merger becoming effective: (i) by mutual consent of Cox Radio and NewCity; (ii) by either Cox Radio or NewCity if the Merger is not consummated by June 30, 1997, provided that the terminating party is not in material breach of its obligations under the Merger Agreement; and (iii) by either party if certain conditions to such party's obligation to effect the Merger have not been waived and are incapable of being satisfied by June 30, 1997. Indemnification. After the closing of the Merger, the Stockholders, jointly and severally, have agreed to indemnify, and hold Cox Radio and the employees, officers, directors and stockholders of Cox Radio harmless from and against liabilities arising from, among other things, the breach of any of the representations and warranties made by NewCity and any of the Stockholders, and the failure of NewCity or any of the Stockholders to fulfill the obligations of NewCity or any of the Stockholders. The Merger Agreement provides 75 83 that the indemnification obligations of the Stockholders are limited to $4 million in the aggregate. Cox Radio has also agreed to indemnify and hold the Stockholders harmless from and against certain matters. THE GUARANTY Cox Broadcasting has provided a guaranty (the "Guaranty") of Cox Radio's obligations to NewCity in connection with the NewCity Acquisition. Cox Radio will be required to borrow approximately $165.5 million to consummate the NewCity Acquisition. Cox Radio expects to be able to obtain the required loan from a syndicate of banks. If such bank financing is not available, the required funds will be loaned by CEI to Cox Radio at market rates. 76 84 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The following sets forth certain information with respect to the Directors and executive officers of Cox Radio (ages as of June 1, 1996):
NAME AGE POSITION WITH COX RADIO - ------------------------------ --- --------------------------------------------- Nicholas D. Trigony........... 55 Chairman of the Board of Directors Robert F. Neil................ 37 President, Chief Executive Officer, Director Maritza C. Pichon............. 42 Chief Financial Officer Marc W. Morgan................ 46 Senior Vice President Robert B. Green............... 43 Regional Vice President James C. Kennedy.............. 48 Director David E. Easterly............. 53 Director
NICHOLAS D. TRIGONY has served as Chairman of the Cox Radio Board since July 1996 and has served as President of Cox Broadcasting since March 1990. Mr. Trigony joined Cox Broadcasting in September 1986 as Executive Vice President -- Radio and was Executive Vice President -- Broadcast from April 1989 to March 1990. He is also a board member of the National Association of Television Program Executives and serves on its Executive Committee. Mr. Trigony is the immediate past chairman and current board member of the Television Operators Caucus, a member of the TV Board of Directors of the National Association of Broadcasters ("NAB") and chairman of NAB's Media Convergence Task Force. ROBERT F. NEIL has served as President, Chief Executive Officer and a Director of Cox Radio since July 1996 and was Executive Vice President -- Radio of Cox Broadcasting from June 1992 to 1996. Previously, he was Vice President and General Manager of WSB-AM/FM. Mr. Neil joined Cox Broadcasting in November 1986. Previously, Mr. Neil was Operations Manager from December 1984 to November 1986 at WYAY-FM (Gainesville), a former NewCity station. He served as Operations Manager from October 1983 to December 1984 and as Program Director from March 1983 to October 1983 at WYYY-FM and WSYR-AM, two of NewCity's Syracuse stations. MARITZA C. PICHON has served as Chief Financial Officer of Cox Radio since July 1996. She was Assistant Controller of CEI from June 1990 through June 1996. Previously, she served as manager of accounting, senior accountant and staff accountant. Ms. Pichon joined CEI in September 1984. MARC W. MORGAN has served as Senior Vice President of Cox Radio since July 1996 and has been Vice President and General Manager of WSB Radio and Regional Radio Vice President of Cox Broadcasting since July 1992. Mr. Morgan was Vice President and General Manager of WCKG-FM (Chicago) from January 1984 to July 1992. ROBERT B. GREEN has served as Regional Vice President of Cox Radio since July 1996 and has been Vice President and General Manager of the Company's Miami radio stations, WIOD-AM, WFLC-FM and WHQT-FM, since September 1992. Mr. Green was Station Manager of WSB-AM/FM from January 1990 to September 1992. JAMES C. KENNEDY has served as a Director of Cox Radio since July 1996. He has served as Chairman of the Board of Directors and Chief Executive Officer of CEI since January 1988, and prior to that time was CEI's President and Chief Operating Officer. Mr. Kennedy joined CEI in 1972 and initially worked with CEI's Atlanta newspapers. Mr. Kennedy serves on the Board of Governors and the Executive Board of the Newspaper Association of America. He is Chairman of the Board of Directors of CCI, and a Director of National Service Industries, Inc. and Flagler Systems, Inc. He is an advisory director of Texas Commerce Bankshares, Inc. DAVID E. EASTERLY has served as a Director of Cox Radio since July 1996 and has served as President and Chief Operating Officer of CEI since October 1994. He was President of Cox Newspapers, Inc. ("Cox Newspapers"), a subsidiary of CEI, which prior to 1993 was a division of CEI, from May 1986 through October 1994. Mr. Easterly joined CEI in 1970 at the Dayton Daily News, transferring to Atlanta in 1981 as Vice President of Operations for Cox Newspapers. He was named Publisher of The Atlanta Jour- 77 85 nal/Constitution in April 1984. Mr. Easterly is a member of the Board of Directors of the Associated Press, the American Press Institute and the Southern Newspapers Publishers Association. He is a Director of CEI and CCI. Directors and executive officers are elected to serve until they resign or are removed, or are otherwise disqualified to serve, or until their successors are elected and qualified. Directors of Cox Radio are elected at the annual meeting of stockholders. Officers of Cox Radio are elected at the Board of Director's first meeting after each annual meeting of stockholders. The Company anticipates that the size of the Cox Radio Board will be increased to seven directors, and that two additional directors who are not affiliated with Cox Radio, NewCity or CEI will be elected to the Cox Radio Board. Cox Radio also anticipates that, upon consummation of the NewCity Acquisition, Richard A. Ferguson will be elected to serve as a member of the Cox Radio Board. RICHARD A. FERGUSON has served as President, Chief Executive Officer and a Director of NewCity since its organization in 1986. He served as the President of Katz Broadcasting Company, Inc., a subsidiary of Katz Communications, Inc., from 1981 to 1986, when he led a management group in organizing NewCity to purchase all of the stock of Katz Broadcasting Company, Inc. Prior to 1981, he served as the President of Park City Communications, Inc. ("Park City"), until Park City was acquired by Katz Communications, Inc. Mr. Ferguson is Chairman of the Radio Board of Directors of the NAB and a member of the Radio Operators Caucus. In addition, upon consummation of the NewCity Acquisition, certain officers of NewCity are expected to become executive officers of Cox Radio. JAMES T. MORLEY has been a Director and Executive Vice President of NewCity since its organization in 1986. In 1971, he joined RKO General Broadcasting in Boston, Massachusetts and joined the sales staff of WROR-FM in February 1972. In October 1975, Mr. Morley became the General Sales Manager for Plough Broadcasting's Boston radio stations, WCOP-AM/FM. He became General Sales Manager of WEZN-FM in November 1978, was elected Vice President of Park City in May 1979 and became Station Manager of WEZN-FM in November 1979. In August 1981, he became General Manager of WEZN-FM. From 1981 until 1986, he was Senior Vice President of the Broadcasting Company, then a subsidiary of Katz Broadcasting Company, Inc. He is a member of the Board of Directors of the New York Marketing and Radio Association. RICHARD A. REIS has been a Director and Group Vice President of NewCity since its organization in 1986. From 1983 to 1984, he served as Vice President of the Broadcasting Company, then a subsidiary of Katz Broadcasting Company, Inc, becoming Group Vice President in 1984. He was General Manager of WFTQ-AM and WAAF-FM in Worcester, Massachusetts from 1981 and 1983, respectively, to 1989. Since 1989, he has served as General Manager of WDBO-AM and WWKA-FM in Orlando, Florida and of WCFB-FM since 1992. He is a member of the Orlando Radio Broadcasters Association. Upon consummation of the NewCity Acquisition, it is expected that the Company's senior operating management will consist of Mr. Neil, Mr. Ferguson, Mr. Morgan, Mr. Green, Mr. Morley and Mr. Reis. 78 86 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION For the fiscal year ended December 31, 1995, the Compensation Committee of CEI, which consists of Ben F. Love, Barbara Cox Anthony and Anne Cox Chambers, determined the compensation of the executive officers of Cox Radio. The composition of the Compensation Committee of Cox Radio after the effective time of the Offerings has not yet been determined. EXECUTIVE COMPENSATION The following table sets forth certain information for the year ended December 31, 1995 concerning the cash and non-cash compensation earned by or awarded to the Chief Executive Officer and the three executive officers of Cox Radio whose combined salary and bonus exceeded $100,000 in such periods (the "Named Executive Officers"): SUMMARY COMPENSATION TABLE
UNIT ANNUAL COMPENSATION APPRECIATION NAME AND -------------------- PLAN ALL OTHER PRINCIPAL POSITION SALARY BONUS PAYOUTS(1) COMPENSATION - ---------------------------------------- -------- ------- ------------ ------------ Robert F. Neil.......................... $266,890 $93,450 $ 28,478 $6,000(2) President and Chief Executive Officer Marc W. Morgan.......................... 225,216 87,565 -- 6,000(3) Senior Vice President Robert B. Green......................... 175,770 86,277 -- 6,000(3) Regional Vice President
- --------------- (1) Reflects cash payouts and the value as of the date of issuance of CEI stock awards under the Cox Enterprises, Inc. Unit Appreciation Plan. See "-- Cox Enterprises, Inc. Unit Appreciation Plan." (2) Includes $3,960 contributed to the Cox Enterprises, Inc. Savings and Investment Plan (the "401(k) Plan") and $2,040 credited under the Cox Enterprises, Inc. Executive Savings Plus Restoration Plan (the "Restoration Plan"). (3) Includes $4,620 contributed to the 401(k) Plan and $1,380 credited under the Restoration Plan. COX ENTERPRISES, INC. UNIT APPRECIATION PLAN The Cox Enterprises, Inc. Unit Appreciation Plan (the "UAP") provides incentive compensation to key employees of CEI and its divisions and subsidiaries. The UAP is administered by appointed members from the Board of Directors of CEI (the "CEI Committee"). The CEI Committee, in its discretion, designates key employees as participants, determines the number of units to be awarded to the participants and retains the right to award additional units at any time. No CEI Committee member may vote on any decision to award units to that member. Upon award, the beginning base price of each unit is equal to the appraised fair market value of a share of common stock of CEI on the date of the award, as determined by an independent appraisal firm or firms selected by the Board of Directors of CEI. The appreciation period for units awarded under the UAP begins on the date of award, which is January 1 of the year of the award, and ends on the earlier of the last day of the fifth calendar year after the award or the December 31 which precedes the date the participant terminates employment with CEI or one of its subsidiaries. Awarded units are subject to a five-year vesting schedule, with no vesting rights earned in the first two years after the award, sixty percent vesting after completion of the third year and twenty percent additional vesting in each of the next two years. A participant who retires at 65, becomes disabled or dies becomes fully vested in the awarded units. A special twenty percent per year vesting schedule applies in the case of participants who elect early retirement. Participants who are terminated by CEI for cause forfeit all rights under the UAP. The measure of benefit payable to any participant is equal to the appreciated value of units from the award date to the end of the appreciation period multiplied by the vested percentage (the "Standard 79 87 Benefit"). If the appreciation period ends on the last day of the fifth year after the award date, the benefit payable to any participants is equal to the greater of the Standard Benefit or the excess of the average of the appraised unit values at the end of the last two years in the appreciation period over the unit value as of the date of award. However, the maximum award per unit shall not exceed 150% of the beginning unit base price as of the date of award. The following table sets forth information, valued as of December 31, 1995, concerning the value of UAP awards issued to each Named Executive Officer: 1995 FISCAL YEAR-END UAP VALUES
NUMBER VALUE NAME AWARD OF UNITS % VESTED OF UNITS(1) ----------------------------------------- --------- -------- -------- ----------- Robert F. Neil........................... 1992 UAP 16,500 80% $ 410,685 1994 UAP 23,880 0% $ 387,095 Marc W. Morgan........................... 1992 UAP 12,375 80% $ 308,014 1994 UAP 13,430 0% $ 217,700 Robert B. Green.......................... 1992 UAP 2,250 80% $ 56,003 1994 UAP 9,700 0% $ 157,237
- --------------- (1) Values are expressed as fully vested amounts. No units were awarded under the UAP to the Named Executive Officers for the fiscal years ended December 31, 1993 and 1995. LONG-TERM INCENTIVE PLAN It is anticipated that Cox Radio will adopt the Cox Radio, Inc. Long-Term Incentive Plan (the "LTIP"). Pursuant to the LTIP, executive officers and selected employees of Cox Radio who have been selected as participants are eligible to receive awards of various forms of equity-based incentive compensation, including stock options, stock appreciation rights, stock bonuses, restricted stock awards, performance units and phantom stock and awards consisting of combinations of such incentives. Subsequent to the consummation of the Pending Transactions, there will be approximately 100 individuals eligible to be selected to receive awards under the LTIP. Cox Radio has reserved shares of Class A Common Stock for issuance under the LTIP. Subject to the maximum shares reserved under the LTIP, no individual may receive a stock option covering more than 300,000 shares of Class A Common Stock in any year and be granted more than 100,000 shares of Class A Common Stock, in any combination of performance awards, restricted stock or other stock-based awards that are subject to performance criteria in any year. The maximum payout for any individual for a performance award paid in cash is 100% of his or her base salary as of the beginning of the year of the performance award payment. The LTIP is to be administered by the Compensation Committee of the Board of Directors (the "Compensation Committee"), and no Compensation Committee member is eligible to participate in the LTIP. Subject to the provisions of the LTIP, the Compensation Committee is to have sole discretionary authority to interpret the LTIP and to determine the type of awards to grant, when, if, and to whom awards are granted, the number of shares covered by each award and the terms and conditions of the award. Options granted under the LTIP may be "Incentive Stock Options" ("ISOs"), within the meaning of Section 422 of the Internal Revenue Code of 1986 (the "Code"), or Nonqualified Stock Options ("NQSOs"). The exercise price of the options will be determined by the Committee when the options as granted, subject to a minimum price of the Fair Market Value (as defined in the LTIP) of the Class A Common Stock on the date of grant. In the discretion of the Committee, the option exercise price may be paid in cash or in shares of Class A Common Stock having a Fair Market Value on the date of exercise equal to the option exercise price, or by delivering to Cox Radio a copy of irrevocable instructions to a stockbroker to deliver 80 88 promptly to Cox Radio an amount of sale or loan proceeds sufficient to pay the exercise price. There is no current intention to grant ISOs to any LTIP participant. The LTIP permits the Committee to grant Class A Common Stock appreciation rights ("SARs"). An SAR granted as an alternative or a supplement to a related stock option will entitle its holder to be paid an amount equal to the Fair Market Value of the Class A Common Stock subject to the SAR on the date of exercise of the SAR less the exercise price of the related stock option, or such other price as the Committee may determine under the LTIP for such stock option. There is no current intention to grant SARs to any LTIP participant. Shares of Class A Common Stock covered by a restricted stock award will be issued to the recipient at the time the award is granted but will be subject to forfeiture in the event continued employment and/or other restrictions and conditions established by the Committee at the time the award is granted are not satisfied. A performance award or a deferred stock award will provide for the future payment of cash or the issuance of shares of Class A Common Stock to the recipient if continued employment or other performance objectives established by the Committee at the time of grant are attained. The performance objectives that must be attained to receive any award subject to performance criteria shall be selected by the Committee and shall be based on preestablished amounts of annual net income, operating income, cash flow, return on assets, return on equity, return on capital or total stockholder return. There is no current intention to grant performance awards or deferred stock awards to any LTIP participant. Dividend equivalents may be granted that provide for current or accrued value of dividends that may be paid in the future. Such dividend equivalents shall be paid or distributed when accrued or shall be deemed to have been reinvested in additional shares or awards, or otherwise reinvested. There is no current intention to grant dividend equivalents to any LTIP participant. Stock bonus awards, restricted stock awards and performance awards may, in the discretion of the Committee, be settled in cash, on each date on which shares of Class A Common Stock covered by the awards would otherwise have been delivered or become unrestricted, in an amount equal to the Fair Market Value of such shares on such date. In general, in the event of a "change in control" and a "qualified termination:" (i) the performance criteria of all performance awards and performance-based restricted stock will be deemed fully achieved and all such awards will become fully earned and vested; (ii) all options and stock appreciation awards will become fully exercisable and vested; and (iii) the restrictions, deferral limitations and forfeiture conditions applicable to any other awards granted under the LTIP will lapse and such awards will become fully vested. A "change in control" means any transaction that results in CEI's voting control of Cox Radio falling below 50.1%. In general, a "qualified termination" means termination of employment for reasons other than "cause," death, disability, retirement, or the voluntary resignation of a participant without "good reason" within one year following a change in control. The LTIP may be amended, suspended or terminated by the Cox Radio Board in whole or in part at any time, provided that no such amendment, suspension or termination of the LTIP may adversely affect the rights of or obligations to the participants without such participants' consent, and any such amendment, suspension or termination will be subject to the approval of Cox Radio's stockholders to the extent required by any federal or state law or regulation of any stock exchange on which Class A Common Stock is listed. EMPLOYEE STOCK PURCHASE PLAN It is anticipated that Cox Radio will adopt the Cox Radio, Inc. Employee Stock Purchase Plan (the "Stock Purchase Plan"). The Cox Radio Board has authorized a maximum of shares of Class A Common Stock to be issued under the Stock Purchase Plan. The Stock Purchase Plan is intended to qualify under Section 423 of the Code. Under the terms of the Stock Purchase Plan, eligible employees may subscribe to purchase shares of Class A Common Stock in a designated amount (the "Subscription Amount"). Eligible employees are any employees who are regularly scheduled to work at least 20 hours per week and who are employed on December 1, 1996. The price of Class A Common Stock offered to employees will be 85% of the 81 89 market value of the Class A Common Stock on the grant date. In order to participate, employees will authorize Cox Radio to withhold from their monthly pay an amount equal to one twenty-fifth of the Subscription Amount commencing August 1, 1997. In no case shall an employee subscribe for more than $25,000 in Class A Common Stock during the entire subscription period. An employee may elect to withdraw from the Stock Purchase Plan at any time and may request his or her aggregate contributions to be paid in cash or in Class A Common Stock. In the event that the aggregate subscriptions exceed the authorized shares, each participant's subscription will be reduced on a pro rata basis. The Stock Purchase Plan will be administered by the Cox Radio Board or by its designee. The Stock Purchase Plan may be amended, suspended or terminated by the Cox Radio Board in whole or in part at any time, provided that no such amendment, suspension or termination of the Stock Purchase Plan may adversely affect the rights of or obligations to the participants without such participants' consent and any such amendment, suspension or termination will be subject to the approval of Cox Radio's stockholders to the extent required by any federal or state law or regulation of any stock exchange on which Class A Common Stock is listed. RETIREMENT PLANS Cox Enterprises, Inc. Pension Plan. The Cox Enterprises, Inc. Pension Plan (the "Plan") is a tax-qualified defined benefit pension plan. The Plan covers all eligible employees of CEI and any of its affiliates who have adopted the Plan (including the Cox Radio Named Executive Officers). The Plan is funded through a tax-exempt trust, into which contributions are made as necessary based on an actuarial funding analysis. The Plan provides for the payment of benefits upon retirement, early retirement, death, disability and termination of employment. Participants become vested in their benefits under the Plan after completing five years of vesting service. The Plan benefit is determined under a formula based on a participant's compensation and years of benefit accrual service. Participants may elect from several option forms of benefit distribution. Cox Executive Supplemental Plan. The Cox Executive Supplemental Plan (the "CESP") is a non-qualified defined benefit pension plan providing supplemental retirement benefits to certain CEI management employees (including the Cox Radio Named Executive Officers). The CESP is administered by the Executive Benefit Committee whose members are appointed by the CEI Board of Directors. Such committee designates management employees to participate in the CESP. The CESP monthly benefit formula, payable at normal retirement, is 2.5% of a participant's average compensation, as calculated in the CESP multiplied by the participant's years of benefit service credited under the CESP. The normal retirement benefit will not exceed 50 percent of a participant's average compensation at retirement. Benefits payable with respect to early retirement are reduced to reflect an earlier commencement date. Special disability, termination of employment and death benefits also are provided. All benefits payable under the CESP are reduced by benefits payable to the participant under the Plan. Participants may elect from several optional forms of benefit distributions. The CESP is not funded currently by CEI. In the future, Cox Radio will make annual payments to CEI arising from its employees' participation in this plan. However, all payments of current and future benefits due to Cox Radio employees will be made from the general funds of CEI. 82 90 The following table provides estimates of annual retirement income benefits payable to certain executives under the Plan and the CESP: PENSION PLAN TABLE
YEARS OF SERVICE FINAL AVERAGE ----------------------------------------------- COMPENSATION 20 OR (5 YEARS) 5 10 15 MORE ----------------------------------------- -------- --------- --------- --------- $150,000................................. $ 18,750 $ 37,500 $ 56,250 $ 75,000 250,000................................. 31,250 62,500 93,750 125,000 350,000................................. 43,750 87,500 131,250 175,000 450,000................................. 56,250 112,500 168,750 225,000 550,000................................. 68,750 137,500 206,250 275,000 650,000................................. 81,250 162,500 243,750 325,000 750,000................................. 93,750 187,500 281,250 375,000
The Named Executive Officers have been credited with the following years of benefit service: Mr. Neil, ten years; Mr. Morgan, 12 years; and Mr. Green, six years. COMPENSATION OF DIRECTORS The Directors of Cox Radio currently receive no compensation for serving on the Cox Radio Board. Cox Radio anticipates that the Directors of Cox Radio who are not affiliates of CEI will be paid fees and reimbursed for expenses consistent with industry norms, but the precise amount of such compensation has not yet been determined. It is anticipated that Cox Radio will adopt the Cox Radio, Inc. Restricted Stock Plan for Non-Employee Directors (the "Directors Restricted Stock Plan"). Pursuant to the Directors Restricted Stock Plan, Directors who are not employees of Cox Radio or any of its subsidiaries or affiliates will receive 50% of any annual Cox Radio Board retainer fee in the form of Class A Common Stock, subject to certain restrictions and forfeitures prior to the expiration of the period ending five years after the date of the grant of the award or, if earlier, the date of death or disability in certain circumstances. The maximum number of shares of Class A Common Stock that may be granted pursuant to restricted stock awards under the Directors Restricted Stock Plan is . The Directors of Cox Radio who are employees of Cox Radio do not receive any compensation for serving on the Cox Radio Board. COMMITTEES OF DIRECTORS The Company will form an audit committee of the Cox Radio Board which will consist of independent Directors. 83 91 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS The following table provides information as of , 1996 and as adjusted to reflect the shares of Class A Common Stock to be sold in the Offerings with respect to the shares of Class A Common Stock and Class B Common Stock beneficially owned by (i) each person known by Cox Radio to own more than 5% of the outstanding voting securities of Cox Radio; (ii) each of the Directors; (iii) each of the Named Executive Officers; and (iv) all Directors and officers as a group:
PERCENT OF VOTE OF ALL CLASSES OF CLASS A COMMON STOCK PERCENT OF CLASS COMMON STOCK --------------------- --------------------- CLASS B --------------------- NAME OF BEFORE AFTER BEFORE AFTER COMMON PERCENT BEFORE AFTER BENEFICIAL OWNER OFFERINGS OFFERINGS OFFERINGS OFFERINGS STOCK OF CLASS OFFERINGS OFFERINGS - ------------------------------- --------- --------- --------- --------- ------- -------- --------- --------- Cox Enterprises, Inc.(1)(2)(3)................ 0 0 0% 0% 100.0% 100.0% % Nicholas D. Trigony............ Robert F. Neil................. Marc W. Morgan................. Robert B. Green................ James C. Kennedy............... David E. Easterly.............. All directors and officers as a group (seven persons, including those named above).......................
The following table provides information regarding the beneficial ownership of the common stock of CEI by (i) each person known by Cox Radio to own more than 5% of the outstanding voting securities of Cox Radio; (ii) each of the Directors; (iii) each of the Named Executive Officers; and (iv) all Directors and officers as a group:
NUMBER OF SHARES OF NAME OF CEI BENEFICIAL OWNER COMMON STOCK OWNED -------------------------------------------------------------- ---------------------- Cox Enterprises, Inc.(1)(2)(3)................................ 0 Nicholas D. Trigony........................................... 24,374 Robert F. Neil................................................ 3,068 Marc W. Morgan................................................ 4,350 Robert B. Green............................................... 0 James C. Kennedy.............................................. 0 David E. Easterly............................................. 111,049 ---------- All directors and officers as a group (seven persons, including those named above)................................ 142,841 ========================
- --------------- (1) The business address for CEI is 1400 Lake Hearn Drive, N.E., Atlanta, Georgia 30319. (2) All the shares of Common Stock of Cox Radio that are beneficially owned by CEI are held of record by Cox Broadcasting. All the shares of outstanding capital stock of Cox Broadcasting are beneficially owned by Cox Holdings, Inc., and all of the shares of outstanding capital stock of Cox Holdings, Inc. are beneficially owned by CEI. The beneficial ownership of the outstanding capital stock of CEI is described in footnote (3) below. (3) There are 202,644,870 shares of common stock of CEI outstanding, with respect to which (i) Barbara Cox Anthony, as trustee of the Anne Cox Chambers Atlanta Trust, exercises beneficial ownership over 58,316,422 shares (28.8%); (ii) Anne Cox Chambers, as trustee of the Barbara Cox Anthony Atlanta Trust, exercises beneficial ownership over 58,316,422 shares (28.8%); (iii) Barbara Cox Anthony, Anne Cox Chambers and Marion H. Allen, III, as trustees of the Dayton Cox Trust A, exercise beneficial ownership over 82,745,685 shares (40.8%); and (iv) 226 individuals and trusts exercise beneficial ownership over the remaining 3,266,341 shares (1.6%). Thus, Barbara Cox Anthony and Anne Cox Chambers, who are sisters, together exercise sole or shared beneficial ownership over 199,378,529 shares (98.4%) of the common stock of CEI. In addition, Garner Anthony, the husband of Barbara Cox Anthony, holds beneficially and of record 14,578 shares of common stock of CEI. Barbara Cox Anthony disclaims beneficial ownership of such shares. Barbara Cox Anthony and Anne Cox Chambers are the mother and aunt, respectively, of James C. Kennedy, the Chairman of the Board of Directors and Chief Executive Officer of CEI and a Director of Cox Radio. 84 92 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Cox Radio is currently an indirect, wholly-owned subsidiary of CEI. As of June 30, 1996, the indirect, wholly-owned subsidiaries of CEI through which the radio operations of CEI are conducted (the "CEI Radio Subsidiaries") owed to CEI and one of its other subsidiaries $134.2 million. As of June 30, 1996, CEI contributed $26.9 million to the capital of certain of the CEI Radio Subsidiaries. The remaining $107.3 million owed by the CEI Radio Subsidiaries to CEI is evidenced by the CEI Notes which bear interest at the prime rate (as reported by Chase Manhattan Bank, N.A.) plus 1.5%. Immediately prior to the closing of the Offerings, the Cox Radio Consolidation will be effected through the transfer to Cox Radio of all of CEI's U.S. radio operations and Cox Radio will assume the CEI Notes. Cox Radio will apply $107.3 million of the net proceeds of the Offerings to discharge completely all amounts owed under the CEI Notes. See "Use of Proceeds." Cox Radio has entered into a revolving credit facility with CEI (the "New CEI Credit Facility"). Borrowings under the New CEI Credit Facility will not bear interest until the consummation of the Offerings. Upon consummation of the Offerings, all existing and future borrowings under the New CEI Credit Facility will accrue interest at the prime rate (as reported by Chase Manhattan Bank, N.A.) plus 1.5%. CEI performs, and after the Offerings will continue to perform, day-to-day cash management services for Cox Radio, with settlements of debit or credit balances between Cox Radio and CEI occurring monthly at market interest rates. Certain other management services have been and will continue to be provided to Cox Radio by CEI. Such services include legal, tax, treasury, internal audit, risk management, benefits administration and other support services. Cox Radio was allocated expenses for years ended December 31, 1993, 1994 and 1995 of $1.6 million, $1.8 million, and $2.2 million, respectively, for such services. Allocated expenses are based on CEI's estimate of expenses related to the services provided to Cox Radio in relation to those provided to other divisions of CEI. Rent and occupancy expense is allocated based on occupied space. Management believes that these allocations are made on a reasonable basis. However, the allocations are not necessarily indicative of the level of expenses that might have been incurred had Cox Radio operated on a stand-alone basis. Management has not made a study or any attempt to obtain quotes from third parties to determine what the cost of obtaining such services from third parties could have been. The fees and expenses to be paid by Cox Radio to CEI are subject to change. Cox Broadcasting has provided a guaranty of Cox Radio's payment obligations to NewCity in connection with the NewCity Acquisition. See "The NewCity Acquisition -- The Guaranty." Prior to the Offerings, Cox Radio will enter into leases with subsidiaries of CEI with respect to properties in Atlanta and Dayton that are used for Cox Radio's radio operations and CEI's television operations in those markets. 85 93 DESCRIPTION OF CAPITAL STOCK The following summary description of the capital stock of Cox Radio is qualified in its entirety by reference to Cox Radio's Amended and Restated Certificate of Incorporation (the "Cox Radio Certificate") and Cox Radio's Bylaws, which are filed as exhibits to the Registration Statement of which this Prospectus is a part and are incorporated herein by reference. Cox Radio's authorized capital stock consists of: (i) 70,000,000 shares of Class A Common Stock, $1.00 par value per share; (ii) 45,000,000 shares of Class B Common Stock, $1.00 par value per share; and (iii) 5,000,000 shares of Preferred Stock, $1.00 par value per share (the "Preferred Stock"). COMMON STOCK General. Except with respect to voting and conversion, shares of Class A Common Stock and Class B Common Stock are identical in all respects. Holders of shares of Class A Common stock are entitled to one vote per share, and holders of shares of Class B Common Stock are entitled to ten votes per share. Voting. Except as set forth below, all actions submitted to a vote of Cox Radio's stockholders are voted on by holders of Class A Common Stock and Class B Common Stock voting together as a single class. The affirmative vote of the holders of a majority of the outstanding shares of Class A Common Stock and/or Class B Common Stock voting separately as a class is required (i) to approve any amendment to the Cox Radio Certificate that would alter or change the powers, preferences, or special rights of such class so as to affect the holders of such class adversely and (ii) to approve such other matters as may require a class vote under the Delaware General Corporation Law (the "DGCL"). Dividends and Other Distributions (Including Distributions upon Liquidation or Sale of Cox Radio). Each share of Class A Common Stock and Class B Common Stock is equal in respect of dividends and other distributions in cash, stock or property (including distributions upon liquidation of Cox Radio and consideration to be received upon a sale of all or substantially all of Cox Radio's assets); except that in the case of dividends or other distributions payable on the Class A Common Stock or Class B Common Stock in shares of such stock, including distributions pursuant to stock splits or dividends, only Class A Common Stock will be distributed with respect to Class A Common Stock and only Class B Common Stock will be distributed with respect to Class B Common Stock. In no event will any of the Class A Common Stock or Class B Common Stock be split, divided or combined unless each other class is proportionately split, divided or combined. Convertibility of Class B Common Stock into Class A Common Stock. All of the Class B Common Stock outstanding currently is held by Cox Broadcasting. The Class B Common Stock is convertible at any time, or from time to time, at the option of the holder of such Class B Common Stock, and without cost to such holder (except any transfer taxes that may be payable, as in the case of any transfer of Class A Common Stock, if certificates are to be issued in a name other than that in which the certificate surrendered is registered), into Class A Common Stock on a share-for-share basis. In the event of any such automatic conversion of Class B Common Stock, certificates formerly representing outstanding shares of Class B Common Stock will thereafter be deemed to represent a like number of shares of Class A Common Stock. In addition to conversions into Class A Common Stock as described above, a record or beneficial owner of shares of Class B Common Stock may transfer such shares of Class B Common Stock (whether by sale, assignment, gift, bequest, appointment or otherwise) to any transferee. Preemptive Rights. Neither the Class A Common Stock nor the Class B Common Stock carry any preemptive rights enabling a holder to subscribe for or receive shares of stock of Cox Radio of any class or any other securities convertible into shares of stock of Cox Radio. The Cox Radio Board possesses the power to issue shares of authorized but unissued Class A Common Stock, Class B Common Stock and Preferred Stock without further stockholder action. Liquidation, Dissolution or Winding Up. In the event of any liquidation, dissolution or winding up of Cox Radio, whether voluntarily or involuntarily, after payment or provision for payment of the debts and other 86 94 liabilities of Cox Radio and the preferential amounts to which the holders of any stock ranking prior to the Class A Common Stock and the Class B Common Stock in the distribution of assets shall be entitled upon liquidation, the holders of the Class A Common Stock and the Class B Common Stock shall be entitled to share pro rata in the remaining assets of Cox Radio according to their respective interests. Transfer Agent and Registrar. The Transfer Agent and Registrar for the Class A Common Stock is . PREFERRED STOCK Shares of preferred stock may be issued by Cox Radio from time to time in one or more series. Shares of preferred stock which may be redeemed, purchased or acquired by Cox Radio may be reissued except as otherwise provided by law. The Cox Radio Board is authorized to fix or alter the designations and powers, preferences and relative, participating, optional or other rights, if any, and qualifications, limitations or restrictions thereof, including, without limitation, the dividend rate (and whether dividends are cumulative), conversion rights, if any, voting rights, rights and terms of redemption (including sinking fund provisions, if any), redemption price and liquidation preferences of any wholly unissued series of preferred stock, and the number of shares constituting any such series and the designation thereof, or any of them, and to increase or decrease the number of shares of any series subsequent to the issue of shares of that series, but not below the number of shares of such series then outstanding. ANTI-TAKEOVER PROVISIONS Elimination of Stockholder's Power to Call Special Stockholders Meeting and Right to Act Without a Meeting. The Cox Radio Certificate provides that a special meeting of stockholders may be called only by the Cox Radio Board. The principal effect of this provision is to prevent stockholders from forcing a special meeting to consider a proposal by the Cox Radio Board. In addition, the Cox Radio Certificate provides that any action required by the DGCL to be taken at any annual or special meeting of stockholders, and any action which may be taken at any annual or special meeting of stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of record of shares of the outstanding stock of the Company having not less than the minimum number of votes necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Procedures for Stockholder Proposals. The Cox Radio Certificate provides that a stockholder must furnish written notice to the Secretary of Cox Radio of any nomination or business proposal to be brought before a stockholders meeting not less than 30 nor more than 60 days prior to the meeting as originally scheduled. In the event that less than 40 days' public notice of a meeting is given by Cox Radio, a stockholder must furnish notice of a nomination or business proposal not later than the close of business on the tenth day following the mailing or the public disclosure of notice of the meeting date. These procedures prohibit last minute attempts by any stockholder to nominate a director or present a business proposal at an annual stockholders meeting, even if such a nomination or proposal might be desired by a majority of the stockholders. Amendment of Charter Provisions. The Cox Radio Certificate provides that any alteration, amendment, repeal or rescission of the provisions contained in the Cox Radio Certificate must be approved by a majority of the Directors of Cox Radio then in office and by the affirmative vote of the holders of a majority of the voting stock. SECTION 203 OF THE DGCL Section 203 of the DGCL prohibits a publicly held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person became an interested stockholder, unless: (i) prior to such date, the transaction is approved by the Board of Directors of the corporation; (ii) upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owns at least 85% of the 87 95 outstanding voting stock; or (iii) on or after such date, the business combination is approved by the Board of Directors of the corporation and by affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the interested stockholder. A "business combination" includes mergers, asset sales and certain other transactions resulting in a financial benefit to the stockholder. An "interested stockholder" is a person who, together with affiliates and associates, owns (or within three years, did own) 15% or more of the corporation's voting stock. CEI is an "interested stockholder" of Cox Radio. DESCRIPTION OF INDEBTEDNESS The summaries contained herein of the material provisions of certain indebtedness of Cox Radio do not purport to be complete and are qualified in their entirety by reference to the provisions of the various agreements related thereto, which are filed as exhibits to the Registration Statement of which this Prospectus is a part and to which exhibits reference is hereby made. CEI INDEBTEDNESS The CEI Radio Subsidiaries have entered into the CEI Notes, which bear interest at the prime rate (as reported by Chase Manhattan Bank, N.A.) plus 1.5%. In addition, Cox Radio has entered into the New CEI Credit Facility. Borrowings under the New CEI Credit Facility currently bear no interest. Upon consummation of the Offerings, all existing and future borrowings under the New CEI Credit Facility will accrue interest at the prime rate (as reported by Chase Manhattan Bank, N.A.) plus 1.5%. See "Certain Relationships and Related Transactions." Upon the consummation of the Offerings, Cox Radio will use $107.3 million of the net proceeds of the Offerings to completely discharge all amounts owed under the CEI Notes. NEWCITY NOTES Pursuant to the NewCity Acquisition, Cox Radio will assume certain indebtedness of NewCity, including NewCity's obligations under an indenture with Shawmut Bank Connecticut, dated November 2, 1993 (the "Indenture") which governs the terms and conditions of the NewCity Notes. The NewCity Notes are general unsecured obligations of NewCity and are subordinated to all existing and future senior indebtedness of NewCity. The NewCity Notes are redeemable at the option of NewCity, in whole or in part, at any time on or after November 1, 1998, at an initial redemption price of 104.266% of the principal amount, plus accrued and unpaid interest through the date of redemption. The NewCity Acquisition will trigger an obligation on the part of NewCity to offer to repurchase such NewCity Notes at 101% of the principal amount thereof plus accrued and unpaid interest to the date of any such repurchase. If NewCity is required to repurchase any of the NewCity Notes, the Company expects to fund such repurchase through debt financing, including bank financing. The Indenture contains certain covenants that, among other things, limit the ability of NewCity and its subsidiaries to incur additional indebtedness, pay dividends and make other restricted payments, issue or sell common stock of its subsidiaries, enter into sale and leaseback transactions, create liens, or engage in mergers, consolidations and asset sales. Following consummation of the NewCity Acquisition, the NewCity Notes will be obligations of NewCity as a wholly-owned subsidiary of the Company. Accordingly, the covenants in the Indenture which affect subsidiaries will only limit the actions of NewCity and its subsidiaries and not the other subsidiaries of the Company. SHARES ELIGIBLE FOR FUTURE SALE Upon completion of the Offerings, Cox Radio will have shares of Class A Common Stock outstanding, assuming no exercise of the Underwriters' over-allotment option. Of these shares, shares will be freely transferable without restriction or further registration under the Securities Act, except that any shares purchased by "affiliates" of the Company, as that term is defined in Rule 144 under the Securities Act ("Affiliates"), may generally only be sold in compliance with the limitations of Rule 144 88 96 described below. The remaining shares (the "Restricted Shares") of Class A Common Stock outstanding are "restricted securities" within the meaning of Rule 144 under the Securities Act and may not be sold in the absence of registration under the Securities Act unless an exemption from registration is available, including an exemption afforded by Rule 144 under the Securities Act. The Company, its directors, CEI and certain officers of the Company, who will own shares of Class A Common Stock and vested options to purchase shares of Class A Common Stock upon completion of the Offerings, have agreed not to, directly or indirectly, offer for sale, sell or otherwise dispose of, or announce the offering of, any shares of Class A Common Stock or any securities convertible into or exercisable or exchangeable for shares of Class A Common Stock for a period of 180 days after the date of this Prospectus without the prior written consent of Lehman Brothers Inc. In general, under Rule 144 as currently in effect, beginning approximately 90 days after the effective date of the Registration Statement of which this Prospectus is a part, a stockholder, including an Affiliate, who has beneficially owned his or her restricted securities (as that term is defined in Rule 144) for at least two years from the later of the date such securities were acquired from the Company or (if applicable) the date they were acquired from an Affiliate is entitled to sell, within any three-month period, a number of such shares that does not exceed the greater of 1% of the then outstanding shares of Class A Common Stock (approximately shares immediately after the Offerings) or the average weekly trading volume in the Class A Common Stock during the four calendar weeks preceding the date on which notice of such sale was filed under Rule 144, provided certain requirements concerning availability of public information, manner of sale and notice of sale are satisfied. In addition, under Rule 144(k), if a period of at least three years has elapsed between the later of the date restricted securities were acquired from the Company or (if applicable) the date they were acquired from an Affiliate of the Company, a stockholder who is not an Affiliate of the Company at the time of sale and has not been an Affiliate of the Company for at least three months prior to the sale is entitled to sell the shares immediately without compliance with the foregoing requirements under Rule 144. The Securities and Exchange Commission has proposed an amendment to Rule 144 which would reduce the holding period required for shares subject to Rule 144 to become eligible for sale in the public market from two years to one year, and from three years to two years in the case of Rule 144(k). If this proposal is adopted, the shares held by (assuming no exercise of the over-allotment option) will become eligible for sale to the public pursuant to Rule 144 or 144(k) one year or two years, respectively, from the effective date of the Offerings. The Company intends to file registration statements on Form S-8 under the Securities Act immediately following the consummation of the Offerings to register all shares of Class A Common Stock issuable under the LTIP and the Stock Purchase Plan. The registration statements are expected to be filed shortly after the effective date of the Registration Statement of which this Prospectus is a part and will be effective upon filing. Shares issued upon the exercise of stock options after the effective date of the Form S-8 registration statements will be eligible for resale in the public market without restriction, subject to Rule 144 limitations applicable to Affiliates and the lock-up agreements noted above. Prior to the Offerings, there has been no public market for the Class A Common Stock. No prediction can be made as to the effect, if any, that market sales of shares of Class A Common Stock or the availability of shares for sale will have on the market price of the Class A Common Stock prevailing from time to time. Nevertheless, sales of significant numbers of shares of Class A Common Stock in the public market could adversely affect the market price of the Class A Common Stock and could impair the Company's ability to raise capital through an offering of its equity securities. See "Shares Eligible for Future Sale" and "Underwriting." 89 97 UNDERWRITING Under the terms of and subject to the conditions contained in the U.S. Underwriting Agreement, the form of which is filed as an exhibit to the Registration Statement of which this Prospectus forms a part, the U.S. Underwriters, for whom Lehman Brothers Inc., Allen & Company Incorporated, CS First Boston Corporation and Morgan Stanley & Co. Incorporated are acting as representatives (the "Representatives"), have severally agreed to purchase from Cox Radio, and Cox Radio has agreed to sell to each U.S. Underwriter, the aggregate number of shares of Class A Common Stock set forth opposite the name of such U.S. Underwriter below:
U.S. UNDERWRITERS NUMBER OF SHARES --------------------------------------------------------------------- ---------------- Lehman Brothers Inc.................................................. Allen & Company Incorporated......................................... CS First Boston Corporation.......................................... Morgan Stanley & Co. Incorporated.................................... Total......................................................
Under the terms of and subject to the conditions contained in the International Underwriting Agreement, the form of which is filed as an exhibit to the Registration Statement of which this Prospectus forms a part, the International Managers, for whom Lehman Brothers International (Europe), Allen & Company Incorporated, CS First Boston Limited and Morgan Stanley & Co. International Limited are acting as lead managers (the "Lead Managers"), have severally agreed to purchase from Cox Radio, and Cox Radio has agreed to sell to each International Manager, the aggregate number of shares of Class A Common Stock set forth opposite the name of such Manager below:
MANAGERS NUMBER OF SHARES --------------------------------------------------------------------- ---------------- Lehman Brothers International (Europe)............................... Allen & Company Incorporated......................................... CS First Boston Limited.............................................. Morgan Stanley & Co. International Limited........................... Total......................................................
The U.S. Underwriting Agreement and the International Underwriting Agreement (collectively, the "Underwriting Agreements") provide that the obligations of the U.S. Underwriters and the International Managers, respectively, to purchase shares of Class A Common Stock are subject to the approval of certain legal matters by counsel and to certain other conditions and that, if any of the shares of Class A Common Stock are purchased by the U.S. Underwriters pursuant to the U.S. Underwriting Agreement or by the International Managers pursuant to the International Underwriting Agreement, all the shares of Class A Common Stock agreed to be purchased by the U.S. Underwriters or the International Managers, as the case may be, pursuant to their respective Underwriting Agreements must be so purchased. The initial public offering price and underwriting discounts and commissions for each of the U.S. Offering and the International Offering are identical. The closing of each of the U.S. Offering and the International Offering is conditioned upon the closing of the other. Cox Radio has been advised by the Representatives and the Lead Managers that the U.S. Underwriters and the International Managers propose to offer part of the shares to the public at the public offering price set forth on the cover page hereof and part to certain dealers at a price that represents a concession not in excess of $ per share under the public offering price (the "selling concession"). The Underwriters may allow, and such dealers may reallow, a concession not in excess of $ per share to certain other Underwriters, or to certain other brokers or dealers. After the initial offering to the public, the offering price and other selling terms may be changed by the Representatives and the Lead Managers. Cox Radio has granted to the U.S. Underwriters and the International Managers an option to purchase up to an additional shares and shares of Class A Common Stock, respectively, exercisable solely to cover over-allotments, at the initial offering price to the public, less the underwriting discounts and 90 98 commissions, shown on the cover page of this Prospectus. Any or all of such options may be exercised at any time until 30 days after the date of the U.S. Underwriting Agreement and the International Underwriting Agreement, as the case may be. To the extent that an option is exercised, each U.S. Underwriter or International Manager, as the case may be, will be committed, subject to certain conditions, to purchase a number of the additional shares of Class A Common Stock proportionate to such Underwriter's initial commitment as indicated in the preceding tables. The U.S. Underwriters and the International Managers have entered into an Agreement Between U.S. Underwriters and International Managers (the "Agreement Between") pursuant to which each U.S. Underwriter has agreed that, as part of the distribution of the shares of Class A Common Stock offered in the United States and Canada, (a) it is not purchasing any of such shares for the account of anyone other than a U.S. or Canadian Person (as defined below) and (b) it has not offered or sold, and will not offer, sell, resell or deliver, directly or indirectly, any of such shares or distribute any prospectus relating to such shares to anyone other than a U.S. or Canadian Person. In addition, pursuant to the Agreement Between, each International Manager has agreed that, as part of the distribution of the shares of Class A Common Stock offered outside the United States and Canada, (a) it is not purchasing any of such shares for the account of any U.S. or Canadian Person and (b) it has not offered or sold, and will not offer, sell, resell or deliver, directly or indirectly, any of such shares or distribute any prospectus relating to such shares to any U.S. or Canadian Person. The foregoing limitations do not apply to stabilization transactions or to certain other transactions specified in the Underwriting Agreements and the Agreement Between, including (i) certain purchases and sales between the U.S. Underwriters and the International Managers; (ii) certain offers, sales, resales, deliveries or distributions to or through investment advisors or other persons exercising investment discretion; (iii) purchases, offers or sales by a U.S. Underwriter who is also acting as an International Manager for the account of a Person other than a U.S. or Canadian Person and by an International Manager who is also acting as a U.S. Underwriter for the account of a U.S. or Canadian Person; and (iv) other transactions specifically approved by the U.S. Underwriters and International Managers. As used herein, "U.S. or Canadian Person" means any resident or citizen of the United States or Canada, any corporation, partnership or other entity created or organized in or under the laws of the United States or Canada or any political subdivision thereof or any estate or trust the income of which is subject to United States federal income taxation or Canadian income taxation regardless of the source (other than the foreign branch of any U.S. or Canadian Person), and includes any United States or Canadian branch of a person other than a U.S. or Canadian Person. The term "United States" means the United States of America (including the states thereof and the District of Columbia) and its territories, its possessions and other areas subject to its jurisdiction and the term "Canada" means Canada, its provinces, territories, possessions and other areas subject to its jurisdiction. Pursuant to the Agreement Between, sales may be made between the U.S. Underwriters and the International Managers of such number of shares of Class A Common Stock as may be mutually agreed. The price of any shares so sold shall be the public offering price as then in effect for Class A Common Stock being sold by the U.S. Underwriters and International Managers, less an amount not greater than the selling concession unless otherwise determined by mutual agreement. To the extent that there are sales pursuant to the Agreement Between, the number of shares initially available for sale by the U.S. Underwriters or by the International Managers may be more or less than the amount specified on the cover page of this Prospectus. The Representatives and the Lead Managers have informed the Company that the Underwriters do not intend to confirm sales to accounts over which they exercise discretionary authority. This Prospectus is not, and under no circumstances is to be construed as, an advertisement or a public offering of the Class A Common Stock in Canada or any province or territory thereof. Any offer or sale of the shares of Class A Common Stock in Canada may only be made pursuant to an exemption from the requirement to file a prospectus in the province or territory of Canada in which such offer or sale is made. Each International Manager has represented and agreed that (i) it has not offered or sold and prior to the date six months after the date of issue of the shares of Class A Common Stock will not offer or sell any shares of Class A Common Stock to persons in the United Kingdom except to persons whose ordinary activities 91 99 involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (ii) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 (the "1986 Act") with respect to anything done by it in relation to the shares of Class A Common Stock in, from or otherwise involving the United Kingdom; and (iii) it has only issued or passed on, and will only issue and pass on to any person in the United Kingdom, any investment advertisement (within the meaning of the 1986 Act) relating to the shares of Class A Common Stock if that person falls within Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995. The shares of Class A Common Stock may not be offered or sold directly or indirectly in Hong Kong by means of this document or any other offering material or document other than to persons whose ordinary business it is to buy or sell shares or debentures, whether as principal or as agent. Unless permitted to do so by the securities laws of Hong Kong, no person may issue or cause to be issued in Hong Kong this document or any amendment or supplement thereto or any other information, advertisement or document relating to the shares of Class A Common Stock other than with respect to shares of Class A Common Stock intended to be disposed of to persons outside Hong Kong or to persons whose business involves the acquisition, disposal or holding of securities, whether as principal or as agent. The shares of Class A Common Stock have not been registered under the Securities and Exchange Law of Japan and are not being offered and may not be offered or sold directly or indirectly in Japan or to residents of Japan, except pursuant to applicable Japanese laws and regulations. No action has been taken or will be taken in any jurisdiction by Cox Radio or the International Managers that would permit a public offering of the shares offered pursuant to the Offerings in any jurisdiction where action for that purpose is required, other than the United States. Persons into whose possession this Prospectus comes are required by Cox Radio and the International Managers to inform themselves about, and to observe any restrictions as to, the offering of the shares offered pursuant to the Offerings and the distribution of this Prospectus. Purchasers of the shares of Class A Common Stock offered hereby may be required to pay stamp taxes and other charges in accordance with the laws and practices of the country of purchase in addition to the offering price set forth on the cover page hereof. Cox Radio has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act. The Company has agreed to reimburse certain expenses of the Underwriters. At the request of Cox Radio, the Underwriters intend to reserve approximately shares of Class A Common Stock (approximately % of the Offerings assuming the Underwriters' over-allotment option is not exercised) for sale at the initial public offering price to certain of Cox Radio's employees and certain other persons. The number of shares available for sale to the general public will be reduced to the extent such individuals purchase such reserved shares. Any reserved shares of Class A Common Stock that are not so purchased by such persons at the closing of the Offerings will be offered to the general public on the same terms as the other shares of Class A Common Stock offered by this Prospectus. Cox Radio, its Directors, CEI and certain officers of Cox Radio, subject to certain exceptions, have agreed not to, directly or indirectly, offer for sale, sell or otherwise dispose of or announce the offering of, any shares of Class A Common Stock or any securities convertible into or exercisable or exchangeable for Class A Common Stock for a period of 180 days after the date of this Prospectus without the prior written consent of Lehman Brothers Inc. The Underwriters have from time to time rendered investment banking and financial advisory services to CEI, its subsidiaries and its affiliates for which they have received customary fees. DETERMINATION OF THE OFFERING PRICE Prior to the Offerings, there has been no public market for the Class A Common Stock. The initial public offering price for the Class A Common Stock will be determined by negotiations among the Company, the Representatives and the Lead Managers. Among the factors considered in such negotiations will be prevailing market conditions, the market values of publicly traded companies that the Underwriters believed to be 92 100 somewhat comparable to the Company, the demand for the Class A Common Stock and for similar securities of companies comparable to Cox Radio, the current state of Cox Radio's development and other factors deemed relevant. There can, however, be no assurance that the prices at which the Class A Common Stock will sell in the public market after the Offerings will not be lower than the price at which they will be sold in the Offerings. CERTAIN UNITED STATES TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS OF CLASS A COMMON STOCK The following is a general discussion of certain United States federal income and estate and gift tax consequences of the ownership and sale or other disposition of Class A Common Stock by a holder that, for United States federal income tax purposes, is not a "United States person" (a "Non-United States Holder"). For purposes of this discussion, a "United States person" means a citizen or resident (as determined for U.S. federal income tax purposes) of the United States; a corporation created or organized in the United States or under the laws of the United States or of any political subdivision thereof; or a person or entity the income of which is includible in gross income for United States federal income tax purposes regardless of its source. Resident alien individuals will be subject to United States federal income tax with respect to the Class A Common Stock as if they were United States citizens. THIS DISCUSSION IS BASED ON THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), AND THE ADMINISTRATIVE INTERPRETATIONS AS OF THE DATE HEREOF, ALL OF WHICH MAY BE CHANGED EITHER RETROACTIVELY OR PROSPECTIVELY. THIS DISCUSSION IS FOR GENERAL INFORMATION ONLY, DOES NOT CONSIDER ANY SPECIFIC FACTS OR CIRCUMSTANCES THAT MAY APPLY TO A PARTICULAR NON-UNITED STATES HOLDER AND DOES NOT ADDRESS ANY TAX CONSEQUENCES ARISING UNDER ANY STATE, MUNICIPALITY, FOREIGN COUNTRY OR OTHER TAXING JURISDICTION. PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE UNITED STATES FEDERAL TAX CONSEQUENCES OF OWNING AND DISPOSING OF CLASS A COMMON STOCK (INCLUDING THE INVESTOR'S STATUS AS A UNITED STATES PERSON OR NON-UNITED STATES HOLDER), AS WELL AS ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY STATE, MUNICIPALITY, FOREIGN COUNTRY OR OTHER TAXING JURISDICTION. DIVIDENDS Dividends paid to a Non-United States Holder will generally be subject to the withholding of United States federal income tax at the rate of 30%, unless the dividend is effectively connected with the conduct of a trade or business (or, if an income tax treaty applies, is attributable to a "permanent establishment", as defined therein) within the United States of the Non-United States Holder, in which case the dividend will be subject to the rules described in the next paragraph. Non-United States Holders should consult any applicable income tax treaties, which may provide for reduced withholding or other rules different from those described above. For purposes of determining whether tax is to be withheld at a 30% rate or a reduced rate as specified by an income tax treaty, current law permits Cox Radio to presume that dividends paid to an address in a foreign country are paid to a resident of such country absent definite knowledge that such presumption is not warranted. However, under proposed U.S. Treasury regulations, which have not yet been put into effect, in the case of dividends paid after December 31, 1997 (December 31, 1999 in the case of dividends paid to accounts in existence on or before the date that is 60 days after the proposed regulations are published as final regulations), a Non-United States Holder generally would be subject to United States withholding tax at a 31% rate under the backup withholding rules described below, rather than at a 30% rate or a reduced rate under an income tax treaty, unless certain certification procedures (or, in the case of payments made outside the United States with respect to an offshore account, certain documentary evidence procedures) are satisfied, directly or through an intermediary. A Non-United States Holder who is eligible for a reduced withholding 93 101 rate may obtain a refund of any excess amounts withheld by filing a tax return with the Internal Revenue Service (the "Service"). Cox Radio will not withhold federal income tax upon dividends paid to a Non-United States Holder if the company receives the appropriate form of the Service (currently Form 4224) from that Non-United States Holder, establishing that such income is effectively connected with the conduct of a trade or business (or, if an income tax treaty applies, is attributable to a "permanent establishment", as defined therein) within the United States of the Non-United States Holder, unless Cox Radio has knowledge to the contrary. Dividends paid to a Non-United States Holder of Class A Common Stock that are effectively connected with the conduct of a trade or business (or, if an income tax treaty applies, are attributable to a "permanent establishment", as defined therein) within the United States of the Non-United States Holder are generally taxed on a net income basis (that is, after allowance for applicable deductions) at the graduated rates that are applicable to United States persons. In the case of a Non-United States Holder that is a corporation, such income may also be subject to the United States federal branch profits tax (which is generally imposed on a foreign corporation upon the deemed repatriation from the United States of effectively connected earnings and profits) at a 30% rate, unless the rate is reduced or eliminated by an applicable income tax treaty and the Non-United States Holder is a qualified resident of the treaty country. GAIN ON SALE OR OTHER DISPOSITION Subject to special rules applicable to individuals as described below, a Non-United States Holder will generally not be subject to regular United States federal income or withholding tax on gain recognized on a sale or other disposition of Class A Common Stock unless (i) the gain is effectively connected with the conduct of a trade or business (or, if an income tax treaty applies, is attributable to a "permanent establishment", as defined therein) within the United States of the Non-United States Holder or of a partnership, trust or estate in which the Non-United States Holder is a partner or beneficiary, or (ii) Cox Radio has been, is or becomes a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Code at any time within the shorter of the five-year period preceding such sale or other disposition or such Non-United States Holder's holding period for the Class A Common Stock. A corporation is generally considered to be a United States real property holding corporation if the fair market value of its "United States real property interests" within the meaning of Section 897(c)(1) of the Code equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus the fair market value of any other of its assets used or held for use in a trade or business. Cox Radio believes that it has not been, is not currently and is not likely to become a United States real property holding corporation. Further, even if Cox Radio were to become a United States real property holding corporation, any gain recognized by a Non-United States Holder still would not be subject to U.S. federal income tax if the Class A Common Stock were considered to be "regularly traded" (within the meaning of applicable U.S. Treasury regulations) on an established securities market (e.g., the , on which the Class A Common Stock will be listed), and the Non-United States Holder did not own, directly or indirectly, at any time during the five-year period ending on the date of the sale or other disposition, more than 5% of the Class A Common Stock. Gains realized by a Non-United States Holder of Class A Common Stock that are effectively connected with the conduct of a trade or business (or, if an income tax treaty applies, are attributable to a "permanent establishment," as defined therein) within the United States of the Non-United States Holder are generally taxed on a net income basis (that is, after allowance for applicable deductions) at the graduated rates that are applicable to United States persons. In the case of a Non-United States Holder that is a corporation, such income may also be subject to the United States federal branch profits tax (which is generally imposed on a foreign corporation upon the deemed repatriation from the United States of effectively connected earnings and profits) at a 30% rate, unless the rate is reduced or eliminated by an applicable income tax treaty and the Non-United States Holder is a qualified resident of the treaty country. In addition to being subject to the rules described above, an individual Non-United States Holder who holds Class A Common Stock as a capital asset will generally be subject to tax at a 30% rate on any gain 94 102 recognized on the sale or other disposition of such stock if (i) such gain is not effectively connected with the conduct of a trade or business (or, if an income tax treaty applies, is not attributable to a "permanent establishment," as defined therein) within the United States of the Non-United States Holder, and (ii) such individual is present in the United States for 183 days or more in the taxable year of the sale or other disposition and either (A) has a "tax home" in the United States (as specially defined for purposes of the United States federal income tax), or (B) maintains an office or other fixed place of business in the United States and the income from the sale of the stock is attributable to such office or other fixed place of business. Individual Non-United States Holders may also be subject to tax pursuant to provisions of United States federal income tax law applicable to certain United States expatriates. Furthermore, under a recent legislative proposal of the Clinton Administration, U.S. citizens and residents who expatriate on or after February 6, 1995 would be deemed to have sold their Class A Common Stock at fair market value immediately prior to their expatriation. Accordingly, gain would be recognized and subject to tax at the graduated rates applicable to United States persons. The Clinton Administration proposal or some similar legislative proposal may or may not be enacted. In past years, legislation has been introduced that, if enacted, would under certain circumstances have imposed United States federal income tax on gain realized from the sale or other disposition of Class A Common Stock by certain Non-United States Holders who owned, at or prior to the time of sale or other disposition, 10% or more of the Class A Common Stock. There can be no assurance that similar legislation will not again be proposed in the future and, if proposed, enacted. FEDERAL ESTATE AND GIFT TAXES Class A Common Stock owned or treated as owned by an individual (regardless of whether such an individual is a citizen or a resident of the United States) at the date of death will be included in such individual's estate for United States federal estate tax purposes, unless an applicable estate tax treaty provides otherwise. A Non-United States Holder will not be subject to United States federal gift tax on a transfer of Class A Common Stock, unless such person is a domiciliary of the United States. INFORMATION REPORTING AND BACKUP WITHHOLDING Cox Radio must report annually to the Service and to each Non-United States Holder the amount of dividends paid to, and the tax withheld with respect to, such Non-United States Holder, regardless of whether tax was actually withheld and whether withholding was reduced or eliminated by an applicable income tax treaty. Pursuant to certain income tax treaties and other agreements, that information may also be made available to the tax authorities of the country in which the Non-United States Holder resides. United States federal backup withholding (which generally is withholding imposed at the rate of 31% on certain payments to persons not otherwise exempt who fail to furnish certain identifying information) will generally not apply to (i) dividends paid to a Non-United States Holder that is subject to withholding at the 30% rate (or that is subject to withholding at a reduced rate under an applicable income tax treaty), or (ii) under current law, dividends paid to a Non-United States Holder at an address outside of the United States (unless the payor has knowledge that the payee is a United States person). However, under proposed U.S. Treasury regulations, which have not yet been put into effect, in the case of dividends paid after December 31, 1997 (December 31, 1999 in the case of dividends paid to accounts in existence on or before the date that is 60 days after the proposed regulations are published as final regulations), a Non-United States Holder generally would be subject to United States withholding tax at a 31% rate, unless certain certification procedures (or, in the case of payments made outside the United States with respect to an offshore account, certain documentary evidence procedures) are satisfied, directly or through an intermediary. The backup withholding and information reporting requirements also apply to the gross proceeds paid to a Non-United States Holder upon the sale or other disposition of Class A Common Stock by or through a United States office of a United States or foreign broker, unless the Non-United States Holder certifies to the broker under penalties of perjury as to, among other things, its name, address and status as a Non-United States Holder by filing the Service's Form W-8 with the broker, or unless the Non-United States Holder 95 103 otherwise establishes an exemption. Information reporting requirements (but not backup withholding) will apply to a payment of the proceeds of a sale or other disposition of Class A Common Stock effected at a foreign office of (i) a United States broker; (ii) a foreign broker 50% or more of whose gross income for certain periods is effectively connected with the conduct of a trade or business within the United States; or (iii) a foreign broker that is a "controlled foreign corporation" for United States federal income tax purposes, unless the broker has documentary evidence in its records that the Non-United States Holder is a Non-United States Holder (and the broker has no knowledge to the contrary) and certain other conditions are met, or unless the Non-United States Holder otherwise establishes an exemption. Neither backup withholding nor information reporting will generally apply to a payment of the proceeds of a sale or other disposition of Class A Common Stock effected at a foreign office of a foreign broker not subject to the preceding sentence. Any amounts withheld under the backup withholding rules will be refunded or credited against the Non-United States Holder's United States federal income tax liability, provided that the Non-United States Holder files a tax return with the Service. These backup withholding and information reporting requirements are under review by the Service, and their application to the Class A Common Stock could be changed by future regulations. LEGAL MATTERS The validity of the Class A Common Stock offered hereby will be passed upon for Cox Radio by Dow, Lohnes & Albertson, PLLC, Washington, D.C. The Underwriters have been represented by Cravath, Swaine & Moore, New York, New York. EXPERTS The consolidated financial statements of Cox Radio at December 31, 1994 and 1995 and for each of the three years in the period ending December 31, 1995 included in this Prospectus and Registration Statement and the related consolidated financial statement schedule included elsewhere in the Registration Statement have been audited by Deloitte & Touche LLP, independent auditors, as stated in their reports appearing herein and elsewhere in the Registration Statement (which reports express an unqualified opinion and include an explanatory paragraph referring to changes in the methods of accounting for postretirement benefits other than pensions, income taxes, and postemployment benefits), and have been so included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. The consolidated financial statements of NewCity at December 31, 1994 and 1995, and for each of the three years in the period ending December 31, 1995, appearing in this Prospectus and Registration Statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere herein and are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. The consolidated financial statements of Infinity Holdings Corp. of Orlando at December 31, 1995 and for the year then ended included in this Prospectus and Registration Statement have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein and elsewhere in the Registration Statement, and have been so included in reliance upon the report given upon their authority as experts in accounting and auditing. AVAILABLE INFORMATION Cox Radio has filed with the Securities and Exchange Commission ("the Commission"), Washington, D.C. 20549, a Registration Statement (which term shall include all amendments, exhibits and schedules thereto) on Form S-1 under the Securities Act with respect to the shares of Class A Common Stock offered hereby. This Prospectus, which constitutes a part of the Registration Statement, omits certain of the information contained in the Registration Statement. Reference is hereby made to the Registration Statement for further information with respect to Cox Radio and the Class A Common Stock offered hereby. Any 96 104 statements contained herein concerning the provisions of any contract or other document are not necessarily complete, and where such contract or other document is an exhibit to the Registration Statement, each such statement is qualified in all respects by the provisions in such exhibit, to which reference is hereby made. Copies of the Registration Statement may be examined or copied at the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Commission located at 7 World Trade Center, Suite 1300, New York, New York 10048 and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies can also be obtained by mail at prescribed rates. Requests should be directed to the Commission's Public Reference Section, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. 97 105 INDEX TO FINANCIAL STATEMENTS
PAGE ---- COX RADIO, INC. Independent Auditors' Report.......................................................... F-2 Consolidated Balance Sheets, December 31, 1994 and 1995 and (Unaudited) March 31, 1996................................................................................ F-3 Consolidated Statements of Operations, Years Ended December 31, 1993, 1994 and 1995 and (Unaudited) Three Months Ended March 31, 1995 and 1996.......................... F-4 Consolidated Statements of Shareholder's Equity, Years Ended December 31, 1993, 1994 and 1995 and (Unaudited) Three Months Ended March 31, 1996.......................... F-5 Consolidated Statements of Cash Flows, Years Ended December 31, 1993, 1994 and 1995 and (Unaudited) Three Months Ended March 31, 1995 and 1996.......................... F-6 Notes to Consolidated Financial Statements............................................ F-7 NEWCITY COMMUNICATIONS, INC. Report of Independent Auditors........................................................ F-17 Consolidated Balance Sheets, December 31, 1994 and 1995............................... F-18 Consolidated Statements of Operations, Years Ended December 31, 1993, 1994 and 1995... F-19 Consolidated Statements of Stockholders' Deficiency, Years Ended December 31, 1993, 1994 and 1995....................................................................... F-20 Consolidated Statements of Cash Flows, Years Ended December 31, 1993, 1994 and 1995... F-21 Notes to Consolidated Financial Statements............................................ F-22 Consolidated Balance Sheets (Unaudited) March 31, 1996 and December 31, 1995.......... F-33 Consolidated Statements of Operations, (Unaudited) Three Months Ended March 31, 1996 and 1995............................................................................ F-34 Consolidated Statements of Cash Flows, (Unaudited) Three Months Ended March 31, 1996 and 1995............................................................................ F-35 Notes to Consolidated Interim Financial Statements (Unaudited)........................ F-36 INFINITY HOLDINGS CORP. OF ORLANDO Independent Auditors' Report.......................................................... F-37 Consolidated Balance Sheets, December 31, 1995 and (Unaudited) March 31, 1996......... F-38 Consolidated Statements of Operations, Year Ended December 31, 1995 and (Unaudited) Three Months Ended March 31, 1995 and 1996.......................................... F-39 Consolidated Statements of Cash Flows, Year Ended December 31, 1995 and (Unaudited) Three Months Ended March 31, 1995 and 1996.......................................... F-40 Notes to Consolidated Financial Statements............................................ F-41
F-1 106 INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholder of Cox Radio, Inc. We have audited the accompanying consolidated balance sheets of Cox Radio, Inc. ("Cox Radio") as of December 31, 1994 and 1995, and the related consolidated statements of operations, shareholder's equity and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of Cox Radio's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Cox Radio, Inc. at December 31, 1994 and 1995, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. As discussed in Notes 2, 7 and 8 to the consolidated financial statements, during 1993 Cox Radio changed its methods of accounting for postretirement benefits other than pensions, income taxes, and postemployment benefits to conform with Statements of Financial Accounting Standards No. 106, 109 and 112, respectively. DELOITTE & TOUCHE LLP Atlanta, Georgia July 18, 1996 F-2 107 COX RADIO, INC. CONSOLIDATED BALANCE SHEETS
DECEMBER 31, ------------------- MARCH 31, 1994 1995 1996 -------- -------- ----------- (UNAUDITED) (DOLLARS IN THOUSANDS) ASSETS CURRENT ASSETS: Cash and cash equivalents................................... $ 1,897 $ 1,691 $ 2,052 Accounts and notes receivable, less allowance for doubtful accounts of $760, $774 and $779.......................... 28,446 30,667 25,105 Prepaid expenses and other current assets................... 3,152 3,289 5,296 -------- -------- ----------- Total current assets................................ 33,495 35,647 32,453 Plant and equipment, net...................................... 26,255 28,020 29,087 Intangible assets, net........................................ 120,053 126,798 132,965 Other assets.................................................. 220 1,302 1,175 -------- -------- ----------- Total assets........................................ $180,023 $191,767 $ 195,680 ======== ======== ========= LIABILITIES AND SHAREHOLDER'S EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses....................... $ 11,455 $ 10,924 $ 10,740 Income taxes payable........................................ 315 278 1,694 Other current liabilities................................... 518 873 1,021 -------- -------- ----------- Total current liabilities........................... 12,288 12,075 13,455 Amounts due to Cox Enterprises, Inc........................... 120,495 126,052 126,936 Deferred income taxes......................................... 6,833 6,470 6,307 -------- -------- ----------- Total liabilities................................... 139,616 144,597 146,698 -------- -------- ----------- Commitments and contingencies (Note 12) SHAREHOLDER'S EQUITY: Common stock, $1.00 par value; 6,000 shares authorized and 600 shares outstanding................................... 1 1 1 Additional paid-in capital.................................. 90,947 90,947 90,947 Deficit in retained earnings................................ (50,541) (43,778) (41,966) -------- -------- ----------- Total shareholder's equity.......................... 40,407 47,170 48,982 -------- -------- ----------- Total liabilities and shareholder's equity.......... $180,023 $191,767 $ 195,680 ======== ======== =========
See notes to consolidated financial statements. F-3 108 COX RADIO, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS YEAR ENDED DECEMBER 31, ENDED MARCH 31, --------------------------- ----------------- 1993 1994 1995 1995 1996 ------- ------- ------- ------- ------- (UNAUDITED) (DOLLARS IN THOUSANDS) Net revenues: Local.......................................... $68,018 $80,484 $93,465 $18,727 $22,562 National....................................... 26,202 30,193 29,385 6,987 6,841 Other.......................................... 730 858 722 142 165 ------- ------- ------- ------- ------- Total net revenues..................... 94,950 111,535 123,572 25,856 29,568 Costs and expenses: Operating...................................... 29,903 32,218 41,831 8,150 9,440 Selling, general and administrative............ 38,045 44,096 48,131 11,130 12,343 Corporate general and administrative........... 2,522 2,667 5,853 879 1,103 Depreciation and amortization.................. 7,224 6,995 7,247 1,841 1,982 ------- ------- ------- ------- ------- Operating income................................. 17,256 25,559 20,510 3,856 4,700 Other income (expense): Interest expense............................... (5,590) (5,229) (5,974) (1,427) (1,467) Other -- net................................... 873 (260) (147) (45) (96) ------- ------- ------- ------- ------- Income before income taxes and cumulative effect of accounting changes.......................... 12,539 20,070 14,389 2,384 3,137 Income taxes..................................... 6,048 8,863 6,226 1,120 1,325 ------- ------- ------- ------- ------- Income before cumulative effect of accounting changes........................................ 6,491 11,207 8,163 1,264 1,812 Cumulative effect of accounting changes.......... (7,592) -- -- -- -- ------- ------- ------- ------- ------- Net income (loss)................................ $(1,101) $11,207 $ 8,163 $ 1,264 $ 1,812 ======= ======= ======= ======= =======
See notes to consolidated financial statements. F-4 109 COX RADIO, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
COMMON STOCK ADDITIONAL --------------- PAID-IN DEFICIT IN SHARES AMOUNT CAPITAL RETAINED EARNINGS TOTAL ------ ------ ---------- ----------------- -------- (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) BALANCE AT JANUARY 1, 1993 (UNAUDITED)...... 1 $1 $ 106,335 $ (36,055) $ 70,281 Net loss.................................. -- -- (1,101) (1,101) Dividends to CEI.......................... -- (4,114) (886) (5,000) - -- ---------- ----------------- -------- BALANCE AT DECEMBER 31, 1993................ 1 1 102,221 (38,042) 64,180 Net income................................ -- -- 11,207 11,207 Dividends to CEI.......................... -- (11,274) (23,706) (34,980) - -- ---------- ----------------- -------- BALANCE AT DECEMBER 31, 1994................ 1 1 90,947 (50,541) 40,407 Net income................................ -- -- 8,163 8,163 Dividends to CEI.......................... -- -- (1,400) (1,400) - -- ---------- ----------------- -------- BALANCE AT DECEMBER 31, 1995................ 1 1 90,947 (43,778) 47,170 Net income (unaudited).................... -- -- 1,812 1,812 - -- ---------- ----------------- -------- BALANCE AT MARCH 31, 1996 (UNAUDITED)....... 1 $1 $ 90,947 $ (41,966) $ 48,982 ===== ====== ======== ============= ========
See notes to consolidated financial statements. F-5 110 COX RADIO, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS YEAR ENDED DECEMBER 31, ENDED MARCH 31, ----------------------------- ----------------- 1993 1994 1995 1995 1996 ------- -------- -------- ------- ------- (UNAUDITED) (DOLLARS IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)............................ $(1,101) $ 11,207 $ 8,163 $ 1,264 $ 1,812 Items not requiring cash: Cumulative effect of accounting changes... 7,592 -- -- -- -- Depreciation.............................. 2,273 2,216 2,382 589 637 Amortization.............................. 4,951 4,779 4,865 1,252 1,345 Deferred income taxes..................... (28) 34 (441) (161) (160) (Increase) decrease in accounts receivable... (2,385) (6,109) (2,221) 5,980 5,562 Increase (decrease) in accounts payable and accrued expenses.......................... 808 1,902 (299) (222) 601 Increase (decrease) in taxes payable......... 672 (257) (37) 1,403 1,416 Other, net................................... (1,353) 109 799 (1,422) (1,766) ------- -------- -------- ------- ------- Net cash provided by operating activities......................... 11,429 13,881 13,211 8,683 9,447 ------- -------- -------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures......................... (1,065) (2,705) (4,073) (680) (442) Acquisitions................................. (9,390) (9,954) (11,697) -- (8,680) (Increase) decrease in other long-term assets.................................... (301) 337 (1,580) (8) (83) Proceeds from sale of business............... 4,688 -- -- -- -- Other, net................................... 15 30 8 -- 20 ------- -------- -------- ------- ------- Net cash used in investing activities......................... (6,053) (12,292) (17,342) (688) (9,185) ------- -------- -------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase (decrease) in amounts due to CEI.... 3,762 30,845 5,557 (5,199) 884 Repayment of debt............................ (3,000) -- -- -- -- Dividends paid............................... (5,000) (34,980) (1,400) -- -- Increase (decrease) in book overdrafts....... (538) 2,715 (232) (2,629) (785) ------- -------- -------- ------- ------- Net cash provided by (used in) financing activities............... (4,776) (1,420) 3,925 (7,828) 99 ------- -------- -------- ------- ------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................... 600 169 (206) 167 361 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.................................... 1,128 1,728 1,897 1,897 1,691 ------- -------- -------- ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD... $ 1,728 $ 1,897 $ 1,691 $ 2,064 $ 2,052 ======= ======== ======== ======= =======
See notes to consolidated financial statements. F-6 111 COX RADIO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND BASIS OF PRESENTATION Cox Radio, Inc. ("Cox Radio" or "the Company"), a wholly-owned indirect subsidiary of Cox Enterprises, Inc. ("CEI"), is a leading national radio broadcasting company whose business is devoted exclusively to operating, acquiring and developing radio stations located throughout the United States. Prior to the Offerings, CEI and certain of its subsidiaries will transfer ownership of their radio broadcast properties to Cox Radio. CEI's historical basis in the assets and liabilities of the operations will be carried over to Cox Radio. The Consolidated Financial Statements of Cox Radio represent the operations of the radio stations currently owned or operated by CEI or its other subsidiaries or to which sales and marketing services were provided in connection with CEI's radio broadcasting operations. The consolidated historical financial statements do not necessarily reflect the results of operations or financial position that would have existed had Cox Radio been an independent company. All significant intercompany accounts (other than amounts due to CEI) have been eliminated in the consolidated financial statements of Cox Radio. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Fair value approximates carrying value. Revenue Recognition Revenue is recognized as advertising air time is broadcast and is net of advertising agency commissions. Corporate General and Administrative Expenses Corporate general and administrative expenses consist of corporate overhead costs not specifically allocable to any of the Company's individual stations and expenses related to the CEI Unit Appreciation Plan. In 1995, corporate general and administrative expenses included a nonrecurring corporate charge. Plant and Equipment Plant and equipment is stated at cost less accumulated depreciation. Depreciation is computed using principally the straight-line method at rates based upon estimated useful lives of 5 to 40 years for buildings and building improvements and 5 to 20 years for broadcast equipment. Expenditures for maintenance and repairs are charged to operating expense as incurred. At the time of retirements, sales or other dispositions of property, the original cost and related accumulated depreciation are written off. Intangible Assets Intangible assets consist primarily of goodwill/FCC broadcast licenses, an option to purchase WJZF-FM (Atlanta) and non-compete agreements. Goodwill/FCC broadcast licenses recorded in business combinations and the purchase option related to WJZF-FM generally are amortized on a straight-line basis over 30 to 40 years. Non-compete agreements are amortized on a straight-line basis over the contractual lives of the agreements, generally 3 to 5 years. Cox Radio assesses, on an on-going basis, the recoverability of intangible assets based on estimates of future undiscounted cash flows for the applicable business acquired compared to net book value of the related intangible asset. If the future undiscounted cash flow estimate is less than net book value, net book value is then reduced to the estimated fair value. Cox Radio also evaluates the amortization periods of intangible assets to determine whether events or circumstances warrant revised estimates of useful lives. F-7 112 COX RADIO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Income Taxes The accounts of Cox Radio are included in the consolidated federal income tax return and certain state income tax returns of CEI. Current federal and state income tax expenses and benefits are allocated on a separate return basis to Cox Radio based on (i) the current year tax effects of the inclusion of its income, expenses and credits in the consolidated federal income tax returns of CEI or (ii) separate state income tax returns. Deferred income taxes arise from temporary differences between income taxes and financial reporting and principally relate to depreciation, amortization and employee benefits. On January 1, 1993, Cox Radio adopted Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," which requires, among other things, that deferred taxes, including those previously recorded, be adjusted to current rates. Cox Radio reported as the cumulative effect of an accounting change an expense related to the adoption of SFAS No. 109 of $4.9 million. Pension, Postretirement and Postemployment Benefits CEI generally provides defined pension benefits to all employees based on years of service and compensation during those years. CEI also provides certain health care and life insurance benefits to substantially all retirees and employees. For employees and retirees of Cox Radio, these benefits are provided through the CEI benefit plans. Expenses related to these plans are allocated to Cox Radio through intercompany transfers. The amount of the allocations is generally based on actuarial determinations of the effects of Cox Radio employees' participation in the plans. On January 1, 1993, Cox Radio adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," which requires accrual of postretirement benefits during the years an employee provides services. Cox Radio also adopted, as of January 1, 1993, SFAS No. 112, "Employers' Accounting for Postemployment Benefits." This statement requires an accrual method of recognizing postemployment benefits such as disability-related benefits. Cox Radio elected to immediately recognize the obligation for both of these new statements. The adoption of SFAS No. 106 resulted in a $4.1 million ($2.6 million net-of-tax) charge to income and SFAS No. 112 resulted in a $0.2 million ($0.1 million net-of-tax) charge. These one-time, net-of-tax charges were reported as the cumulative effect of accounting changes. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Concentration of Risk A significant portion of the Company's business is conducted in Los Angeles, Atlanta and Miami. Revenues earned from radio stations located in Los Angeles, Atlanta, and Miami represent 40%, 18% and 20%, respectively, of total revenues for the year ended December 31, 1993, 37%, 19% and 18%, respectively, of total revenues for the year ended December 31, 1994, and 35%, 25% and 17%, respectively, of total revenues for the year ended December 31, 1995. As discussed in Note 13, in April 1996, Cox Radio agreed to sell WIOD-AM (Miami), which, upon closing of the transaction, will reduce the Company's concentration of risk in Miami. F-8 113 COX RADIO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Recently Issued Accounting Pronouncements In March 1995, SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of," was issued. This statement requires that long-lived assets and certain intangibles be reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, with any impairment losses being reported in the period in which the recognition criteria are first applied based on the fair value of the asset. Long-lived assets and certain intangibles to be disposed of are required to be reported at the lower of carrying amount or fair value less cost to sell. Cox Radio adopted SFAS No. 121 in the first quarter of 1996. The adoption of SFAS No. 121 did not have a material impact on Cox Radio's financial statements. In October 1995, SFAS No. 123, "Accounting for Stock-Based Compensation," was issued. The adoption of the new recognition provisions for stock-based compensation expense included in SFAS No. 123 is optional; however, the pro forma effects on net income and earnings per share had the new recognition provisions been elected is required to be disclosed in the financial statements. Cox Radio will continue to follow the requirements of APB No. 25, "Accounting for Stock Issued to Employees," in its accounting for employee stock options; therefore, no impact on the Company's financial position and results of operations is expected. Cox Radio will provide the required disclosures under SFAS No. 123 in the annual financial statements for the year ended December 31, 1996. Unaudited Interim Financial Statements The consolidated financial statements as of March 31, 1996 and for the three months ended March 31, 1995 and 1996 include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position and results of operations for these periods. Operating results for the three months ended March 31, 1996 are not necessarily indicative of the results that may be expected for the entire year. 3. CASH MANAGEMENT SYSTEM Cox Radio participates in CEI's cash management system, whereby the bank sends daily notification of Cox Radio's checks presented for payment. CEI transfers funds from other sources to cover Cox Radio's checks presented for payment. Book overdrafts of $1.1 million, $3.8 million and $3.6 million existed at December 31, 1993, 1994 and 1995, respectively, as a result of Cox Radio's checks outstanding. These book overdrafts were reclassified as accounts payable on Cox Radio's financial statements. 4. ACQUISITIONS AND DISPOSITIONS OF BUSINESSES In December 1993, Cox Radio acquired WYSY-FM (Chicago) for $9.4 million. Also in December 1993, Cox Radio exchanged KLRX-FM (Dallas) for WYNF-FM (Tampa), and approximately $4.7 million. Given the significant monetary consideration received, this transaction was accounted for as a monetary transaction. Accordingly, the "sale" of KLRX-FM and the "purchase" of WYNF-FM were recorded at fair value. The "sale" of KLRX-FM resulted in a pre-tax gain of $1.1 million. Subsequent to the exchange, the Company switched the dial position of WYNF-FM with its existing Tampa station, WWRM-FM, and changed WYNF-FM's call letters to WCOF-FM. In January 1994, Cox Radio entered into a local marketing agreement ("LMA") to operate WJZF-FM (Atlanta). In September 1994, the Company paid $9.4 million (including legal fees) for an option to purchase, pending FCC approval, substantially all of the station's assets. In August 1994, the Company began operating KACE-FM in Inglewood, California, a suburb of Los Angeles, as an LMA until it acquired the station in August 1995 for $11.7 million. In April 1995, Cox Radio F-9 114 COX RADIO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) entered into an LMA to operate WCNN-AM (Atlanta). In June 1995, Cox Radio entered into a joint sales agreement ("JSA") with WFNS-AM (Tampa). Under an LMA or a JSA, Cox Radio provides a combination of programming, sales, marketing and similar services for WJZF-FM, KACE-FM, WCNN-AM and WFNS-AM. The broadcast revenues and operating expenses of stations operated under LMAs and JSAs have been included in the Company's operations since the respective dates of such agreements. The acquisitions were accounted for by the purchase method, and accordingly, the purchase price has been allocated to the assets acquired based on their estimated fair values at the date of the acquisition. A substantial portion of each purchase price was allocated to intangible assets to reflect the FCC broadcasting licenses acquired. The excess of the purchase price over the fair value of the net assets acquired has been recorded as goodwill and is being amortized over 30 to 40 years using the straight-line basis. No liabilities were assumed by Cox Radio as a result of the acquisitions. Operations of each of the such acquired radio stations have been included in the consolidated results of Cox Radio since the acquisition date of such stations. These acquisitions are not considered to be significant and thus, pro forma results of operations are not presented. 5. PLANT AND EQUIPMENT Plant and equipment is summarized as follows:
DECEMBER 31, ------------------- 1994 1995 -------- -------- (DOLLARS IN THOUSANDS) Land and land improvements....................................... $ 14,845 $ 14,845 Buildings and building improvements.............................. 5,769 5,782 Broadcast equipment.............................................. 25,154 27,461 Construction in progress......................................... 222 1,629 -------- -------- Plant and equipment, at cost................................... 45,990 49,717 Less accumulated depreciation.................................... (19,735) (21,697) -------- -------- Net plant and equipment................................ $ 26,255 $ 28,020 ======== ========
6. INTANGIBLE ASSETS Intangible assets are summarized as follows:
DECEMBER 31, ------------------- 1994 1995 -------- -------- (DOLLARS IN THOUSANDS) Goodwill/FCC broadcast licenses.................................. $151,416 $162,433 WJZF-FM purchase option.......................................... 9,381 9,381 Non-compete agreements........................................... 5,207 5,707 Other............................................................ 1,418 1,511 -------- -------- Total.................................................. 167,422 179,032 Less accumulated amortization.................................... (47,369) (52,234) -------- -------- Net intangible assets.................................. $120,053 $126,798 ======== ========
F-10 115 COX RADIO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 7. INCOME TAXES Effective January 1, 1993, Cox Radio adopted SFAS No. 109, "Accounting for Income Taxes," which requires the use of the liability method of accounting for deferred income taxes. Financial statements for prior years were not restated to apply the provisions of SFAS No. 109. The cumulative effect of this accounting change was a decrease in net income of $4.9 million. Income tax expense (benefit) is summarized as follows:
YEAR ENDED DECEMBER 31, ------------------------ 1993 1994 1995 ------ ------ ------ (DOLLARS IN THOUSANDS) Current: Federal.................................................... $4,890 $7,439 $5,226 State...................................................... 1,186 1,390 1,441 ------ ------ ------ Total current...................................... 6,076 8,829 6,667 ------ ------ ------ Deferred: Federal.................................................... 56 137 (589) State...................................................... (84) (103) 148 ------ ------ ------ Total deferred..................................... (28) 34 (441) ------ ------ ------ Total income taxes................................. $6,048 $8,863 $6,226 ====== ====== ======
The tax effects of significant temporary differences which comprise the net deferred tax liability are as follows:
DECEMBER 31, --------------------- 1994 1995 ------- ------- (DOLLARS IN THOUSANDS) Current deferred tax asset: Provision for doubtful accounts.............................. $ 221 $ 301 ------- ------- Noncurrent deferred tax assets (liabilities): Plant and equipment.......................................... (2,339) (2,463) Intangibles.................................................. (5,516) (5,550) Net operating loss carryforwards............................. 1,055 1,056 Employee benefits............................................ 428 1,028 State taxes.................................................. (379) (473) Other........................................................ (82) (68) ------- ------- Total net noncurrent liability....................... (6,833) (6,470) ------- ------- Net deferred tax liability........................... $(6,612) $(6,169) ======= =======
F-11 116 COX RADIO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Income tax expense computed using the United States federal statutory rate is reconciled to the reported income tax provisions as follows:
YEAR ENDED DECEMBER 31, ------------------------ 1993 1994 1995 ------ ------ ------ (DOLLARS IN THOUSANDS) U.S. federal statutory income tax rate..................... 35% 35% 35% Computed tax expense at federal statutory rates on income before income taxes..................................... $4,389 $7,025 $5,036 State income taxes (net of federal tax benefit)............ 717 836 1,033 Non-deductible amortization of intangibles................. 1,102 1,028 811 1% increase in enacted tax rate............................ 65 -- -- Benefit arising from low income housing credits............ -- (125) (555) Other, net................................................. (225) 99 (99) ------ ------ ------ Income tax provision............................... $6,048 $8,863 $6,226 ====== ====== ======
The consolidated federal income tax returns of CEI for 1986 through 1994 and the combined California franchise tax returns of CEI for 1984 through 1990 are presently under audit. Management believes that any additional liabilities arising from current tax-related audits are sufficiently provided for at December 31, 1995. 8. RETIREMENT PLANS Substantially all of Cox Radio's employees participate in the funded, non-contributory defined benefit pension plan of CEI and certain key employees participate in an unfunded, non-qualified supplemental pension plan. The plans call for benefits to be paid to eligible employees at retirement based primarily upon years of service with Cox Radio and compensation rates during those years. Pension expense allocated to Cox Radio by CEI was $431,000, $412,000, and $636,000 for the years ended December 31, 1993, 1994 and 1995, respectively. The following table sets forth certain information attributable to the Cox Radio employees' participation in the CEI pension plans:
DECEMBER 31, DECEMBER 31, 1994 1995 ------------------ ------------------ FUNDED UNFUNDED FUNDED UNFUNDED PLANS PLANS PLANS PLANS ------- -------- ------- -------- (DOLLARS IN THOUSANDS) Actuarial present value of benefit obligations: Vested benefits................................ $ 7,916 $ 786 $10,276 $1,233 Nonvested benefits............................. 672 96 1,012 199 ------- -------- ------- -------- Accumulated benefit obligation................... $ 8,588 $ 882 $11,288 $1,432 ======= ======= ======= ======= Projected benefit obligation..................... $11,081 $1,242 $13,965 $1,879 ======= ======= ======= =======
Assumptions used in the actuarial computations were:
DECEMBER 31, ------------- 1994 1995 ---- ---- Discount rate.......................................................... 8.50% 7.25% Rate of increase in compensation levels................................ 6.25% 5.00% Expected long-term rate of return on assets............................ 9.00% 9.00%
F-12 117 COX RADIO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Upon completion of the Offerings, CEI may establish a defined benefit pension plan and segregate plan assets for Cox Radio. The amount of the assets that would be segregated would have an estimated fair value equal to the projected benefit obligation of the CEI defined benefit pension plan attributable to Cox Radio employees as of December 31, 1995, or $13,965,000. The segregated assets would be used to fund payments to retirees. Any non-qualified supplemental pension plan payments due to Cox Radio employees will be made by CEI. However, Cox Radio will continue to recognize the annual expense associated with this plan. CEI provides certain health care and life insurance benefits to substantially all retirees of CEI and its subsidiaries. In January 1993, Cox Radio, along with CEI, adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." SFAS No. 106 requires companies to accrue the cost of postretirement health care and life insurance benefits within the period the employee provides services. Cox Radio, along with CEI, elected to immediately recognize the cumulative effect of a change in accounting for postretirement benefits. Cox Radio's allocated portion of this cumulative effect was $4,061,000 ($2,597,000 net of related tax benefits) which represented the accumulated postretirement benefit obligation ("APBO") existing at January 1, 1993, net of previously recorded liabilities. Prior to the adoption of SFAS No. 106, health benefits for eligible retirees were generally expensed as the claims were incurred. Postretirement expense allocated to Cox Radio by CEI was $331,000, $298,000 and $218,000 for the years ended December 31, 1993, 1994 and 1995, respectively. Cox Radio's APBO at December 31, 1995 was $4,239,000. The funded status of the portion of the postretirement plan covering the employees of Cox Radio is not determinable. The APBO for the postretirement plan of CEI substantially exceeded the fair value of assets held in the plan at December 31, 1995. Actuarial assumptions used to determine the APBO include a discount rate of 7.25% and an expected long-term rate of return on plan assets of 9%. The assumed health care cost trend rate for retirees is 11.5%. For participants under the age of 65, the trend rate gradually decreases to 5.5% by year 2007 and remains level thereafter. For retirees at age 65 or older, this rate decreases to 5.0% by year 2008. Increasing the assumed health care cost trend rate by one percentage point would have resulted in an increase in the CEI plan's APBO of approximately 7.5% and an increase in the aggregate of the service cost and interest cost components of the net periodic postretirement benefit cost of approximately 5.9% for 1995. In addition, substantially all of Cox Radio's employees are eligible to participate in the savings and investment plan of CEI. Under the terms of the plan, Cox Radio matches 50% of employee contributions up to a maximum of 6% of the employee's base salary. Cox Radio's expense under the plan was $448,000, $471,000 and $523,000 for the years ended December 31, 1993, 1994 and 1995, respectively. Cox Radio employees whose savings and investment plan contributions are at the Internal Revenue Service ("IRS") maximum or are restricted in order to pass the nondiscrimination test required by the IRS are eligible to participate in CEI's non-qualified savings restoration plan, which began in 1995. Under the terms of this plan, Cox Radio matches 50% of employee contributions to both the savings and investment and restoration plans up to a maximum percentage of the employee's eligible compensation. Cox Radio's expense under the non-qualified savings restoration plan was $23,000 for the year ended December 31, 1995. 9. UNIT APPRECIATION PLANS Certain of the executives and key employees of Cox Radio participate in certain CEI Unit Appreciation Plans ("UAP") that provide for payment of benefits in the form of shares of CEI common stock, cash, or both, generally five years after the date of award. Unit benefits are based on the excess, if any, over a base amount (value of award), of the fair value of a share of CEI common stock five years after the effective date of award. Fair values are determined by independent appraisal. The plans provide for a maximum unit benefit of 150% of the base amount and benefits vest over the five year period following the date of award. The cost of awards made under the plans was allocated to Cox Radio by CEI over the applicable vesting periods and was F-13 118 COX RADIO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) charged to corporate general and administrative expenses. Amounts charged to expense for Cox Radio employees for the years ended December 31, 1993, 1994 and 1995 were $880,000, $833,000 and $1,646,000, respectively. Amounts accrued under the plans were $1,257,000 and $2,838,000 as of December 31, 1994 and 1995, respectively, and are included in Amounts due to CEI in the accompanying Consolidated Balance Sheets. 10. TRANSACTIONS WITH AFFILIATED COMPANIES Cox Radio borrows funds for working capital and other needs from CEI. Certain management services are provided to Cox Radio by CEI. Such services include rent, legal, corporate secretarial, tax, treasury, internal audit, risk management, benefits administration and other support services and are included in corporate general and administrative expenses in the Consolidated Statements of Operations. Cox Radio was allocated expenses for the years ended December 31, 1993, 1994 and 1995 of approximately $1,642,000, $1,834,000 and $2,207,000, respectively, related to these services. Cox Radio pays rent and certain other occupancy costs to CEI for office facilities. Related rent and occupancy expense was approximately $395,000 for each of the years ended December 31, 1993 and 1994 and approximately $378,000 for the year ended December 31, 1995. Corporate general and administrative expense allocations are based on a specified percentage of expenses related to the services provided to Cox Radio in relation to those provided to CEI's other subsidiaries. Rent and occupancy expense is allocated based on occupied space. Management believes that these allocations were made on a reasonable basis. However, the allocations are not necessarily indicative of the level of expenses that might have been incurred had Cox Radio contracted directly with third parties. Management has not made a study or any attempt to obtain quotes from third parties to determine what the cost of obtaining such services from third parties would have been. The fees and expenses to be paid by Cox Radio to CEI are subject to change. The amounts due to CEI represent the net of various transactions, including those described above. The amounts due to CEI are classified as long-term because the Company has the ability and the intent to refinance these obligations on a long-term basis. The amounts due to CEI are as follows:
YEAR ENDED DECEMBER 31, ----------------------------- 1993 1994 1995 ------- -------- -------- (DOLLARS IN THOUSANDS) Notes payable to CEI.................................... $63,498 $ 58,918 $ 58,918 Other intercompany amounts due to CEI................... 26,152 61,577 67,134 ------- -------- -------- Total......................................... $89,650 $120,495 $126,052 ======= ======== ========
Notes payable to CEI bear interest at the prime rate plus 1.5%. These interest rates are established at the beginning of each quarter and are as follows:
1993 1994 1995 ---- ---- ----- First quarter.................................................. 7.50% 7.50% 10.00% Second quarter................................................. 7.50 7.75 10.50 Third quarter.................................................. 7.50 8.75 10.50 Fourth quarter................................................. 7.50 9.25 10.25
Interest is not charged by CEI on other intercompany balances except for amounts related to reserves for possible tax contingencies. Interest on those amounts is accrued based on the applicable federal rates for the years to which the contingencies relate. The rates used for the interest charges ranged from 7% to 13% in 1993, from 7% to 13% in 1994, and from 7% to 12% in 1995. F-14 119 COX RADIO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Included in the other intercompany amounts due to CEI are the following transactions (in thousands): Intercompany due to CEI, December 31, 1992............................... $ 11,577 Dividends to CEI....................................................... 5,000 Cash transferred to CEI................................................ (85,537) Acquisitions........................................................... 9,390 Net operating expense allocations and reimbursements................... 85,722 --------- Intercompany due to CEI, December 31, 1993............................... 26,152 Dividends to CEI....................................................... 34,980 Cash transferred to CEI................................................ (96,501) Acquisitions........................................................... 9,954 Net operating expense allocations and reimbursements................... 86,992 --------- Intercompany due to CEI, December 31, 1994............................... 61,577 Dividends to CEI....................................................... 1,400 Cash transferred to CEI................................................ (110,617) Acquisitions........................................................... 11,697 Net operating expense allocations and reimbursements................... 103,077 --------- Intercompany due to CEI, December 31, 1995............................... $ 67,134 =========
In accordance with the requirements of SFAS No. 107, "Disclosures About Fair Value of Financial Instruments," Cox Radio has estimated the fair value of its intercompany advances and notes payable. Given the short-term nature of these advances, the carrying amounts reported in the balance sheets approximate fair value. 11. SUPPLEMENTAL CASH FLOW INFORMATION
1993 1994 1995 ------ ------ ------ (DOLLARS IN THOUSANDS) Additional cash flow information: Cash paid for interest............................................. $5,285 $5,354 $6,071 Cash paid for income taxes......................................... 5,184 9,943 7,844
12. COMMITMENTS AND CONTINGENCIES Cox Radio leases land, office facilities, and various items of equipment under noncancellable operating leases. Rental expense under operating leases amounted to $1,405,000 in 1993, $1,676,000 in 1994 and $1,735,000 in 1995. Future minimum lease payments as of December 31, 1995 for all noncancellable operating leases are as follows (in thousands): 1996........................................................................ $ 885 1997........................................................................ 721 1998........................................................................ 665 1999........................................................................ 668 2000........................................................................ 678 Thereafter.................................................................. 3,321 ------ Total............................................................. $6,938 ======
Cox Radio has contracts for sports programming and on-air personalities with future minimum payments for 1996, 1997, 1998 and 1999 of $9.2 million, $9.7 million, $10.1 million and $9.0 million, respectively. Cox Radio is a party to various legal proceedings which are ordinary and incidental to its business. Management does not expect that any legal proceedings currently pending will have a material adverse impact on Cox Radio's consolidated financial position or consolidated results of operations. F-15 120 COX RADIO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 13. SUBSEQUENT EVENTS In January 1996, Cox Radio completed the acquisition of Louisville stations WRKA-FM and WRVI-FM for $8.7 million. In June 1996, the Company agreed to acquire WXNU-FM (Louisville) for $2.5 million (the "Louisville Acquisition"). The Company expects to consummate the Louisville Acquisition during the last quarter of 1996. In April 1996, the Company agreed to sell WIOD-AM (Miami) for $13.0 million ( the "Miami Disposition"). This transaction is expected to close during the last quarter of 1996. In June 1996, the Company agreed to exchange WCKG-FM (Chicago) and WYSY-FM (Chicago) for WHOO-AM, WHTQ-FM and WMMO-FM (Orlando) (the "Orlando Acquisition"). In addition to receiving the three Orlando stations, Cox Radio will also receive approximately $20 million in cash, subject to certain adjustments. The Company expects to consummate the Orlando Acquisition in the first half of 1997. For tax purposes, the Company will account for the Orlando Acquisition and Miami Disposition as like-kind exchanges. Tax rules will allow the Company to defer the related tax gains on these transactions upon the reinvestment of the $32.5 million in net proceeds in qualifying future acquisitions. The Company has not yet identified the properties to be acquired. In June 1996, the Company acquired WHEN-AM and WWHT-FM (Syracuse) for $4.5 million. In June 1996, the Company and its subsidiaries which operated the Company's radio operations owed to CEI and one of its subsidiaries $134.2 million. In June 1996, CEI contributed to the capital of the Company and its subsidiaries $26.9 million. The remaining $107.3 million owed by the Company and its subsidiaries to CEI is evidenced by interest bearing notes accruing interest at Chase Manhattan Bank's prime rate plus 1.5%. The amount of such contribution and of such remaining indebtedness is subject to adjustments under certain circumstances. In July 1996, the Company entered into an agreement to acquire NewCity Communications, Inc. for approximately $253 million, subject to certain working capital adjustments, of which $167 million is to be paid in cash and $86 million in assumption of debt (the "NewCity Acquisition"). The NewCity Acquisition is expected to be financed with proceeds from a new bank credit facility to be negotiated prior to the consummation of the acquisition. The consummation of the NewCity Acquisition, which is anticipated to occur in early 1997, is subject to certain closing conditions, including receipt of FCC approval. In July 1996, the Company decided to exercise its option to purchase WFNS-AM (Tampa) for an aggregate consideration of $1.5 million. F-16 121 REPORT OF INDEPENDENT AUDITORS To the Board of Directors and Shareholders NewCity Communications, Inc. We have audited the accompanying consolidated balance sheet of NewCity Communications, Inc. as of December 31, 1995 and 1994, and the related consolidated statements of operations, stockholders' deficiency, and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of NewCity Communications, Inc. at December 31, 1995 and 1994, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Stamford, Connecticut March 1, 1996 F-17 122 NEWCITY COMMUNICATIONS, INC. CONSOLIDATED BALANCE SHEETS
DECEMBER 31, -------------------- 1994 1995 -------- -------- (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA) ASSETS Current Assets: Cash and cash equivalents................................................... $ 168 $ 206 Accounts receivable, less allowances of $989 and $678....................... 10,654 10,709 Prepaid expenses and other current assets................................... 749 608 Deferred barter expenses.................................................... 1,051 1,104 -------- -------- Total current assets................................................. 12,622 12,627 Property and equipment: Land........................................................................ 1,312 2,237 Buildings................................................................... 2,232 2,269 Equipment................................................................... 14,149 16,800 Leasehold improvements...................................................... 350 559 Construction in progress.................................................... 62 -- -------- -------- 18,105 21,865 Less accumulated depreciation and amortization................................ 11,439 12,828 -------- -------- 6,666 9,037 Other assets: Cash in escrow.............................................................. 1,175 -- Intangibles, primarily cost in excess of net assets of businesses acquired, less accumulated amortization of $11,372 and $13,195...................... 51,840 60,064 Other....................................................................... 141 212 -------- -------- 53,156 60,276 -------- -------- Total assets......................................................... $ 72,444 $ 81,940 ========= ========= LIABILITIES AND STOCKHOLDERS' DEFICIENCY Current liabilities: Accounts payable............................................................ $ 1,145 $ 933 Accrued expenses............................................................ 2,296 927 Salaries, wages and commissions payable..................................... 688 733 Accrued interest payable.................................................... 1,422 1,671 State income taxes payable.................................................. 907 898 Deferred barter revenue..................................................... 1,546 1,736 Current portion of long-term debt........................................... -- 1,200 -------- -------- Total current liabilities............................................ 8,004 8,098 Long-term debt, less current portion.......................................... 76,000 85,800 $166.67 Cumulative redeemable preferred stock held by certain Investors (preference in liquidation, redemption value in 2005 -- $14,000) Authorized, issued and outstanding shares -- 6,000...................................... 10,348 11,348 Commitments and Contingencies (Notes 9 and 12) Stockholders' deficiency: Preferred Stock, par value $.05: Authorized shares -- 5,000 Issued shares -- none..................................................... -- -- 9% Convertible Preferred Stock held by certain Investors (preference in liquidation), par value $.05: Authorized, issued and outstanding shares -- 8,000........................ -- -- Class A Common Stock, par value $.01: Authorized shares -- 500,000 Issued and outstanding shares -- 262,000.................................. 3 3 Class B Common Stock, par value $.01: Authorized shares -- 700,000 Issued and outstanding shares -- 168,317.................................. 2 2 Additional paid-in capital.................................................. 292 -- Accumulated deficit......................................................... (21,565) (22,671) 8% Notes receivable from officers and shareholders for Class A Common Stock..................................................................... (640) (640) -------- -------- (21,908) (23,306) -------- -------- Total liabilities and stockholders' deficiency....................... $ 72,444 $ 81,940 ========= =========
See accompanying notes. F-18 123 NEWCITY COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, ----------------------------- 1993 1994 1995 -------- -------- ------- (DOLLARS IN THOUSANDS) Broadcasting revenues: Local......................................................... $ 39,854 $ 39,572 $42,774 National and regional......................................... 18,395 17,781 17,335 Other......................................................... 2,066 2,193 2,571 -------- -------- ------- 60,315 59,546 62,680 Less advertising agency commissions........................... 7,025 6,878 7,044 -------- -------- ------- Net revenues.......................................... 53,290 52,668 55,636 Station operating costs and expenses: Broadcasting operations....................................... 17,096 17,226 20,059 Selling, general and administrative........................... 19,654 19,694 20,654 Depreciation and amortization................................. 3,871 3,070 3,510 Corporate general and administrative expenses................... 1,918 1,802 1,745 -------- -------- ------- Total operating costs................................. 42,539 41,792 45,968 -------- -------- ------- Operating income................................................ 10,751 10,876 9,668 Interest expense................................................ (11,645) (10,050) (9,817) Gain on sale of broadcasting property assets.................... 15,038 1,585 -- -------- -------- ------- Income (loss) before income taxes and extraordinary item................................................ 14,144 2,411 (149) Income taxes.................................................... 1,058 165 249 -------- -------- ------- Income (loss) before extraordinary item............... 13,086 2,246 (398) Extraordinary item, loss on extinguishment of debt.............. (2,048) (182) -- -------- -------- ------- Net income (loss)..................................... $ 11,038 $ 2,064 $ (398) ======== ======== =======
See accompanying notes. F-19 124 NEWCITY COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
COMMON STOCK ----------------------------------- 9% CONVERTIBLE PREFERRED STOCK CLASS A CLASS B ADDITIONAL --------------- ---------------- ---------------- PAID-IN SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL ------ ------ ------- ------ ------- ------ ---------- (IN THOUSANDS, EXCEPT FOR SHARE DATA) Balance at December 31, 1992................................. 8,000 $-0- 262,000 $3 168,317 $2 $ 3,494 Redeemable Preferred Stock cash dividends (Series A)....... (987) Cash dividends accrued on $166.67 Redeemable Preferred Stock.................................................... (1,000) Cash dividends accrued on $50 Redeemable Preferred Stock (Series B)............................................... (27) Cash dividends accrued on $50 Redeemable Preferred Stock (Series C)............................................... (12) Net income................................................. -- -- ------ ------ ------- ------- ---------- Balance at December 31, 1993................................. 8,000 -0- 262,000 3 168,317 2 1,468 Cash dividends accrued on $166.67 Redeemable Preferred Stock.................................................... (1,000) Cash dividends accrued on $50 Redeemable Preferred Stock (Series B)............................................... (121) Cash dividends accrued on $50 Redeemable Preferred Stock (Series C)............................................... (55) Net Income................................................. -- -- ------ ------ ------- ------- ---------- Balance at December 31, 1994................................. 8,000 -0- 262,000 3 168,317 2 292 Cash dividends accrued on $166.67 Redeemable Preferred Stock.................................................... (292) Net loss................................................... -- -- ------ ------ ------- ------- ---------- Balance at December 31, 1995................................. 8,000 $-0- 262,000 $3 168,317 $2 $ 0 ====== ======= ======= ======= ======= ======= ========= NOTES RECEIVABLE ACCUMULATED FROM OFFICERS DEFICIT AND SHAREHOLDERS TOTAL ----------- ---------------- -------- Balance at December 31, 1992................................. $ (34,667) $ (640) $(31,808) Redeemable Preferred Stock cash dividends (Series A)....... (987) Cash dividends accrued on $166.67 Redeemable Preferred Stock.................................................... (1,000) Cash dividends accrued on $50 Redeemable Preferred Stock (Series B)............................................... (27) Cash dividends accrued on $50 Redeemable Preferred Stock (Series C)............................................... (12) Net income................................................. 11,038 11,038 ----------- ------ -------- Balance at December 31, 1993................................. (23,629) (640) (22,796) Cash dividends accrued on $166.67 Redeemable Preferred Stock.................................................... (1,000) Cash dividends accrued on $50 Redeemable Preferred Stock (Series B)............................................... (121) Cash dividends accrued on $50 Redeemable Preferred Stock (Series C)............................................... (55) Net Income................................................. 2,064 2,064 ----------- ------ -------- Balance at December 31, 1994................................. (21,565) (640) (21,908) Cash dividends accrued on $166.67 Redeemable Preferred Stock.................................................... (708) (1,000) Net loss................................................... (398) (398) ----------- ------ -------- Balance at December 31, 1995................................. $ (22,671) $ (640) $(23,306) =========== =============== ========
See accompanying notes. F-20 125 NEWCITY COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, ------------------------------ 1993 1994 1995 -------- -------- -------- (DOLLARS IN THOUSANDS) Operating activities: Net income (loss)............................................ $ 11,038 $ 2,064 $ (398) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization of intangibles and deferred interest expense........................................ 7,383 4,168 3,892 Provision for losses on accounts receivable............... 497 538 434 Gain on sale of broadcasting property assets.............. (15,038) (1,585) -- Extraordinary item........................................ 2,048 182 -- Other..................................................... 21 64 (71) Net changes in operating assets and liabilities........... 956 (1,256) (1,507) -------- -------- -------- Net cash provided by operating activities............ 6,905 4,175 2,350 Investing activities: Purchases of property and equipment.......................... (1,545) (1,307) (1,514) Cash in escrow............................................... -- (175) 1,175 Purchase of Birmingham Communications, Inc................... (10) -- -- Purchase of radio station assets: Property and equipment.................................... (148) -- (2,608) Intangibles............................................... (3,602) -- (9,844) Increase in intangibles...................................... (67) (267) (521) Net proceeds from sale of broadcasting property assets....... 18,222 8,895 -- -------- -------- -------- Net cash provided (used) by investing activities..... 12,850 7,146 (13,312) Financing activities: Long-term debt borrowings.................................... 86,950 3,000 17,200 Extinguishment of debt....................................... (67,383) (3,360) -- Redemption of Cumulative Preferred Stock: Series A.................................................. (6,790) -- -- Series B.................................................. -- (842) -- Series C.................................................. -- (374) -- Deferred financing and other costs........................... (3,809) -- -- Prepayment penalties on long-term debt extinguishment........ (1,000) -- -- Payments of deferred interest to Investors................... (6,412) (1,457) -- Proceeds from sale of preferred stock to Investors........... 290 -- -- Payments on long-term debt borrowings........................ (21,988) (10,527) (6,200) -------- -------- -------- Net cash provided (used) by financing activities..... (20,142) (13,560) 11,000 -------- -------- -------- Increase (decrease) in cash and cash equivalents............... (387) (2,239) 38 Cash and cash equivalents at beginning of year................. 2,794 2,407 168 -------- -------- -------- Cash and cash equivalents at end of year....................... $ 2,407 $ 168 $ 206 ======== ======== ========
See accompanying notes. F-21 126 NEWCITY COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995 1. BUSINESS DATA AND SIGNIFICANT ACCOUNTING POLICIES Business NewCity Communications, Inc. (the "Company") operates exclusively in the radio broadcasting industry. Through its subsidiaries, the Company is the owner and operator of seventeen radio stations that are located in six geographical markets in the Southeastern, Southwestern and Northeastern regions of the United States. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, NewCity Broadcasting Company, Inc., which itself has various wholly-owned subsidiaries. Upon consolidation, all significant intercompany accounts and transactions are eliminated. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Property and Equipment Property and equipment is stated on the basis of cost. Depreciation of equipment is computed by the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized by the straight-line method over the lesser of the useful lives of the improvements or the lease term. Intangibles The excess of cost over the net assets of broadcasting properties acquired (attributable primarily to FCC licenses) is being amortized over a forty year period by the straight-line method. Other intangible assets are amortized over the economic useful lives of such assets. Upon the determination by management that any impairment has occurred in the carrying value of an intangible, based on economic events or circumstances, an adjustment is recorded reducing such intangible during such determination period. The valuation method used to determine if any impairment has occurred is based on fair value measurements provided by independent sources or undiscounted future cash flows. Such cash flows are defined by management as earnings before interest, income taxes, depreciation and amortization expenses. There were no impairment adjustments to goodwill during 1995, 1994 or 1993. Barter Transactions The Company records barter transactions at the fair value of goods and/or services received. Expenses from barter transactions are recognized when goods and/or services received have been used. Revenue from barter transactions is recognized when advertising time is provided. Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Fair value approximates carrying value. F-22 127 NEWCITY COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Defined Contribution Plan The Company sponsors a defined contribution plan (the "Plan") that covers all employees who meet the eligibility conditions of the Plan, as defined. Contributions to the Plan by the Company are determined annually by its Board of Directors in accordance with the terms of the Plan. During the years ended December 31, 1995, 1994 and 1993, the Company contribution to the Plan was approximately $10,000 each year. Employee contributions to the Plan are voluntary and are based on eligible compensation, as defined. Radio Station Format Costs The Company considers all costs incurred in connection with changing the programming format of its radio stations to be period costs expensed as incurred. Impairment of Long-Lived Assets In March 1995, the FASB issued Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Statement 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The Company will adopt Statement 121 in the first quarter of 1996 and, based on current circumstances, does not believe the effect of adoption will be material. 2. DEBT Long-term debt is comprised of the following (in thousands):
DECEMBER 31, ----------------- 1995 1994 1995 FAIR VALUE ------- ------- ---------- Borrowings under Senior Credit Facility: Line of Credit due in 2000..................................... $ 1,000 $ 6,000 $ 6,000 Term Loan due in 1999.......................................... 4,000 4,000 ------- ------- 1,000 10,000 16.33% promissory note......................................... 2,000 2,000 11.375% senior subordinated notes due November 1, 2003......... 75,000 75,000 69,375 ------- ------- 76,000 87,000 Less current portion............................................. 1,200 ------- ------- $76,000 $85,800 ======= =======
The fair value of the Company's 11.375% subordinated notes is based on published market prices. On November 1, 1993 in connection with a refinancing, the Company entered into a loan agreement with Fleet National Bank ("Fleet") (the "Fleet Agreement") that provided for an aggregate senior credit facility of $15,000,000. One portion of the senior credit facility provided an $11,000,000 reducing revolving line of credit maturing on March 31, 2000 (the "Line of Credit"). Beginning on March 31, 1996, the Line of Credit is subject to permanent quarterly reductions that continue until maturity on March 31, 2000, when a final aggregate reduction of $2,000,000 occurs. As of December 31, 1995, the Line of Credit availability was $8,510,000 as the result of an open standby letter of credit of $2,490,000 issued by Fleet in May 1995 in connection with the Company's issuance of the 16.33% promissory note due May 16, 1997. The Line of Credit availability will continue to be reduced by any outstanding standby letter of credit issued, or to be issued, in connection with the 16.33% promissory note. The Fleet Agreement also provided for a separate revolving line F-23 128 NEWCITY COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) of credit of $4,000,000 to be used for future acquisitions of radio stations, as defined, that will convert to a term loan on March 31, 1996 and mature on December 31, 1999 (the "Term Loan"). Principal payments for any borrowings outstanding on the conversion date will commence on June 30, 1996 and continue on a quarterly basis until maturity in amounts ranging from $66,666 to $400,000. Collectively, the Line of Credit and the Term Loan represent the Company's aggregate senior credit facility (the "Senior Credit Facility"). Interest on any borrowings under the Fleet Agreement is payable at the prime interest rate maintained by Fleet plus 1.5% or, at the Company's option, the London Interbank Offered Rate ("LIBOR") plus 2.75% (the "LIBOR Option"). At December 31, 1994 and 1995, the Company had exercised its LIBOR Option for the entire principal balances outstanding with Fleet, thereby setting its interest rates on such borrowings at approximately 8.9% through May 1995, and 8.4% through November 1996, respectively. The effective interest rate for the Fleet borrowings, including amortization of deferred financing costs, was 7.7% for the period from November 1, 1993 through December 31, 1993 and 9.4% and 10% for the years ended December 31, 1994 and 1995, respectively. The Company has pledged all assets to Fleet. In addition, the terms of the Fleet Agreement, among other conditions, restrict the Company's ability to pay dividends and incur additional indebtedness; require the Company to maintain an annual minimum level of cash flow, as defined; and restrict annual capital expenditures. The 16.33% promissory note was issued on May 17, 1995 in connection with the acquisition of substantially all the assets of radio station KJSR-FM in Tulsa, (see Note 3). Such promissory note, which will be constantly secured by a standby letter of credit for all future debt service payments, requires annual principal payments of $1,000,000, plus interest, on May 16, 1996 and 1997, respectively. On November 2, 1993, the Company entered into an agreement with Shawmut Bank Connecticut, National Association (the "Trustee") that governs the terms and conditions of the 11.375% Senior Subordinated Notes (the "Notes") (the "Indenture"). Among the conditions of the Indenture are limitations on the Company's ability to incur additional indebtedness and make restricted payments, as defined. Interest on the Notes is payable each May 1 and November 1 to the Trustee. For the period from November 2, 1993 through December 31, 1993 and for the years ended December 31, 1994 and 1995, the effective interest rate for the Notes, including amortization of deferred financing costs, approximated 12%, respectively. The Company also entered into an Amended and Restated Note and Stock Purchase Agreement on November 2, 1993 with its Investors, as defined in Note 6, (the "Amended Investor Agreement") in connection with its refinancing. The Amended Investor Agreement provides for limitations on additional indebtedness and restricted payments, as defined, among other conditions. In addition, the Amended Investor Agreement provides for limitations, as defined, on any distributions related to, or redemptions of, its capital stock and grants certain registration rights, as defined, to the Investors in connection with certain future events affecting the Common Stock of the Company. The Company has also agreed to indemnify the Investors for any future incremental income taxes incurred by the Investors arising as a result of the refinancing of certain Investor indebtedness in 1993 that was paid in 1994. The Company recorded an extraordinary loss related to its refinancing of $2,048,000 during the year ended December 31, 1993. The components of the extraordinary loss include prepayment penalties of $1,000,000 related to the early retirement of certain indebtedness. In addition, the extraordinary loss includes $644,000 related to the write-off of unamortized deferred financing costs and $404,000 due to the recognition of a liability in an amount equal to the present value of future payments due on existing interest rate swap agreements that expired in April and June 1994. During the year ended December 31, 1994, the Company also recorded an extraordinary loss of $182,000 related to its early retirement of certain indebtedness to Investors. Such loss represents the write-off of unamortized deferred financing costs. F-24 129 NEWCITY COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Annual principal maturities of long-term debt through the year 2000 at December 31, 1995 are as follow (in thousands): 1996....................................................................... $ 1,200 1997....................................................................... 2,890 1998....................................................................... 3,800 1999....................................................................... 4,110 ------- $12,000 =======
3. SALE OF BROADCASTING PROPERTY AND AGREEMENT TO SELL AND LEASE BROADCASTING PROPERTY On August 17, 1993, the Company sold substantially all the assets of WYAY-FM, a radio broadcasting property located in Atlanta, for a gross selling price of $19,000,000. The net proceeds received on such date, approximately $18,222,000 after deducting direct selling expenses, plus working capital, were entirely used to concurrently reduce certain indebtedness outstanding at that time by $18,500,000. As a result of the sale of the assets of WYAY-FM, the Company recorded a gain of $15,038,000 for financial reporting purposes equal to the difference between the contract selling price less all related selling expenses, and the net carrying value of the assets sold on August 17, 1993. A substantial portion of the assets sold was comprised of intangibles and equipment. In a separate transaction, on June 18, 1993 the Company entered into a contract for the sale of substantially all the assets of WJZF-FM (formerly WYAI-FM), a radio broadcasting property also located in Atlanta, for $8,000,000. A challenge to such contract was filed with the Federal Communications Commission ("FCC") which significantly delayed the completion of the contract closing. On May 5, 1995, the FCC dismissed the application for consent to the sale of WJZF-FM. The prospective buyer has appealed the FCC ruling. The FCC's decision and the ultimate outcome of any appeal related to WJZF-FM should not have a material financial impact on the Company. The company that is appealing the FCC's decision to allow the purchase of WJZF-FM also entered into an agreement effective January 1, 1994 to begin leasing substantially all the assets of such radio station. The lease may be terminated at the option of either party, as defined. On September 20, 1994, the Company amended the existing leasing arrangement for radio station WJZF-FM (the "Amendment"). Among other items, the Amendment provided for the extension of the lease term through December 31, 1999 and the issuance by the Company to the lessee of an exclusive option to purchase substantially all the assets of radio station WJZF-FM during the lease term (the "Option"). In consideration for the Option, the Company received a cash payment of $9,123,000 that is nonrefundable (the "Option Payment"). Upon the exercise of the Option, the Company will receive additional cash consideration of $100. In addition, upon the exercise of the option, the Company is obligated to execute a new definitive agreement for the sale of substantially all the assets of WJZF-FM. Of the total cash proceeds received, $6,033,000 was immediately paid to the Investors to retire certain indebtedness, plus deferred interest, and all the outstanding shares of certain redeemable preferred stock, plus accrued dividends (see Note 6). An additional $3,000,000 was concurrently used to reduce outstanding borrowings under the Company's Senior Credit Facility. Because the cash proceeds received from the Option Payment are nonrefundable and such proceeds, in the opinion of management, approximated the fair market value of the assets of WJZF-FM, the Company accounted for the economic substance of this transaction as if a sale of substantially all the assets of WJZF-FM had occurred. Accordingly, a gain of $1,585,000 was recorded for financial reporting purposes equal to the difference between the Option Payment received, less all related selling expenses, and the net carrying value of the assets of WJZF-FM, including all intangibles and equipment. For income tax purposes, the Company recognized a loss related to the WJZF-FM transaction. F-25 130 NEWCITY COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Net broadcasting revenues and operating costs and expenses for the broadcasting properties sold or held for sale or lease were as follows:
YEAR ENDED DECEMBER 31, -------------------- 1993 1994 1995 ------ ---- ---- (DOLLARS IN THOUSANDS) Net broadcasting revenues....................................... $3,714 $270 $349 Operating costs and expenses.................................... 3,556 485 270
4. ACQUISITIONS During the three year period ended December 31, 1995, the Company acquired substantially all the assets of the following radio broadcasting properties:
PURCHASE RADIO BROADCASTING ACQUISITION DATE PRICE PROPERTY AND LOCATION ------------------------------------------- ---------- ------------------------ May 31, 1995............................... $6,000,000 WCFB-FM (Orlando) May 17, 1995............................... 3,500,000 KJSR-FM (Tulsa) March 17, 1995............................. 3,206,000 KCJZ-FM (San Antonio) March 3, 1995.............................. 500,000 WZKD-AM (Orlando) August 3, 1993............................. 3,750,000 WBBS-FM (Syracuse)
Each of these acquisitions was financed with a combination of borrowings under the Senior Credit Facility (see Note 2), promissory notes to seller, certain indebtedness to Investors, cash in escrow or cash on hand. One promissory note to seller and certain indebtedness to Investors issued in connection with the purchase of WBBS-FM was repaid in 1993 and 1994, respectively. On March 1, 1993, the Company acquired 100% of the voting common stock of Birmingham Communications, Inc. (BCI), a corporation originally established by certain Investors with a capitalization of subordinated debt borrowings from such Investors of $2,160,000 bearing 25% deferred interest and proceeds of $540,000 from the issuance of preferred stock, bearing cumulative $25 per share annual cash dividends to such Investors. The total BCI purchase price was $2,991,000 consisting of $10,000 in cash and the assumption of BCI's subordinated debt and preferred stock obligations having a carrying amount of $2,385,000 and $596,000, respectively. In a separate transaction, in February 1993, BCI also entered into an asset purchase agreement to purchase the FM radio station being leased by the Company in Birmingham, WODL-FM. On May 19, 1993, the FCC approved the purchase of such FM radio station by BCI. All BCI indebtedness to Investors was repaid in 1994 (see Note 6). The purchase method of accounting for business combinations was used to record all acquisitions and, accordingly, the accompanying consolidated financial statements reflect the operating results of the radio stations from the respective dates of acquisition. A substantial portion of each purchase price was allocated to intangibles to reflect the FCC broadcasting licenses acquired. The unaudited consolidated results of operations of the Company on a pro forma basis for the years ended December 31, 1993, 1994 and 1995, assuming all acquisitions occurred on January 1 of each respective year, are as follows:
YEAR ENDED DECEMBER 31, --------------------------- 1993 1994 1995 ------- ------- ------- (DOLLARS IN THOUSANDS) Net broadcasting revenues................................. $54,577 $53,995 $55,636 Loss before extraordinary item............................ (3,079) (34) (675) Net income (loss)......................................... 9,911 1,369 (675)
F-26 131 NEWCITY COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 5. LEASING ARRANGEMENTS FOR BROADCASTING PROPERTIES During the three year period ended December 31, 1995, the Company leased substantially all the assets of certain radio broadcasting properties under separate leasing arrangements, including two such leasing arrangements for KCJZ-FM and WODL-FM with its Investors. As of December 31, 1995, the Company had acquired each of the radio broadcasting properties that had been leased. The Company has treated all leasing arrangements for radio stations as operating leases. It has included the broadcasting revenues and operating costs and expenses of each radio station from the respective initial lease dates in its consolidated statement of operations. 6. TRANSACTIONS WITH INVESTORS During 1990, the Company entered into a Note and Stock Purchase Agreement ("Investor Agreement") with an association of investment partnerships and individual investors (collectively, the "Investors") that provided for an aggregate cash investment in the Company by the Investors of $20,000,000. As consideration for such investment, the Investors received 6,000 shares of newly created $166.67 Redeemable Preferred Stock, 8,000 shares of newly created 9% Convertible Preferred Stock and $6,000,000 of 25% subordinated promissory notes. Each share of these two new classes of preferred stock was sold to the Investors at $1,000 per share. On November 2, 1993, as a result of a refinancing of the Company's long-term indebtedness, the 25% $6,000,000 subordinated promissory notes, plus deferred interest through such date and a prepayment penalty of $600,000, were paid in full. As part of the Refinancing, the Company entered into an Amended Investor Agreement that provided for the Company to issue two new series of Redeemable Preferred Stock to the Investors in exchange for certain outstanding shares of Preferred Stock held by the Investors prior to the refinancing which had been issued by two subsidiaries to assist in financing certain acquisitions. As a result, the Company issued to its Investors 2,700 shares of newly created Series B Redeemable Preferred Stock and 1,450 shares of newly created Series C Redeemable Preferred Stock. The Preferred Stock shares returned to the Company by the Investors were retired. Both the Series B and C shares were subject to a mandatory redemption on December 31, 2005. However, on September 20, 1994, the Company redeemed all shares of its Series B and C Preferred Stock for $830,000 and paid aggregate accrued cumulative dividends thereon of $385,700 to its Investors (see Note 3 for additional details). In addition, on September 20, 1994, the Company retired certain indebtedness due to the Investors of $3,360,000, plus deferred interest through such date. The Company had borrowed such indebtedness from the Investors to assist in financing the acquisitions of certain radio broadcasting properties. As part of the Amended Investor Agreement, the Company amended its certificate of incorporation on November 2, 1993 to provide for the extension of the mandatory redemption date for the $166.67 Redeemable Preferred Stock to December 31, 2005. Also, such amendment provides that dividends on the $166.67 Preferred Stock cease to accrue after July 31, 1998 and that the aggregate maximum redemption value is $14,000,000. On March 17, 1995, the Company acquired substantially all the assets of KCJZ-FM, located in San Antonio, from its Investors for a cash payment of $3,206,000 (see Note 3). Previously, such radio station had been leased from the Investors (see Note 9). The $166.67 Redeemable Preferred Stock shareholders are entitled to a cumulative cash dividend each year on July 31. However, the declaration and payment date for such dividends is subject to the approval of the Board of Directors. Since the date of issuance, the Company has not paid a cash dividend on this stock. Convertible Preferred Stock dividends are payable only if and when declared by the Board of Directors. The $166.67 Redeemable Preferred Stock has a mandatory redemption value of $1,000 per share plus any unpaid cumulative dividends. Also, the $166.67 Redeemable Preferred Stock is subject to a mandatory redemption and, accordingly, dividends are accrued ratably over the period by increasing the carrying amount F-27 132 NEWCITY COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) of the Redeemable Preferred Stock obligation with a corresponding charge to additional paid-in capital or accumulated deficit. At December 31, 1995, aggregate cumulative accrued dividends amounted to $5,348,000 on such stock. In the event of the Company's liquidation or similar circumstances, as defined in the Investor Agreement, the Redeemable Preferred Stock shareholders are entitled to receive $1,000 per share plus any unpaid cumulative dividends while the Convertible Preferred Stock shareholders are entitled to receive $1,000 per share before any payments can be made to Common Stock shareholders. However, the liquidation value per share for the Convertible Preferred Stock reduces annually by $125 each August 1. The Convertible Preferred Stock provides the option, at any time, to convert each share into 44.26 shares of the Company's Class B Common Stock, subject to certain adjustments, and to exercise registration rights in certain circumstances. The $166.67 Redeemable Preferred Stock and Convertible Preferred Stock provide for shareholder voting approval of certain transactions, as defined. The Investor Agreement also provides that no more than 7,111 shares of such stock may be converted into Class B Common Stock prior to March 15, 1996. The Company has reserved 354,080 shares of Class B stock for such conversion. The amendment to the certificate of incorporation on November 2, 1993 required by the Amended Investor Agreement also provided that the approval of a majority in interest of the holders of the $166.67 Redeemable Preferred Stock is required for any future changes to the Company's existing capital stock structure. Because the Series B and C Preferred Stock shares redeemed in 1994 were subject to a mandatory redemption, dividends were accrued ratably over the period by increasing the carrying amount of the respective obligations with a corresponding charge to additional paid-in capital due to the absence of accumulated earnings. All shares outstanding for the $166.67 Redeemable Preferred Stock are nonvoting except as required by law or agreement. 7. CAPITAL STOCK The $.05 Preferred Stock is issuable in designated series at the discretion of the Board of Directors. The Board of Directors also has the authority to determine all rights and restrictions associated with any designated series to be issued including redemption and liquidation values, and dividend and conversion rights. All series of Preferred Stock are nonvoting, except as required by law or agreement. The Board of Directors designated 25,000 shares of Preferred Stock as Cumulative Preferred Stock, Series A, with a redemption value of $1,000 per share and an annual dividend rate of $200 per share in cash or additional shares of Series A Preferred Stock payable on each December 31. The Series A Preferred Stock was subject to a mandatory redemption on July 31, 1998 and accordingly dividends were accrued ratably over the period by increasing the carrying amount of the Series A Preferred Stock obligation with a corresponding charge to additional paid-in capital. During 1993, the Company redeemed all outstanding shares of Series A Preferred Stock as part of a refinancing and paid cash dividends related to such shares of $474,000. As a result of the redemption of all Series A shares plus cash dividends thereon, cash payments made to Series A shareholders included $2,889,000 in aggregate to officers and directors of the Company and $567,000 to an Investor. The shareholders of Class A and Class B Common Stock have the right to vote, with Class A shares having ten times the voting rights of Class B shares. Under the terms of its loan agreements, the Company cannot pay cash dividends on its Class A and Class B Common Stock until minimum annual cash flow and operating income requirements, as defined in the respective loan agreements, have been attained. F-28 133 NEWCITY COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Additionally, all holders of currently outstanding Common Stock have entered into, and anyone purchasing Common Stock shall be required to enter into, a "Purchase Agreement" containing restrictions on the resale or transfer of that stock. Any sale, assignment, transfer or other disposition of Common Stock is subject to the Company's right of first refusal and upon the other terms and conditions as offered by a third party. In total, the Company had reserved 515,994 shares of Class B Common Stock for future issuance at December 31, 1995. All repurchases of Common Stock are subject to compliance with covenants contained in the Company's loan agreements as well as restrictions imposed by applicable legal requirements regarding sufficiency of capital surplus. The Purchase Agreement provides that the Company may purchase shares of Common Stock with either cash or, if not permitted by its loan agreements to pay cash, a noninterest bearing promissory note which will be subordinated to the Company's other debt instruments. The promissory notes will have no stated maturity, permitting the Company to defer payment of such notes until it is permitted to do so under its various loan agreements. See Notes 6 and 8 for additional information concerning the Company's capital stock. 8. STOCK OPTION PLAN AND EMPLOYEE STOCK PURCHASE PLAN The Company has an Incentive Stock Option Plan (the "Plan") and has authorized 100,000 shares of Class B Common Stock for issuance thereunder, of which 53,070 are available for grant at December 31, 1995. Under terms of the Plan, the exercise price of any options will not be less than the fair market value of such shares at the date such options are granted. The Company accounts for stock option grants in accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees." At December 31, 1995, there were no options outstanding under such plan. During 1995, 1994 and 1993, there were no such options exercised. On February 1, 1996, the Company granted an option to an officer that permits the purchase of up to 3,534 shares of Class B Common Stock at an exercise price of $20 per share. Such option expires in 2001. The Company also has an Employee Stock Purchase Plan and has reserved 158,500 shares of Class B Common Stock and 694 shares of Series A Redeemable Preferred Stock for issuance thereunder, of which 108,883 shares and 62 shares, respectively, are available for purchase at December 31, 1995. The purchase price per share for both the Class B Common Stock and the Series A Redeemable Preferred Stock shall be determined by the Board of Directors on the date such shares are authorized to be granted. During 1995, 1994 and 1993, respectively, no shares of Class B Common Stock or Series A Stock were sold under the Plan. 9. LEASE COMMITMENTS The Company conducts a substantial portion of its operations from leased premises and also leases various equipment. The leases, classified as operating leases, extend through 2010 and provide for options to extend lease terms in certain instances. F-29 134 NEWCITY COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Future annual minimum payments under noncancellable office space and equipment operating leases are as follows at December 31, 1995 (in thousands): 1996............................................................. $1,319 1997............................................................. 1,055 1998............................................................. 951 1999............................................................. 689 2000............................................................. 338 Thereafter....................................................... 933 ------- $5,285 =================
Rent expense attributable to all operating leases was $1,893,000, $1,805,000 and $1,693,000 for the years ended December 31, 1993, 1994 and 1995, respectively. Included in such rental expense is $600,000, $618,000 and $380,000 in 1993, 1994 and 1995, respectively, for operating lease arrangements related to broadcasting properties of which $179,000, $171,000 and $43,000 was paid to an Investor, respectively. 10. BARTER TRANSACTIONS Excluding barter transactions related to its broadcasting properties sold the accompanying consolidated statement of operations includes revenue from barter transactions of $3,493,000, $3,180,000 and $4,346,000, and expenses from barter transactions of $3,595,000, $3,230,000 and $4,292,000 for the years ended December 31, 1993, 1994 and 1995, respectively. 11. INCOME TAXES Significant components of the Company's deferred income tax liability and assets are as follows:
DECEMBER 31, -------------------- 1994 1995 ------- -------- (DOLLARS IN THOUSANDS) Deferred income tax liability -- property and equipment......... $ 3 $ -- ======= ======== Deferred income tax assets: FCC broadcast licenses........................................ $ -- $ 7,796 Allowance for bad debts....................................... 336 264 Net operating loss carryforwards.............................. 1,058 3,407 All others.................................................... 268 289 ------- -------- Total deferred income tax assets...................... 1,662 11,756 Valuation allowance for deferred income tax assets.............. (1,659) (11,756) ------- -------- Net deferred income tax assets........................ $ 3 $ -- ======= ========
The valuation allowance for deferred income tax assets was $3,329,000 at January 1, 1994. F-30 135 NEWCITY COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The reconciliation of income tax attributable to income before extraordinary item computed at the U.S. federal statutory tax rates to income tax expense follows:
LIABILITY METHOD --------------------------------------------------------- 1993 1994 1995 ----------------- ----------------- ---------------- AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT ------- ------- ------ ------- ------ ------- (DOLLARS IN THOUSANDS) Tax at U.S. federal statutory rates.............................. $ 4,850 34.3% $ 820 34.0% $(51) (34)% State income taxes, net of federal tax benefit........................ 500 3.5 109 4.5 164 110 Amortization of goodwill............. 524 3.7 440 18.2 188 126 Gain on sale of broadcasting property........................... -- -- (663) (27.5) -- -- Use of net operating loss carryforwards...................... (4,079) (28.8) (718) (29.8) -- -- Effect of extraordinary item......... (696) (4.9) (61) (2.6) -- -- Other................................ (41) (.3) 238 10.0 (52) (35) ------- ------- ------ ------- ------ ------- $ 1,058 7.5% $ 165 6.8% $249 167% ======= ===== ====== ===== ====== =====
At December 31, 1995, the Company had a federal net operating loss carryforward of approximately $10,400,000 that expires in various amounts in years through 2010. Pursuant to the Internal Revenue Code, the Company's loss carryforwards could be limited under certain circumstances. During 1995, the Company obtained the approval of the Internal Revenue Service ("IRS") to begin amortizing, for federal income tax reporting purposes, the costs attributable to the Federal Communications Commission ("FCC") broadcasting licenses acquired in 1986. The total of such costs of $33,317,000 will be included as additional amortization expense in the Company's income tax returns through 2000. The Company reported the following current provisions for income taxes:
1993 1994 1995 ------ ---- ---- (DOLLARS IN THOUSANDS) Federal..................................................... $ 300 -- -- State....................................................... 758 $165 $249 ------ ---- ---- $1,058 $165 $249 ====== ==== ====
For the year ended December 31, 1993, the federal provision is attributable to the alternative minimum tax arising from the limitation on the use of net operating loss carryforwards in calculating such tax. For the years ended December 31, 1993, 1994 and 1995, the Company also recorded provisions for state franchise taxes. However, such amounts, which are immaterial to consolidated results of operations, are included in selling, general and administrative expenses. On April 17, 1993, the Department of Revenue of the Commonwealth of Massachusetts made an assessment against the Company of approximately $451,000 relating to the tax years 1987 to 1989. The Company intends to defend this assessment vigorously through the administrative process and, if necessary, in the courts. In the opinion of management, the outcome of the matter described in this paragraph will not have a material adverse effect on the Company's financial condition or results of operations. 12. CONTINGENCIES The Company is party to certain litigation arising in the ordinary course of business. Management believes, based upon discussion with counsel, that such litigation will not have any material adverse effect on the financial condition or results of operations of the Company. F-31 136 NEWCITY COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 13. SUPPLEMENTAL CASH FLOW INFORMATION Net changes in operating assets and liabilities include:
1993 1994 1995 ------- ------- ------- (DOLLARS IN THOUSANDS) Accounts receivable....................................... $(1,185) $ (575) $ (489) Prepaid expenses and other assets......................... (127) 246 141 Deferred barter expenses.................................. 227 165 (53) Accounts payable.......................................... 542 (158) (212) Accrued expenses.......................................... 503 (527) (1,369) Salaries, wages and commissions payable................... (195) 21 45 Accrued interest payable.................................. 1,175 (402) 249 State taxes payable....................................... 411 107 (9) Deferred barter revenue................................... (395) (133) 190 ------- ------- ------- $ 956 $(1,256) $(1,507) ======= ======= =======
The components of depreciation, amortization and deferred interest expense are as follows:
1993 1994 1995 ------ ------ ------ (DOLLARS IN THOUSANDS) Depreciation and amortization of property and equipment...... $1,997 $1,282 $1,751 Amortization of intangibles.................................. 3,059 1,788 1,759 Deferred interest expense.................................... 2,327 1,098 382 ------ ------ ------ $7,383 $4,168 $3,892 ====== ====== ======
Income tax payments were $670,000, $190,000 and $267,000 in 1993, 1994 and 1995, respectively. During the years ended December 31, 1993, 1994 and 1995, interest payments amounted to $7,473,000, $9,425,000 and $9,125,000, respectively, excluding aggregate deferred interest payments to Investors of $6,412,000, $1,457,000 and none, respectively. See Notes 2, 4, 6 and 10 for description of noncash transactions. 14. SUBSEQUENT EVENT On February 22, 1996, the Company acquired an office building in Birmingham, Alabama for $900,000 that will eventually become the operating site for the Company's radio broadcasting properties presently located in Birmingham. The funds to finance such acquisition were provided by a mortgage loan from a local bank. The mortgage loan bears interest at prime plus one-half percent and has escalating annual principal payments ranging from $32,400 in the first year to $423,000 in 2006. F-32 137 NEWCITY COMMUNICATIONS, INC. CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31, 1996 1995 ----------- ------------ (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA) ASSETS Current assets: Cash and cash equivalents................................................... $ 292 $ 206 Accounts receivable, less allowances of $659 and $678....................... 9,816 10,709 Prepaid expenses and other current assets................................... 1,480 608 Deferred barter expenses.................................................... 1,478 1,104 ----------- ------------ Total current assets................................................. 13,066 12,627 Property and equipment: Land........................................................................ 2,467 2,237 Buildings................................................................... 3,022 2,269 Equipment................................................................... 17,143 16,800 Leasehold improvements...................................................... 563 559 ----------- ------------ 23,195 21,865 Less accumulated depreciation and amortization................................ 13,203 12,828 ----------- ------------ 9,992 9,037 Other assets: Intangibles, primarily cost in excess of net assets of businesses acquired, less accumulated amortization of $13,731 and $13,195...................... 59,540 60,064 Other....................................................................... 178 212 ----------- ------------ 59,718 60,276 ----------- ------------ Total assets......................................................... $ 82,776 $ 81,940 =========== ============ LIABILITIES AND STOCKHOLDERS' DEFICIENCY Current liabilities: Accounts payable............................................................ $ 928 $ 933 Accrued expenses............................................................ 947 927 Salaries, wages and commissions payable..................................... 650 733 Accrued interest payable.................................................... 3,847 1,671 State income taxes payable.................................................. 954 898 Deferred barter revenue..................................................... 1,930 1,736 Current portion of long-term debt........................................... 1,450 1,200 ----------- ------------ Total current liabilities............................................ 10,706 8,098 Long-term debt, less current portion.......................................... 84,347 85,800 $166.67 Cumulative redeemable preferred stock held by certain Investors (preference in liquidation, redemption value in 2005 -- $14,000): Authorized, issued and outstanding shares -- 6,000.......................... 11,598 11,348 Stockholders' deficiency: Preferred Stock, par value $.05 Authorized shares -- 5,000 Issued shares -- none..................................................... -- -- 9% Convertible Preferred Stock held by certain Investors (preference in liquidation), par value $.05: Authorized, issued and outstanding shares -- 8,000........................ -- -- Class A Common Stock, par value $.01: Authorized shares -- 500,000 Issued and outstanding shares -- 262,000.................................. 3 3 Class B Common Stock, par value $.01: Authorized shares -- 700,000 Issued and outstanding shares -- 166,817.................................. 2 2 Accumulated deficit......................................................... (23,240) (22,671) 8% Notes receivable from certain officers and shareholders for Class A Common Stock.............................................................. (640) (640) ----------- ------------ (23,875) (23,306) ----------- ------------ Total liabilities and stockholders' deficiency....................... $ 82,776 $ 81,940 =========== ============
See accompanying notes. F-33 138 NEWCITY COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, --------------------- 1996 1995 ------- ------- (DOLLARS IN THOUSANDS) Broadcasting revenues: Local................................................................ $10,032 $ 9,408 National and regional................................................ 4,018 4,127 Other................................................................ 701 688 ------- ------- 14,751 14,223 Less advertising agency commissions.................................... (1,594) (1,578) ------- ------- Net revenues................................................. 13,157 12,645 Station operating costs and expenses: Broadcasting operations.............................................. 4,163 4,193 Selling, general and administrative.................................. 5,303 5,446 Depreciation and amortization........................................ 817 724 Corporate general and administrative expenses.......................... 487 531 ------- ------- Total operating costs........................................ 10,770 10,894 ------- ------- Operating income....................................................... 2,387 1,751 Interest expense....................................................... 2,564 2,288 ------- ------- Loss before income taxes............................................... (177) (537) Income tax expense..................................................... 112 124 ------- ------- Net loss..................................................... $ (289) $ (661) ======= =======
See accompanying notes. F-34 139 NEWCITY COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, --------------------- 1996 1995 ------- ------- (DOLLARS IN THOUSANDS) Operating activities: Net loss..................................................... $ (289) $ (661) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization............................. 914 814 Provision for losses on accounts receivable............... 128 146 Changes in operating assets and liabilities: Decrease in accounts receivable........................... 765 793 Increase in prepaid expenses and other current assets..... (872) (734) Increase in deferred barter expenses...................... (374) (450) Increase (decrease) in accounts payable................... (5) 352 Increase (decrease) in accrued expenses................... 20 (90) Decrease in salaries, wages and commissions payable....... (83) (94) Increase in state income taxes payable.................... 56 29 Increase in accrued interest payable...................... 2,176 2,172 Increase in deferred barter revenue....................... 194 300 (Increase) decrease in other assets....................... 34 (85) ------- ------- Net cash provided by operating activities............ 2,664 2,492 Investing activities: Purchase of property, plant and equipment.................... (1,347) (596) Purchases of radio station assets: Intangibles............................................... -- (3,164) Property and equipment.................................... -- (542) Increase in intangibles...................................... (28) (199) ------- ------- Net cash used by investing activities................ (1,375) (4,501) Financing activities: Principal payments on long-term borrowings................... (2,103) (1,000) Proceeds from long-term borrowings........................... 900 3,500 ------- ------- Net cash provided (used) by financing activities..... (1,203) 2,500 ------- ------- Increase in cash and cash equivalents.......................... 86 491 Cash and cash equivalents at beginning of period............... 206 168 ------- ------- Cash and cash equivalents at end of period..................... $ 292 $ 659 ======= =======
See accompanying notes. F-35 140 NEWCITY COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 1996 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of NewCity Communications, Inc. ("the Company") have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, certain information and footnote disclosures required by generally accepted accounting principles for complete financial statements have been excluded. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 1996 are not necessarily indicative of the results that may be expected for the year ended December 31, 1996. The balance sheet data at December 31, 1995 was derived from the audited consolidated financial statements included in the Form 10-K Annual Report filed by the Company for the year ended December 31, 1995. The accompanying unaudited consolidated financial statements should be read in conjunction with such audited consolidated financial statements. 2. SUBSEQUENT EVENT On May 10, 1996, the Company signed a letter of intent related to the potential sale of all outstanding common stock shares. Such transaction is subject to the execution of a definitive agreement and obtaining the approval of necessary Federal regulatory authorities. F-36 141 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholder of Cox Radio, Inc.: We have audited the accompanying consolidated balance sheet of Infinity Holdings Corp. of Orlando (the "Company") as of December 31, 1995, and the related consolidated statements of operations and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Infinity Holdings Corp. of Orlando at December 31, 1995 and the consolidated results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Atlanta, Georgia July 19, 1996 F-37 142 INFINITY HOLDINGS CORP. OF ORLANDO CONSOLIDATED BALANCE SHEETS
DECEMBER 31, MARCH 31, 1995 1996 ------------ ----------- (UNAUDITED) (DOLLARS IN THOUSANDS) ASSETS CURRENT ASSETS: Cash and cash equivalents........................................... $ 164 $ 758 Accounts receivable, less allowance for doubtful accounts of $47 and $54.............................................................. 1,756 1,471 Prepaid expenses and other current assets........................... 39 84 ------------ ----------- Total current assets........................................ 1,959 2,313 Plant and equipment, net.............................................. 3,635 3,551 Intangible assets, net................................................ 11,948 11,728 Other assets.......................................................... 20 20 ------------ ----------- Total assets................................................ $ 17,562 $17,612 ========== ========= LIABILITIES AND SHAREHOLDER'S EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses............................... $ 514 $ 573 Other current liabilities........................................... 145 38 ------------ ----------- Total current liabilities................................... 659 611 Amounts due to Affiliate.............................................. 11,802 12,582 Other long-term liability............................................. 300 200 ------------ ----------- Total liabilities........................................... 12,761 13,393 ------------ ----------- Commitments and contingencies (Note 9) SHAREHOLDER'S EQUITY: Common Stock, $.01 par value; 50,000 shares authorized; 9,800 shares issued and outstanding........................................... 1 1 Additional paid-in capital.......................................... 9,458 9,458 Deficit in retained earnings........................................ (4,658) (5,240) ------------ ----------- Total shareholder's equity.................................. 4,801 4,219 ------------ ----------- Total liabilities and shareholder's equity.................. $ 17,562 $17,612 ========== =========
See notes to consolidated financial statements. F-38 143 INFINITY HOLDINGS CORP. OF ORLANDO CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS YEAR ENDED ENDED MARCH 31, DECEMBER 31, --------------------------- 1995 1995 1996 ------------ ------------ ------------ (UNAUDITED) (DOLLARS IN THOUSANDS) Net revenues: Local and regional..................................... $ 3,602 $ 672 $1,132 National............................................... 1,863 362 435 Other.................................................. 167 16 3 ------------ ------------ ------------ Total net revenues............................. 5,632 1,050 1,570 Costs and expenses: Operating.............................................. 1,488 390 448 Selling, general and administrative.................... 3,281 810 931 Corporate general and administrative................... 418 104 166 Depreciation and amortization.......................... 1,216 174 344 ------------ ------------ ------------ Operating loss........................................... (771) (428) (319) Other expense: Interest expense....................................... (902) (90) (263) Other -- net........................................... (39) -- -- ------------ ------------ ------------ Loss before extraordinary item........................... (1,712) (518) (582) Extraordinary item....................................... (36) (36) -- ------------ ------------ ------------ Net loss................................................. $ (1,748) $ (554) $ (582) ========== ========== ==========
See notes to consolidated financial statements. F-39 144 INFINITY HOLDINGS CORP. OF ORLANDO CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDING MARCH YEAR ENDED 31, DECEMBER 31, ------------------------- 1995 1995 1996 ------------ ----------- ----------- (UNAUDITED) (DOLLARS IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss................................................... $ (1,748) $(554) $(582) Items not requiring cash: Depreciation and amortization............................ 1,216 174 344 Extraordinary item....................................... 36 36 -- (Increase) decrease in accounts receivable................. (1,055) (200) 278 Increase (decrease) in accounts payable and accrued expenses................................................. 341 246 (149) Other, net................................................. (290) (48) (25) ------------ ----------- ----------- Net cash used in operating activities............ (1,500) (346) (134) ------------ ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures....................................... (588) (184) (52) ------------ ----------- ----------- Net cash used in investing activities............ (588) (184) (52) ------------ ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase in amounts due to Affiliate....................... 1,684 286 780 ------------ ----------- ----------- Net cash provided by financing activities........ 1,684 286 780 ------------ ----------- ----------- Net increase (decrease) in cash and cash equivalents....... (404) (244) 594 Cash and cash equivalents at beginning of period........... 568 568 164 ------------ ----------- ----------- Cash and cash equivalents at end of period................. $ 164 $ 324 $ 758 ========== ========= ========= SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest..................................... $ 764 $ 31 $ 371 ========== ========= =========
See notes to consolidated financial statements. F-40 145 INFINITY HOLDINGS CORP. OF ORLANDO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND BASIS OF PRESENTATION Infinity Holdings Corp. of Orlando, formerly GCI Orlando Holding, Inc., ("the Company"), is a wholly-owned subsidiary of Infinity Broadcasting Corporation ("Infinity"), which purchased the Company from Granum Holdings, L.P. ("Granum") in June 1996. Subsequently in June 1996, Cox Radio entered into an agreement with Infinity to purchase the Company. The Company operates three radio stations, WHOO-AM, WHTQ-FM and WMMO-FM, located and broadcast in Orlando. The historical financial statements do not necessarily reflect the results of operations or financial position that would have existed had the Company been an independent company. The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts have been eliminated in the consolidated financial statements of GCI. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Revenue Recognition Revenue is recognized as advertising air time is broadcast and is net of advertising agency commissions. Corporate General and Administrative Expenses Corporate general and administrative expenses consist of corporate overhead costs not specifically allocable to any of the Company's individual stations and primarily includes management fees charged by Granum. Plant and Equipment Plant and equipment is stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method at rates based upon estimated useful lives of 8 to 15 years for building, tower, antennae and broadcast equipment, 5 to 7 years or term of the lease for leasehold improvements and 5 years for furniture, fixtures and other assets. Intangible Assets Intangible assets consist primarily of goodwill/FCC broadcast licenses and covenants not to compete. Goodwill/FCC broadcast licenses recorded in business combinations are amortized on a straight-line basis over 25 years. Non-compete agreements are amortized on a straight-line basis over the contractual lives of the agreements, generally 3 to 5 years. Other intangibles associated with the business combinations are amortized on a straight-line basis over 5 years. The Company assesses the recoverability of intangible assets based on estimates of future undiscounted cash flows from operations for the applicable business acquired compared to net book value. Such assessment is made whenever events or changes in circumstances indicate that the net book value of an asset may not be recoverable. If the future undiscounted cash flow estimate is less than net book value, net book value is then reduced to the estimated fair value. The Company also evaluates the amortization periods of intangible assets to determine whether events or circumstances warrant revised estimates of useful lives. Income Taxes The Company files its federal, state and local tax returns on a consolidated basis. The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," which requires, among other things, the recognition of deferred income taxes which arise from temporary differences in the basis of the assets between income taxes and financial reporting. Deferred tax assets relate principally to net operating loss carryforwards ("NOLs") while deferred tax F-41 146 INFINITY HOLDINGS CORP. OF ORLANDO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) liabilities relate to depreciation and amortization. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Recently Issued Accounting Pronouncements In March 1995, SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of," was issued. This Statement requires that long-lived assets and certain intangibles be reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, with any impairment losses being reported in the period in which the recognition criteria are first applied based on the fair value of the asset. Long-lived assets and certain intangibles to be disposed of are required to be reported at the lower of carrying amount or fair value less cost to sell. The Company adopted SFAS No. 121 in the first quarter of 1996. The effect on the financial statements upon adoption of SFAS No. 121 was not material. Unaudited Interim Financial Statements The consolidated financial statements as of March 31, 1996 and for the three months ended March 31, 1995 and 1996 include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position and results of operations. Operating results for the three months ended March 31, 1996 are not necessarily indicative of the results that may be expected for the entire year. 3. ACQUISITION OF BUSINESS In November 1994, Granum entered into an agreement to purchase certain assets of Orlando radio stations WHTQ-FM and WHOO-AM from TK Communications, Inc. ("TK") for $11.5 million. Concurrently, Granum entered into a local marketing agreement ("LMA") with TK to operate WHTQ-FM and WHOO-AM beginning on December 1, 1994. Operations of the radio stations have been included in the consolidated results of the Company since the effective date of the LMA. Granum consummated the asset purchase on March 31, 1995. The stations' assets were contributed by Granum to the Company at the time of acquisition together with a capital contribution of approximately $3.2 million and intercompany debt of approximately $8.3 million. Subsequently, an additional $1.8 million capital contribution was made by Granum to the Company in the form of forgiveness of intercompany debt. This acquisition was accounted for by the purchase method, and accordingly, the purchase price has been allocated to the assets acquired based on their estimated fair values at the date of the acquisition. No liabilities were assumed by the Company as a result of the acquisition. Amounts allocated to goodwill/FCC licenses in connection with this acquisition are being amortized over 25 years using the straight-line basis. F-42 147 INFINITY HOLDINGS CORP. OF ORLANDO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 4. PLANT AND EQUIPMENT Plant and equipment at December 31, 1995 is summarized as follows (in thousands): Land and land improvements.................................................. $ 788 Buildings and building improvements......................................... 644 Broadcast equipment......................................................... 2,494 Furniture and fixtures, other............................................... 507 ------ Plant and equipment, at cost...................................... 4,433 Less accumulated depreciation............................................... (798) ------ Net plant and equipment........................................... $3,635 ======
5. INTANGIBLE ASSETS Intangible assets at December 31, 1995 are summarized as follows (in thousands): Goodwill/FCC broadcast licenses............................................ $11,533 Non-compete agreements..................................................... 500 Other...................................................................... 1,358 ------- Total............................................................ 13,391 Less accumulated amortization.............................................. (1,443) ------- Net intangible assets............................................ $11,948 =======
6. INCOME TAXES The Company recorded no income tax expense or benefit in 1995. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 1995 are as follows (in thousands): Deferred tax assets: Net operating loss carryforwards......................................... $ 1,670 Provision for doubtful accounts.......................................... 18 ------- Total deferred tax assets........................................ 1,688 Valuation allowance...................................................... (1,428) ------- Net deferred tax assets.......................................... 260 ------- Deferred tax liabilities: Plant and equipment...................................................... (90) Intangibles.............................................................. (170) ------- Total deferred tax liabilities................................... (260) ------- Net deferred tax asset (liability)............................... $ -- =======
The provision for income taxes is different than the amount computed using the applicable statutory federal income tax rate with the differences summarized below (in thousands): Computed tax benefit at statutory rate....................................... $(594) Non-deductible amortization of intangibles................................... (40) Increase in valuation allowance.............................................. 631 Other........................................................................ 3 ----- Net tax expense (benefit).......................................... $ -- =====
F-43 148 INFINITY HOLDINGS CORP. OF ORLANDO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company has approximately $4,400,000 of NOLs that expire from 2007 to 2010. The utilization of such NOLs is subject to certain limitations under federal, state and local income tax laws. Therefore, realization is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards. The NOLs have a full valuation allowance against them to the extent they will not be realized through the reversal of deferred tax liabilities. 7. RETIREMENT PLANS The Company sponsors a defined contribution 401(k) savings plan for its full-time employees through Granum. Neither the Company nor Granum match employees' contributions nor do they provide any other retirement benefits to its employees. 8. TRANSACTIONS WITH AFFILIATED COMPANIES In 1995, the Company was allocated fees of $417,714 from Granum for certain management activities and corporate overhead. The amounts due Granum and its affiliates represent the net of various transactions and the allocation of interest expense on Granum's long-term debt. The allocated long-term debt bears interest consistent with Granum's credit facility which provides for interest based on various rate alternatives. 9. COMMITMENTS AND CONTINGENCIES The Company leases office facilities and various items of equipment under noncancellable operating leases. Rental expense under operating leases amounted to $212,635 in 1995. Future minimum lease payments as of December 31, 1995 for all noncancellable operating leases are as follows (in thousands): 1996................................................................ $ 218 1997................................................................ 218 1998................................................................ 218 1999................................................................ 218 2000................................................................ 155 Thereafter.......................................................... 776 ------ Total..................................................... $1,803 ------
10. SHAREHOLDER'S EQUITY The following reflects the changes in shareholder's equity for the year ended December 31, 1995 and the three months ended March 31, 1996 (in thousands, except share data):
TOTAL SHARES COMMON ADDITIONAL DEFICIT IN SHAREHOLDER'S OUTSTANDING STOCK PAID-IN-CAPITAL RETAINED EARNINGS EQUITY ----------- ------ --------------- ----------------- ------------- Balance, January 1, 1995.......... 9,800 $ 1 $ 4,400 $(2,910) $ 1,491 Capital contributions............. -- -- 5,058 -- 5,058 Net loss.......................... -- -- -- (1,748) (1,748) ----------- ------ ------- ----------------- ------------- Balance, December 31, 1995........ 9,800 1 9,458 (4,658) 4,801 Net loss (unaudited).............. -- -- -- (582) (582) ----------- ------ ------- ----------------- ------------- Balance, March 31, 1996 (unaudited)..................... 9,800 $ 1 $ 9,458 $(5,240) $ 4,219 ========= ====== =========== ============= ==========
F-44 149 INFINITY HOLDINGS CORP. OF ORLANDO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 11. EXTRAORDINARY ITEMS During March 1995, Granum negotiated a new loan facility and repaid its then outstanding borrowings resulting in an extraordinary loss on the extinguishment of debt. The Company's allocable portion of that extraordinary loss was $36,031. F-45 150 COX RADIO, INC. SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNT
COLUMN C --------------------------- ADDITIONS COLUMN B --------------------------- ------------ CHARGED TO COLUMN D COLUMN E COLUMN A BALANCE AT CHARGED TO OTHER ----------- ------------- ------------------ BEGINNING OF COSTS AND ACCOUNTS -- DEDUCTIONS -- BALANCE AT DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE(1) END OF PERIOD ------------------ ------------ -------------- ---------- ----------- ------------- (IN THOUSANDS) Year Ended December 31, 1993......... Allowance for doubtful accounts receivable $697 $496 $ -- $ 647 $ 546 ========= =========== ======== ========== ========== Year Ended December 31, 1994......... Allowance for doubtful accounts receivable $546 $620 $ -- $ 406 $ 760 ========= =========== ======== ========== ========== Year Ended December 31, 1995............ Allowance for doubtful accounts receivable $760 $558 $ -- $ 540 $ 774 ========= =========== ======== ========== ==========
- --------------- (1) Represents the net of accounts written off and accounts recovered. S-1 151 - ------------------------------------------------------ - ------------------------------------------------------ NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE U.S. UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. --------------------------- TABLE OF CONTENTS
PAGE ---- Certain Definitions and Market and Industry Data......................... Prospectus Summary...................... Risk Factors............................ Use of Proceeds......................... Dividend Policy......................... Dilution................................ Capitalization.......................... Unaudited Pro Forma Combined Financial Data.................................. Unaudited Pro Forma Combined Balance Sheet................................. Unaudited Pro Forma Combined Statements of Operations......................... Selected Historical Consolidated Financial Data.................................. Management's Discussion and Analysis of the Pro Forma Combined Results of Operations............................ Management's Discussion and Analysis of Financial Condition and Results of Operations of Cox Radio............... Management's Discussion and Analysis of Financial Condition and Results of Operations of NewCity................. Business................................ The NewCity Acquisition................. Management.............................. Security Ownership of Certain Beneficial Owners................................ Certain Relationships and Related Transactions.......................... Description of Capital Stock............ Description of Indebtedness............. Shares Eligible for Future Sale......... Underwriting............................ Certain United States Federal Tax Consequences to Non-United States Holders of Class A Common Stock....... Legal Matters........................... Experts................................. Available Information................... Index to Financial Statements...........
--------------------------- UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS U.S. UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ SHARES [COX RADIO LOGO] COX RADIO, INC. CLASS A COMMON STOCK --------------------------- PROSPECTUS , 1996 --------------------------- LEHMAN BROTHERS ALLEN & COMPANY INCORPORATED CS FIRST BOSTON MORGAN STANLEY & CO. INCORPORATED ------------------------------------------------------ ------------------------------------------------------ 152 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following are the expenses of issuance and distribution of the shares of Class A Common Stock registered hereunder on Form S-1, other than underwriting discounts and commissions. All amounts except the Registration fee are estimated. Registration fee........................................................... $47,587 NASD Registration fees..................................................... 14,300 fees............................................................. * Blue Sky fees and expenses................................................. * Legal fees and expenses.................................................... * Accounting fees and expenses............................................... * Printing and engraving expenses............................................ * Registrar and Transfer Agent's fees........................................ * Miscellaneous.............................................................. * ----- Total............................................................ $ * =====
- --------------- * To be supplied by amendment. All of the above expenses have been or will be paid by the Company. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Reference is made to Section 102(b)(7) of the Delaware General Corporation Law (the "DGCL"), which enables a corporation in its original certificate of incorporation or an amendment thereto to eliminate or limit the personal liability of a director for violations of the director's fiduciary duty, except (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the DGCL (providing for liability of directors for unlawful payment of dividends or unlawful stock purchases or redemptions), or (iv) for any transaction from which a director derived an improper personal benefit. The Company's Amended and Restated Certificate of Incorporation contains a provision which eliminates the liability of directors to the extent permitted by Section 102(b)(7) of the DGCL. Reference is made to Section 145 of the DGCL, which provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement in connection with specified actions, suits or proceedings, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation (a "derivative action")), if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. A similar standard is applicable in the case of derivative actions, except that indemnification only extends to expenses (including attorneys' fees) incurred in connection with the defense or settlement of such action, and the statute requires court approval before there can be any indemnification where the person seeking indemnification has been found liable to the corporation. The statute provides that it is not exclusive of other indemnification that may be granted by a corporation's charter, by-laws, disinterested director vote, stockholder vote, agreement or otherwise. The Amended and Restated Certificate of Incorporation of the Company provides that the Company shall indemnify its directors and officers to the fullest extent permitted by Delaware law. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES There have been no sales of unregistered securities of the Company in the last three years. II-1 153 ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits
EXHIBIT NUMBER DESCRIPTION - ------ ---------------------------------------------------------------------------------- *1.1 -- Form of Underwriting Agreement, dated as of , 1996, by and among Cox Radio, Inc. and Lehman Brothers Inc., Allen & Company Incorporated, CS First Boston Corporation and Morgan Stanley & Co. Incorporated. *1.2 -- Form of International Underwriting Agreement, dated as of , 1996, by and among Cox Radio, Inc. and Lehman Brothers International (Europe), Allen & Company Incorporated, CS First Boston Limited and Morgan Stanley & Co. International Limited. 2.1 -- Agreement and Plan of Merger, dated as of July 1, 1996, by and among Cox Radio, Inc., New Cox Radio II, Inc., NewCity Communications, Inc. and certain stockholders of NewCity Communications, Inc. 2.2 -- Guaranty by Cox Broadcasting, Inc., dated as of July 1, 1996, in favor of NewCity Communications, Inc. *3.1 -- Amended and Restated Certificate of Incorporation of Cox Radio, Inc. *3.2 -- Bylaws of Cox Radio, Inc. 4.1 -- Indenture between NewCity Communications, Inc. and Shawmut Bank Connecticut, National Association, as Trustee, relating to the 11 3/8% Notes due 2003 of NewCity Communications, Inc. *4.2 -- Specimen of Class A Common Stock Certificate. *5.1 -- Opinion of Dow, Lohnes & Albertson, PLLC (including consent). *10.1 -- Form of CEI Note. *10.3 -- Form of New CEI Credit Facility. 21 -- Subsidiaries of the Registrant. 23.1 -- Consent and Report on Schedule of Deloitte & Touche LLP. 23.2 -- Consent of Ernst & Young LLP. 23.3 -- Consent of Deloitte & Touche LLP. *23.4 -- Consent of Dow, Lohnes & Albertson, PLLC (contained in their opinion filed as Exhibit 5.1). 24.1 -- Power of Attorney (included on page II-4). 27.1 -- Financial Data Schedule (for SEC use only).
- --------------- * To be filed by amendment. (b) Financial Statement Schedules II. Valuation and Qualifying Account All other schedules for which provisions are made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted. ITEM 17. UNDERTAKINGS. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, (the "Act") may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question II-2 154 whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. The Company hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of Prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall br deemed to be part of this Registration Statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of Prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. The undersigned Registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser. II-3 155 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Atlanta, State of Georgia, on July 24, 1996. COX RADIO, INC. By: /s/ ROBERT F. NEIL ------------------------------------ Robert F. Neil President and Chief Executive Officer POWER OF ATTORNEY Cox Radio, Inc., a Delaware corporation, and each person whose signature appears below, constitutes and appoints Robert F. Neil and Maritza C. Pichon, and either of them, with full power to act without the other, such person's true and lawful attorneys-in-fact, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign this Registration Statement, any subsequent related registration statement filed pursuant to Rule 462(b) promulgated under the Securities Act of 1933, and any and all amendments to such registration statements and other documents in connection therewith, and to file the same, and all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform each and every act and thing necessary or desirable to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, thereby ratifying and confirming all that said attorneys-in-fact, or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - --------------------------------------------- ------------------------------- -------------- /s/ NICHOLAS D. TRIGONY Chairman of the Board of July 24, 1996 - --------------------------------------------- Directors Nicholas D. Trigony /s/ ROBERT F. NEIL President and Chief Executive July 24, 1996 - --------------------------------------------- Officer, Director Robert F. Neil /s/ MARITZA C. PICHON Chief Financial Officer July 24, 1996 - --------------------------------------------- (Principal Financial Officer Maritza C. Pichon and Principal Accounting Officer) /s/ JAMES C. KENNEDY Director July 24, 1996 - --------------------------------------------- James C. Kennedy /s/ DAVID E. EASTERLY Director July 24, 1996 - --------------------------------------------- David E. Easterly
II-4 156 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS Subject to Completion, dated , 1996 PROSPECTUS SHARES COX RADIO, INC. [COX RADIO LOGO] CLASS A COMMON STOCK --------------------------- All of the shares of Class A Common Stock, par value $1.00 per share (the "Class A Common Stock"), offered hereby are being sold by Cox Radio, Inc. ("Cox Radio" or the "Company"). Of the shares of Class A Common Stock being offered, shares are being offered initially outside the United States and Canada (the "International Offering") by the International Managers and shares are being concurrently offered in the United States and Canada (the "U.S. Offering") by the U.S. Underwriters (together with the International Managers, the "Underwriters"). The International Offering and the U.S. Offering are collectively referred to as the "Offerings." Cox Radio's authorized capital stock includes Class A Common Stock and Class B Common Stock, par value $1.00 per share (the "Class B Common Stock" and, together with the Class A Common Stock, the "Common Stock"). Except with respect to voting and conversion, the rights of holders of Class A Common Stock and Class B Common Stock are identical. Each share of Class B Common Stock generally entitles its holder to ten votes, whereas each share of Class A Common Stock entitles its holder to one vote. Shares of Class B Common Stock are convertible into shares of Class A Common Stock on a one-for-one basis at the option of the holder. After giving effect to the sale of Class A Common Stock offered hereby (assuming that the Underwriters' over-allotment option is not exercised), Cox Enterprises, Inc. ("CEI") will own approximately % of the outstanding Common Stock and % of the voting power of the Company. See "Description of Capital Stock." Prior to the Offerings, there has been no public market for the Class A Common Stock. The initial public offering price is expected to be between $ and $ per share. See "Underwriting" for information relating to the factors to be considered in determining the initial public offering price. The initial public offering price and the underwriting discounts and commissions per share are identical for each of the Offerings. At the request of Cox Radio, the Underwriters have reserved shares of the Class A Common Stock for sale at the initial public offering price to certain of Cox Radio's employees and certain other persons. If such shares are not purchased by such employees or other persons, they will be offered by the Underwriters to the public upon the terms and conditions set forth in this Prospectus. See "Underwriting." Application has been made for listing of the Class A Common Stock on under the symbol " ." --------------------------- SEE "RISK FACTORS" COMMENCING ON PAGE 9 HEREIN FOR CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS. --------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ---------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------- UNDERWRITING PRICE TO DISCOUNTS AND PROCEEDS TO PUBLIC COMMISSIONS(1. COMPANY(2. - ---------------------------------------------------------------------------------------------------------- Per Share................................................. $ $ $ - ---------------------------------------------------------------------------------------------------------- Total(3).................................................. $ $ $ - ---------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------
(1) Cox Radio has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933 (the "Securities Act"). See "Underwriting." (2) Before deducting expenses payable by Cox Radio estimated to be $ . (3) Cox Radio has granted the Underwriters a 30-day option to purchase up to an aggregate of additional shares of Class A Common Stock on the same terms and conditions as set forth herein, solely to cover over-allotments, if any. If such option is exercised in full, the total Price to Public, Underwriting Discounts and Commissions and Proceeds to Company will be $ , $ and $ , respectively. See "Underwriting." --------------------------- The shares of Class A Common Stock offered by this Prospectus are offered by the International Managers subject to prior sale, to withdrawal, cancellation, or modification of the offer without notice, to delivery to and acceptance by the International Managers and to certain further conditions. It is expected that delivery of the shares will be made at the offices of Lehman Brothers Inc., New York, New York, on or about , 1996. --------------------------- LEHMAN BROTHERS ALLEN & COMPANY INCORPORATED CS FIRST BOSTON MORGAN STANLEY & CO. INTERNATIONAL , 1996 157 ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS - ------------------------------------------------------ - ------------------------------------------------------ NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE INTERNATIONAL MANAGERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. --------------------------- TABLE OF CONTENTS
PAGE ---- Certain Definitions and Market and Industry Data..................................... Prospectus Summary......................... Risk Factors............................... Use of Proceeds............................ Dividend Policy............................ Dilution................................... Capitalization............................. Unaudited Pro Forma Combined Financial Data..................................... Unaudited Pro Forma Combined Balance Sheet.................................... Unaudited Pro Forma Combined Statements of Operations............................... Selected Historical Consolidated Financial Data..................................... Management's Discussion and Analysis of the Pro Forma Combined Results of Operations............................... Management's Discussion and Analysis of Financial Condition and Results of Operations of Cox Radio.................. Management's Discussion and Analysis of Financial Condition and Results of Operations of NewCity.................... Business................................... The NewCity Acquisition.................... Management................................. Security Ownership of Certain Beneficial Owners................................... Certain Relationships and Related Transactions............................. Description of Capital Stock............... Description of Indebtedness................ Shares Eligible for Future Sale............ Underwriting............................... Certain United States Federal Tax Consequences to Non-United States Holders of Class A Common Stock.................. Legal Matters.............................. Experts.................................... Available Information...................... Index to Financial Statements..............
--------------------------- UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS INTERNATIONAL MANAGERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ SHARES [COX RADIO LOGO] COX RADIO, INC. CLASS A COMMON STOCK --------------------------- PROSPECTUS , 1996 --------------------------- LEHMAN BROTHERS ALLEN & COMPANY INCORPORATED CS FIRST BOSTON MORGAN STANLEY & CO. INTERNATIONAL ------------------------------------------------------ ------------------------------------------------------ 158 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------ ---------------------------------------------------------------------------------- *1.1 -- Form of Underwriting Agreement, dated as of , 1996, by and among Cox Radio, Inc. and Lehman Brothers Inc., Allen & Company Incorporated, CS First Boston Corporation and Morgan Stanley & Co. Incorporated. *1.2 -- Form of International Underwriting Agreement, dated as of , 1996, by and among Cox Radio, Inc. and Lehman Brothers International (Europe), Allen & Company Incorporated, CS First Boston Limited and Morgan Stanley & Co. International Limited. 2.1 -- Agreement and Plan of Merger, dated as of July 1, 1996, by and among Cox Radio, Inc., New Cox Radio II, Inc., NewCity Communications, Inc. and certain stockholders of NewCity Communications, Inc. 2.2 -- Guaranty by Cox Broadcasting, Inc., dated as of July 1, 1996, in favor of NewCity Communications, Inc. *3.1 -- Amended and Restated Certificate of Incorporation of Cox Radio, Inc. *3.2 -- Bylaws of Cox Radio, Inc. 4.1 -- Indenture between NewCity Communications, Inc. and Shawmut Bank Connecticut, National Association, as Trustee, relating to the 11 3/8% Notes due 2003 of NewCity Communications, Inc. *4.2 -- Specimen of Class A Common Stock Certificate. *5.1 -- Opinion of Dow, Lohnes & Albertson, PLLC (including consent). *10.1 -- Form of CEI Note. *10.3 -- Form of New CEI Credit Facility. 21 -- Subsidiaries of the Registrant. 23.1 -- Consent and Report on Schedule of Deloitte & Touche LLP. 23.2 -- Consent of Ernst & Young LLP. 23.3 -- Consent of Deloitte & Touche LLP. *23.4 -- Consent of Dow, Lohnes & Albertson, PLLC (contained in their opinion filed as Exhibit 5.1). 24.1 -- Power of Attorney (included on page II-4). 27.1 -- Financial Data Schedule (for SEC use only).
- --------------- * To be filed by amendment. EX-2.1 2 AGREEMENT & PLAN OF MERGER 1 EXHIBIT 2.1 EXECUTION AGREEMENT AND PLAN OF MERGER BY AND AMONG COX RADIO, INC., NEW COX RADIO II, INC., NEWCITY COMMUNICATIONS, INC., CERTAIN STOCKHOLDERS OF NEWCITY COMMUNICATIONS, INC. AND THE STOCKHOLDERS' AGENT DATED AS OF JULY 1, 1996 2 TABLE OF CONTENTS
PAGE ---- ARTICLE I THE MERGER 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . 2 1.3 Effective Time of the Merger . . . . . . . . . . . . . . 2 1.4 Effect of the Merger . . . . . . . . . . . . . . . . . . 2 ARTICLE II THE SURVIVING CORPORATION 2.1 Certificate of Incorporation . . . . . . . . . . . . . . 2 2.2 By-laws . . . . . . . . . . . . . . . . . . . . . . . . 3 2.3 Board of Directors; Officers . . . . . . . . . . . . . . 3 ARTICLE III MERGER CONSIDERATION AND REDEMPTION OF SHARES 3.1 Merger Consideration . . . . . . . . . . . . . . . . . . 3 3.2 Redemption of Shares . . . . . . . . . . . . . . . . . . 3 3.3 Adjustment to Merger Consideration as of Closing Date . 4 3.4 Dissenting Shares . . . . . . . . . . . . . . . . . . . 5 3.5 Payment . . . . . . . . . . . . . . . . . . . . . . . . 6 3.6 No Further Rights . . . . . . . . . . . . . . . . . . . 7 3.7 Closing of the Company's Transfer Books . . . . . . . . 7 3.8 Final Adjustment of Merger Consideration . . . . . . . . 8 3.9 Escrow Agreement . . . . . . . . . . . . . . . . . . . . 9 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY 4.1 Organization and Qualification . . . . . . . . . . . . 10 4.2 Capitalization . . . . . . . . . . . . . . . . . . . . 11 4.3 Authority Relative to This Merger Agreement . . . . . 11 4.4 No Conflicts, Required Filings and Consents . . . . . 12 4.5 Reports and Financial Statements . . . . . . . . . . . 13 4.6 Litigation . . . . . . . . . . . . . . . . . . . . . . 14 4.7 Absence of Certain Changes or Events . . . . . . . . . 14 4.8 Employee Matters . . . . . . . . . . . . . . . . . . . 15 4.9 ERISA . . . . . . . . . . . . . . . . . . . . . . . . 16 4.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . 18 4.11 State Takeover Statutes . . . . . . . . . . . . . . . 20 4.12 Brokers . . . . . . . . . . . . . . . . . . . . . . . 20 4.13 Environmental Matters . . . . . . . . . . . . . . . . 20 4.14 Contracts . . . . . . . . . . . . . . . . . . . . . . 22 4.15 Tangible Personal Property . . . . . . . . . . . . . . 23 4.16 Intangible Property . . . . . . . . . . . . . . . . . 24 4.17 Real Property . . . . . . . . . . . . . . . . . . . . 24 4.18 Undisclosed Liabilities . . . . . . . . . . . . . . . 26 4.19 Governmental Authorizations . . . . . . . . . . . . . 26
3
PAGE ---- 4.20 Compliance with FCC Requirements . . . . . . . . . . . 27 4.21 Insurance . . . . . . . . . . . . . . . . . . . . . . 28 4.22 Powers of Attorney . . . . . . . . . . . . . . . . . . 28 4.23 Payment of Indebtedness . . . . . . . . . . . . . . . 28 4.24 Disclosure . . . . . . . . . . . . . . . . . . . . . . 28 ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS 5.1 Ownership of Class A Common Stock . . . . . . . . . . 28 5.2 Authority; Binding Effect . . . . . . . . . . . . . . 29 5.3 No Conflicts, Required Filings and Consents . . . . . 29 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB 6.1 Organization and Qualification . . . . . . . . . . . . 29 6.2 Ownership of Sub . . . . . . . . . . . . . . . . . . . 30 6.3 Authority Relative to This Merger Agreement . . . . . 30 6.4 No Conflicts; Required Filings and Consents . . . . . 30 6.5 Litigation . . . . . . . . . . . . . . . . . . . . . . 31 6.6 Voting Requirements . . . . . . . . . . . . . . . . . 31 6.7 Brokers . . . . . . . . . . . . . . . . . . . . . . . 31 6.8 Financing . . . . . . . . . . . . . . . . . . . . . . 31 6.9 FCC Applications . . . . . . . . . . . . . . . . . . . 31 6.10 State Takeover Statutes . . . . . . . . . . . . . . . 31 6.11 Disclosure . . . . . . . . . . . . . . . . . . . . . . 32 ARTICLE VII CONDUCT OF BUSINESS PENDING THE MERGER 7.1 Conduct of Business by the Company Pending the Merger 32 7.2 Control of the Stations . . . . . . . . . . . . . . . 34 7.3 Intentionally Omitted . . . . . . . . . . . . . . . . 35 7.4 Massachusetts Income Tax Assessment . . . . . . . . . 35 ARTICLE VIII ADDITIONAL AGREEMENTS 8.1 Access to Information . . . . . . . . . . . . . . . . 35 8.2 Filings . . . . . . . . . . . . . . . . . . . . . . . 35 8.3 Employee and Other Arrangements . . . . . . . . . . . 36 8.4 Public Announcements . . . . . . . . . . . . . . . . . 36 8.5 Efforts; Consents . . . . . . . . . . . . . . . . . . 36 8.6 Notice of Breaches . . . . . . . . . . . . . . . . . . 38 8.7 Transfer and Certain Other Taxes and Expenses . . . . 38 8.8 Financial and FCC Reports . . . . . . . . . . . . . . 38 8.9 Updating of Information . . . . . . . . . . . . . . . 38 8.10 Release of Liens . . . . . . . . . . . . . . . . . . . 39 8.11 Environmental Audit . . . . . . . . . . . . . . . . . 39 8.12 Agreement to Vote . . . . . . . . . . . . . . . . . . 39 8.13 Tax Matters. . . . . . . . . . . . . . . . . . . . . . 39
4
PAGE ---- 8.14 Event of Loss . . . . . . . . . . . . . . . . . . . . 43 8.15 Further Assurances . . . . . . . . . . . . . . . . . . 44 8.16 Solicitation of Employees . . . . . . . . . . . . . . 44 8.17 Capital Expenditures . . . . . . . . . . . . . . . . . 44 8.18 Exercise of Stock Options . . . . . . . . . . . . . . 44 ARTICLE IX CONDITIONS PRECEDENT 9.1 Conditions to Each Party's Obligation to Effect the Merger. . . . . . . . . . . . . . . . . . . 44 9.2 Conditions to Obligation of the Company and the Stockholders to Effect the Merger . . . . . . . . . . 45 9.3 Conditions to Obligations of Parent and Sub to Effect the Merger. . . . . . . . . . . . . . . . . . . 46 ARTICLE X TERMINATION, AMENDMENT AND WAIVER 10.1 Termination . . . . . . . . . . . . . . . . . . . . . 49 10.2 Effect of Termination . . . . . . . . . . . . . . . . 49 10.3 Fees and Expenses . . . . . . . . . . . . . . . . . . 50 10.4 No Solicitation . . . . . . . . . . . . . . . . . . . 50 10.5 Amendment . . . . . . . . . . . . . . . . . . . . . . 50 10.6 Waiver . . . . . . . . . . . . . . . . . . . . . . . . 50 ARTICLE XI INDEMNIFICATION 11.1 Indemnification Out of Closing Escrow. . . . . . . . . 50 11.2 Indemnification By Parent . . . . . . . . . . . . . . 51 11.3 Notification of Claims. . . . . . . . . . . . . . . . 52 ARTICLE XII GENERAL PROVISIONS 12.1 Stockholders' Agent . . . . . . . . . . . . . . . . . 53 12.2 Notices . . . . . . . . . . . . . . . . . . . . . . . 53 12.3 Specific Performance . . . . . . . . . . . . . . . . . 55 12.4 Entire Agreement . . . . . . . . . . . . . . . . . . . 55 12.5 Assignments; Parties in Interest . . . . . . . . . . . 55 12.6 Governing Law . . . . . . . . . . . . . . . . . . . . 55 12.7 Headings . . . . . . . . . . . . . . . . . . . . . . . 56 12.8 Remedies . . . . . . . . . . . . . . . . . . . . . . . 56 12.9 Certain Definitions . . . . . . . . . . . . . . . . . 56 12.10 Counterparts . . . . . . . . . . . . . . . . . . . . . 58 12.11 Severability . . . . . . . . . . . . . . . . . . . . . 58 12.12 Gender and Number . . . . . . . . . . . . . . . . . . 58 12.13 List of Definitions . . . . . . . . . . . . . . . . . 58
5 EXHIBITS Exhibit A Surviving Corporation Certificate of Incorporation Exhibit B Selling Stockholders Exhibit C Form of Estimated Closing Statement Exhibit D Form of Closing Escrow Agreement Exhibit E Form of Opinion of Dow, Lohnes & Albertson, PLLC Exhibit F Form of Opinions of Tyler Cooper & Alcorn, LLP and Kaye, Scholer, Fierman, Hays & Handler, LLP SCHEDULES Schedule 3.2 Redemption of Shares Schedule 4.1 Company Subsidiaries Schedule 4.2 Capitalization Schedule 4.4 Conflicts, Required Filings and Consents Schedule 4.5 Reports and Financial Statements Schedule 4.6 Litigation Schedule 4.7 Absence of Certain Changes or Events Schedule 4.8 Employee Matters Schedule 4.9 ERISA Schedule 4.10 Taxes Schedule 4.13 Environmental Matters Schedule 4.14 Contracts and Third Party Consents Schedule 4.15 Tangible Personal Property Schedule 4.16 Intangible Property Schedule 4.17 Real Property Schedule 4.18 Undisclosed Liabilities Schedule 4.19 Governmental Authorizations Schedule 4.20 Compliance with FCC Requirements Schedule 4.21 Insurance Schedule 4.22 Powers of Attorney Schedule 4.23 Payment of Indebtedness Schedule 5.1 Ownership of Company Capital Stock Schedule 6.9 FCC Applications Schedule 7.1 Conduct of Business Pending the Merger 6 AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER (this "Merger Agreement"), is dated as of July 1, 1996, by and among COX RADIO, INC., a Delaware corporation ("Parent"), NEW COX RADIO II, INC., a Delaware corporation ("Sub"), NEWCITY COMMUNICATIONS, INC., a Delaware corporation (the "Company"), the holders of shares of the Company's Class A Common Stock (as defined below) and listed on the signature pages hereof (each, a "Stockholder" and collectively, the "Stockholders"), and the Chief Financial Officer of the Company, currently John Riccardi, as agent (the "Stockholders' Agent") for all of the holders of the issued and outstanding capital stock of the Company (the "Selling Stockholders"). WHEREAS, Parent is engaged in the business of owning and operating radio broadcast stations; WHEREAS, the Company, through wholly-owned subsidiaries, owns and operates, pursuant to licenses issued by the Federal Communications Commission ("FCC"), Radio Stations WODL(FM), Birmingham, Alabama; WZZK(AM), Birmingham, Alabama; WZZK-FM, Birmingham, Alabama; WEZN(FM), Bridgeport, Connecticut; WDBO(AM), Orlando, Florida; WWKA(FM), Orlando, Florida; WZKD(AM), Orlando, Florida; WCFB(FM), Daytona Beach, Florida; WJZF(FM), La Grange, Georgia; WBBS(FM), Fulton, New York; WSYR(AM), Syracuse, New York; WYYY(FM), Syracuse, New York; KRMG(AM), Tulsa, Oklahoma; KWEN(FM), Tulsa, Oklahoma; KJSR(FM), Tulsa, Oklahoma; KKYX(AM), San Antonio, Texas; KCYY(FM), San Antonio, Texas; and KCJZ(FM), Terrell Hills, Texas (each a "Station" and collectively, the "Stations"); and WHEREAS, the respective Boards of Directors of Parent, Sub and the Company have approved the merger of Sub with and into the Company (the "Merger"), upon the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing premises and the representations, warranties and agreements contained herein, the parties hereto agree as follows: ARTICLE I THE MERGER 1.1 The Merger. Upon the terms and subject to the conditions hereof, at the Effective Time (as defined in SECTION 1.3), Sub shall be merged with and into the Company and the separate existence of Sub shall thereupon cease, and the Company shall continue as the surviving corporation in the Merger (the "Surviving Corporation") under the laws of the State of Delaware under the name set forth in the Certificate of Incorporation of the Surviving Corporation. 7 1.2 Closing. Unless this Merger Agreement shall have been terminated and the transactions herein contemplated shall have been abandoned pursuant to SECTION 10.1, and subject to the satisfaction or waiver of the conditions set forth in Article IX, the closing of the Merger (the "Closing") will take place as promptly as practicable (and in any event within two Business Days) after satisfaction or waiver of the conditions set forth in SECTIONS 9.1(A) and (C) and 9.3(P), at the offices of Dow, Lohnes & Albertson, PLLC, 1200 New Hampshire Avenue, N.W., Suite 800, Washington, D.C. 20036, unless another date, time or place is agreed to in writing by the parties hereto (the "Closing Date"). 1.3 Effective Time of the Merger. The Merger shall become effective upon the filing of a Certificate of Merger (the "Certificate of Merger") with the Secretary of State of Delaware in accordance with the provisions of the Delaware General Corporation Law (the "DGCL"), or at such other time as Sub and the Company shall agree should be specified in the Certificate of Merger, which filing shall be made as soon as practicable on the Closing Date. When used in this Merger Agreement, the term "Effective Time" shall mean the time at which the Certificate of Merger is accepted for filing by the Secretary of State of Delaware or such time as otherwise specified in the Certificate of Merger. 1.4 Effect of the Merger. The Merger shall, from and after the Effective Time, have all the effects provided by the DGCL. If at any time after the Effective Time the Surviving Corporation shall consider or be advised that any further deeds, conveyances, assignments or assurances in law or any other acts are necessary, desirable or proper to vest, perfect or confirm, of record or otherwise, in the Surviving Corporation, the title to any property or rights of Sub or the Company (the "Constituent Corporations") to be vested in the Surviving Corporation, by reason of, or as a result of, the Merger, or otherwise to carry out the purposes of this Merger Agreement, the Constituent Corporations agree that the Surviving Corporation and its proper officers and directors shall execute and deliver all such deeds, conveyances, assignments and assurances in law and do all things necessary, desirable or proper to vest, perfect or confirm title to such property or rights in the Surviving Corporation and otherwise to carry out the purposes of this Merger Agreement, and that the proper officers and directors of the Surviving Corporation are fully authorized in the name of each of the Constituent Corporations or otherwise to take any and all such action. ARTICLE II THE SURVIVING CORPORATION 2.1 Certificate of Incorporation. The Certificate of Incorporation of the Surviving Corporation after the Effective Time shall be in the form set forth in EXHIBIT A hereto, until thereafter changed or amended as provided therein or by applicable law. - 2 - 8 2.2 By-laws. The By-laws of the Sub as in effect immediately prior to the Effective Time shall be the By-laws of the Surviving Corporation, until thereafter changed or amended as provided therein or by applicable law. 2.3 Board of Directors; Officers. The directors of Sub immediately prior to the Effective Time and Richard A. Ferguson shall be the directors of the Surviving Corporation, and the officers of Sub immediately prior to the Effective Time and Richard A. Ferguson and James T. Morley shall be the officers of the Surviving Corporation, in each case until the earlier of their respective resignations or the time that their respective successors are duly elected or appointed and qualified. ARTICLE III MERGER CONSIDERATION AND REDEMPTION OF SHARES 3.1 Merger Consideration. The total consideration for the capital stock of the Company shall be One Hundred and Sixty-Five Million Dollars ($165,000,000) (the "Merger Consideration") as adjusted pursuant to the provisions of SECTIONS 3.3 and 3.8 hereof, and shall be paid in cash at Closing in accordance with the procedures set forth in SECTION 3.5. 3.2 Redemption of Shares. As of the Effective Time, by virtue of the Merger: (a) Each issued and outstanding share of Class A Common Stock, $.01 par value, of the Company ("Class A Common Stock"), other than any Dissenting Shares (as defined in SECTION 3.3), shall be redeemed in exchange for cash in the amount per share set forth on SCHEDULE 3.2 (such amount of cash being referred to herein as the "Class A Common Merger Consideration"). (b) Each issued and outstanding share of the Class B Common Stock, $.01 par value, of the Company ("Class B Common Stock"), other than any Dissenting Shares, shall be redeemed in exchange for cash in the amount per share set forth on SCHEDULE 3.2 (the "Class B Common Merger Consideration"). (c) Each issued and outstanding share of 9% Convertible Preferred Stock, $.05 par value, of the Company ("Convertible Preferred Stock") shall be redeemed in exchange for cash in the amount per share set forth on SCHEDULE 3.2 (the "Convertible Preferred Merger Consideration"). (d) Each issued and outstanding share of the $166.67 Redeemable Preferred Stock, par value $.05, of the Company ("Redeemable Preferred Stock") shall be redeemed by the Company in accordance with the requirements of the Certificate of Incorporation of the Company. (e) All shares of Class A Common Stock, Class B Common Stock and all shares of Preferred Stock, par value $.05, of the Company ("Preferred Stock") unissued or which are held in - 3 - 9 treasury by the Company shall be canceled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor. (f) Set forth on EXHIBIT B is a true and complete list of the Selling Stockholders and the holders of any Stock Options, as defined below, and, for each such Selling Stockholder and Stock Option holder, the number of shares of such Stock or such Options held. 3.3 Adjustment to Merger Consideration as of Closing Date. (a) Working Capital Adjustment. The Merger Consideration shall be (i) increased by the amount by which the Working Capital as of the Closing Date (as defined below) of the Company exceeds the Target Working Capital (as defined below); or (ii) decreased by the amount by which the Working Capital as of the Closing Date is less than the Target Working Capital. "Working Capital" as of any date shall mean on a consolidated basis, current assets less current liabilities determined in accordance with generally accepted accounting principles ("GAAP") consistently applied. "Target Working Capital" shall mean Six Million Dollars ($6,000,000). Current assets shall include cash, accounts receivable and prepaid expenses, and other current assets consistently reported in accordance with past practices, excluding deferred expenses incurred under trade and barter agreements. Current liabilities shall include accounts payable, accrued expenses and, until resolved at which time the Working Capital computation shall reflect the amount of such resolution, a reserve of Two Hundred Thousand Dollars ($200,000) representing the Company's best estimate of the contingent tax liability of the Company to the Commonwealth of Massachusetts for calendar years 1987 through 1989, excluding deferred revenue under trade and barter agreements, accrued interest payable, the current portion of the Company's long-term indebtedness and excess income tax reserves. (b) Indebtedness Adjustment. The Merger Consideration shall be (i) decreased by the amount by which the aggregate amount of the Company's outstanding long-term indebtedness for money borrowed plus interest accrued thereon determined in accordance with GAAP (the "Indebtedness") as of the Closing Date exceeds the Target Debt Amount; or (ii) increased by the amount by which the Indebtedness of the Company as of the Closing Date is less than the Target Debt Amount. The "Target Debt Amount" shall mean the amount of Eighty-Five Million Dollars ($85,000,000). Notwithstanding the foregoing, for purposes of this SECTION 3.3 and SECTION 3.8 only, the Indebtedness shall not include any amounts owing to AmSouth Bank of Alabama pursuant to that certain Loan Agreement dated as of February 22, 1996 between NewCity Communications of Alabama, Inc. and AmSouth Bank of Alabama (the "Birmingham Loan Agreement"). - 4 - 10 (c) The Merger Consideration, as adjusted pursuant to paragraphs (a) and (b) shall be the "Adjusted Merger Consideration." To the extent that the Adjusted Merger Consideration exceeds or is less than the Merger Consideration taking into account the adjustments described in paragraphs (a) and (b) of this SECTION 3.3, the payment per share described in SECTION 3.2(A), (B) and (C) shall be adjusted accordingly. (d) Adjustment Procedures. (i) Not later than five (5) Business Days before the Closing Date, the Company shall prepare and deliver to Parent a closing statement of the Company (the "Estimated Closing Statement"), in the form attached as EXHIBIT C, which shall set forth (A) the Company's best estimate of the Working Capital of the Company as of the Closing Date (including without limitation an estimate of those adjustments set forth in SECTION 3.8(B)(5), (6) AND (7)), and (B) the Company's best estimate of the Indebtedness as of the Closing Date. Subject to the provisions of this SECTION 3.3(D), the Estimated Closing Statement shall be prepared in accordance with GAAP and shall fairly present the Company's best estimate of the current assets and current liabilities (as described in SECTION 3.3(A)) of the Company as of the Closing Date. Accounts receivable shall be valued consistent with the Company's past practices. (ii) Parent may object to such Estimated Closing Statement by written notice provided to the Company within three Business Days after receipt thereof. In the event of a dispute between the Company and Parent as to any matter set forth in this SECTION 3.3(D), as of the Closing, any amounts in dispute in respect of the Estimated Closing Statement shall be deposited in the Adjustment Escrow Fund (as defined below) in addition to the amount required to be deposited in such Fund under SECTION 3.9(B), to be held by the Closing Escrow Agent until the resolution of such dispute in accordance with SECTION 3.8. 3.4 Dissenting Shares. Notwithstanding anything in this Agreement to the contrary, any issued and outstanding share of Class A Common Stock, Class B Common Stock, or Convertible Preferred Stock held by a Selling Stockholder who objects to the Merger and complies with all of the provisions of the DGCL concerning the right of holders of Class A Common Stock, Class B Common Stock and Convertible Preferred Stock to dissent from the Merger and require appraisal of his shares of Class A Common Stock, Class B Common Stock and Convertible Preferred Stock ("Dissenting Shareholder") shall not be redeemed as described in SECTION 3.2, but instead shall become the right to receive such consideration as may be determined to be due to such Dissenting Shareholder pursuant to the DGCL; provided, however, that each share of Class A Common Stock, Class B Common Stock, and Convertible Preferred Stock issued and outstanding immediately prior to the Effective Time of the Merger and held by a Dissenting Shareholder ("Dissenting Shares") who shall, after the - 5 - 11 Effective Time of the Merger, withdraw his demand for appraisal or lose his right of appraisal, in either case pursuant to the DGCL, shall be deemed to be redeemed as of the Effective Time of the Merger in exchange for the Class A Common Merger Consideration, the Class B Common Merger Consideration, or the Convertible Preferred Merger Consideration as the case may be. The Company shall give Parent (i) prompt notice of any written demands for appraisal of shares of Class A Common Stock, Class B Common Stock, or Convertible Preferred Stock received by the Company, and (ii) the opportunity to direct all negotiations and proceedings with respect to any such demands. The Company shall not, without the prior written consent of Parent, voluntarily make any payment with respect to, or settle, or offer to settle or otherwise negotiate, any such demands. 3.5 Payment. (a) Pursuant to an agreement in form and substance reasonably acceptable to the Company to be entered into prior to the Effective Time between Parent and The Bank of New York (the "Disbursing Agent"), one day prior to the Effective Time, Parent or Sub shall make available to the Disbursing Agent the aggregate amount in cash of the Adjusted Merger Consideration. Immediately after Parent or Sub makes available to the Disbursing Agent the cash referred to in the preceding sentence, the Sub and the Company shall file the Certificate of Merger with the Secretary of State of the State of Delaware in accordance with the provisions of the DGCL. (b) Seven days prior to the Closing Date, the Company shall cause the Disbursing Agent to send a notice and a letter of transmittal to each holder of certificates representing shares of Class A Common Stock, Class B Common Stock or Convertible Preferred Stock advising such holder of the anticipated Closing Date of the Merger and the procedure for surrendering to the Disbursing Agent such certificates for redemption and that delivery shall be effected, and risk of loss and title to the shares of Class A Common Stock, Class B Common Stock or Convertible Preferred Stock shall pass, only upon proper delivery to the Disbursing Agent of the certificates for the shares of Class A Common Stock, Class B Common Stock or Convertible Preferred Stock and a duly executed letter of transmittal and any other required documents of transfer. Each holder of certificates theretofore evidencing shares of Class A Common Stock, Class B Common Stock, or Convertible Preferred Stock upon surrender thereof to the Disbursing Agent together with such letter of transmittal (duly executed) and any other required documents of transfer, shall be entitled to receive as of the Effective Time in exchange therefor the amounts payable with respect to such stock pursuant to SECTION 3.2 hereof. Upon such surrender, the Disbursing Agent shall promptly pay such amounts (less any amount required to be withheld under applicable law) in accordance with the instructions set forth in the related letter of transmittal, and the certificates so surrendered shall promptly be canceled. After the Effective Time and until - 6 - 12 surrendered, certificates formerly evidencing shares of Class A Common Stock, Class B Common Stock or Convertible Preferred Stock (other than Dissenting Shares) shall be deemed for all purposes to evidence only the right to receive payment pursuant to SECTION 3.2 hereof or, in the case of Dissenting Shares, the fair value of such Dissenting Shares. No interest shall accrue or be paid on any cash payable upon the surrender of certificates which immediately prior to the Effective Time represented outstanding shares of Class A Common Stock, Class B Common Stock, or Convertible Preferred Stock (other than Dissenting Shares in accordance with the DGCL). (c) If the amount payable to a Selling Stockholder pursuant to SECTION 3.2 hereof is to be delivered to a Person other than the Person in whose name the certificates surrendered in exchange therefor are registered, it shall be a condition to the payment of such amount that the certificates so surrendered shall be properly endorsed or accompanied by appropriate stock powers and otherwise in proper form for transfer, that such transfer otherwise be proper and that the Person requesting such transfer pay to the Disbursing Agent any transfer or other taxes payable by reason of the foregoing or establish to the satisfaction of the Disbursing Agent that such taxes have been paid or are not required to be paid. (d) Unless required otherwise by applicable law, any portion of the amount payable under SECTION 3.2 and SECTION 3.8 hereof which remains undistributed to holders of shares of Class A Common Stock, Class B Common Stock or Convertible Preferred Stock six (6) months after the Effective Time shall be delivered by the Disbursing Agent to the party who provided such funds to the Disbursing Agent and any holders of such stock who have not theretofore complied with the provisions of this Article III shall thereafter look only to Parent for payment of any amounts to which they are entitled pursuant to this Article III. Neither Parent nor the Disbursing Agent shall be liable to any holder of shares of Class A Common Stock, Class B Common Stock or Convertible Preferred Stock for any cash held by Parent or the Disbursing Agent for payment pursuant to this Article III delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. 3.6 No Further Rights. From and after the Effective Time, holders of certificates theretofore evidencing shares of Class A Common Stock, Class B Common Stock or Convertible Preferred Stock shall cease to have any rights as stockholders of the Company, except as provided herein or by law. 3.7 Closing of the Company's Transfer Books. At the Effective Time, the stock transfer books of the Company shall be closed and no transfer of any shares of Class A Common Stock, Class B Common Stock or Convertible Preferred Stock shall be made thereafter. If after the Effective Time, certificates for shares of the Class A Common Stock, Class B Common Stock or Convertible Preferred Stock are presented to Parent or the Surviving - 7 - 13 Corporation, they shall be canceled and exchanged for Class A Common Merger Consideration, Class B Common Merger Consideration or Convertible Preferred Merger Consideration, as the case may be, subject to applicable law in the case of Dissenting Shares. 3.8 Final Adjustment of Merger Consideration. The Adjusted Merger Consideration shall be subject to further adjustment after the Closing as provided in this SECTION 3.8: (a) No more than ninety (90) days after the Closing Date, Parent shall prepare and deliver to Stockholders' Agent a final closing statement of the Company, prepared on a basis consistent with the accounting standards used for the preparation of the Estimated Closing Statement, and in the form of the Estimated Closing Statement (the "Final Closing Statement") which shall, based upon the books and records of the Company, set forth (i) the actual Working Capital of the Company as of the Closing Date (the "Final Working Capital"), and (ii) the actual Indebtedness of the Company as of the Closing Date (the "Final Debt Amount"). (b) The Adjusted Merger Consideration shall be adjusted dollar for dollar as follows: (1) increased if and to the extent the Indebtedness as estimated in accordance with SECTIONS 3.3(B) and 3.3(D) exceeds the Final Debt Amount; and (2) decreased if and to the extent the Final Debt Amount exceeds the Indebtedness as estimated in accordance with SECTIONS 3.3(B) and 3.3(D); and (3) increased if and to the extent the Final Working Capital exceeds the Working Capital estimated in accordance with SECTIONS 3.3(A) and 3.3(D); and (4) decreased if and to the extent the Working Capital estimated in accordance with SECTIONS 3.3(A) and 3.3(D) exceeds the Final Working Capital; and (5) decreased by the sum of the adjustments set forth in SECTIONS 3.8(E), 8.7 AND 10.3; (6) increased by the amount owed by Parent to the Company pursuant to SECTION 8.17(B); and (7) increased or decreased, as appropriate, by the amount set forth in SECTION 8.3. (c) In the event that the Adjusted Merger Consideration shall have been increased, Parent shall pay the amount of such adjustment at the direction of the Stockholders' Agent by wire transfer of same day funds within two Business Days of the final determination of the Final Closing Statement as described in SECTION 3.8(E). - 8 - 14 (d) In the event that the Adjusted Merger Consideration shall have been decreased, Parent shall deliver written notice to the Closing Escrow Agent (as defined below) and the Stockholders' Agent, specifying the amount of such decrease of the Adjusted Merger Consideration, and the Closing Escrow Agent shall, within two Business Days of its receipt of such notice and in accordance with the terms of the Closing Escrow Agreement, pay such amount to Parent out of the Adjustment Escrow Fund (as defined in the Closing Escrow Agreement) by wire transfer in same day funds. In the event that the Adjustment Escrow Fund is insufficient to cover the amount of such decrease, then the Closing Escrow Agent shall distribute the entire Adjustment Escrow Fund to Parent as provided above and the Closing Escrow Agent shall, in accordance with the terms of the Closing Escrow Agreement, pay any shortfall to Parent out of the Indemnity Escrow Fund (as defined in the Closing Escrow Agreement) by wire transfer in same day funds. In the event that the amount of funds in the Adjustment Escrow Fund exceeds the amount of the decrease of the Adjusted Merger Consideration, the Closing Escrow Agent shall, after paying the amount of such decrease to Parent, pay the remaining amount of funds in the Adjustment Escrow Fund to the Selling Stockholders in accordance with the Closing Escrow Agreement. (e) The Stockholders' Agent may object to the Final Closing Statement by written notice provided to Parent within four Business Days after receipt thereof. In the event of a dispute between the Selling Stockholders and Parent, as to any matter set forth in SECTION 3.8(A), the Selling Stockholders and Parent shall use all reasonable efforts to resolve any such dispute, and shall provide the other party with access to and the right to copy any books and records in its possession relating to determination of the final adjustments. If a final resolution is not obtained within thirty (30) days after the Final Closing Statement is delivered to the Stockholders' Agent, any remaining dispute shall be resolved by a nationally recognized firm of independent public accountants, as shall be mutually agreed upon by the Stockholders' Agent and Parent. Such accounting firm may use such auditing procedures as it may deem appropriate and the decision of such accounting firm shall be binding and conclusive upon the parties. The fees and expenses of such accounting firm shall be borne one-half by the Selling Stockholders (by a decrease to the Adjusted Merger Consideration in accordance with SECTION 3.8(B)) and one-half by Parent. (f) Any payments required to be made pursuant to SECTIONS 3.8(C) or (D) shall bear interest from the Closing Date through the date of payment at the rate publicly announced by The Bank of New York or any successor thereto from time to time as its base rate. 3.9 Escrow Agreement. (a) On the Closing Date, the Stockholders' Agent, Parent and The Bank of New York as escrow agent (the "Closing - 9 - 15 Escrow Agent") shall enter into a Closing Escrow Agreement substantially in the form of EXHIBIT D hereto. (b) In accordance with the terms of the Closing Escrow Agreement, and if the Closing occurs on the last day of a calendar month, at the Closing Parent shall deposit as a credit to the Merger Consideration an amount equal to Two Hundred Fifty Thousand Dollars ($250,000). If the Closing occurs on any other day of a calendar month, at the Closing Parent shall deposit with the Closing Escrow Agent as a credit to the Merger Consideration an amount equal to Five Hundred Thousand Dollars ($500,000). In either case, the amount of $250,000 or $500,000 is referred to herein as the "Adjustment Escrow Amount." (c) In accordance with the terms of the Closing Escrow Agreement, at the Closing, Parent shall deposit with the Closing Escrow Agent an amount equal to Four Million Dollars ($4,000,000) (the "Indemnity Escrow Amount" and together with the "Adjustment Escrow Amount" the "Closing Escrow Amount"). (d) The Closing Escrow Agent shall maintain the Adjustment Escrow Amount and the Indemnity Escrow Amount in two separate accounts to be managed and paid out by the Closing Escrow Agent in accordance with the terms of the Closing Escrow Agreement. 3.10 Conversion of the Shares of Sub. On the Closing Date, each share of the Common Stock of Sub held by Parent shall be converted into and represent 100 shares of the Common Stock of the Surviving Corporation. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Parent and Sub that: 4.1 Organization and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and each Subsidiary of the Company is a corporation duly organized, validly existing and in good standing under the laws of the States of Delaware, Connecticut or Oklahoma. The Company and each of its Subsidiaries has the requisite corporate power and authority to carry on its business as it is now being conducted and is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of its properties owned or held under lease or the nature of its activities makes such qualification necessary, except where the failure to be so qualified will not have a Material Adverse Effect. SCHEDULE 4.1 includes a list of the Company's Subsidiaries. At the Closing, the Company shall deliver to Parent and Sub a complete and correct copy of the Certificates of Incorporation and By-laws or comparable organizational documents, each as amended to the Closing Date, of the Company and each of its Subsidiaries. - 10 - 16 4.2 Capitalization. (a) The authorized capital stock of the Company consists of 500,000 shares of Class A Common Stock, 700,000 shares of Class B Common Stock, 8,000 shares of Convertible Preferred Stock, 6,000 shares of Redeemable Preferred Stock and 30,000 shares of Preferred Stock. As of the date hereof, 262,000 shares of Class A Common Stock, 166,817 shares of Class B Common Stock, 8,000 shares of Convertible Preferred Stock and 6,000 shares of Redeemable Preferred Stock are validly issued and outstanding, fully paid and nonassessable. As of the date hereof, there are no bonds, debentures, notes or other indebtedness issued or outstanding having general voting rights under ordinary circumstances. As of the date hereof, except as disclosed on SCHEDULE 4.2, and except for (i) stock options to acquire 3,534 shares of Class B Common Stock (the "Stock Options"), (ii) the conversion rights of holders of the Convertible Preferred Stock, and (iii) as contemplated by this Merger Agreement, there are no options, warrants, calls or other rights, agreements or commitments presently outstanding obligating the Company to issue, deliver or sell shares of its capital stock, or obligating the Company to grant, extend or enter into any such option, warrant, call or other such right, agreement or commitment. (b) Except as disclosed on SCHEDULE 4.2, all the outstanding shares of capital stock of each Subsidiary of the Company are validly issued, fully paid and nonassessable and owned by the Company or by a wholly-owned Subsidiary of the Company, free and clear of any lien, charge, security interest, pledge, or encumbrance of any kind or nature (any of the foregoing being a "Lien"). There are no existing options, warrants, calls or other rights, agreements or commitments of any character relating to the sale, issuance or voting of any shares of the issued or unissued capital stock of any of the Subsidiaries of the Company which have been issued, granted or entered into by the Company or any of its Subsidiaries. (c) Except for the capital stock of its Subsidiaries and except for the ownership interests set forth on SCHEDULE 4.2, the Company does not own, directly or indirectly, any capital stock or other ownership interest in any corporation, partnership, joint venture or other entity. 4.3 Authority Relative to This Merger Agreement. The Company has the necessary corporate power and authority to execute and deliver this Merger Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Merger Agreement and the consummation of the transactions contemplated hereby by the Company have been duly and validly authorized and approved by the Company's Board of Directors and except for the approval of the holders of the Redeemable Preferred Stock, the Convertible Preferred Stock, the Class A Common Stock and the Class B Common Stock, no other corporate or stockholder proceedings on the part of the Company are necessary to authorize or approve this Merger Agreement or to consummate - 11 - 17 the transactions contemplated hereby. This Merger Agreement has been duly executed and delivered by the Company, and assuming its due authorization, execution and delivery by Parent and Sub, constitutes the valid and binding obligation of the Company enforceable against the Company in accordance with its terms except as such enforceability may be limited by general principles of equity or principles applicable to creditors' rights generally. The Company has delivered to Parent and Sub a certified copy of the minutes of the meetings of the Board of Directors of the Company at which the execution and delivery of this Merger Agreement and the transactions contemplated hereby were authorized and approved. 4.4 No Conflicts, Required Filings and Consents. (a) Except as disclosed on SCHEDULE 4.4, none of the execution and delivery of this Merger Agreement by the Company, the consummation by the Company of the transactions contemplated hereby, or compliance by the Company with any of the provisions hereof, will (i) conflict with or violate the Certificate of Incorporation or By-laws of the Company or the comparable organizational documents of any of the Company's Subsidiaries, (ii) subject to receipt or filing of the required Consents referred to in SECTION 4.4(B), result in a violation of any statute, ordinance, rule, regulation, order, judgment or decree applicable to the Company or any of its Subsidiaries, or by which any of them or any of their respective properties or assets may be bound or affected, or (iii) result in a violation or breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of any Lien on any of the property or assets of the Company or any of the Company's Subsidiaries, any of the foregoing referred to in clause (ii) or this clause (iii) being a "Violation" pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective properties or assets is bound or affected that involves a payment by the Company or any of its Subsidiaries of Fifty Thousand Dollars ($50,000) or more on an annual basis, except in the case of the foregoing clauses (ii) and (iii) for any such Violation which would not have a Material Adverse Effect. (b) None of the execution and delivery of this Merger Agreement by the Company, the consummation by the Company of the transactions contemplated hereby or compliance by the Company with any of the provisions hereof will require any consent, waiver, license, approval, authorization, order or permit of, or registration or filing with, or notification to (any of the foregoing being a "Consent"), any government or subdivision thereof, domestic, foreign, multinational, or any administrative, governmental, or regulatory authority, agency, commission, court, tribunal or body, domestic, foreign or - 12 - 18 multinational (a "Governmental Entity"), except for (i) the filing of the Certificate of Merger pursuant to the DGCL, (ii) compliance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (iii) such filings as may be required in connection with the taxes described in SECTION 8.7, and (iv) Consents from the FCC in connection with the transfer of control of the FCC licenses applicable to the Company's radio broadcast operations (such licenses being referred to herein collectively as the "FCC Licenses," and such consents, without the requirement of obtaining a Final Order, being referred to herein collectively as the "FCC Consents"), and (v) Consents the failure of which to obtain would not have a Material Adverse Effect. 4.5 Reports and Financial Statements. (a) The audited consolidated balance sheets as of December 31, 1995 and 1994 and the related consolidated statements of operations, stockholders' deficiency and cash flows for each of the years ended December 31, 1995 and 1994 (including the related notes and schedules thereto) of the Company, true and complete copies of which have previously been delivered to Parent (the "Audited Financial Statements"), present fairly, in all material respects, the consolidated financial position, and the consolidated results of operations and cash flows of the Company and its consolidated Subsidiaries as of the dates or for the periods presented therein in conformity with GAAP applied on a consistent basis during the periods involved except as otherwise noted therein, including in the related notes. (b) The unaudited consolidating and consolidated balance sheets and the related consolidating and consolidated statements of operations and consolidated cash flows of the Company for the period ended May 31, 1996 (the "Interim Financial Statements"), true and complete copies of which have previously been delivered to Parent, have been prepared in accordance with GAAP consistently applied as to both the consolidated and separate operating entities for Interim Financial Statements and on a basis consistent with the Audited Financial Statements except for year-end adjustments for interest, general, administrative and overhead expenses of the Company and the allocation thereof among its Subsidiaries. The Interim Financial Statements present fairly, in condensed or summary form in all material respects, the consolidated financial position, results of operations and cash flows of the Company and its consolidated Subsidiaries as of the dates and for the periods presented therein; subject, however, to the absence of footnotes which otherwise would be required under GAAP. All appropriate adjustments are reflected in the Interim Financial Statements. (c) Except as disclosed in the Company's Audited Financial Statements or in the Interim Financial Statements or as otherwise disclosed on SCHEDULE 4.5 as of the date hereof, neither the Company nor any of its Subsidiaries has any liabilities or any obligations of any nature whether accrued, - 13 - 19 contingent or otherwise, that would be required by GAAP to be reflected on a consolidated balance sheet of the Company and its Subsidiaries (including the notes thereto), except for liabilities or obligations incurred in the ordinary course of business since December 31, 1995. The accounting methods, practices and procedures employed at each of the Subsidiaries of the Company in the preparation of the Audited Financial Statements and the Interim Financial Statements have been applied on a basis consistent with the Company's past practices. 4.6 Litigation. Except as disclosed on SCHEDULE 4.6, there is no suit, action or proceeding pending or, to the knowledge of the Company, threatened, against or affecting the Company or any of its Subsidiaries that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, nor is there any judgment, decree, injunction or order of any Governmental Entity or arbitrator outstanding against the Company or any of its Subsidiaries, having, or which could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 4.7 Absence of Certain Changes or Events. Except as disclosed on SCHEDULE 4.7, since December 31, 1995, the Company has conducted its business only in the ordinary course, and there has not been (i) any change that could reasonably be expected to have a Material Adverse Effect, as defined below, other than changes relating to or arising from general economic, market or financial conditions or generally affecting the industries in which the Company operates, (ii) any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to any of the Company's capital stock, or, except in connection with the Stock Options, any redemption, purchase or other acquisition of its capital stock, (iii) any split, combination or reclassification of any of the Company's capital stock or, except with respect to the Stock Options or with respect to the conversion of the Convertible Preferred Stock, any issuance, or the authorization of any other securities in respect of, in lieu of or in substitution for shares of the Company's capital stock, (iv) except as previously disclosed to Parent and Sub, any granting by the Company or any of its Subsidiaries to any employee of the Company of any increase in compensation, except in the ordinary course of business or as required under employment agreements in effect as of or prior to the date of this Merger Agreement, (v) any granting by the Company or any of its Subsidiaries to any such employee of any increase in severance or - 14 - 20 termination pay, except as required under employment agreements in effect as of or prior to the date of this Merger Agreement, (vi) any entry by the Company or any of its Subsidiaries into any employment, severance or termination agreement with any such employee, except in the ordinary course of business, (vii) any damage, destruction or loss, whether or not covered by insurance, that could reasonably be expected to have a Material Adverse Effect, or (viii) any change in accounting methods, principles or practices by the Company or any of its Subsidiaries materially affecting their respective assets, liabilities or business, except insofar as may have been required by a change in GAAP. 4.8 Employee Matters. SCHEDULE 4.8 lists the names and current annual salary or hourly rates of pay of all employees of the Company and its Subsidiaries, which list includes for each such person the amounts paid or payable as base salary and such list identifies each Company Benefit Plan or Compensation Arrangement, as defined below, which provides benefits to such employees. SCHEDULE 4.8 lists each Company Benefit Plan and each Compensation Arrangement. The Company has provided to Parent true and complete copies of all written, and descriptions of any unwritten Company Benefit Plans and Compensation Arrangements (or related insurance policies) and any amendments thereto, along with copies of any employee handbooks or similar documents describing such Company Benefit Plans and Compensation Arrangements and copies of any employment agreements. Except as set forth on SCHEDULE 4.8, neither the Company nor any Subsidiary is a party to any written or oral contract of employment with any employee, other than oral employment agreements terminable at will without penalty. The Company and its Subsidiaries are not subject to or bound by any labor agreement or collective bargaining agreement (other than employment contracts disclosed on SCHEDULE 4.8). There is no labor dispute, grievance, controversy, strike or request for union representation pending or threatened against the Company or its Subsidiaries relating to or materially affecting the business or operations of the Company or any of its Subsidiaries and, to the knowledge of the Company or any of its Subsidiaries, there has been no occurrence of any events which would give rise to any material labor dispute, controversy, strike or request for representation. Except as disclosed on SCHEDULE 4.8, neither the Company nor any Subsidiary is a party to or has in effect any Company Benefit Plan or Compensation Arrangement, and there are no Company Benefit Plans or Compensation Arrangements which shall become effective after the date of this Merger Agreement. For purposes of this Merger Agreement: (i) the term "Company Benefit Plan" shall mean any plan, program or arrangement, whether or not written, that is - 15 - 21 or was an "employee benefit plan" as such term is defined in Section 3 (3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and (a) which was or is established or maintained by the Company or any ERISA Affiliate; (b) to which either the Company or any ERISA Affiliate contributed or were obligated to contribute or to fund or provide benefits; or (c) which provides or promises benefits to any person who performs or who has performed services for the Company or any ERISA Affiliate and because of those services is or has been (A) a participant therein or (B) entitled to benefits thereunder; (ii) the term "Compensation Arrangement" shall mean any plan or compensation arrangement other than a Company Benefit Plan, whether written or unwritten, which provides to employees, former employees, officers, directors or shareholders of the Company or any ERISA Affiliate any compensation or other benefits, whether deferred or not, in excess of base salary or wages (excluding overtime pay), including, but not limited to, any bonus or incentive plan, stock rights plan, employee stock ownership plan, deferred compensation arrangement, life insurance, stock purchase plan, severance pay plan and any other perquisites and employee fringe benefit plan; (iii) the term "ERISA Affiliate" shall mean any corporation, partnership, sole proprietorship or other entity related to the Company or any Subsidiary within the meaning of Sections 414(b), (c), (m) or (o) of the Code. 4.9 ERISA. (a) All Company Benefit Plans have been administered without material exception in accordance with their terms and with the applicable provisions of ERISA and the Internal Revenue Code of 1986, as amended (the "Code"). Each of the Company Benefit Plans which is intended to meet the requirements of Section 401(a) of the Code, and each amendment thereto, is the subject of a favorable determination letter, and no plan amendment that is not the subject of a favorable determination letter would adversely affect the validity of any Company Benefit Plan's letter. No Company Benefit Plan is a "multiemployer plan" within the meaning of Section 3(37) of ERISA. No Company Benefit Plan is subject to Title IV of ERISA or Section 412 of the Code. Neither the Company nor any of its Subsidiaries has engaged in any non-exempt "prohibited transactions," as such term is defined in Section 4975 of the Code or Section 406 of ERISA, involving the Company Benefit Plans which would subject the Company or its Subsidiaries to any material penalty or tax imposed under Section 502(i) of ERISA or Section 4975 of the Code. Neither the Company nor any of its Subsidiaries has made a complete or partial withdrawal, within the meaning of Section 4201 of ERISA, from any multiemployer plan which has resulted in, or is reasonably expected to result in, any withdrawal liability to the Company or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries has engaged in any transaction described in Section 4069 of ERISA within the last five years. Except as disclosed on - 16 - 22 SCHEDULE 4.9, neither the execution and delivery of this Merger Agreement nor the consummation of the transactions contemplated hereby will (i) result in any material payment (including, without limitation, severance, unemployment compensation or golden parachute) becoming due to any director or employee of the Company, (ii) materially increase any benefits otherwise payable under any Company Benefit Plan or Compensation Agreement or (iii) result in the acceleration of the time of payment or vesting of any such benefits to any material extent. No Company Benefit Plan is a multiple employer welfare arrangement as defined in ERISA Section 3(40). (b) Except as disclosed on SCHEDULE 4.9, the Company and its Subsidiaries, as applicable, have: (i) filed or caused to be filed all returns and reports on the Company Benefit Plans that they are required to file; and (ii) paid or made adequate provision for all fees, interest, penalties, assessments or deficiencies that have become due pursuant to those returns or reports or pursuant to any assessment or adjustment that has been made relating to those returns or reports. All other material fees, interest, penalties and assessments that are payable by or for the Company or any of its Subsidiaries have been timely reported, fully paid and discharged. There are no material unpaid fees, penalties, interest or assessments due from the Company or any of its Subsidiaries with respect to any Company Benefit Plan. (c) The Company and its Subsidiaries are not aware of the existence of any governmental audit or examination of any Company Benefit Plan or Compensation Arrangement or of any facts which would lead the Company and its Subsidiaries to believe that any such audit or examination is pending or threatened. There exists no action, suit or claim (other than routine claims for benefits) with respect to any Company Benefit Plan or Compensation Arrangement pending or, to the knowledge of the Company and its Subsidiaries, threatened against any of such plans or arrangements, and the Company and its Subsidiaries do not have knowledge of any facts which could give rise to any such action, suit or claim. (d) Except as disclosed on SCHEDULE 4.9, neither the Company nor any ERISA Affiliate sponsors, maintains or contributes to any Company Benefit Plan or Compensation Arrangement that provides medical or life insurance coverage to retirees or other former employees of the Company or any of its Subsidiaries. (e) SCHEDULE 4.9 contains a complete and accurate list of all qualified beneficiaries, as defined under Section 4980B of the Code, who currently are covered by the Company's or any Subsidiary's group health plan, and the Company and each of its Subsidiaries agrees to provide to Parent, at the Closing, an updated list of qualified beneficiaries as of the Closing Date. - 17 - 23 (f) SCHEDULE 4.9 contains a complete and accurate list of all qualified domestic relations orders, as defined in Section 414(p) of the Code, which affect benefits under any Company Benefit Plan. (g) Neither the Company nor any of its Subsidiaries is a party to any agreement, contract, arrangement or plan that has resulted or would result, separately or in the aggregate, in the payment of any "excess parachute payments" within the meaning of Section 280G of the Code. (h) Fewer than fifty full-time employees are employed by the Company and its Subsidiaries at the Company's corporate headquarters in the Bridgeport, Connecticut metropolitan area. 4.10 Taxes. Except as set forth in SCHEDULE 4.10: (a) For purposes of this Agreement, "Tax" (and, with correlative meaning, "Taxes") means all federal, state, local or foreign income, gross receipts, windfall profits, severance, property, production, sales, use, license, excise, franchise, capital, transfer, employment, withholding and other taxes and assessments, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties; and "Tax Returns" means all federal, state, local and foreign income and franchise Tax returns and Tax reports (including any attached schedules) and other Tax statements and other similar filings required to be filed, including any information return, claim for refund, amended return, extension or declaration of estimated Tax. (b) The Company and each of its Subsidiaries have duly and timely filed all Tax Returns required to be filed by them, either on a separate, combined or consolidated basis, and the Company has delivered to Parent true and complete copies of all of the Tax Returns of the Company and its Subsidiaries. (c) The Company and its Subsidiaries have paid or, prior to the Effective Time will pay, all Taxes that are due and payable or required to be withheld by them, including Taxes for which no Tax Return was required to be filed, and all Taxes claimed to be due by any federal or state taxing authority (except to the extent such Taxes are being contested in good faith by appropriate proceedings and a reserve or other appropriate provision as required in conformity with GAAP has been made in the Audited Financial Statements). The Company and its Subsidiaries have paid or made adequate reserve or other appropriate provision as required in accordance with GAAP in the Audited Financial Statements of the Company for all material Taxes payable in respect of all periods ending on or prior to December 31, 1995. Any unpaid Taxes of the Company and its Subsidiaries relating to all periods ending on or prior to the Closing Date and not reflected on the Audited Financial Statements of the Company will be included or recorded as a - 18 - 24 current liability or properly reserved against in the Estimated Closing Statement. (d) Neither the Company nor any of its Subsidiaries has waived or been requested to waive any statute of limitations in respect of Taxes. (e) Except as disclosed on SCHEDULE 4.10, no material issues have been raised (and are currently pending) by any taxing authority in connection with any of the Tax Returns referred to in SECTION 4.10(B) and all material deficiencies asserted or assessments made as a result of any examinations by taxing authorities have been paid in full. (f) The Company and each of its Subsidiaries have filed their federal income tax returns as a member of an affiliated group (as defined in Section 1504(a) of the Code) of which the Company is the common parent (the "Company Consolidated Group"). Neither the Company nor any of its Subsidiaries has been a member of any other affiliated group. (g) Except as disclosed on SCHEDULE 4.10, neither the Company nor any of its Subsidiaries has any liability for Taxes, whether currently due or deferred, of any entity or person (i) under Treasury Regulation Section 1.1502-6 (or any similar provision of state or local law), (ii) as a transferee or successor, (iii) by contract, or (iv) otherwise. (h) No consent under Section 341(f) of the Code has ever been filed with respect to any of the Company Consolidated Group. Neither the Company nor any of its Subsidiaries will be required to include any amount in its income or exclude any amount from its deductions in any taxable period ending after the Closing Date by reason of a change in method of accounting or use of the installment method of accounting in any period ending on or prior to the Closing Date. (i) Neither the Company nor any of its Subsidiaries is, and for the five years preceding the Closing Date has not been, a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Code. (j) SCHEDULE 4.10 includes a summary setting forth: (i) the tax basis of the assets of the Company and its Subsidiaries as of December 31, 1995 and estimated as of December 31, 1996; (ii) the net operating loss carryover, general business credit carryover, alternative minimum tax carryover and capital loss carryover of the Company Consolidated Group available for federal, state and local income tax purposes as of December 31, 1995 and estimated as of December 31, 1996; (iii) all federal, state and local tax elections in effect for the Company Consolidated Group as of December 31, 1995 and (iv) the Company's basis including the earnings and profits (and any adjustment required by Section 1503(e) of the Code) and excess loss - 19 - 25 accounts, if any, in the stock of each Subsidiary as of December 31, 1995 and estimated as of December 31, 1996. (k) The aggregate basis of "3-year property," "5-year property," "7-year property,", "10-year property," "15-year property," and "nonresidential real property" (each as defined in Section 168 of the Code) of the Company and its Subsidiaries for their taxable year ending on December 31, 1996 is estimated to be not less than the following: 3-year property $__________ 5-year property $__________ 7-year property $__________ 10-year property $__________ 15-year property $__________ Nonresidential real property $__________ (l) The aggregate net operating loss carryover under Section 172 of the Internal Revenue Code of the Company Consolidated Group for the taxable year ending on December 31, 1996 is estimated to be not less than $__________. (m) Within 60 days of the date of this Merger Agreement, the Company shall deliver to Parent an updated SCHEDULE 4.10 including the information set forth in paragraphs (j), (k) and (l) above. 4.11 State Takeover Statutes. The Board of Directors of the Company has approved the Merger and this Merger Agreement, and such approval is sufficient to render inapplicable to the Merger, this Merger Agreement, and the transactions contemplated by this Merger Agreement, the provisions of Section 203 of DGCL. To the Company's knowledge, no other state takeover statute or similar statute or regulation, applies or purports to apply to the Merger, this Merger Agreement, or any of the transactions contemplated by this Merger Agreement. 4.12 Brokers. No broker or finder is entitled to any broker's or finder's fee in connection with the transactions contemplated by this Merger Agreement based upon arrangements made by or on behalf of the Company. 4.13 Environmental Matters. Except as set forth on SCHEDULE (a) To the best knowledge of the Company and its Subsidiaries, the Company and each of its Subsidiaries have materially complied and are in material compliance with, and the Real Property is in material compliance with, all rules and regulations of the FCC, the Environmental Protection Agency and any other federal, state or local government authority pertaining to human exposure to RF radiation and all applicable rules and regulations of federal, state and local laws, including statutes, regulations, ordinances, codes, rules, as amended, relating to the discharge of air pollutants, water pollutants or process - 20 - 26 waste water or otherwise relating to the environment or Hazardous Materials or toxic substances including, but not limited to, the Federal Solid Waste Disposal Act, the Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource Conservation and Recovery Act of 1976, the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, regulations of the Environmental Protection Agency, the Toxic Substance Control Act, regulations of the Nuclear Regulatory Agency, and regulations of any state department of natural resources or state environmental protection agency now in effect (the "Environmental Laws"). (b) None of the Company or its Subsidiaries is a party to any material litigation or administrative proceeding nor, to the knowledge of the Company and its Subsidiaries, is any material litigation or administrative proceeding threatened against the Company or any of its Subsidiaries, which in either case: (i) asserts or alleges that the Company or any of its Subsidiaries has violated any Environmental Laws; (ii) asserts or alleges that the Company or any of its Subsidiaries is required to clean up, remove or take remedial or other responsive action due to the disposal, depositing, discharge, leaking or other release of any wastes, substances, or materials (whether solids, liquids or gases) that under Environmental Laws are deemed hazardous, toxic, pollutants, or contaminants, including, without limitation, substances defined as "hazardous wastes," "hazardous substances," "toxic substances," "radioactive materials," or other similar designations in any Environmental Laws, including, but not limited to polychlorinated biphenyls (PCBs), asbestos, lead-based paints, infectious wastes, radioactive materials and wastes and petroleum and petroleum products (including, without limitation, crude oil or any fraction thereof) ("Hazardous Materials"); or (iii) asserts or alleges that the Company or any of its Subsidiaries is required to pay all or a portion of the cost of any past, present or future cleanup, removal or remedial or other responsive action which arises out of or is related to the disposal, depositing, discharge, leaking or other release of any Hazardous Materials by the Company or any of its Subsidiaries. (c) Except as set forth in the following sentence, to the best knowledge of the Company and its Subsidiaries, with respect to the time before the Company and its Subsidiaries owned or occupied any Real Property, no Person has caused or permitted Hazardous Materials to be stored, deposited, treated, recycled or disposed of on, under or at any Real Property owned, leased, used or occupied by the Company or any of its Subsidiaries, except in accordance with applicable Environmental Laws and except for such matters as have not had, and are not reasonably anticipated by any of the Company or its Subsidiaries to have a Material Adverse Effect. To the best knowledge of the Company and its Subsidiaries, if any Person owning or occupying the Real Property before the Company and its Subsidiaries caused or permitted Hazardous Materials to be stored, treated, recycled or disposed - 21 - 27 of on, under or at any Real Property, such condition has been remedied in compliance with Environmental Laws. (d) There are not now, nor to the knowledge of the Company and its Subsidiaries have there previously been, tanks or other facilities on, under, or at the Real Property which contained any Hazardous Materials which, if known to be present in soils or ground water, would require cleanup, removal or some other remedial action under Environmental Laws. (e) None of the Company or its Subsidiaries has received notice that it is subject to any judgment, order or citation related to or arising under any Environmental Laws or that it is named or listed as a potentially responsible party by any governmental body or agency in a matter related to or arising under any Environmental Laws. (f) The operation of the Stations does not exceed the permissible levels of exposure to RF radiation specified in the FCC's applicable rules, regulations and policies concerning RF radiation. (g) The Company and each of its Subsidiaries have been duly issued, and currently have and will maintain through the Closing Date, all permits, licenses, certificates and approvals required under any Environmental Law ("Environmental Permits"), except where the failure to have such Environmental Permits would not have a Material Adverse Effect. Except in accordance with the Environmental Permits, or as otherwise permitted by applicable laws, there has been no discharge by any of the Company or its Subsidiaries of any Hazardous Materials or any other material regulated by such permits, licenses, certificates or approvals, which would require remediation under the Environmental Laws. 4.14 Contracts. (a) SCHEDULE 4.14 lists all contracts, agreements, leases, arrangements, commitments or understandings, written or oral, expressed or implied to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their properties or assets is bound (the "Contracts") other than contracts for the sale of advertising time for cash at standard rates. (b) Except as set forth in SCHEDULE 4.14: (1) The Company and each of its Subsidiaries have performed each material term, covenant and condition of each of the Contracts, and no material default on the part of the Company or any of its Subsidiaries, and to the knowledge of the Company and its Subsidiaries, any other party thereto, exists under any of the Contracts; - 22 - 28 (2) No event has occurred under any of the Contracts which would constitute a material default thereunder on the part of the Company or any of its Subsidiaries and, to the knowledge of the Company and its Subsidiaries, any other party thereto but for the requirement that notice be given or time elapse or both; (3) Each of the Contracts: (i) is in full force and effect, unimpaired by any acts or omissions of the Company or its Subsidiaries; (ii) constitutes the legal and binding obligation of, and is legally enforceable against, the Company and its Subsidiaries as applicable; and (iii) constitutes the legal and binding obligations of any other party thereto in accordance with its terms, except as enforcement of such Contracts may be limited by general principles of equity or principles applicable to creditors' rights generally; (4) The Company and its Subsidiaries have furnished to Parent and Sub true and complete copies of all Contracts, including all amendments, modifications and supplements thereto; and (5) Set forth on SCHEDULE 4.14 is a list of third party consents (other than Consents of Governmental Entities) required for the consummation of the Merger with consents marked with an asterisk designating consents that the Company shall be required to have obtained in order to satisfy the condition precedent to the Merger referred to in SECTION 9.3(F) (the "Required Consents"). Except to the extent that any such third party consents are not obtained, each Contract shall, on and after the Effective Time, continue in full force and without penalty or other adverse consequence. For purposes of this SECTION 4.14 only, the term "material default" shall mean any default which would allow the other party to such Contract to terminate such contract or accelerate any material amounts due thereunder. 4.15 Tangible Personal Property. SCHEDULE 4.15 lists all items of tangible personal property used or useful in the business or operations of the Company and its Subsidiaries, other than property acquired or leased pursuant to trade and barter agreements with a value at the time of the acquisition thereof of at least Two Thousand Dollars ($2,000) (the "Personal Property"). All items of leased Personal Property listed in SCHEDULE 4.15 are marked with an asterisk. Except as disclosed on SCHEDULE 4.15, the Company or its Subsidiaries, as the case may be, have good title to, or valid leasehold interests in, all items of Personal Property free and clear of all Liens and all Personal Property is in working condition, ordinary wear and tear excepted, and is not in need of imminent repair or replacement. - 23 - 29 4.16 Intangible Property. (a) SCHEDULE 4.16 lists (i) all copyrights and copyright applications owned by the Company or any of its Subsidiaries related to the Stations (the "Copyrights"); (ii) all trade names, trademarks, service marks, jingles, slogans, logos, trademark and service mark registrations and trademark and service mark applications owned, used, held for use, licensed by or leased by the Company or any of its Subsidiaries (the "Trademarks"), together with all of the rights of each of the Company and its Subsidiaries in and to the call letters for each Station, all rights to and goodwill in the name "NewCity Communications" or any logo, variation or derivation thereof, and all goodwill associated with any of such items (the "Intangible Property"). (b) Except as set forth on SCHEDULE 4.16: (1) there are no claims, demands or proceedings instituted, pending or, to the knowledge of any of the Company and its Subsidiaries, threatened by any third party pertaining to or challenging the right of the Company or any of its Subsidiaries to use any of the Intangible Property; (2) there are no facts which would render any of the Intangible Property invalid or unenforceable; (3) there is no trademark, trade name, patent or copyright owned by a third party which any of the Company and its Subsidiaries are using without license or other legal right to do so (which licenses, if any, constitute part of the Contracts); and (4) there are no royalty agreements (which royalty agreements, if any, constitute part of the Contracts) between any of the Company or any of its Subsidiaries and any third party relating to any of the Intangible Property which provide for annual payments or receipts by any of the Company or any of its Subsidiaries of more than Five Thousand Dollars ($5,000) in the case of any single agreement and One Hundred Thousand Dollars ($100,000) in the aggregate. 4.17 Real Property. (a) SCHEDULE 4.17 lists all fee simple and leasehold interests in real property of the Company and its Subsidiaries including all buildings, improvements and fixtures thereon, together with all strips and gores, rights of way, easements, privileges and appurtenances pertaining thereto along with any right, title and interest of any of the Company or any of its Subsidiaries in and to any street adjoining any portion of the Real Property (the "Real Property"). (b) Except as disclosed on SCHEDULE 4.17: - 24 - 30 (1) The Company or its Subsidiaries, as the case may be, has good, valid and insurable fee simple absolute or leasehold interest in the Real Property. Attached to SCHEDULE 4.17 are all policies of title insurance currently existing in favor of each of the Company and its Subsidiaries, as applicable, with respect to the Real Property. Except for Permitted Liens and the items set forth on SCHEDULE 4.17, there are no material Liens, restrictions or encumbrances to title to any portion of the Real Property. The Company and its Subsidiaries have not subjected the Real Property to any material easements, rights, duties, obligations, covenants, conditions, restrictions, limitations or agreements not of record. (2) There is no pending condemnation or similar proceeding affecting the Real Property or any portion thereof, and to the knowledge of any of the Company and its Subsidiaries, no such action is presently contemplated or threatened. (3) None of the Company or any of its Subsidiaries has received any notice from any insurance company of any material defects or inadequacies in the Real Property or any part thereof which would materially and adversely affect the insurability of all or any portion of the Real Property or the premiums for the insurance thereof. None of the Company or any of its Subsidiaries has received any notice from any insurance company which has issued or refused to issue a policy with respect to any portion of the Real Property or by any board of fire underwriters (or other body exercising similar functions) requesting the performance of any material repairs, alterations or other work with which compliance has not been made. (4) There are no parties in possession of any portion of the Real Property other than the Company or its Subsidiaries, as applicable, whether as lessees, tenants at will, trespassers or otherwise, except for lessees of transmission towers which do not impair the ability of the Company and its Subsidiaries to use such towers and which are disclosed on SCHEDULE 4.17. (5) No zoning, building, environmental, land-use, fire or other federal, state or municipal law, ordinance, regulation or restriction is violated by the continued maintenance, operation or use of the Real Property or any tract or portion thereof or interest therein in its present manner except for such violations which would not have a Material Adverse Effect. The current use of the Real Property and all parts thereof as aforesaid does not violate any restrictive covenants affecting the Real Property the violation of which would have a Material Adverse Effect. (6) There is no law, ordinance, order, regulation or requirement now in existence, including, without limitation, any Environmental Law which would require any material expenditure to modify or improve any of the Real Property in order to bring it into compliance therewith. - 25 - 31 (7) The Real Property has adequate access to dedicated and accepted public roads either directly or pursuant to perpetual easements, and there is no pending or, to the knowledge of any of the Company and its Subsidiaries, threatened governmental or other proceeding which would impair or curtail such access. (8) There are presently in existence water, sewer, gas and/or electrical lines or private systems on the Real Property which are sufficient to serve adequately the current operations of each building or other facility located on the Real Property. (9) There are no material structural, electrical, mechanical, plumbing, air conditioning, heating or other defects in the buildings located on the Real Property and the roofs of the building located on the Real Property are free from material leaks and in good condition. 4.18 Undisclosed Liabilities. The Company and its Subsidiaries have no debt, liability or obligation whether accrued, absolute, contingent or otherwise, including, without limitation, any liability or obligation on account of Taxes or any governmental charges or penalty, interest or fines, except: (i) those liabilities reflected or disclosed in the Audited Financial Statements and the Interim Financial Statements; (ii) liabilities disclosed in SCHEDULE 4.18 including any contingent liabilities; (iii) liabilities incurred in the ordinary course of business (other than contingent liabilities) since December 31, 1995; and (iv) liabilities incurred in connection with the transactions provided for in this Merger Agreement. 4.19 Governmental Authorizations. (a) Each of the Company and its Subsidiaries holds, and on the Closing Date each of the Company and its Subsidiaries will hold, regular and valid Licenses from the FCC to operate the Stations as currently operated in accordance with the terms of the FCC License for each main Station disclosed on SCHEDULE 4.19. Applications are pending at the FCC for the renewal of the FCC Licenses for Radio Station WWKA(FM), licensed to Orlando, Florida and Radio Station WCFB(FM), licensed to Daytona Beach, Florida. Each of the Company and its Subsidiaries has obtained all material qualifications, registrations, privileges, franchises, licenses, permits, approvals and authorizations required for each of the Company and each of its Subsidiaries to own and lease its properties and assets, to operate the Stations in the manner operated on the date hereof and to carry on the businesses of the Stations substantially as they are now conducted (the "Company Permits"). Except as listed on SCHEDULE 4.19, no action or proceeding is pending or, to the knowledge of the Company and its Subsidiaries, threatened before the FCC or any other governmental body to revoke, refuse to renew or modify such Licenses or other authorizations of any Station other than those requests for modification initiated and submitted by the Company or any of its - 26 - 32 Subsidiaries, none of which is adverse. To the best knowledge of the Company and its Subsidiaries, the Company and its Subsidiaries are in compliance in all material respects with applicable laws and the terms of the Company Permits. To the best knowledge of the Company and its Subsidiaries, except as disclosed on SCHEDULE 4.19, the business operations of the Company and its Subsidiaries are being conducted in compliance in all material respects with any applicable law, ordinance or regulation of any Governmental Entity. (b) To the best knowledge of the Company and its Subsidiaries, except as disclosed on SCHEDULE 4.19, there are no facts or circumstances which would disqualify the Company or any of its Subsidiaries under the Communications Act of 1934, as amended (the "Communications Act"), from transferring control of the Company's radio broadcast operations. Except as disclosed on SCHEDULE 4.19, there are no FCC notices of violations or adverse orders against the Company or its Subsidiaries and, as of the date hereof, there are no actions, suits or proceedings pending or, to the knowledge of the Company and its Subsidiaries, threatened before the FCC for the cancellation, material involuntary modification or non-renewal of any FCC Licenses, except for any such notice of violation, adverse order, action, suit or proceeding generally affecting the industries in which the Company operates or which would not, individually or in the aggregate, have a Material Adverse Effect and except for FCC License renewal proceedings which the Company reasonably expects will result in renewals of the FCC Licenses. 4.20 Compliance with FCC Requirements. Except as set forth on SCHEDULE 4.20, the Company and each of its Stations, their physical facilities, electrical and mechanical systems and transmitting and studio equipment are being and have been operated in all material respects in accordance with the specifications of the applicable FCC Licenses, and the Company, its Subsidiaries and the Stations are in substantial compliance with all material requirements, rules and regulations of the FCC. The Company and its Stations have complied in all material respects with all requirements of the FCC and the Federal Aviation Administration with respect to the construction and/or alteration of the Company's and the Stations' antenna structures, and "no hazard" determinations for each antenna structure have been obtained, where required. Except as set forth in SCHEDULE 4.20, all reports and other filings required by the FCC with respect to the Company, its Subsidiaries and the Stations, including, without limitation, material required to be placed in the public inspection files of each of the Stations, have been duly filed by the Company and its Subsidiaries as of the date hereof, and are true and complete in all material respects. Except as set forth on SCHEDULE 4.20, there is currently pending no proceeding before the FCC relating to the Company, its Subsidiaries or the Stations, other than regularly scheduled license renewal proceedings, or proceedings relating to the radio industry in general. - 27 - 33 4.21 Insurance. The Company and its Subsidiaries have in full force and effect property, liability and casualty insurance and broadcasters' insurance insuring the business, properties and assets of the Stations. SCHEDULE 4.21 lists all such insurance policies held by the Company and each of its Subsidiaries. 4.22 Powers of Attorney. Except as set forth on SCHEDULE 4.22, there are no Persons holding a power of attorney on behalf of the Company or any of its Subsidiaries. 4.23 Payment of Indebtedness. Except as set forth on SCHEDULE 4.23, the only Indebtedness of the Company or any of its Subsidiaries of any kind is (i) that owed by the Company to the lenders under the Loan Agreement between Fleet National Bank and the Company dated as of November 1, 1993, as amended (the "Loan Agreement"), (ii) that owed under the 11 3/8 Senior Subordinated Notes of the Company (the "Senior Subordinated Notes") issued pursuant to the Indenture dated as of November 2, 1993, as amended, by and among the Company, certain guarantors and Shawmut Bank National Association, (iii) that owed under the Term Note made by the Company on May 16, 1995 to Central Broadcast Company in connection with its acquisition of KJSR (the "KJSR Promissory Note"), and (iv) that owed under the Birmingham Loan Agreement. On the Closing Date, the Parent will be permitted to repay, without any further notice by Parent or Sub or any other required action by Parent or Sub or any premium, penalty or other charge (other than filing fees to release any Liens) of any kind, all principal and interest then owed by the Company under the Loan Agreement and the Birmingham Loan Agreement. 4.24 Disclosure. No statement of material fact by the Company contained in this Agreement, and all agreements and documents related thereto and all EXHIBITS and SCHEDULES related hereto and thereto contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements herein or therein contained not misleading. There is no significant fact presently known to any Stockholder, the Company or its Subsidiaries (other than matters of a general economic or political nature which do not affect the Company, or its Subsidiaries or the Stations uniquely), which has, or will have, a Material Adverse Effect, which has not been set forth in this Merger Agreement. ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS Each Stockholder with respect to himself only represents and warrants to Parent and Sub as follows: 5.1 Ownership of Class A Common Stock. Such Stockholder is the lawful owner of the number of shares of Class A Common Stock listed opposite the name of such Stockholder in EXHIBIT B attached hereto, free and clear of all Liens. Except as disclosed on SCHEDULE 5.1, such Stockholder has full legal right, power and authority to enter into this Merger Agreement and to - 28 - 34 sell, assign, transfer and convey his shares of Class A Common Stock. 5.2 Authority; Binding Effect. All necessary action required to have been taken by or on behalf of such Stockholder by applicable law or otherwise to authorize (a) the approval, execution, and delivery on behalf of such Stockholder of this Merger Agreement and (b) the performance by such Stockholder of his obligations under this Merger Agreement and the consummation of the transactions contemplated by this Merger Agreement has been taken. Assuming that this Merger Agreement constitutes a valid, binding, and enforceable agreement of Parent and Sub, this Merger Agreement constitutes a valid and binding agreement of such Stockholder, enforceable against him in accordance with its terms, except as enforcement of this Agreement may be limited by general principles of equity or principles applicable to creditors' rights generally. 5.3 No Conflicts, Required Filings and Consents. (a) None of the execution and delivery of this Merger Agreement by such Stockholder, the consummation by such Stockholder of the transactions contemplated hereby or compliance by such Stockholder with any of the provisions hereof will (i) conflict with or violate any organizational documents of any such Stockholder (to the extent applicable), (ii) subject to receipt or filing of the required Consents referred to in SECTION 4.4(B), result in a violation of any statute, ordinance, rule, regulation, order, judgment or decree applicable to such Stockholder, or by which he or any of his properties or assets may be bound or affected, or (iii) result in a Violation of any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which he is a party or by which such Stockholder or any of his properties or assets is bound or affected. (b) None of the execution and delivery of this Merger Agreement by such Stockholder, the consummation by such Stockholder of the transactions contemplated hereby or compliance by such Stockholder with any of the provisions hereof will require any Consent of any Governmental Entity, except for (i) the filing of the Certificate of Merger pursuant to the DGCL, (ii) compliance with the HSR Act, (iii) such filings as may be required in connection with the taxes described in SECTION 8.7, and (IV) the FCC Consents. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB Parent and Sub jointly and severally represent and warrant to the Company as follows: 6.1 Organization and Qualification. Each of Parent and Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Each of Parent - 29 - 35 and Sub has the requisite corporate power and authority to carry on its business as it is now being conducted and is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of its properties owned or held under lease or the nature of its activities makes such qualification necessary, except where the failure to be so qualified will not, individually or in the aggregate, have a material adverse effect on the business, operations or financial condition of Parent and Sub taken as a whole, or have a material adverse effect on Parent's proposed arrangements for financing the transactions contemplated by this Merger Agreement or on Parent's ability to consummate such financing arrangements (a "Parent Material Adverse Effect"). 6.2 Ownership of Sub. Sub is a direct wholly-owned subsidiary of Parent. 6.3 Authority Relative to This Merger Agreement. Each of Parent and Sub has the necessary corporate power and authority to execute and deliver this Merger Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Merger Agreement and the consummation of the transactions contemplated hereby by Parent and Sub have been duly and validly authorized and approved by the respective Boards of Directors of Parent and Sub, by Parent as the sole stockholder of Sub, and by Cox Enterprises, Inc., as the ultimate parent of Parent, and no other corporate proceedings on the part of Parent, Sub or Cox Enterprises, Inc. are necessary to authorize and approve this Merger Agreement or to consummate the transactions contemplated hereby. This Merger Agreement has been duly executed and delivered by each of Parent and Sub, and assuming due authorization, execution and delivery by the Company and the Stockholders, constitutes the valid and binding obligation of Parent and Sub enforceable against each of them in accordance with its terms except as such enforceability may be limited by general principles of equity or principles applicable to creditors' rights generally. 6.4 No Conflicts; Required Filings and Consents. (a) None of the execution and delivery of this Merger Agreement by Parent or Sub, the consummation by Parent or Sub of the transactions contemplated hereby or compliance by Parent or Sub with any of the provisions hereof will (i) conflict with or violate the Certificate of Incorporation or By-laws of Parent or Sub, (ii) subject to receipt or filing of the required Consents referred to in SECTION 6.4(B), result in a violation of any statute, ordinance, rule, regulation, order, judgment or decree applicable to Parent or Sub, or by which any of them or any of their respective properties or assets may be bound or affected, or (iii) result in a Violation of any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Parent or Sub is a party or by which Parent or Sub or any of their respective properties may be bound or affected that involves a - 30 - 36 payment by Parent or Sub of Fifty Thousand Dollars ($50,000) or more on an annual basis, except in the case of the foregoing clauses (ii) and (iii) for any such Violations which would not have a Parent Material Adverse Effect. (b) None of the execution and delivery of this Merger Agreement by Parent or Sub, the consummation by Parent or Sub of the transactions contemplated hereby or compliance by Parent or Sub with any of the provisions hereof will require any Consent of any Governmental Entity, except for (i) the filing of the Certificate of Merger pursuant to the DGCL, (ii) compliance with the HSR Act, (iii) such filings as may be required in connection with the taxes described in SECTION 8.7, (iv) the FCC Consents in connection with the transfer of control of the FCC Licenses, and (v) Consents the failure of which to obtain would not have a Parent Material Adverse Effect. 6.5 Litigation. There is no suit, action or proceeding pending or, to the knowledge of Parent or Sub, threatened against or affecting Parent or Sub that, individually or in the aggregate, could reasonably be expected to have a Parent Material Adverse Effect, nor is there any judgment, decree, injunction or order of any Governmental Entity or arbitrator outstanding against Parent or Sub having, or which could reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. 6.6 Voting Requirements. No vote of the holders of any class or series of the capital stock of Parent is necessary to approve this Merger Agreement or the transactions contemplated hereby. 6.7 Brokers. No broker or finder is entitled to any broker's or finder's fee in connection with the transactions contemplated by this Merger Agreement based upon arrangements made by or on behalf of Parent or Sub. 6.8 Financing. Parent has delivered the Guaranty to the Company and the Selling Stockholders. 6.9 FCC Applications. Except as disclosed on SCHEDULE 6.9, Parent and Sub are and will as of the Closing Date be legally, financially and otherwise qualified to hold or control the entities which hold and will hold, the FCC Licenses and are not aware of any facts or circumstances (other than facts or circumstances relating solely to the Company or its Subsidiaries) that could reasonably be expected to prevent or delay consent to the FCC Applications, and Parent and Sub further represent and warrant that no waiver of the FCC's rules is necessary to obtain the FCC Consents. 6.10 State Takeover Statutes. The Board of Directors of each of the Parent and Sub has approved the Merger and this Merger Agreement, and such approval is sufficient to render inapplicable to the Merger, this Merger Agreement, and the - 31 - 37 transactions contemplated by this Merger Agreement, the provisions of Section 203 of DGCL. To each of the Parent's and Sub's knowledge, no other state takeover statute or similar statute or regulation, applies or purports to apply to the Merger, this Merger Agreement, or any of the transactions contemplated by this Merger Agreement. 6.11 Disclosure. No statement of material fact by either the Parent or Sub contained in this Agreement, and all agreements and documents related thereto and all EXHIBITS and SCHEDULES related hereto and thereto contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements herein or therein contained not misleading. ARTICLE VII CONDUCT OF BUSINESS PENDING THE MERGER 7.1 Conduct of Business by the Company Pending the Merger. From and after the date hereof, prior to the Effective Time, except as contemplated by this Merger Agreement (including SECTION 7.2) and except for the matters set forth on SCHEDULE 7.1 or unless Parent shall otherwise agree in writing, the Company shall, and shall cause its Subsidiaries to: (a) not (i) declare, set aside, or pay any dividends on, or make any other distributions in respect of, any of its capital stock, other than dividends and distributions by any direct or indirect Subsidiary of the Company to its parent, (ii) split, combine or reclassify any of its capital stock or issue or, other than pursuant to the exercise of the Stock Options or upon the conversion of the Convertible Preferred Stock, authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, or (iii) purchase, redeem or otherwise acquire, other than pursuant to the exercise of the Stock Options, any shares of capital stock of the Company or any of its Subsidiaries or any other equity securities thereof or any rights, warrants, or options to acquire any such shares or other securities; (b) not, except for issuances of capital stock of the Company's Subsidiaries to the Company or a wholly-owned Subsidiary of the Company, issue, deliver, sell, pledge or otherwise encumber any shares of its capital stock, any other voting securities issued by the Company or any securities convertible into, or any rights, warrants or options to acquire, any such shares or voting securities (other than the issuance of Class B Common Stock upon the exercise of the Stock Options outstanding on the date of this Merger Agreement); (c) not amend its Certificate of Incorporation, By-laws or other comparable organizational documents; (d) not acquire or agree to acquire (i) by merging or consolidating with, or by purchasing a substantial portion of - 32 - 38 the assets of, or by any other manner, any business or any corporation, partnership, joint venture, association or other business organization or division thereof, or (ii) any properties or assets with a cost in excess of $100,000 or that are otherwise material, individually or in the aggregate, to the Company or any of its Subsidiaries, except, in any such case, in the ordinary course of business, and except transactions between a wholly-owned Subsidiary of the Company and the Company or another wholly-owned Subsidiary of the Company; (e) not subject to a Lien or sell, lease or otherwise dispose of any properties or assets with a net book value in excess of $100,000 or that are otherwise material, individually or in the aggregate to the Company or any of its Subsidiaries, except in the ordinary course of business and except transactions between a wholly-owned Subsidiary of the Company and the Company or another wholly-owned Subsidiary of the Company; (f) not (i) incur any indebtedness for borrowed money or guarantee any such indebtedness of another Person or issue or sell any debt securities of the Company or any of its Subsidiaries, guarantee any debt securities of another Person (other than indebtedness to, guarantees of, or issuances or sales to the Company or a wholly-owned Subsidiary of the Company) or enter into any "keep well" or other agreement to maintain any financial condition of another Person, except, in any such case, for borrowings or other transactions incurred in the ordinary course of business, including to repay existing indebtedness pursuant to the terms thereof, or (ii) except in the ordinary course of business, make any loans, advances or capital contributions to, or investments in, any other Person, other than to the Company or any direct or indirect Subsidiary of the Company or settle or compromise any material claim or litigation; (g) not increase or otherwise change the rate or nature of the compensation (including wages, salaries and bonuses) which is paid or payable to any employee or independent contractor of the Company or any Subsidiary, except pursuant to existing Company Benefit Plans, Compensation Arrangements, and practices which have been disclosed to Parent; (h) not adopt, or commit to adopt, any employee benefit plan, compensation arrangement, and not to make material amendments to any Company Benefit Plan or Compensation Arrangement except to the extent required by law or necessary to preserve the nature of the benefits provided under such plan or arrangement; (i) not enter into, renew or allow the renewal of, any employment or consulting agreement or other contract or arrangement with respect to the performance of personal services for a term of more than one year or requiring the payment of more than $75,000 in annual compensation, except in the ordinary course of business consistent with past practices; - 33 - 39 (j) not voluntarily agree to enter into any collective bargaining agreement applicable to any employees of the Company or its Subsidiaries or otherwise recognize any union as the bargaining representative of any such employees, and will promptly notify Parent of any attempt or actual collective bargaining organizing activity with respect to any such employees; (k) not amend, modify or consent to the termination of any Contract or the rights of the Company or any of its Subsidiaries thereunder; (l) not promote any corporate or executive officers of the Company; (m) not authorize any of, or commit or agree to take any of, the foregoing actions (a) through (l); (n) carry on their respective businesses in the usual, regular and ordinary course in substantially the same manner as heretofore conducted; (o) use all reasonable efforts to preserve intact their present business organizations, keep available the services of their employees and preserve their relationships with customers, suppliers, licensors, licensees, distributors and others having business dealings with them to the end that their goodwill and on-going businesses shall not be impaired in any material respect at the Effective Time; provided, however, that the resignation of one or more officers of the Company or any of its Subsidiaries or the loss of one or more customers of the Company or any of its Subsidiaries shall not be deemed a breach of the foregoing requirement unless such resignation or loss could reasonably be expected to have a Material Adverse Effect; (p) operate the Stations in accordance with applicable FCC requirements, rules and regulations in all material respects; (q) maintain all Personal Property in good operating condition, ordinary wear and tear and usage excepted, and replace any of the Personal Property which is material to the operation of the Company, a Station or a Subsidiary which shall be worn out; and (r) maintain in full force and effect policies of property, liability and casualty insurance and errors and omissions insurance of the same type, character and coverage as the policies currently carried with respect to the business, operations and assets of the Company, the Stations and its Subsidiaries. 7.2 Control of the Stations. Prior to the Effective Time, control of the Company's radio broadcast operations along with all of the Company's other operations (including without - 34 - 40 limitation control over the finances, personnel and programming of each Station), shall remain with the Company. The Company, Parent and Sub acknowledge and agree that neither Parent nor Sub nor any of their respective employees, agents or representatives, directly or indirectly, shall, or have any right to, control, direct or otherwise supervise, or attempt to control, direct or otherwise supervise, such broadcast and other operations, it being understood that supervision of all programs, equipment, operations and other activities of such broadcast and other operations shall be the sole responsibility, and at all times prior to the Effective Time remain with the complete control and discretion, of the Company, subject to the terms of SECTION 7.1 above. 7.3 Intentionally Omitted. 7.4 Massachusetts Income Tax Assessment. The Company shall continue to defend vigorously the proceedings before the Commonwealth of Massachusetts Department of Revenue pertaining to the Company's income tax liability for calendar years 1987 through 1989, and shall promptly inform Parent of all material developments arising with respect to such proceeding. ARTICLE VIII ADDITIONAL AGREEMENTS 8.1 Access to Information. From the date hereof through the Effective Time, the Company and its Subsidiaries shall afford to Parent and Parent's accountants, counsel, agents and other representatives (collectively, "Parent's Agents") reasonable access during normal business hours (and at such other times as the parties may mutually agree) upon reasonable prior notice to and approval of the Company, which shall not be unreasonably withheld, to its properties, books, contracts, commitments, records and personnel and, during such period, shall furnish promptly to Parent all information concerning its business, properties and personnel as Parent may reasonably request ("Company Information"). Parent shall hold, and shall cause its employees and Parent's Agents to hold, in strict confidence all Company Information including, without limitation, in the event of termination of this Merger Agreement. In the event of termination of this Merger Agreement, Parent shall promptly return, and Parent shall cause Parent's Agents to promptly return, all Company Information or copies or summaries of Company Information that Parent or Parent's Agents may have made either on paper or electronic format, to the Company. Parent and Parent's Agents shall, in the exercise of the rights described in this SECTION 8.1, not unduly interfere with the operation of the business of the Company or its Subsidiaries. 8.2 Filings. The Company shall promptly provide Parent, and Parent and Sub shall promptly provide the Company, copies of all filings made by the Company or Parent and Sub, as the case may be, with any Governmental Entity in connection with this Merger Agreement and the transactions contemplated hereby. - 35 - 41 8.3 Employee and Other Arrangements. No later than six (6) months after the date hereof, Parent shall provide the Company with a list of those corporate employees of the Company or its Subsidiaries whose services will not be required by the Surviving Corporation subsequent to the Closing. To the extent that severance payments are owed to such employees, Parent and the Company shall cooperate in establishing appropriate levels of severance payments to such employees. Parent shall be responsible for Eighty Thousand Dollars ($80,000) of such severance payments, and the Company shall be responsible for any severance and related expenses exceeding Eighty Thousand Dollars ($80,000). 8.4 Public Announcements. So long as this Merger Agreement is in effect, Parent, Sub and the Company agree to use their respective reasonable efforts to consult with each other before issuing any press release or otherwise making any public statement with respect to the transactions contemplated by this Merger Agreement except as may be required by any applicable law, rule or regulation. 8.5 Efforts; Consents. (a) Subject to the terms and conditions herein provided and, in the case of the Company, fiduciary duties under applicable law, each of the parties hereto agrees to use all reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated by this Merger Agreement and the Merger and to cooperate with each other in connection with the foregoing. Without limiting the generality of the foregoing, each of the Company, Sub and Parent shall make or cause to be made all required filings with or applications to Governmental Entities (including under the HSR Act and applicable requirements of the FCC, and the Communications Act), and use all reasonable efforts to (i) obtain all necessary waivers of any Violations and other Consents of all Governmental Entities and other third parties, necessary for the parties to consummate the transactions contemplated hereby, (ii) oppose, lift or rescind any injunction or restraining order or other order adversely affecting the ability of the parties to consummate the transactions contemplated hereby, and (iii) fulfill all conditions to this Merger Agreement. (b) Without limiting the foregoing, the Company and Parent shall use all reasonable efforts and cooperate in promptly preparing and filing (i) within twenty Business Days of executing this Merger Agreement, notifications under the HSR Act, and (ii) within seven Business Days of executing this Merger Agreement, the FCC applications in connection with the Merger and the other transactions contemplated hereby ("FCC Applications"), and to respond as promptly as practicable to any inquiries or requests received from the Federal Trade Commission (the "FTC"), the Antitrust Division of the United States Department of Justice - 36 - 42 (the "Antitrust Division"), and the FCC for additional information or documentation and to respond as promptly as practicable to all inquiries and requests received from any State Attorney General or other Governmental Entity in connection with antitrust matters or matters relating to the FCC Applications. Each of Parent, Sub and the Company, to the extent applicable, further agrees to file contemporaneously with the filing of the FCC Applications any requests for waivers of applicable FCC rules as may be required to prosecute expeditiously such waiver requests and to diligently submit any additional information or amendments for which the FCC may ask with respect to such waiver requests. Parent and Sub further covenant to prosecute each such waiver request in good faith and to supply any information requested by the FCC in connection with such waiver in a timely and complete manner. In the event Parent becomes aware of any facts or circumstances which might cause the FCC to determine that Parent is not qualified to acquire the Stations, Parent shall promptly notify the Company in writing thereof and shall use its best efforts to prevent or cure such disqualification. All fees to be paid to the FTC and the Antitrust Division in respect of the notifications under the HSR Act shall be divided equally between the Company on the one hand and Parent and Sub on the other hand. (c) In furtherance and not in limitation of the foregoing, the Company, Parent and Sub shall use all reasonable efforts to resolve such objections, if any, as may be asserted with respect to the transactions contemplated by this Merger Agreement under any antitrust, competition or trade regulatory laws, rules or regulations of any Governmental Entity ("Antitrust Laws") or any laws, rules or regulations of the FCC or other Governmental Entities relating to the broadcast, cable, newspaper, mass media or communications industries (collectively, "Communications Laws") and will use all reasonable efforts (such efforts not to include agreeing to hold separate, to place in trust or to divest any of the businesses or assets of Parent or any of its Subsidiaries or Affiliates) as may be required (i) for securing the expeditious termination of any applicable waiting period or the expeditious grant of the FCC Applications and for resolving any objections to the transactions contemplated hereby of any Governmental Entities under the Antitrust Laws or Communications Laws or (ii) by any domestic or foreign court or similar tribunal, in any suit brought by a private party or Governmental Entity challenging the transactions contemplated by this Merger Agreement as violative of any Antitrust Law or Communications Law, in order to avoid the entry of, or to effect the dissolution of, any injunction, temporary restraining order or other order that has the effect of preventing the consummation of any of such transactions. (d) Each of Parent and the Company shall promptly provide the other with a copy of any inquiry or request for information (including notice of any oral request for information), pleading, order or other document either party - 37 - 43 receives from any Governmental Entities with respect to the matters referred to in this SECTION 8.5. 8.6 Notice of Breaches. Each Stockholder and the Company shall give prompt notice to Parent, and Parent or Sub shall give prompt notice to the Company and the Stockholders, of (i) any representation or warranty made by it contained in this Merger Agreement which has become untrue or inaccurate in any material respect, or (ii) the failure by it to comply with or satisfy in any material respect any covenant, condition, or agreement to be complied with or satisfied by it under this Merger Agreement; provided, however, that such notification shall not excuse or otherwise affect the representations, warranties, covenants or agreements of the parties or the conditions to the obligations of the parties under this Merger Agreement. 8.7 Transfer and Certain Other Taxes and Expenses. Payment of all real property transfer taxes and all documentary stamps, filing fees, recording fees and sales and use taxes, if any, and any penalties or interest with respect thereto, payable in connection with consummation of the Merger shall be divided equally between the Company on the one hand and Parent and Sub on the other hand; provided that any such taxes and expenses that are allocable to the Selling Stockholders shall constitute a decrease to the Adjusted Merger Consideration as provided in SECTION 3.8(B). 8.8 Financial and FCC Reports. Within twenty (20) days after the end of each month ending after May 31, 1996 through the Closing Date, the Company will furnish Parent and Sub with copies of the Company's monthly financial reports for each Station prepared after the date hereof (including a balance sheet and operating statement) for each such month and the fiscal year to the end of such month, and the Company will furnish to Parent and Sub, within five (5) days after filing, all material reports filed with the FCC with respect to the Stations after the date hereof. All of the foregoing financial statements shall comply with the requirements concerning financial statements set forth in SECTION 4.5(B). 8.9 Updating of Information. Not more than ten (10) Business Days prior to the Closing Date, the Company will deliver to Parent and Sub, and Parent will deliver to the Company, updated SCHEDULES including (a) information necessary to update the SCHEDULES and the lists, documents and other information furnished by the Company or Parent and Sub, as the case may be, as contemplated by this Merger Agreement, and (b) updated copies of documents relating to or included as a part of the SCHEDULES, in order that all such SCHEDULES, lists, documents and other information shall be complete and accurate in all material respects as of the Closing Date. No such updating of the SCHEDULES shall be deemed to cure any breach of a representation or warranty made hereunder which was not true and correct as of the time made. - 38 - 44 8.10 Release of Liens. At or prior to the Closing, the Company shall obtain the release of all Liens on the property or assets of the Company, its Subsidiaries and the Stations disclosed in the SCHEDULES hereto and any other Liens on the property or assets of the Company, its Subsidiaries or the Stations, other than (a) Permitted Liens, (b) Liens pursuant to the Loan Agreement, and (c) Liens against the Company or any of its Subsidiaries with respect to leased Personal Property having a value of no more than Twenty-Five Thousand Dollars ($25,000), and either shall file such releases of Liens in each governmental agency or office in which any such Lien or evidence thereof shall have been previously filed, or deliver the release to Parent and Sub to file or obtain payoff letters from such Lien holder, which shall include a statement that upon receipt of certain funds, the Lien holder will release its Lien. 8.11 Environmental Audit. The Company shall permit Parent and Sub and their agents, as soon as practical after the date hereof, access to the Real Property and improvements thereon for the purpose of conducting Phase I and Phase II environmental audits or updating existing environmental audits. The cost of such audits shall be split evenly between Parent and Sub, on the one hand, and the Company, on the other hand. Any such environmental audits shall be conducted by a reputable environmental investigatory firm of the Parent's and Sub's choice. Such audits shall be conducted in a manner as will not unreasonably interfere with the normal business and operations of any of the Stations. The Company shall take all action reasonably necessary and required under any applicable Environmental Law or Environmental Permit to clean up, remove or treat any Hazardous Materials located on, at or under the Real Property prior to the Closing Date. 8.12 Agreement to Vote. At any shareholders meeting of the Company subsequent to the date hereof at which a vote is taken regarding this Merger Agreement and the transactions contemplated hereby, each Stockholder shall vote all of his shares of Class A Common Stock in support of the consummation of this Merger Agreement and the transactions contemplated hereby. The Company shall take such actions, as necessary, immediately following the execution of this Merger Agreement to secure the approval of all of the holders of shares of the Class A Common Stock, Class B Common Stock, the Convertible Preferred Stock and the Redeemable Preferred Stock to the transactions contemplated by this Merger Agreement. 8.13 Tax Matters. (a) "Booked Taxes" means Taxes of the Company and its Subsidiaries payable with respect to a Reporting Period (as defined below) ending on or before the Effective Time, or with respect to a Short Period (as defined below), that are reflected on the Final Closing Statement with respect to such Taxes and that are taken into account in computing the Final Working Capital under SECTION 3.8 hereof. - 39 - 45 (b) Taxes of the Company and its Subsidiaries with respect to the period ending on (and including) the Effective Time, other than the Booked Taxes, shall be the responsibility of the Selling Stockholders, subject to the terms, conditions and limitations set forth in the Closing Escrow Agreement. Taxes of the Company and its Subsidiaries with respect to the period after the Effective Time shall be the responsibility of Parent (and the Company and its Subsidiaries). (i) In accordance with the terms of this SECTION 8.13, and subject to the terms, conditions and limitations set forth in the Closing Escrow Agreement, the Selling Stockholders agree to pay and, notwithstanding any disclosure of potential Tax liabilities made by the Company and its Subsidiaries, to indemnify, reimburse, and hold harmless Parent, its Affiliates, and the Company and its Subsidiaries, and their respective successors, and their respective officers, directors, employees, agents, and representatives, from and against any and all Taxes of the Company and its Subsidiaries payable with respect to, and any and all claims, liabilities, losses, damages, costs and expenses (including without limitation court costs and reasonable professional fees incurred in the investigation, defense or settlement of any claims covered by this indemnity) (herein referred to as "Indemnifiable Tax Damages"), arising out of or in any manner incident, relating or attributable to Taxes of the Company and its Subsidiaries payable with respect to, or Tax Returns required to be filed by the Company and its Subsidiaries with respect to, (i) any taxable year (or other applicable reporting period) ("Reporting Period") of the Company and its Subsidiaries ending on or before the Effective Time, and (ii) any period beginning on the first day of any Reporting Period that is not completed as of the Effective Time and ending as of the Effective Time (a "Short Period"), to the extent that such Taxes exceed the amount of the Booked Taxes. (ii) Parent agrees to pay and to indemnify, reimburse and hold harmless the Selling Stockholders, their agents and representatives, from and against (i) any and all Booked Taxes and (ii) any and all Taxes of the Company and its Subsidiaries payable with respect to, and any and all Indemnifiable Tax Damages, arising out of or in any manner incident, relating or attributable to, Taxes of the Company and its Subsidiaries payable with respect to, or Tax Returns required to be filed by the Company and its Subsidiaries with respect to, (A) any Reporting Period of the Company and its Subsidiaries beginning after the Effective Time; and (B) that portion of any Reporting Period that includes the Effective Time which commences the day after the Effective Time. (iii) If an item claimed as a deduction or credit in a period prior to the Effective Time subsequently is adjusted by a Tax authority into a period after the Effective Time, or an item of income in a period after the Effective Time is accelerated into a period prior to the Effective Time, then the amount of any reduction in Taxes to the Company and its - 40 - 46 Subsidiaries for periods after the Effective Time resulting from such adjustment shall offset the payment obligations of the Selling Stockholders pursuant to SECTION 8.13(B)(I); provided, however, that if the only benefit available to the Company and its Subsidiaries is recovery of basis through a sale, such benefit shall not be taken into account hereunder unless an actual sale occurs prior to the date such payment is required to be made by the Selling Stockholders thereunder. The amount of any offset shall take into account the difference between the time the payment would otherwise be made pursuant to SECTION 8.13(B)(I) and the time a benefit is derived by the Company and its Subsidiaries (using a discount rate equal to the "overpayment rate" under section 6221(a) of the Code, compounded semi-annually). Any offset pursuant to this paragraph shall be reduced to the extent, if any, that items claimed as a deduction or credit for periods after the Effective Time are adjusted by a Tax authority to periods prior to the Effective Time or items of income are moved from a period prior to the Effective Time to a period after the Effective Time. (c) Parent shall be responsible for preparing and filing on behalf of the Company and its Subsidiaries all Tax Returns for the Company and its Subsidiaries which have not been filed as of the Effective Time, including (i) all Tax Returns for Reporting Periods of the Company and its Subsidiaries ending on or before the Effective Time which have not been filed on or before the Effective Time; (ii) all Tax Returns of the Company and its Subsidiaries for Reporting Periods beginning before and ending after the Effective Time; and (iii) all Tax Returns for Reporting Periods of the Company and its Subsidiaries beginning on or after the Effective Time; provided, however, that with respect to Tax Returns described in clauses (i) and (ii), Parent shall consult with the Stockholders' Agent in preparing such returns, and such Tax Returns shall not report any item in a manner that is inconsistent with the manner in which any corresponding item has been previously reported in any such Tax Return already filed, unless such inconsistent treatment is (x) required due to a change in law or circumstances, or (y) if permitted by law, Parent elects to make such change in treatment, and such change would not be prejudicial to the Selling Stockholders or to the Company. Parent shall furnish the Stockholders' Agent with copies of Tax Returns described in clauses (i) and (ii) of this paragraph (c) within 30 days following the filing date. (d) Any tax sharing agreement, practice, or other similar arrangement between the Company and its Subsidiaries and corporations or other entities related to the Company or any of its Subsidiaries shall be terminated as of the Effective Time. (e) Except as otherwise provided in this SECTION 8.13, any amounts owed by the Selling Stockholders to any party under this SECTION 8.13 shall be paid within ten business days of notice from such party; provided that if such party has not paid such amounts and such amounts are being contested before the - 41 - 47 appropriate governmental authorities in good faith, the Selling Stockholders shall not be required to make payment until it is determined finally by an appropriate governmental authority or court that payment is due, provided that the Selling Stockholders post appropriate security as necessary to protect such party from (i) the immediate imposition of a lien that arises or attaches from nonpayment after assessment and demand of such amounts, or (ii) seizures of assets. Except as otherwise provided in this SECTION 8.13, any amounts owed by Parent to any party under this SECTION 8.13 shall be paid within ten business days of notice from such party; provided that if such party has not paid such amounts and such amounts are being contested before the appropriate governmental authorities in good faith, Parent shall not be required to make payment until it is determined finally by an appropriate governmental authority or court that payment is due if Parent posts appropriate security as necessary to protect such party from (A) the immediate imposition of a lien that arises or attaches from nonpayment after assessment and demand of such amounts, or (B) seizures of assets. Any amounts that are not paid within the period provided in this SECTION 8.13(D) shall accrue interest at the "Underpayment Rate" under Section 6621 of the Code for the underpayment of taxes by corporations. (f) The Tax liabilities for each Short Period for the Company and its Subsidiaries shall be determined by closing the books and records of the Company and its Subsidiaries as of the Effective Time, by treating each such Short Period as if it were a separate Reporting Period, and by employing accounting methods which are consistent with those employed in preparing the Tax Returns for the Company and its Subsidiaries in prior Reporting Periods and which do not have the effect of distorting income or expenses (taking into account the transactions contemplated by this Merger Agreement), except that Taxes based on items other than income or sales shall be computed for the Reporting Period beginning on the first day of the applicable Short Period and prorated on a time basis between the Short Period and the period beginning on the first day after the Effective Time and ending on the last day of the Reporting Period which includes the Effective Time; provided that with respect to any Tax which is not in effect during the entire Short Period, the proration of such Tax shall be based on the period during the Short Period that such Tax was in effect. (g) Parent shall promptly notify the Stockholders' Agent in writing of any notice, letter, correspondence, claim, determination, decision or decree ("Tax Claim") received by the Parent or the Company and its Subsidiaries or their successors for any Reporting Period ending on or before the Effective Time or any Short Period that might raise a claim for indemnification hereunder. Parent shall have the sole right to handle, answer, defend, compromise or settle any such Tax Claim; provided, however, that the Stockholders' Agent, at the cost and expense of the Selling Stockholders, shall have the right to (and shall promptly notify Parent as to whether or not he will) participate in any Tax examination, audit, contest or litigation in - 42 - 48 connection with such Tax Claim. Parent shall cause the Company and its Subsidiaries and their successors to give promptly to the Stockholders' Agent any relevant information relating to such Tax Claim which may be particularly within the knowledge of the Company and its Subsidiaries or their successors and otherwise to cooperate fully with the Stockholders' Agent in good faith with respect to such Tax Claim. If the Stockholders' Agent fails within a reasonable time after notice to participate in any Tax Claim or any examination, audit, contest or litigation as provided herein, the Selling Stockholders shall be bound by the results obtained by Parent, or its successors or assigns, in connection with such Tax Claim and such examination, audit, contest or litigation. Notwithstanding the foregoing, the Parent shall not agree, without the consent of the Stockholders' Agent (which consent shall not be unreasonably withheld or delayed), to any adjustment for any period ending on or prior to the Effective Time which will require a payment by the Selling Stockholders hereunder in excess of One Hundred Thousand Dollars ($100,000) for any Reporting Period (or for any Short Period). (h) Each of the parties hereto will provide the other with such assistance as may reasonably be requested by any of them in connection with the preparation of any Tax Return (including amended Tax Returns and claims for Tax refunds), any audit or other examination by any taxing authority, or any judicial or administrative proceedings relating to liability for Taxes, and each will retain until the expiration of any relevant statutes of limitations (and, to the extent notified by the other party, any extension thereof) and provide the other, at all reasonable times, with any work papers, records or other information which may be relevant to such return, audit or examination, proceeding or determination (including, but not limited to, determinations under this SECTION 8.13). The party requesting assistance or documents hereunder shall reimburse the other parties for reasonable expenses incurred in providing such assistance or documents. (i) Parent shall not make any election under Section 338 of the Code with respect to the Merger. (j) The obligations of the Selling Stockholders under this SECTION 8.13 are subject to the terms, conditions and limitations set forth in the Closing Escrow Agreement. 8.14 Event of Loss. Upon the occurrence of any loss, taking, condemnation, damage or destruction of or to any of the Stations (an "Event of Loss") after the date hereof in excess of $100,000 prior to the Closing, the Company or its Subsidiaries, as applicable, shall take steps to repair, replace and restore the damaged, destroyed or lost property to the condition existing prior to having been damaged. The condition set forth in the preceding sentence shall be satisfied if at the Closing neither Parent, the Surviving Corporation nor Sub can bring a claim pursuant to SECTION 11.1 with respect to such matter. If such condition has not been satisfied at or prior to Closing, the - 43 - 49 Company or its Subsidiaries, as applicable, shall assign (or deliver any cash received, if not assignable) to the Surviving Corporation all of their rights under any insurance and all proceeds of insurance (excluding business interruption proceeds for periods prior to the Closing Date) covering the property damage, destruction or loss not so repaired, replaced or restored prior to the Closing Date. 8.15 Further Assurances. Subject to the terms and conditions of this Merger Agreement, each of the parties hereto will use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the Merger contemplated by this Merger Agreement. 8.16 Solicitation of Employees. From the date of this Merger Agreement through the second anniversary of the Closing Date, each Stockholder agrees that it will not, directly or indirectly, persuade or attempt to persuade any employee of the Company or any of its Subsidiaries, or any individual who was its employee at any time during the two years prior to the date of this Merger Agreement, to become employed by any Stockholder or any Affiliate of any Stockholder. 8.17 Capital Expenditures. (a) In cooperation with Parent and Sub, the Company shall establish a budget for capital expenditures to be made in 1996, taking into account actual capital expenditures made by the Company or any Subsidiary prior to the date hereof. (b) Parent agrees to reimburse the Company for expenses incurred by the Company prior to the Closing Date in making capital improvements, to be mutually agreed upon by Parent and the Company, to the office building or property site owned by NewCity Communications of Alabama, Inc. in Birmingham, Alabama and any equipment or furnishings contained therein. The Company and Parent agree to develop an appropriate budget for such capital expenditures. 8.18 Exercise of Stock Options. The Company shall take such actions, as necessary, to ensure that the holders of any Stock Options exercise such Stock Options prior to the Closing. ARTICLE IX CONDITIONS PRECEDENT 9.1 Conditions to Each Party's Obligation to Effect the Merger. The respective obligations of each party to effect the Merger shall be subject to the fulfillment at or prior to the Effective Time of the following conditions: (a) The waiting period applicable to the consummation of the Merger under the HSR Act shall have expired - 44 - 50 or been terminated and there shall have been no material adverse change to the transactions contemplated by this Merger Agreement required in order to obtain approval under the HSR Act, and any other Consents from Governmental Entities (including specifically the FCC Consents) and other third parties required prior to the Effective Time with respect to the transactions contemplated hereby shall have been either filed or received. (b) The consummation of the Merger shall not be restrained, enjoined or prohibited by any order, judgment, decree, injunction or ruling of a court of competent jurisdiction; provided, however, that the parties shall comply with the provisions of SECTION 8.5 and shall further use all reasonable efforts to cause any such order, judgment, decree, injunction or ruling to be vacated or lifted. (c) Each of the FCC Consents shall have been obtained without conditions materially adverse to the Company, Parent or Sub, and each party shall have satisfied any such conditions that are not materially adverse to such party. 9.2 Conditions to Obligation of the Company and the Stockholders to Effect the Merger. The obligation of the Company and the Stockholders to effect the Merger shall be subject to the fulfillment at or prior to the Effective Time of the additional following conditions, unless waived by the Company: (a) Parent and Sub shall have performed in all material respects their respective agreements contained in this Merger Agreement required to be performed at or prior to the Effective Time and the representations and warranties of Parent and Sub contained in this Merger Agreement shall be true in all material respects when made and (except for representations and warranties made as of a specified date, which need only be true in all material respects as of such date) at and as of the Effective Time as if made at and as of such time, except as contemplated by this Merger Agreement; and the Company shall have received a certificate of the Chief Executive Officer or a Vice President of Parent and Sub to that effect. (b) All material proceedings, corporate or other, to be taken by Parent and Sub in connection with the performance of this Merger Agreement, and all material documents incident thereto, shall be complete in all material respects and Parent and Sub shall have made available to the Company for examination the originals or true and correct copies of all documents which the Company and Stockholders' Agent may reasonably request in connection with the transactions contemplated by this Merger Agreement. (c) Parent and Sub shall have delivered or caused to be delivered to the Company the documents, each properly executed and dated as of the Closing Date, as required pursuant to this Merger Agreement. - 45 - 51 (d) The Company shall have received an opinion of Dow, Lohnes & Albertson, PLLC, counsel to Parent and Sub, dated the Closing Date, in substantially the form attached hereto as EXHIBIT E. (e) Parent and Sub shall have delivered to the Company such documents and certificates of officers of Parent and Sub and public officials as shall be reasonably requested by the Company's counsel to establish the existence of Parent and Sub and good standing of Parent and Sub and the due authorization of this Merger Agreement and the transactions contemplated hereby by Parent and Sub. 9.3 Conditions to Obligations of Parent and Sub to Effect the Merger. The obligations of Parent and Sub to effect the Merger shall be subject to the fulfillment at or prior to the Effective Time of the additional following conditions, unless waived by Parent, that: (a) The Stockholders and the Company shall have performed in all material respects their respective agreements contained in this Merger Agreement required to be performed at or prior to the Effective Time and the representations and warranties of the Company and the Stockholders contained in this Merger Agreement shall be true in all material respects when made and (except for representations and warranties made as of a specified date, which need only be true in all material respects as of such date) at and as of the Effective Time as if made at and as of such time; and Parent and Sub shall have received a certificate of the Chief Executive Officer or a Vice President of the Company and from each Stockholder to that effect. (b) Intentionally omitted. (c) All material proceedings, corporate or other, to be taken by the Company in connection with the performance of this Merger Agreement, and all material documents incident thereto, shall be complete in all material respects and the Company shall have made available to Parent and Sub for examination the originals or true and correct copies of all documents which Parent and Sub may reasonably request in connection with the transactions contemplated by this Merger Agreement. (d) Between the date of this Merger Agreement and the Closing, there shall not have occurred any Material Adverse Effect. (e) The Company shall have delivered or caused to be delivered to Parent and Sub the documents, each properly executed and dated as of the Closing Date, as required pursuant to this Merger Agreement. - 46 - 52 (f) There shall have been secured all Consents required by any Governmental Entity and all Required Consents as set forth in SCHEDULE 4.14. (g) The Company or its Subsidiaries shall be the holders of the FCC Licenses and there shall not have been any adverse material modification of any of the FCC Licenses since the date hereof. (h) Between the date of this Merger Agreement and the Closing, none of the Company, any of its Subsidiaries or any of the Stations shall have sustained any loss, taking, condemnation, damage or destruction to any property or asset which individually or in the aggregate would cost in excess of $500,000 to repair, unless such repair has been completed on or prior to the Closing Date to the condition existing prior to having been damaged or sufficient insurance proceeds are available to effect such repair; provided, however, that the Company may elect to extend the Closing Date for a reasonable period not to exceed ninety (90) days necessary to complete such repairs; and provided, further if Parent and Sub waive this condition, the provisions of SECTION 8.14 shall be applicable. (i) Parent and Sub shall have received the opinions of Tyler Cooper & Alcorn, LLP, corporate counsel to the Company, and Kaye, Scholer, Fierman, Hays & Handler, LLP, communications counsel to the Company, both dated the Closing Date, in substantially the forms attached hereto as EXHIBIT F. (j) The Company shall have delivered to Parent and Sub such documents and certificates of officers of the Company and public officials as shall be reasonably requested by the Parent's counsel to establish the existence and good standing of the Company and the due authorization of this Merger Agreement and the transactions contemplated hereby by the Company. (k) The Parent and Sub shall have received the resignations effective as of the Closing Date of all the directors and officers of the Company except for such persons as shall have been designated in writing prior to the Closing Date by Parent and Sub to the Company, the employment agreements in respect of all such persons shall have been terminated and all such persons shall have executed and delivered to Parent a full release releasing the Company and Parent, their respective Subsidiaries, all related entities and all of their representatives from any and all claims of such persons. (l) The Company shall have effected the cancellation or exercise of all Stock Options. (m) The only FCC Licenses for which a license renewal proceeding is pending shall be the FCC Licenses for KRMG(AM), KWEN(FM), and KJSR(FM), Tulsa, Oklahoma (the "Renewal Stations"), and Parent and Sub shall be satisfied with the status thereof. The status of the renewals for the Renewal Stations - 47 - 53 shall be deemed satisfactory to Parent and Sub if (i) no petition to deny or other objection shall have been filed against the applications for renewal of the Renewal Stations; (ii) the applications for renewal of license of each of the Renewal Stations shall have demonstrated compliance with the FCC's rules with respect to each of those matters required to be addressed in the renewal application; (iii) the Company shall have responded on behalf of each of the Renewal Stations to each inquiry of the FCC relating to the renewal applications of the Renewal Stations; and (iv) the Company shall have certified to Parent and Sub that it is not aware of any reason why the FCC would not grant an unconditional renewal to the Renewal Stations in the normal course. (n) The Phase I and Phase II environmental audits referred to in SECTION 8.11 shall have been obtained and shall report the absence of any environmental conditions or circumstances that could materially and adversely affect the Real Property or the value thereof or result in material liability or material costs if cleaned up or removed from the Real Property pursuant to the requirements of applicable Environmental Laws. (o) The Company shall have furnished to the Parent and Sub (i) an extended coverage owner's policy of title insurance from a reputable title insurance company for each parcel of Real Property designated with an asterisk on SCHEDULE 4.17 subject only to Permitted Liens (and without a survey exception) and for an amount equal to the fair market value for each such parcel, and (ii) a current and complete survey of each such parcel of land made by a competent registered surveyor in accordance with the American Land Title Association guidelines. (p) Each of the FCC Consents shall have become a Final Order (as defined in SECTION 12.9) without conditions materially adverse to Parent or Sub. (q) The Closing Escrow Agreement shall have been executed by all parties thereto and the Adjustment Escrow Amount and the Indemnity Escrow Amount shall have been fully funded. (r) No action or proceeding shall be pending before any court or Governmental Entity in which it is sought to restrain or prohibit or obtain damages or other relief in connection with this Merger or the consummation of the transactions contemplated hereby. (s) The Company shall have taken all necessary steps and given all necessary notices to enable Parent to repay immediately, without premium, penalty or other charge of any kind, all principal and interest owed by the Company in respect of the Loan Agreement and the Birmingham Loan Agreement. ARTICLE X TERMINATION, AMENDMENT AND WAIVER - 48 - 54 10.1 Termination. This Merger Agreement may be terminated at any time prior to the Effective Time: (a) by mutual written consent of Parent and the Company; (b) by the Company, upon a material breach of this Merger Agreement on the part of Parent or Sub or upon a material breach of the Guaranty by Cox Broadcasting, Inc., which has not been cured and which would cause the conditions set forth in SECTION 9.2 to be incapable of being satisfied by June 30, 1997; (c) by Parent, upon a material breach of this Merger Agreement on the part of the Stockholders or the Company which has not been cured and which would cause the conditions set forth in SECTION 9.3 to be incapable of being satisfied by June 30, 1997; (d) subject to SECTION 8.15 hereof, by either Parent or the Company if any court of competent jurisdiction shall have issued, enacted, entered, promulgated or enforced any order, judgment, decree, injunction or ruling which restrains, enjoins or otherwise prohibits the Merger and such order, judgment, decree, injunction or ruling shall have become final and nonappealable; or (e) by either Parent or the Company if the Merger shall not have been consummated on or before June 30, 1997 (provided the terminating party is not otherwise in material breach of its representations, warranties or obligations under this Merger Agreement). 10.2 Effect of Termination. (a) In the event of termination of this Merger Agreement by either Parent or the Company as provided in SECTION 10.1, this Merger Agreement shall forthwith become void and there shall be no liability hereunder on the part of any of the Stockholders, the Company, Parent or Sub or their respective officers or directors; provided that SECTIONs 10.2, 10.3, 12.3, and 12.6 and the second and third sentences of SECTION 8.1 shall survive the termination. (b) If the Merger is not consummated because of a material breach of this Merger Agreement by any party and this Merger Agreement is terminated pursuant to SECTION 10.1(B) or SECTION 10.1(C), and subject to the terms of this SECTION 10.2 and SECTION 12.3 the nonbreaching party shall be entitled to pursue all legal and equitable remedies against the breaching party for such breach, including in the case of Parent and Sub specific performance, and all fees and expenses incurred by the nonbreaching party or parties in connection with enforcing its rights under this Merger Agreement with respect to such breach shall be paid by the party breaching this Merger Agreement. - 49 - 55 10.3 Fees and Expenses. Except as otherwise specified in this Agreement, all costs and expenses, including, without limitation, fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Merger Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses; provided that any such costs and expenses incurred by the Company or by the Selling Stockholders that are to be paid by the Company which remain unpaid as of the Closing Date shall to the extent they are so unpaid constitute a decrease to the Adjusted Merger Consideration as provided in SECTION 3.8(B). 10.4 No Solicitation. Neither the Company, any of its Subsidiaries, officers, directors, representatives or agents nor any Stockholder shall, directly or indirectly, knowingly encourage, solicit, initiate or, except as otherwise provided in this SECTION 10.4, participate in any way in discussions or negotiations with, or knowingly provide any confidential information to, any corporation, partnership, person or other entity or group (other than Parent or any affiliate or associate of Parent and their respective directors, officers, employees, representatives and agents) concerning any merger of the Company, or any of its Subsidiaries, the sale of any substantial part of the assets of the Company, sale of shares of capital stock of the Company, or any of its Subsidiaries or similar transactions involving the Company. 10.5 Amendment. This Merger Agreement may not be amended except by an instrument in writing signed on behalf of the parties hereto. 10.6 Waiver. At any time prior to the Effective Time, the parties hereto may, to the extent permitted by applicable law, (i) extend the time for the performance of any of the obligations or other acts of any other party hereto, (ii) waive any inaccuracies in the representations and warranties by any other party contained herein or in any documents delivered by any other party pursuant hereto and (iii) waive compliance with any of the agreements of any other party or with any conditions to its own obligations contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. ARTICLE XI INDEMNIFICATION 11.1 Indemnification Out of Closing Escrow. (a) After the Closing, the Selling Stockholders jointly and severally, in accordance with the terms of this Article XI and subject to the terms and conditions of the Closing Escrow Agreement, agree to indemnify, and hold Parent and Sub and the employees, officers, directors and stockholders of Parent and Sub (collectively, the "Buyer Indemnified Parties") harmless from - 50 - 56 and against, and agree to promptly defend the Buyer Indemnified Parties from and reimburse the Buyer Indemnified Parties for any and all actual damages, out-of-pocket costs and expenses, liabilities, obligations and claims of third persons of any kind, including, without limitation, reasonable attorneys' fees, other legal costs and expenses (hereinafter, collectively, "Claims" and, individually, a "Claim") which the Buyer Indemnified Parties may suffer or incur, or become subject to, as a result of or in connection with: (1) the breach of any of the representations and warranties made by the Company and any of the Stockholders in this Merger Agreement or in any instrument, document, certificate or affidavit delivered at the Closing by the Company or any of the Selling Stockholders in accordance with the provisions of this Merger Agreement; (2) the failure of the Company or any of the Stockholders to carry out, perform, satisfy and discharge any of the covenants, agreements, undertakings, liabilities or obligations to be performed by the Company or any of the Stockholders pursuant to this Merger Agreement or under any of the documents and materials delivered at the Closing by the Company or any of the Selling Stockholders pursuant to this Merger Agreement; (3) any breach of the representations and warranties of the Company or any of its Subsidiaries contained in SECTION 4.10; (4) liabilities or obligations of the Company or any of its Subsidiaries arising from or relating to any litigation or proceeding listed on the SCHEDULES hereto and any litigation or proceeding initiated, filed, established or threatened against the Company or any of its Subsidiaries after the execution of this Merger Agreement and relating to matters before the Closing; and (5) any suit, action or other proceeding brought by any governmental authority or Person arising out of, or in any way related to any of the matters referred to in SECTION 11.1. (b) Intentionally omitted. 11.2 Indemnification By Parent. After the Closing, Parent, in accordance with the terms of this Article XI, agrees to indemnify, and hold all of the Selling Stockholders (collectively, the "Seller Indemnified Parties") harmless from and against, and agree to promptly defend the Seller Indemnified Parties from and reimburse the Seller Indemnified Parties for any Claim which the Seller Indemnified Parties may suffer or incur, or become subject to, as a result of or in connection with: - 51 - 57 (a) the breach of any of the representations and warranties made by Parent or Sub in this Merger Agreement or in any instrument, document, certificate or affidavit delivered at the Closing by Parent or Sub in accordance with the provisions of this Merger Agreement; (b) the failure of Parent or Sub to carry out, perform, satisfy and discharge any of the covenants, agreements, undertakings, liabilities or obligations to be performed by Parent or Sub pursuant to this Merger Agreement or under any of the documents and materials delivered at the Closing by Parent or Sub pursuant to this Merger Agreement; (c) liabilities or obligations of the Company or any of its Subsidiaries arising from or relating to the business of the Company or its Subsidiaries after the Closing or to any litigation or proceeding initiated, filed, established or threatened against the Company or any of its Subsidiaries after the Closing and relating to matters after the Closing; (d) any suit, action or other proceeding brought by any governmental authority or Person arising out of, or in any way related to any of the matters referred to in this SECTION 11.2. 11.3 Notification of Claims. (a) A party believing itself entitled to be indemnified pursuant to SECTION 11.1(A) or 11.2 above (the "Indemnified Party") shall give the party liable for such indemnification (the "Indemnifying Party") notice in writing of a specific Claim which the Indemnified Party believes has given rise to a right of indemnification under this Merger Agreement (the "Notice of Claim"). Notwithstanding anything to the contrary contained herein, no Claim shall be considered as a valid Claim under SECTION 11.1(A)(1), (2), (4), OR (5) to the extent such Claim relates to SECTION 11.1(A)(1), (2), (4), or (5), or under Section 11.2 to the extent such Claim relates to SECTION 11.2(A), (B), (C), OR (D) above unless the Indemnified Party shall have given the Indemnifying Party a Notice of Claim regarding such Claim within three (3) years and sixty (60) days after the Closing Date and with respect to a Claim arising from a dispute, controversy or claim of a third Person, such third Person must have asserted the dispute, controversy or claim within three (3) years and sixty (60) days of the Closing Date. Subject to the Indemnifying Party's right to dispute Claims asserted by the Indemnified Party or to defend in good faith Claims by third parties as hereinafter provided, the Indemnifying Party shall satisfy its obligations under SECTION 11.1(A) or 11.2 above within thirty (30) days after the receipt of the Notice of Claim. (b) If the Indemnified Party shall give the Indemnifying Party a Notice of Claim pursuant to SECTION 11.3(A) above, and if such Claim relates to a Claim asserted by a third - 52 - 58 party against the Indemnified Party (excluding a Claim by the Internal Revenue Service or any other tax authority pursuant to SECTION 11.1(A)(3) hereof), the Indemnifying Party shall have the right to employ counsel reasonably acceptable to the Indemnified Party to defend such Claim. The Indemnified Party shall have the right, at its own expense, to participate in the defense of any such Claim. The Indemnifying Party shall notify the Indemnified Party in writing, as promptly as possible after its receipt of a Notice of Claim given by the Indemnified Party pursuant to SECTION 11.3(A) above (but in any case before the due date for the answer or response to a Claim if the Indemnifying Party has been given a Notice of Claim within a reasonable time prior to such due date), of its election to defend any Claim raised by a third party. So long as the Indemnifying Party is defending in any such Claim or demand asserted by a third party against the Indemnified Party, the Indemnified Party shall not settle or compromise such Claim. The Indemnified Party shall make available to the Indemnifying Party or its agents all records and other materials in the Indemnified Party's possession reasonably required by it for its use in contesting any Claim asserted by a third party. Whether or not the Indemnifying Party elects to defend any such Claim asserted by a third party, the Indemnified Party shall have no obligation to do so. (c) The provisions of SECTION 11.3(B) shall not apply to any Claim asserted by the Internal Revenue Service or any other tax authority, which claim shall be subject to the provisions of SECTION 8.13. ARTICLE XII GENERAL PROVISIONS 12.1 Stockholders' Agent. The Company has appointed the Company's Chief Financial Officer, currently John Riccardi, as the Stockholders' Agent and each Selling Stockholder's attorney-in-fact and representative, to do any and all things and to execute any and all documents or other papers, in such Selling Stockholder's name, place and stead, in any way which such Selling Stockholder could do if personally present, in connection with this Merger Agreement and the transactions contemplated hereby, including, without limitation, to resolve issues relating to the adjustment of the Adjusted Merger Consideration on such Selling Stockholder's behalf, or to amend, cancel or extend, or waive the terms of, this Merger Agreement and Parent and Sub shall be entitled to rely, as being binding upon such Selling Stockholder, upon any document or other paper believed by them to be genuine and correct and to have been signed or sent by the Stockholders' Agent, and Parent and Sub shall not be liable to any Selling Stockholder for any action taken or omitted to be taken by it in such reliance. 12.2 Notices. All notices or other communications under this Merger Agreement shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by telecopy (with confirmation of receipt), by - 53 - 59 commercial delivery service or by registered or certified mail, postage prepaid, return receipt requested, addressed as follows: If to the Company: NewCity Communications, Inc. 10 Middle Street Bridgeport, Connecticut 06604 Attention: Mr. Richard A. Ferguson Telecopy : (203) 367-9346 With copies (which shall not Tyler Cooper & Alcorn constitute notice) to: 205 Church Street P.O. Box 1936 New Haven, Connecticut 06510 Attention: Irving S. Schloss, Esq. Telecopy : (203) 789-2133 and Kaye, Scholer, Fierman, Hays & Handler 901 15th Street, N.W. Washington, D.C. 20005 Attention: Irving Gastfreund, Esq. Telecopy : (202) 682-3580 and Mr. John Riccardi Chief Financial Officer NewCity Communications, Inc. 10 Middle Street Bridgeport, Connecticut 06604 Telecopy : (203) 367-9346 If to the Stockholders' Agent: Mr. John Riccardi Chief Financial Officer NewCity Communications, Inc. 10 Middle Street Bridgeport, Connecticut 06604 Telecopy : (203) 367-9346 If to Parent or Sub: Cox Radio, Inc. 1400 Lake Hearn Drive, N.E. Atlanta, Georgia 30319 Attention: Mr. Nicholas D. Trigony Telecopy : (404) 843-5280 and Cox Radio, Inc. 1400 Lake Hearn Drive, N.E. Atlanta, Georgia 30319 Attention: Mr. Robert F. Neil Telecopy : (404) 843-5686 - 54 - 60 With a copy (which shall not Dow, Lohnes & Albertson, PLLC constitute notice) to: 1200 New Hampshire Avenue, N.W. Suite 800 Washington, D.C. 20036 Attention: Kevin F. Reed, Esq. Telecopy : (202) 776-2222 or to such other address as any party may have furnished to the other parties in writing in accordance with this SECTION. 12.3 Specific Performance. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Merger Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that Parent shall be entitled to an injunction or injunctions to prevent breaches of this Merger Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which Parent is entitled at law or in equity. 12.4 Entire Agreement. This Merger Agreement (including the documents and instruments referred to herein) constitutes the entire agreement and supersedes all other prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof (other than as provided in the second sentence of SECTION 8.1). There are no other representations or warranties, whether written or oral, between the parties in connection with the subject matter hereof, except as expressly set forth herein. 12.5 Assignments; Parties in Interest. Neither this Merger Agreement nor any of the rights, interests or obligations hereunder may be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Merger Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Merger Agreement, express or implied, is intended to or shall confer upon any Person not a party hereto any right, benefit or remedy of any nature whatsoever under or by reason of this Merger Agreement, including to confer third party beneficiary rights. 12.6 Governing Law. This Merger Agreement, except to the extent that the DGCL is mandatorily applicable to the Merger and the rights of the Selling Stockholders, shall be governed in all respects by the laws of the State of Delaware (without giving effect to the provisions thereof relating to conflicts of law). The exclusive venue for the adjudication of any dispute or proceeding arising out of this Merger Agreement or the performance thereof shall be the courts located in the City of Wilmington, Delaware, and the parties hereto and their Affiliates hereby consent to and submit to the jurisdiction of any court located in the City of Wilmington, Delaware. - 55 - 61 12.7 Headings. The descriptive headings herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Merger Agreement. 12.8 Remedies. The remedies of the parties hereto are cumulative and not intended to be limited by the doctrine of election of remedies. Without limiting the generality of the foregoing, neither Parent and Sub nor the Company and the Selling Stockholders may rely on the failure of any condition precedent set forth in Article IX, as applicable, to be satisfied if such failure was caused by such other party's (or parties') failure to act in good faith, or a breach of or failure to perform its representations, warranties, covenants or other obligations in accordance with the terms of this Merger Agreement. 12.9 Certain Definitions. As used in this Merger Agreement: (a) the term "Affiliate," as applied to any Person, shall mean any other Person directly or indirectly controlling, controlled by, or under common control with, that Person; for purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities, by contract or otherwise; (b) "Business Day" means a day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in the City of Wilmington, Delaware; (c) the term "Final Order" means an action or order by the FCC (a) that has not been reversed, stayed, enjoined, set aside, annulled or suspended, and (b) with respect to which (i) no requests have been timely filed for administrative or judicial review, reconsideration, appeal or stay and the FCC has not initiated a review of such action or order on its own motion and the periods provided by statute or FCC regulations for filing any such requests and for the FCC to set aside the action on its own motion have expired, or (ii) in the event of review, reconsideration or appeal, the period provided by statute or FCC regulations for further review, reconsideration or appeal has expired without any such request for further review, reconsideration or appeal having been filed; (d) the term "Guaranty" shall mean the Guaranty of Cox Broadcasting, Inc. of even date herewith, guaranteeing the obligations of Parent and Sub under this Merger Agreement; (e) the terms "knowledge," "best knowledge," or any similar formulation of knowledge shall mean, with respect to any - 56 - 62 Subsidiary of the Company, the actual knowledge of its senior executive officers, and with respect to the Company, the actual knowledge of the Chief Executive Officer, the Chief Operating Officer and the Chief Financial Officer of the Company and the general managers of the Stations; (f) "Material Adverse Effect" shall mean any of (i) a Company Material Adverse Effect; and (ii) a Significant Station Material Adverse Effect. For purposes of this definition, a "Company Material Adverse Effect" shall mean a material adverse effect on the aggregate operations, assets, prospects or financial condition of the Company, taken as a whole, other than matters affecting the radio industry generally (including without limitation legislative, regulatory or litigation matters) and matters relating to or arising from national economic conditions (including financial and capital markets); a "Significant Station Material Adverse Effect" shall mean a material adverse effect on the operations, assets, prospects or financial condition of any Station other than matters affecting the radio industry generally (including without limitation legislative, regulatory or litigation matters) and matters relating to or arising from national economic conditions (including financial and capital markets); (g) "Permitted Liens" means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced: (a) Liens for taxes, assessments and governmental charges or levies not yet due and payable; (b) Liens imposed by law, such as materialmen's, mechanics', carriers', workmen's and repairmen's liens and other similar liens arising in the ordinary course of business securing obligations that (i) are not overdue for a period of more than 30 days and (ii) are not in excess of $5,000 in the case of a single property or $50,000 in the aggregate at any time; (c) pledges or deposits to secure obligations under workers' compensation laws or similar legislation or to secure public or statutory obligations; (d) minor survey exceptions, reciprocal easement agreements and other customary encumbrances on title to real property that (i) were not incurred in connection with any Indebtedness, (ii) do not render title to the property encumbered thereby unmarketable and (iii) do not, individually or in the aggregate, materially adversely affect the value or use of such property for its current and anticipated purposes; and (e) Liens pursuant to the Loan Agreement; (h) the term "Person" shall include individuals, corporations, partnerships, limited liability companies, trusts, other entities and groups (which term shall include a "group" as such term is defined in Section 13(d)(3) of the Exchange Act); (i) the term "Subsidiary" or "Subsidiaries" means, with respect to Parent, the Company or any other Person, any corporation, partnership, joint venture or other legal entity of which Parent, the Company or such other Person, as the case may be (either alone or through or together with any other - 57 - 63 Subsidiary) owns, directly or indirectly, stock or other equity interests the holders of which are generally entitled to more than 50% of the vote for the election of the board of directors or other governing body of such corporation or other legal entity. 12.10 Counterparts. This Merger Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which taken together shall constitute a single agreement. 12.11 Severability. If any term or other provision of this Merger Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Merger Agreement shall nevertheless remain in full force and effect so long as the economics or legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any party. Upon determination that any term or other provision hereof is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Merger Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible. 12.12 Gender and Number. Words used herein, regardless of the gender and number specifically used, shall be deemed and construed to include any other gender, masculine, feminine, or neuter, and any other number, singular or plural, as the context requires. 12.13 List of Definitions. The following is a list of certain terms used in this Agreement and a reference to the Section hereof in which such term is defined. Terms Section Adjusted Merger Consideration 3.3(c) Adjustment Escrow Amount 3.9(b) Affiliate 12.9(a) Antitrust Division 8.5(b) Antitrust Laws 8.5(c) Audited Financial Statements 4.5(a) Birmingham Loan Agreement 3.3(b) Booked Taxes 8.13(a) Business Day 12.9(b) Buyer Indemnified Parties 11.1(a) Certificate of Merger 1.3 Claims 11.1(a) Class A Common Merger Consideration 3.2(a) Class A Common Stock 3.2(a) Class B Common Merger Consideration 3.2(b) Class B Common Stock 3.2(b) Closing 1.2 - 58 - 64 Closing Date 1.2 Closing Escrow Agent 3.9(a) Closing Escrow Agreement 3.9(a) Closing Escrow Amount 3.9(c) Code 4.9(a) Communications Act 4.19(b) Communications Laws 8.5(c) Company Preamble Company Benefit Plan 4.8(i) Company Consolidated Group 4.10(f) Company Information 8.1 Company Material Adverse Effect 12.9(f) Company Permits 4.19(a) Compensation Arrangement 4.8(ii) Consent 4.4(b) Constituent Corporations 1.4 Contracts 4.14(a) Control 12.9(a) Convertible Preferred Merger Consideration 3.2(c) Convertible Preferred Stock 3.2(c) Copyrights 4.16(a) DGCL 1.3 Disbursing Agent 3.5(a) Dissenting Shares 3.4 Dissenting Shareholder 3.4 Effective Time 1.3 Environmental Permits 4.13(g) Environmental Laws 4.13(a) ERISA 4.8(i) ERISA Affiliate 4.8(iii) Estimated Closing Statement 3.3(d)(i) Event of Loss 8.14 FCC Preamble FCC Applications 8.5(b) FCC Consents 4.4(b) FCC Licenses 4.4(b) Final Closing Statement 3.8(a) Final Debt Amount 3.8(a) Final Order 12.9(c) Final Working Capital 3.8(a) FTC 8.5(b) GAAP 3.3(a) Governmental Entity 4.4(b) Guaranty 12.9(d) Hazardous Materials 4.13(b) HSR Act 4.4(b) Indebtedness 3.3(b) Indemnifiable Tax Damages 8.13(b)(i) Indemnified Party 11.3(a) Indemnifying Party 11.3(a) Indemnity Escrow Amount 3.9(c) Intangible Property 4.16(a) Interim Financial Statements 4.5(b) KJSR Promissory Note 4.23 - 59 - 65 Knowledge 12.9(e) Lien 4.2(b) Loan Agreement 4.23 Material Adverse Effect 12.9(f) Material Default 4.14 Merger Preamble Merger Agreement Preamble Merger Consideration 3.1 Notice of Claim 11.3(a) Parent Material Adverse Effect 6.1 Parent Preamble Parent's Agents 8.1 Permitted Liens 12.9(g) Person 12.9(h) Personal Property 4.15 Preferred Stock 3.2(e) Real Property 4.17(a) Redeemable Preferred Stock 3.2(d) Renewal Stations 9.3(m) Reporting Period 8.13(b)(i) Required Consents 4.14(b)(5) Seller Indemnified Parties 11.2 Selling Stockholders Preamble Senior Subordinated Notes 4.23 Short Period 8.13(b)(i) Significant Station Material Adverse Effect 12.9(f) Stations Preamble Stock Options 4.2(a) Stockholders Preamble Stockholders' Agent Preamble Sub Preamble Subsidiary 12.9(i) Surviving Corporation 1.1 Target Debt Amount 3.3(b) Target Working Capital 3.3(a) Tax Claim 8.13(g) Tax Returns 4.10(a) Taxes 4.10(a) Trademarks 4.16(a) Violation 4.4(a) Working Capital 3.3(a) - 60 - 66 IN WITNESS WHEREOF, Parent, Sub, the Company and the Stockholders have caused this Merger Agreement to be signed all as of the date first written above. COX RADIO, INC. By: /s/ John J. Rouse, Jr. ---------------------------------- Title: Treasurer ----------------------------- NEW COX RADIO II, INC. By: /s/ John J. Rouse, Jr. ---------------------------------- Title: Vice President and Treasurer ---------------------------- NEWCITY COMMUNICATIONS, INC. By: /s/ Richard A. Ferguson ---------------------------------- Title: President and CEO --------------------------- STOCKHOLDERS, FOR THE LIMITED PURPOSES STATED ABOVE: /s/ Richard A. Ferguson ------------------------------------- Richard A. Ferguson /s/ James T. Morley ------------------------------------- James T. Morley /s/ Richard A. Reis ------------------------------------- Richard A. Reis STOCKHOLDERS' AGENT /s/ John Riccardi ------------------------------------- John Riccardi - 61 - EX-2.2 3 GUARANTY BY COX BROADCASTING 1 EXHIBIT 2.2 EXECUTION GUARANTY This GUARANTY is dated as of July 1, 1996, by COX BROADCASTING, INC., a Delaware corporation ("Guarantor"), in favor of NEWCITY COMMUNICATIONS, INC., a Delaware corporation (the "Company"), and all of the holders of the capital stock of the Company (the "Selling Stockholders"). PRELIMINARY STATEMENT A. Guarantor owns 100% of the issued and outstanding capital stock of COX RADIO, INC., a Delaware corporation, and Cox Radio, Inc. owns 100% of the issued and outstanding capital stock of NEW COX RADIO II, INC., a Delaware corporation (Cox Radio, Inc. and New Cox Radio II, Inc. are referred to collectively herein as the "Cox Subsidiaries"). B. The Company, the Cox Subsidiaries, certain Selling Stockholders and the Stockholders' Agent have entered into an Agreement and Plan of Merger, dated as of the date of this Guaranty (the "Merger Agreement"), relating to the merger of New Cox Radio II, Inc. into the Company. The agreement of Guarantor to deliver this Guaranty was a material inducement to the Company and such Selling Stockholders in entering into the Merger Agreement. AGREEMENTS In consideration of the above recitals, Guarantor, intending to be bound legally, agrees as follows: 1. Guaranty. Guarantor hereby guarantees the full, complete, and timely performance by the Cox Subsidiaries of each and every obligation of the Cox Subsidiaries under the Merger Agreement, including the obligation to pay, satisfy or assume the Company's Indebtedness and to pay and deliver the Merger Consideration as provided in the Merger Agreement. If any default shall be made by the Cox Subsidiaries in the performance of any of such obligations, then Guarantor will itself perform or cause to be performed such obligation immediately upon notice from the Company or the Stockholders' Agent specifying in summary form the default. The Company or the Selling Stockholders may proceed to enforce their rights against Guarantor from time to time prior to, contemporaneously with, or after any enforcement against the Cox Subsidiaries, or without any enforcement against the Cox Subsidiaries. The obligations of Guarantor under this Guaranty shall be absolute and unconditional and shall remain in full force and effect without regard to and shall not be released, discharged, or in any way affected by (a) any amendment 2 or modification of or supplement to the Merger Agreement, (b) any exercise or non-exercise of or delay in exercising any right, remedy, power, or privilege under or in respect of the Merger Agreement, (c) any bankruptcy, insolvency, arrangement, composition, assignment for the benefit of creditors, or similar proceeding commenced by or against the Cox Subsidiaries or Guarantor, (d) the dissolution (voluntarily or involuntarily) of the Cox Subsidiaries, (e) the genuineness, validity, or enforceability of the Merger Agreement, (f) any other circumstances that might otherwise constitute a legal or equitable discharge of a guarantor or surety, or (g) termination of the Merger Agreement by the Cox Subsidiaries. 2. Waivers. Guarantor waives presentment, protest, demand, or action or delinquency in respect of any obligations of the Cox Subsidiaries under the Merger Agreement. Guarantor waives all set-offs and counterclaims and all notices of nonperformance, notices of protest, notices of dishonor, and notices of acceptance of this Guaranty. 3. Continuing Guaranty. This guaranty shall be deemed a continuing guaranty, and the above consents and waivers of Guarantor shall remain in full force and effect until the satisfaction in full of all obligations of the Cox Subsidiaries under the Merger Agreement. 4. Subordination. Guarantor agrees that any and all claims in its favor against the Cox Subsidiaries, any endorser or any other guarantor of all or any part of the obligations of the Cox Subsidiaries under the Merger Agreement, or against any of their respective properties, arising by reason of any payment by Guarantor to the Company or the Selling Stockholders pursuant to the provisions hereof or otherwise, shall be subordinate and subject in right of payment to the prior payment, in full, of all obligations of the Cox Subsidiaries under the Merger Agreement and Guarantor under this Guaranty. 5. Reinstatement. This Guaranty shall remain in full force and effect and continue to be effective in the event any petition is filed by or against the Cox Subsidiaries or Guarantor for liquidation or reorganization, in the event the Cox Subsidiaries or Guarantor becomes insolvent or makes an assignment for the benefit of creditors, or in the event a receiver or trustee be appointed for all or any significant part of the Cox Subsidiaries' or Guarantor's assets, and shall continue to be effective or shall be reinstated, as the case may be, if at any time payment and performance of the obligations of the Cox Subsidiaries under the Merger Agreement, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by the Company or the Selling Stockholders, whether as a "voidable preference", - 2 - 3 "fraudulent conveyance", or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the obligations of the Cox Subsidiaries shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. 6. Representations and Warranties. Guarantor hereby represents and warrants to the Company and the Selling Stockholders as follows: a. Ownership of Cox Subsidiaries. Guarantor owns all the issued and outstanding capital stock of Cox Radio, Inc., and Cox Radio, Inc. owns all the issued and outstanding capital stock of New Cox Radio II, Inc. Guarantor therefore will benefit from the execution, delivery, and performance by the Company and certain Selling Stockholders of the Merger Agreement. b. Organization and Qualification. Guarantor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Guarantor has the requisite corporate power and authority to carry on its business as it is now being conducted. c. Authority Relative to this Guaranty. Guarantor has the necessary corporate power and authority to execute and deliver this Guaranty and to consummate the transactions contemplated hereby. The execution and delivery of this Guaranty and the consummation of the transactions contemplated hereby by Guarantor have been duly and validly authorized and approved by the Board of Directors of Guarantor and by Cox Enterprises, Inc., as the ultimate parent of Guarantor, and no other corporate proceedings on the part of Guarantor or Cox Enterprises, Inc. are necessary to authorize and approve this Guaranty or to consummate the transactions contemplated hereby. This Guaranty has been duly executed and delivered by Guarantor and constitutes the valid and binding obligation of Guarantor enforceable against Guarantor in accordance with its terms except as such enforceability may be limited by general principles of equity or principles applicable to creditors' rights generally. d. No Conflicts. None of the execution and delivery of this Guaranty by Guarantor, the consummation by Guarantor of the transactions contemplated hereby or compliance by Guarantor with any of the provisions hereof will (i) conflict with or violate the Certificate of Incorporation or By-laws of Guarantor, or (ii) conflict with or result in a violation or breach of or constitute a default (or an event which with notice or the lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of any note, bond, mortgage, indenture, contract, - 3 - 4 agreement, lease, license, permit, franchise or other agreement to which Guarantor is a party or by which Guarantor may be bound or affected, except where such violation, breach or default would not have a material adverse effect on the business, operations or financial condition of Guarantor or have a material adverse effect on Guarantor's ability to perform its obligations under this Guaranty. e. Financing. Guarantor has sufficient immediately available bank lines of credit or other binding, committed and immediately available sources of financing (including internally generated cash, funding from its parent, Cox Enterprises, Inc., or binding commitments from other financial institutions) to perform, the obligations of the Cox Subsidiaries in a timely manner under the Merger Agreement at any time between the date hereof and the Closing, whenever that may occur. f. Opinion of Counsel. Guarantor has delivered to the Company the opinion of Dow, Lohnes & Albertson, PLLC attached hereto. 7. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED, CONSTRUED, AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO THE CHOICE OF LAW PROVISIONS THEREOF). 8. Defined Terms. Unless otherwise defined herein, all capitalized terms used in this Guaranty shall have the respective meanings assigned to them in the Merger Agreement. - 4 - 5 IN WITNESS WHEREOF, this Guaranty has been executed as of the date first written above. COX BROADCASTING, INC. By: /s/ John J. Rouse, Jr. ----------------------------------- Name: John J. Rouse, Jr. Title: Vice President and Treasurer - 5 - EX-4.1 4 INDENTURE 1 EXHIBIT 4.1 ================================================================================ NEWCITY COMMUNICATIONS, INC., as Issuer, $75,000,000 11 3/8% Senior Subordinated Notes due 2003 INDENTURE Dated as of November 2, 1993 SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, as Trustee ================================================================================ 2 CROSS-REFERENCE TABLE
TIA Indenture Section Section 310(a)(1) 7.10 (a)(2) 7.10 (a)(3) N.A. (a)(4) N.A. (b) 7.08; 7.10; 12.02 (c) N.A. 311(a) 7.11 (b) 7.11 (c) N.A. 312(a) 2.05 (b) 12.03 (c) 12.03 313(a) 7.06 (b)(1) N.A. (b)(2) 7.06; 12.02 (c) 7.06; 12.02 (d) 7.06 314(a) 4.03; 4.18; 12.02 (b) N.A. (c)(1) 12.04 (c)(2) 12.04 (c)(3) N.A. (d) N.A. (e) 12.05 (f) N.A. 315(a) 7.01(b) (b) 7.05; 12.02 (c) 7.01(a) (d) 7.01(c) (e) 6.11
3 316(a)(last sentence) 12.06 (a)(1)(A) 6.05 (a)(1)(B) 6.04 (a)(2) N.A. (b) 6.07 317(a)(1) 6.08 (a)(2) 6.09 (b) 2.04 318(a) 12.01
N.A. means Not Applicable Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture. 4 TABLE OF CONTENTS
Article Page - ------- ---- I DEFINITIONS AND INCORPORATION BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.02 Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 1.03 Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . 16 1.04 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 II THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 2.01 Dating; Incorporation of Form in Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 2.02 Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 2.03 Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 2.04 Paying Agent to Hold Money in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 2.05 Noteholder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 2.06 Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 2.07 Replacement Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 2.08 Outstanding Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 2.09 Temporary Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 2.10 Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 2.11 Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 III REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 3.01 Right to Redeem; Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 3.02 Selection of Notes to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 3.03 Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 3.04 Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 3.05 Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 3.06 Notes Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 IV COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 4.01 Payment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 4.02 Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 4.03 Provision of Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 4.04 Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 4.05 Limitation on Payment Restrictions Affecting Subsidiaries . . . . . . . . . . . . . . . . . . . . . 29 4.06 Limitation on Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 4.07 Limitation on Incurrence of Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 4.08 Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 4.09 Limitation on Use of Proceeds from Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5
Article Page - ------- ---- 4.10 Compliance with Securities Laws upon Purchase of Notes . . . . . . . . . . . . . . . . . . . . . . . 36 4.11 Limitation on Liens Securing Subordinated Indebtedness . . . . . . . . . . . . . . . . . . . . . . . 37 4.12 Limitation on Other Senior Subordinated Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . 38 4.13 Limitation on Capital Stock of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 4.14 Limitation on Sale and Lease-Back Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 4.15 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 4.16 Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 4.17 Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 4.18 Compliance Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 4.19 Waiver of Stay, Extension or Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 4.20 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 4.21 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 4.22 Payments for Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 V MERGER AND SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 5.01 When Company or Guarantor May Merge, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 5.02 Successor Entity Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 VI DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 6.01 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 6.02 Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 6.03 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 6.04 Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 6.05 Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 6.06 Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 6.07 Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 6.08 Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 6.09 Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 6.10 Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 6.11 Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 VII TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 7.01 Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 7.02 Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 7.03 Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 7.04 Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 7.05 Notice of Defaults or Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 7.06 Reports by Trustee to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 7.07 Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ii 6
Article Page - ------- ---- 7.08 Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 7.09 Successor Trustee by Merger, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 7.10 Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 7.11 Preferential Collection of Claims against Company . . . . . . . . . . . . . . . . . . . . . . . . . 56 VIII SATISFACTION AND DISCHARGE OF INDENTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 8.01 Termination of Company's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 8.02 Application of Trust Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 8.03 Repayment to Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 8.04 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 IX AMENDMENTS, SUPPLEMENTS AND WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 9.01 Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 9.02 With Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 9.03 Compliance with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 9.04 Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 9.05 Notation on or Exchange of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 9.06 Trustee to Sign Amendments, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 X SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 10.01 Agreement to Subordinate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 10.02 Liquidation; Dissolution; Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 10.03 Default on Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 10.04 Acceleration of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 10.05 When Distribution Must Be Paid Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 10.06 Notice by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 10.07 Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 10.08 Relative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 10.09 Subordination May Not Be Impaired by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . 70 10.10 Distribution or Notice to Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 10.11 Rights of Trustee and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 10.12 Authorization to Effect Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 10.13 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 XI GUARANTEE OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 11.01 Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 11.02 Agreement to Subordinate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 11.03 Release of Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 11.04 Limitation on Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 11.05 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 XII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
iii 7
Article Page - ------- ---- 12.01 Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 12.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 12.03 Communication by Holders with Other Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 12.04 Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . 79 12.05 Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 12.06 When Treasury Notes Disregarded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 12.07 Rules by Trustee and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 12.08 Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 12.09 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 12.10 No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 12.11 No Recourse against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 12.12 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 12.13 Multiple Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 12.14 Table of Contents, Headings, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 12.15 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
iv 8 INDENTURE dated as of November 2, 1993 among NEWCITY COMMUNICATIONS, INC., a Delaware corporation (the "Company"), as Issuer, the Guarantors named herein and SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a national banking association (the "Trustee"). The parties agree as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Company's 11 3/8% Senior Subordinated Notes due 2003 ("Notes"): ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE Section 101 Definitions. "Acquired Indebtedness" of the Company means Indebtedness of any Person existing at the time such Person merged with or into or became a Subsidiary of the Company or assumed by the Company in connection with the acquisition of assets from such Person. "Affiliate" of any Person means (i) any Person who, directly or indirectly, is in control of, is controlled by or is under common control with such Person or (ii) any Person who is a director or officer of such Person. For purposes of this definition, control of a Person means the power, direct or indirect, to direct or cause the direction of the management or policies of such Person whether by contract or otherwise; and the terms "controlling," "controlled by" and "under common control" have meanings correlative to the foregoing. For purposes of this definition, beneficial ownership of 10% or more of the Common Equity of a Person (on a fully diluted basis) or securities convertible into such Common Equity (whether or not currently exercisable) shall be deemed to be control of such Person. "Agent" means any Registrar, Paying Agent, co-registrar or agent for service of notice and demands. See Section 2.03. "Asset Sale" means, with respect to any Person, (1) the sale, lease, conveyance, disposition or other transfer by the referent Person of any of its 9 assets (including by way of a Sale and Lease-Back Transaction and including the sale or other transfer of any of the Capital Stock of any Subsidiary of the referent Person) and (ii) the issuance, sale, conveyance, disposition or other transfer by the referent Person of any Capital Stock of the referent Person; provided, however, that notwithstanding the foregoing, the term "Asset Sale" shall not include (A) the sale, lease, conveyance, disposition or other transfer of any assets in the ordinary course of business and consistent with past practice or to a wholly owned Subsidiary of the referent Person or to a Person of whom the referent Person is a wholly owned Subsidiary, and (B) the issuance by the Company of shares of its Capital Stock. "Attributable Debt" means, as of any particular time, the then present value (computed by discounting at the rate of interest per annum borne by the Notes compounded semi-annually) of the obligation of a lessee for Net Rental Payments during the remaining term of any lease (including any period for which such lease has been extended or may, at the option of the lessor, be extended). "Net Rental Payments" means, under any lease for any period, the sum of the rental and other payments required to be paid in such period by the lessee thereunder, not including, however, any amounts required to be paid by such lessee (whether or not therein designated as rental or additional rental) on account of sales, maintenance and repairs, insurance, taxes, assessments, water rates or similar charges required to be paid by such lessee thereunder or any amounts required to be paid by such lessee thereunder contingent upon the amount of sales, maintenance and repairs, insurance, taxes, assessments, water rates or similar charges. "Average Life to Stated Maturity" means, as of the date of determination, with respect to any Indebtedness, the quotient obtained by dividing (i) the sum of the products of (a) the number of years from the date of determination to the date or dates of each successive scheduled principal payment of such Indebtedness multiplied by (b) the amount of each such principal payment by (ii) the sum of all such principal payments. "Board of Directors" means the Board of Directors of the Company or any committee of the Board of Directors. 2 10 "Board Resolution" means a resolution duly adopted by the Board of Directors of any Person and which is in full force and effect. "Business Day" means any day other than a Legal Holiday. "Capital Lease Obligation" means, at any time determination thereof is to be made, the amount of liability in respect of a capital lease that would at such time be so required to be capitalized on the balance sheet in accordance with GAAP. "Capital Stock" of any Person means any and all shares, interests, participations or other equivalents of interests in (however designated) the equity (which includes, but is not limited to, common stock, preferred stock and partnership and joint venture interests) of such Person. A "Change of Control" of the Company will be deemed to have occurred at such time as (i) any Person (including a Person's Affiliates and associates), other than a Permitted Holder, becomes the beneficial owner (as defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of 50% or more of the total voting power of the Company's Common Equity, (ii) any Person (including a Person's Affiliates and associates), other than a Permitted Holder, becomes the beneficial owner of more than 30% of the total voting power of the Company's Common Equity, and the Permitted Holders beneficially own, in the aggregate, a lesser percentage of the total voting power of the Common Equity of the Company than such other Person and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors, (iii) prior to an Initial Public Offering, Permitted Holders shall cease to own beneficially at least 30% of the total voting power of the Company's Common Equity, (iv) there shall be consummated any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which the Common Equity of the Company would be converted into cash, securities or other property, other than a merger or consolidation of the Company in which the holders of the Common Equity of the Company immediately prior to the consolidation or merger hold, 3 11 directly or indirectly, at least a majority of Common Equity of the surviving corporation immediately after such consolidation or merger or (v) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (together with any new directors whose election by the Board of Directors or whose nomination for election by the shareholder of the Company has been approved by 66-2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or recommendation for election was previously so approved) cease to constitute a majority of the Board of Directors. "Common Equity" of any Person means all Capital Stock of such Person that is generally entitled to (i) vote in the election of directors of such Person or (ii) if such Person is not a corporation, vote or otherwise participate in the selection of the governing body, partners, managers or others that will control the management and policies of such Person. "Company" means the party named as such in this Indenture until a successor replaces it pursuant to the Indenture and thereafter means the successor. "Consolidated Interest Expense" means, with respect to any Person, for any period, the aggregate amount of interest which, in conformity with GAAP, would be set forth opposite the caption "interest expense" or any like caption on an income statement for such Person and its Subsidiaries on a consolidated basis (including, but not limited to, dividends, whether paid or accrued, on Subsidiary Preferred Stock, imputed interest included on Capital Lease Obligations, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing, the net costs associated with hedging obligations, amortization of other financing fees and expenses, the interest portion of any deferred payment obligation, amortization of discount or premium, if any, and all other non-cash interest expense (other than interest amortized to cost of sales)) plus, without duplication, all net capitalized interest for such period and all interest incurred or paid under any guarantee of Indebtedness (including a guarantee of principal, interest or any combination thereof) of any Person, plus the amount of all dividends 4 12 or distributions paid on Redeemable Stock (other than dividends paid or payable in shares of Capital Stock or Equity Interests in the Company or its Subsidiaries). "Consolidated Net Income" means, with respect to any Person, for any period, the aggregate of the Net Income of such Person and its Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP, provided that (i) the Net Income of any Person which is not a Subsidiary or is accounted for by such Person by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid to such Person or a Subsidiary, (ii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded and (iii) the Net Income of any Subsidiary that is subject to restrictions, direct or indirect, on the payment of dividends or the making of distributions to such Person shall be excluded, except to the extent dividends or distributions are actually received by such Person. "Consolidated Net Worth" means, at any date of determination, the sum of the Capital Stock and additional paid-in capital plus retained earnings (or minus accumulated deficit) of any Person and its Subsidiaries on a consolidated basis, excluding amounts attributable to Redeemable Stock, each item to be determined in conformity with GAAP. "Corporate Trust Office" means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the date of execution of this Indenture is located at 777 Main Street, Hartford, Connecticut 06115. "Default" means any event which after notice or passage of time would be an Event of Default as described in Section 6.01. "EBITDA" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus (a) provision for taxes based on income or profits to the extent such provision for taxes was deducted in computing Consolidated Net Income, plus (b) Consolidated Interest Expense, to the extent such expense was deducted in computing Consolidated Net 5 13 Income, plus (c) depreciation expense, plus (d) amortization expense, plus (e) other non-cash items reducing Consolidated Net Income, minus (f) non-cash items increasing Consolidated Net Income. "Equity Interests" means Capital Stock, warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Exchange Act" means the Securities Exchange Act of 1934, as amended. "GAAP" means generally accepted accounting principles as applied in the United States set forth in the opinions and pronouncements of the Accounting Principals Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, which are applicable as of the date of determination. "guarantee" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Indebtedness of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such other Person (whether arising by virtue of participation arrangements, by agreement to keep well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring the obligee of such Indebtedness in any other manner of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term "guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. "Guarantee" means the guarantee of the obligations of the Company pursuant to this Indenture and the Notes, issued by each Guarantor pursuant to Article 11 hereof. 6 14 "Guarantor" means any of NewCity Broadcasting Company, Inc., a Delaware corporation, NewCity Communications of Alabama, Inc., a Delaware corporation, NewCity Communications of Atlanta, Inc., a Delaware corporation, NewCity Communications of Connecticut, Inc., a Connecticut corporation, NewCity Communications of Daytona, Inc., a Connecticut corporation, NewCity Communications of Florida, Inc., a Delaware corporation, NewCity Communications of Fulton, Inc., a Delaware corporation, NewCity Communications of Massachusetts, Inc., a Delaware corporation, NewCity Communications of San Antonio, Inc., a Delaware corporation, NewCity Communications of Syracuse, Inc., a Delaware corporation, NewCity Communications of Tulsa, Inc., a Delaware corporation, American Comedy Network, Inc., a Delaware corporation, Birmingham Communications, Inc., a Delaware corporation, CommercialWorks, Inc., a Connecticut corporation, NewCity Tulsa Tower, Inc., an Oklahoma corporation, or ParkCity Productions, Inc., a Connecticut corporation. "Holder" or "Noteholder" means the person in whose name a Note is registered on the Registrar's books. "Indebtedness" of any Person means any indebtedness, contingent or otherwise, in respect of borrowed money and deferred interest thereon (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof) or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement obligations with respect thereto) or representing the balance deferred and unpaid of the purchase price of any property (including pursuant to Capital Lease Obligations), if and to the extent any of the foregoing indebtedness would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP (except that any such balance that constitutes a trade payable and/or an accrued liability arising in the ordinary course of business shall not be considered Indebtedness), and shall also include, to the extent not otherwise included, any Capital Lease Obligations, the maximum liquidation preference of any Redeemable Stock or Subsidiary Preferred Stock, indebtedness secured by a Lien to which the property or assets owned or held by such Person is subject, whether or not the obligations secured thereby shall have been assumed, and guarantees of items that would be included within this definition to the extent of such guarantees (regard- 7 15 less of whether such items would appear upon such balance sheet). For purposes of the preceding sentence, the maximum liquidation preference of any Redeemable Stock or Subsidiary Preferred Stock shall be the greatest amount payable in respect thereof on a liquidation, whether voluntary or involuntary, plus accrued and unpaid dividends. The amount of Indebtedness of any Person at any date shall be, without duplication, (i) the outstanding balance at such date of all unconditional obligations as described above and the maximum liability of any such contingent obligations at such date and (ii) in the case of Indebtedness of others secured by a Lien to which the property or assets owned or held by such Person is subject, the lesser of the fair market value at such date of any asset subject to a Lien securing the Indebtedness of others and the amount of the Indebtedness secured. "Indenture" means this Indenture as amended or supplemented from time to time. "Initial Public Offering" means the first offer and sale to the public by the Company of shares of any class of the Capital Stock of the Company pursuant to a registration statement that has been declared effective by the Securities and Exchange Commission. "Investments" means, with respect to any Person, (i) all investments by such Person in any other Person in the form of loans, advances or capital contributions, (ii) all guarantees of Indebtedness or other obligations of any other Person by such Person, (iii) all purchases (or other acquisitions for consideration) by such Person of Indebtedness, Capital Stock or other securities of any other Person and (iv) all other items that would be classified as investments (including, without limitation, purchases of assets outside the ordinary course of business) on a balance sheet of such Person prepared in accordance with GAAP. "Junior Subordinated Notes" means the notes issued on the date hereof in exchange for notes issued by Birmingham Communications, Inc. and NewCity Communications of Fulton, Inc., which notes are subordinated in right of payment to the Notes. "Lien" means any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, 8 16 whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give any security interest in and any filing or other agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "LMA" means a local marketing agreement. "Net Income" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP, excluding, however, (i) any gain (but not loss) realized upon the sale or other disposition (including, without limitation, dispositions pursuant to Sale and Lease-Back Transactions) of any real property or equipment of such Person which is not sold or otherwise disposed of in the ordinary course of business, and (ii) any gain (but not loss) realized upon the sale or other disposition by such Person of any Capital Stock or marketable securities. "Net Proceeds" means the aggregate proceeds received by the Company or any of its Subsidiaries in respect of any Asset Sale, net of the out-of-pocket costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions) and any relocation expenses and severance and shutdown costs incurred as a result thereof, taxes paid or payable as a result thereof, amounts required to be applied to the repayment of Indebtedness secured by a Lien on the asset or assets which are the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets. "Notes" means the securities that are issued under this Indenture, as amended or supplemented, from time to time pursuant to this Indenture. "Officer" means the Chairman of the Board, the President, any Vice President, the Treasurer, the Secretary or the Controller of the Company. "Officers' Certificate" means a certificate signed by two Officers or by an Officer and an Assistant 9 17 Treasurer, Assistant Secretary or Assistant Controller of the Company. See Sections 12.04 and 12.05. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. "Permitted Holders" means, collectively, any of the holders of the Company's Capital Stock identified under "Stock Ownership" in the final prospectus relating to the offering of the Notes, the members of their immediate families, the respective estates, spouses, heirs, ancestors, lineal descendants, legatees and legal representatives of any of the foregoing and the trustee of any bona fide trust of which one or more of the foregoing are the sole beneficiaries or the grantors thereof, or any entity of which any of the foregoing, individually or collectively, beneficially own more than 50% of the voting securities. "Permitted Indebtedness" means, without duplication, any of the following Indebtedness of the Company or any Subsidiary, as the case may be: (i) Indebtedness of the Company outstanding at any time under the Senior Credit Facility, or any successor or successors thereto, in an aggregate principal amount not to exceed the aggregate commitments as in effect on the date of the Indenture; (ii) Indebtedness and obligations of the Company under the Notes, (b) any Indebtedness and obligations outstanding on the date hereof and (c) Indebtedness and obligations arising after the date hereof in respect of agreements existing as of the date hereof providing for indemnification, adjustment of purchase price or similar obligations incurred in connection with the acquisition of any business; 10 18 (iii) Indebtedness the proceeds of which are used, directly or indirectly, to refinance outstanding Indebtedness of the Company or any Subsidiary in a principal amount (or, if such Indebtedness does not require cash payments prior to maturity, with an original issue price of such Indebtedness) not to exceed the principal amount of the Indebtedness so refinanced (or, if the Indebtedness being refinanced was issued with an original issue discount, the original issue price plus the amortized portion of the original issue discount to the date that such refinancing Indebtedness was incurred); provided that if the Indebtedness being refinanced is Indebtedness of the Company, such refinancing shall be Indebtedness of the Company; provided, further, that Indebtedness the proceeds of which are used to refinance Indebtedness of the Company that is expressly subordinated in right of payment to the Notes will only be permitted if (x) such Indebtedness is expressly subordinated in right of payment to the Notes at least to the same extent that the Indebtedness to be refinanced is subordinated to the Notes, (y) the Average Life to Stated Maturity of such Indebtedness exceeds the Average Life to Stated Maturity of the Notes, and (z) the final scheduled maturity of such Indebtedness exceeds the final maturity of the Notes; and (iv) Indebtedness of a wholly owned Subsidiary to the Company or the Company to a wholly owned Subsidiary. "Permitted Investments" means (i) certificates of deposit with final maturities of one year or less issued by United States commercial banks having capital and surplus in excess of $100,000,000; (ii) commercial paper with a grade of no less than A1 or P1; (iii) direct 11 19 obligations of the United States Government or a United States agency with a maturity of one year or less; (iv) money market preferred stock with a rating of "A" or greater; and (v) shares of money market mutual or similar funds having assets in excess of $100,000,000. "Permitted Liens" means (i) Liens existing on the date of this Indenture as specifically identified in the final prospectus relating to the offering of the Notes; (ii) Liens for taxes, assessments, governmental charges or claims which are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and if a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor; (iii) statutory Liens of landlords and carriers', warehousemen's, mechanics', suppliers', materialmen's, repairmen's, or other like Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate proceedings, and if a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor; (iv) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security; (v) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory obligations, surety and appeal bonds, government contracts, performance and return-of-money bonds and other obligations of a like nature incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money); (vi) easements, rights-of-way, restrictions, minor defects or irregularities in title and other similar charges or encumbrances not interfering in any material respect with the business of the Company or any of its Subsidiaries incurred in the ordinary course of business; (vii) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (viii) judgment and attachment Liens not giving rise to an Event of Default; (ix) leases or subleases granted to others not interfering in any material respect with the business of the Company or any of its Subsidiaries; (x) any interest or title of a lessor in the property subject to any capital lease obligation or operating lease; (xi) Liens arising from filing Uniform Commercial Code financing statements 12 20 regarding leases; and (xii) any renewal of or substitution for any Lien permitted by any of the preceding clauses, provided, however, that the Indebtedness secured is not increased nor the Lien extended to any additional property. "Person" means any individual, corporation, partnership, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof. "Redeemable Stock" means any Equity Interest which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable before the stated maturity of the Notes), or upon the happening of any event, matures or is mandatorily redeemable, in whole or in part, prior to the second anniversary of the final stated maturity of the Notes, or is, by its terms or upon the happening of any event, redeemable at the option of the holder thereof, in whole or in part, at any time prior to the second anniversary of the final stated maturity of the Notes. "Redemption Date" when used with respect to any Note to be redeemed means the date fixed for such redemption pursuant to this Indenture. "Sale and Lease-Back Transaction" means any arrangement with any Person (other than the Company or a Subsidiary), or to which any such Person is a party, providing for the leasing to the Company or a Subsidiary of any property owned by the Company or a Subsidiary and sold or transferred by the Company or such Subsidiary to such Person or to any other Person (other than the Company or a Subsidiary). "SEC" means the Securities and Exchange Commission. "Senior Credit Facility" means the Senior Credit Facility in the aggregate principal amount of $15,000,000 from Fleet National Bank to the Company, dated as of October 1, 1993, and any amendments, extensions, refundings or renewals thereof with the same or different lenders. 13 21 "Senior Indebtedness" means (i) the principal of, premium, if any, and accrued and unpaid interest on, and letters of credit (and matured and unmatured reimbursement obligations with respect thereto) and any fees, expenses, indemnities and other amounts payable under or in connection with the Senior Credit Facility, provided, however, that (a) any Indebtedness under any refinancing, refunding or replacement of the Senior Credit Facility shall not constitute Senior Indebtedness to the extent that Indebtedness thereunder is by its terms expressly subordinate in right of payment to any other Indebtedness of the Company and (b) all interest accruing after the filing of a petition by or against the Company under any Federal, state or foreign bankruptcy or similar law, whether or not such interest is allowed as a claim after such filing in any proceeding under such bankruptcy or similar law, shall constitute Senior Indebtedness; and (ii) the principal of, premium, if any, and accrued and unpaid interest on Indebtedness of the Company, contingent or otherwise, in respect of borrowed money or otherwise, whether outstanding on the date of this Indenture or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Notes. Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i) Indebtedness evidenced by the Notes, (ii) Indebtedness that is expressly subordinate or junior in right of payment to any Indebtedness of the Company, (iii) any liability for Federal, state, local or other taxes owed or owing by the Company, (iv) Indebtedness of or amounts owed by the Company for compensation to employees and for services, (v) Indebtedness of the Company to a Subsidiary of the Company or any other Affiliate of the Company or any of such Affiliate's subsidiaries, (vi) any Indebtedness which at the time of issuance is issued in violation of the Indenture, and (vii) amounts owing under leases (other than Capital Lease Obligations). "Series B Preferred Stock" means the Series B Preferred Stock of the Company, par value $.05 per share, issued on the date hereof. 14 22 "Series C Preferred Stock" means the Series C Preferred Stock of the Company, par value $.05 per share, issued on the date hereof. "Specified Senior Indebtedness" means (i) all Senior Indebtedness under the Senior Credit Facility and (ii) all other Senior Indebtedness, which (a) is secured by a Lien or Liens on all or substantially all of the assets of the Company, (b) has at the time of initial issuance an aggregate outstanding principal amount, together with all other Senior Indebtedness sharing pari passu in such Liens, of $5 million or more and (c) is designated as such by the Board of Directors at the time of initial issuance. "Subordinated Indebtedness" means Indebtedness which is subordinated in right of payment to any other Indebtedness of the Company. "Subsidiary" means (i) a corporation, the majority of the Common Equity of which is owned, directly or indirectly through other subsidiaries, by the Company or a subsidiary of the Company, and (ii) any entity other than a corporation, the majority of the Common Equity of which is owned, directly or indirectly through other subsidiaries, by the Company or a subsidiary of the Company. "Subsidiary Preferred Stock" means any Capital Stock issued by a Subsidiary which has any preference as to payment of dividends or upon liquidation over any other Capital Stock of such Subsidiary. "TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Section Section 77aaa-77bbbb) as in effect on the date of this Indenture. "Trustee" means the party named as such in this Indenture until a successor replaces it pursuant to this Indenture and thereafter means the successor. "Trust Officer" means any officer in the Trustee's principal corporate trust office customarily performing functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred 15 23 because of his knowledge of and familiarity with the particular subject. "United States" means the United States of America. "wholly owned Subsidiary" means any Subsidiary of the Company all the Common Equity of which is owned by the Company, either directly or through wholly owned Subsidiaries. Section 202 Other Definitions.
Term Defined in Section ---- ------------------ "Adjusted Net Worth" 11.04 "Asset Sale Payment" 4.09 "Asset Sale Payment Date" 4.09 "Bankruptcy Law" 6.01 "Change of Control Offer" 4.08 "Change of Control Payment Date" 4.08 "Custodian" 6.01 "Event of Default" 6.01 "Excess Proceeds" 4.09 "Excess Proceeds Offer" 4.09 "Guarantee Date" 11.04 "Legal Holiday" 12.08 "Maximum Guaranteed Amount" 11.04 "Note Proceeds" 11.04 "Paying Agent" 2.03 "Registrar" 2.03 "Restricted Payments" 4.04 "Senior Indebtedness of the Guarantor" 11.02 "U.S. Government Obligations" 8.01
Section 303 Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes. 16 24 "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company or any other obligor on the indenture securities; with respect to the requirement of Sections 312 to 317, inclusive, of the TIA, such term shall include the Guarantors if the Company fails to perform its obligations under such Sections. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them. Section 404 Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles in effect on the date hereof; (3) "or" is not exclusive; and (4) words in the singular include the plural and in the plural include the singular. ARTICLE II THE NOTES Section 101 Dating; Incorporation of Form in Indenture. The Notes, the notation thereon relating to the Guarantee and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A which is incorporated in and made a part of this Indenture. The Notes may have notations, legends or endorsements re- 17 25 quired by law, stock exchange rule, agreements to which the Company is subject, or usage. The Company shall approve the form of the Notes and any notation, legend or endorsement on them. Each Note shall be dated the date of its authentication. Section 202 Execution and Authentication. Two Officers shall sign the Notes for the Company by manual or facsimile signature. The Company's seal shall be impressed, affixed, imprinted or reproduced on the Notes and may be in facsimile form. An Officer of each Guarantor shall sign the notation on the Notes relating to the Guarantee by manual or facsimile signature. If an Officer whose signature is on a Note no longer holds that office at the time the Trustee authenticates the Note, the Note shall be valid nevertheless. A Note shall not be valid until the Trustee manually signs the certificate of authentication on the Note. Such signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall authenticate Notes for original issue in the aggregate principal amount of $75,000,000 upon a written order of the Company signed by two Officers or by an Officer and an Assistant Treasurer of the Company. The aggregate principal amount of Notes outstanding at any time may not exceed such amount except as provided in Section 2.07. The Trustee may appoint an authenticating agent to authenticate Notes. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company. The Notes shall be issuable only in registered form without coupons and only in denominations of $1,000 and integral multiples thereof. Section 303 Registrar and Paying Agent. The Company shall maintain an office or agency where Notes may be presented for registration of transfer 18 26 or for exchange ("Registrar"), an office or agency where Notes may be presented for payment ("Paying Agent") and an office or agency where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional co-paying agents. The Company or any Subsidiary may act as Paying Agent, Registrar or co-registrar and the term "Paying Agent" includes any additional paying agent. The Company shall notify the Trustee of the name and address of any Agent not a party to this Indenture. If the Company fails to maintain a Registrar or Paying Agent, or agent for service of notices and demands, or fails to give the foregoing notice, the Trustee shall act as such. The Company initially appoints the Trustee as Registrar, Paying Agent and agent for service of notices and demands. Section 404 Paying Agent to Hold Money in Trust. Prior to each due date of the principal or interest on any Notes, the Company (or any other obligor on the Notes) shall deposit with the Paying Agent a sum sufficient to pay such principal and interest so becoming due. Each Paying Agent shall hold in trust for the benefit of Noteholders or the Trustee all money held by the Paying Agent for the payment of principal or interest on the Notes, and shall notify the Trustee of any default by the Company (or any other obligor on the Notes) in making any such payment. If the Company or a Subsidiary acts as Paying Agent, it shall on or before each due date of the principal of or interest on any Notes segregate the money and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and the Trustee may at any time during the continuance of any payment default, upon written request to a Paying Agent, require such Paying Agent to forthwith pay to the Trustee all sums so held in trust by such Paying Agent. Upon doing so, the Paying Agent (other than the Company or a Subsidiary) shall have no further liability for the money. 19 27 Section 505 Noteholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Noteholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least ten days before each semi-annual interest payment date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Noteholders. Section 606 Transfer and Exchange. When a Note is presented to the Registrar or a co-registrar with a request to register the transfer, the Registrar or co-registrar shall register the transfer as requested and when Notes are presented to the Registrar or a co-registrar with a request to exchange them for an equal principal amount of Notes of other authorized denominations, the Registrar shall make the exchange as requested provided that every Note presented or surrendered for registration of transfer or exchange shall be duly endorsed or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Registrar duly executed by the Holder thereof or his attorney duly authorized in writing. To permit transfers and exchanges, the Company shall execute and the Trustee shall authenticate Notes and each Guarantor shall endorse the Guarantee thereon at the Registrar's or co-registrar's request. The Company may charge a reasonable fee for any transfer or exchange and may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto, but this provision shall not apply to any exchange pursuant to Sections 2.09, 3.06 or 9.05. The Registrar is not required to transfer or exchange any Note (i) during a period beginning at the opening of business 15 days before any selection of Notes to be redeemed and ending at the close of business on the day of the mailing of a notice of redemption or (ii) selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. 20 28 Section 707 Replacement Notes. If a mutilated Note is surrendered to the Trustee or if the Holder of a Note presents evidence to the satisfaction of the Company and the Trustee that the Note has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Note and each Guarantor shall endorse the Guarantee thereon if the requirements of Section 8-405 of the Uniform Commercial Code as in effect on the date of this Indenture are met. An indemnity bond may be required that is sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee or any Agent from any loss which any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and each Guarantor and shall be entitled to the benefits of this Indenture. Section 808 Outstanding Notes. Notes outstanding at any time are all Notes authenticated by the Trustee except for those cancelled by it and those described in this Section 2.08 as not outstanding. If a Note is replaced pursuant to Section 2.07, (other than a mutilated Note surrendered for replacement) it ceases to be outstanding until the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender of such Note and replacement thereof pursuant to Section 2.07. If the Paying Agent (other than the Company or a Subsidiary) holds on a Redemption Date or maturity date money sufficient to pay the principal of and accrued interest on Notes payable on that date, then on and after that date such Notes cease to be outstanding and interest on them ceases to accrue. A Note does not cease to be outstanding because the Company or an Affiliate holds the Note. 21 29 Section 909 Temporary Notes. Until definitive Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes and each Guarantor shall endorse the Guarantee thereon. Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Company considers appropriate for temporary Notes. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes and each Guarantor shall endorse the Guarantee thereon in exchange for temporary Notes. Until such exchange, such temporary Notes shall be entitled to the same rights, benefits and privileges as the definitive Notes, including the Guarantee. Section 1010 Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar or the Paying Agent shall forward to the Trustee any Notes surrendered to them for transfer, exchange or payment for cancellation. Subject to Section 2.07, the Company may not issue new Notes to replace Notes that it has previously paid or delivered to the Trustee for cancellation. Section 1111 Defaulted Interest. If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest to the persons who are Noteholders on a subsequent special record date. The Company shall fix the special record date and payment date in a manner satisfactory to the Trustee. At least 15 days before the special record date, the Company shall mail to each Noteholder a notice that states the special record date, the payment date, and the amount of defaulted interest to be paid. The Company may pay defaulted interest in any other lawful manner. 22 30 ARTICLE III REDEMPTION Section 101 Right to Redeem; Notices to Trustee. The Company may redeem the Notes on the terms and conditions set forth in paragraph 5 of the Notes. If the Company elects to redeem the Notes pursuant to paragraph 5 of the Notes, it shall notify the Trustee in writing of the Redemption Date and the principal amount of Notes to be redeemed. The Company shall give each notice provided for in this Section in an Officers' Certificate delivered at least 50 days before the Redemption Date (unless a shorter period shall be satisfactory to the Trustee). Section 202 Selection of Notes to Be Redeemed. If less than all the Notes are to be redeemed, the Trustee shall select the Notes to be redeemed pro rata or by lot or by any other method the Trustee considers fair and appropriate. The Trustee shall make the selection from Notes outstanding and not previously called for redemption. The Trustee may select for redemption portions of the principal of Notes that have denominations larger than $1,000. Notes and portions of them the Trustee selects shall be in amounts of $1,000 or multiples of $1,000. Provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. Section 303 Notice of Redemption. At least 30 days but not more than 60 days before a Redemption Date, the Company shall mail a notice of redemption by first-class mail to each Holder of Notes to be redeemed. The notice shall identify the Notes to be redeemed and shall state: (1) the Redemption Date; (2) the redemption price; 23 31 (3) if any Note is to be redeemed in part, the portion of the principal amount to be redeemed, and that on and after the Redemption Date, upon surrender of such Note a new Note or Notes in principal amount equal to the unredeemed portion thereof will be issued; (4) the name and address of the Paying Agent; (5) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; and (6) if less than all the Notes are to be redeemed, the identification of the particular Notes (or portion thereof) to be redeemed, as well as the aggregate principal amount of Notes to be redeemed and the aggregate principal amount of Notes estimated to be outstanding after such partial redemption. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense. Section 404 Effect of Notice of Redemption. Once notice of redemption is mailed, Notes called for redemption become due and payable on the Redemption Date and at the redemption price. Upon surrender to the Paying Agent, such Notes shall be paid at the redemption price, plus accrued interest to the Redemption Date. Section 505 Deposit of Redemption Price. Prior to the Redemption Date, the Company shall deposit with the Paying Agent (or, if the Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued interest on all Notes to be redeemed on that date. 24 32 Section 606 Notes Redeemed in Part. After the Redemption Date, upon surrender of a Note that is redeemed in part, the Trustee shall authenticate for the Holder a new Note and each Guarantor shall endorse the Guarantee thereon equal in principal amount to the unredeemed portion of the Note surrendered. ARTICLE IV COVENANTS Section 101 Payment of Notes. The Company shall pay the principal of and interest on the Notes on the dates and in the manner provided in the Notes and this Indenture. An installment of principal or interest shall be considered paid on the date it is due if the Trustee or Paying Agent (other than the Company or a Subsidiary of the Company) holds on that date money designated for and sufficient to pay the installment. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at a rate per annum equal to the rate set forth in the title of the Notes; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest at the same rate to the extent lawful. Section 202 Maintenance of Office or Agency. Pursuant to the provisions of Section 2.03, the Company shall designate in New York City an office or agency where at all times the Notes may be surrendered for registration of transfer or exchange and where at all times the notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. If at any time the Company shall fail to so designate any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 12.02. The Company may also designate from time to time one or more other offices or agencies where the 25 33 Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided that no such designation or rescission shall in any manner relieve the Company of its obligation to so designate as aforesaid an office or agency in New York City for such purposes. The Company shall give prompt notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the Shawmut Trust Company, 40 Broad Street, New York, New York, as such office or agency of the Company in accordance with this Section. Section 303 Provision of Reports. (a) The Company will supply without cost to each Holder of the Notes, and file with the Trustee within 30 days after the Company is required to file the same with the SEC, copies of the annual reports and quarterly reports and of the information, documents and other reports which the Company may be required to file with the SEC pursuant to Sections 13(a), 13(c) or 15(d) of the Exchange Act. (b) If the Company is not required to file with SEC such reports and other information referred to in paragraph (a) above, the Company will furnish without cost to each Holder of the Notes and file with the Trustee (i) within 120 days after the end of each fiscal year, annual reports containing substantially the information required to be contained in Form 10-K promulgated under the Exchange Act, or substantially the same information required to be contained in comparable items of any successor form, (ii) within 60 days after the end of each of the first three fiscal quarters of each fiscal year, quarterly reports containing substantially the information required to be contained in Form 10-Q promulgated under the Exchange Act, or substantially the same information required to be contained in comparable items of any successor form and (iii) promptly from the time after the occurrence of an event required to be therein reported, such other reports containing substantially the information required to be contained in Form 8-K promulgated under the Exchange Act, or substantially the same 26 34 information required to be contained in any successor form. At the Company's request and at the Company's expense, the Trustee shall deliver to the Holders the documents required to be delivered by the Company pursuant to this Section. Section 404 Limitation on Restricted Payments. The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, (i) declare or pay any dividend or make any distribution on account of the Company's or any of its Subsidiaries' Capital Stock or other Equity Interests (other than dividends or distributions payable to the Company or any of its Subsidiaries or payable in shares of Capital Stock or Equity Interests of the Company or its Subsidiaries (other than Redeemable Stock)), (ii) purchase, redeem or otherwise acquire or retire for value any Equity Interests of the Company or any of its Subsidiaries (other than any such Equity Interests owned by the Company or any of its Subsidiaries), (iii) prepay, repay, redeem, defease or otherwise acquire or retire for value prior to any scheduled maturity, scheduled repayment or scheduled sinking fund payment, any Indebtedness of the Company that ranks junior or pari passu in right of payment to the Notes (including the Junior Subordinated Notes and capitalized interest thereon), (iv) incur, create or assume any guarantee of Indebtedness of any Affiliate of the Company (other than a wholly owned Subsidiary), provided, however, that any Subsidiary may guarantee any Senior Indebtedness of the Company or (v) make Investments, other than Permitted Investments, in any Person other than a wholly owned Subsidiary (the foregoing actions set forth in clauses (i) through (v) being referred to as "Restricted Payments") (a) if at the time of such action, or after giving effect thereto, an Event of Default or Default shall have occurred and be continuing; or (b) if after giving effect to such Restricted Payment, the aggregate amount of Restricted Payments subsequent to the date of this Indenture, would exceed: (1) the aggregate EBITDA of the Company or, in the event such aggregate EBITDA shall be a deficit, minus such deficit, accrued subsequent to December 31, 1993 to the end of the fiscal quarter immediately preceding such Restricted Payment, less (2) 1.6 times Consolidated Interest Expense 27 35 for the same period, plus (3) the aggregate net cash proceeds received by the Company from the issue or sale of Equity Interests of the Company (other than Equity Interests issued or sold to a Subsidiary and other than Redeemable Stock) after December 31, 1993, plus (4) the aggregate net cash proceeds received by the Company upon the exercise of Equity Interests of the Company (other than Equity Interests exercised by a Subsidiary or for Redeemable Stock) after December 31, 1993, plus (5) $1,000,000; or (c) if after giving effect to such Restricted Payment, the ratio of the Company's total Indebtedness to the Company's EBITDA (determined on a pro forma basis for the last four fiscal quarters of the Company for which financial statements are available at the date of determination) would be such that the Company would not be permitted to incur $1.00 of additional Indebtedness under Section 4.07 hereof; provided, however, that the provisions of this Section 4.04 shall not prevent (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment complied with the provisions hereof, (ii) any redemption of the Junior Subordinated Notes or the Series B Preferred Stock or Series C Preferred Stock with all or part of the net proceeds of the sale of WYAI (FM), Atlanta, Georgia, (iii) any repurchase of Capital Stock of the Company from employees of the Company in an aggregate amount not to exceed $500,000, provided, however, that if such Capital Stock is resold to another employee, the aggregate net cash proceeds shall be added back to such $500,000, provided, further, that such sale shall not be included in clause (b)(3) of this Section 4.04 or (iv) an Investment in any Person which, immediately after such Investment, will be a wholly owned Subsidiary, provided that such Person conducts a business which is substantially identical to any business conducted by the Company and its Subsidiaries on the date of this Indenture. Prior to making any Restricted Payment under this Section 4.04, the Company shall deliver to the Trustee an Officers' Certificate setting forth the computation by which the amount available for Restricted Payments was determined and stating that no Default or Event of Default exists and is continuing and no Default or Event of Default will result from making the Restricted Payment. The Trustee shall have no duty or responsibility to determine the accuracy or correctness of this 28 36 computation and shall be fully protected in relying on such Officers' Certificate. Section 505 Limitation on Payment Restrictions Affecting Subsidiaries. The Company will not, and will not permit any Subsidiary to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction which restricts the ability of any such Subsidiary to (i) pay dividends or make any other distributions on such Subsidiary's Capital Stock or pay any Indebtedness owed to the Company or any Subsidiary, (ii) make any Investment in the Company or any Subsidiary, (iii) transfer any of its property or assets to the Company or any Subsidiary, or (iv) guarantee any Indebtedness of the Company or any of its Subsidiaries, except any restrictions existing under (a) applicable law, (b) this Indenture, (c) written agreements in effect at the issuance of the Notes as described on Schedule I hereto or restrictions contained in Specified Senior Indebtedness that are no more restrictive than those provided in the Senior Credit Facility as in effect on the date of this Indenture. Section 606 Limitation on Transactions with Affiliates. The Company will not, and will not permit any Subsidiary to, directly or indirectly, conduct any business or enter into any transaction or series of related transactions (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of the Company (other than the Company or a Subsidiary) unless (i) the terms of such business, transaction or series of transactions are as favorable to the Company or such Subsidiary as terms that would be obtainable at the time for a comparable transaction or series of related transactions in arm's-length dealings with an unrelated third person, (ii) if the business or transaction or series of transactions is in a potential aggregate amount greater than $1,000,000, but less than $3,000,000, such business or transaction or series of transactions shall have been approved in good faith by the Board of Directors and a majority of the independent directors thereof and the Board Resolution provides that the business or transac- 29 37 tion or series of transactions meets the criterion set forth in (i) above or (iii) if the business or transaction or series of transactions is in a potential aggregate amount equal to or greater than $3,000,000, but less than $15,000,000, the Company has received the written opinions of two nationally recognized experts with experience in appraising the terms and conditions of the type of business or transaction or series of transactions for which approval is required, selected by the Board of Directors and all the independent directors thereof, and such opinions are to the effect that the business or transaction or series of transactions are fair to the Company from a financial point of view, or (iv) if the business or transaction or series of transactions is in a potential aggregate amount equal to or greater than $15,000,000, the Company has received a written opinion of a nationally recognized investment banking firm to the effect that the transaction is fair to the Company from a financial point of view. For purposes of the preceding sentence, a business or a transaction or series of transactions involving the incurrence of Indebtedness or the issuance of preferred stock shall be valued at the aggregate net proceeds of such Indebtedness or preferred stock, respectively, without regard to interest or dividend payments. Notwithstanding the foregoing, this provision will not apply to (a) any transaction with an officer or director of the Company or of any Subsidiary in his or her capacity as officer or director entered into in the ordinary course of business (including compensation and employee benefit arrangements with any officer or director of the Company or of any Subsidiary) or (b) the exercise of any purchase option on a property operated pursuant to an LMA as in effect at the issuance of the Notes. Section 707 Limitation on Incurrence of Indebtedness. The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or in any other manner become liable with respect to, or otherwise become responsible for the payment of (collectively, "incur"), any Indebtedness (including Acquired Indebtedness) other than Permitted Indebtedness, provided, however, the Company and its Subsidiaries shall be permitted to incur Indebtedness if, after giving effect to the incurrence of such Indebtedness and the receipt and application of the 30 38 proceeds thereof, the ratio of the Company's total Indebtedness to the Company's EBITDA (determined on a pro-forma basis for the last four fiscal quarters of the Company for which financial statements are available at the date of determination) is less than 6.75 to 1 if the Indebtedness is incurred prior to December 31, 1996 and 6.25 to 1 if the Indebtedness is incurred thereafter; provided, however, that if the Indebtedness which is the subject of a determination under this provision is Acquired Indebtedness, or Indebtedness incurred in connection with the simultaneous acquisition of any Person, business, property or assets, then such ratio shall be determined by giving effect (on a pro forma basis, as if the transaction had occurred at the beginning of the four quarter period) to both the incurrence or assumption of such Acquired Indebtedness or such other Indebtedness by the Company and the inclusion in the EBITDA of the EBITDA of the acquired Person, business, property or assets. The accrual of deferred interest on the Junior Subordinated Notes shall not be deemed an incurrence of Indebtedness for purposes of this covenant. Notwithstanding the foregoing, the Company may not incur or otherwise cause or suffer to exist any Indebtedness of the Company that ranks junior in right of payment to the Notes that (a) has a maturity date or mandatory sinking fund payment prior to the maturity of the Notes or (b) would become due and payable or be capable of being declared due and payable, with the passage of time or otherwise, prior to the date on which it would otherwise become due and payable, solely as a result of a default or Event of Default under the Notes or a default or event of default under the Senior Credit Facility which would cause Indebtedness thereunder to be capable of being declared due and payable prior to the date on which it would otherwise become due and payable. Section 808 Change of Control. Following the occurrence of any Change of Control, the Company shall offer (a "Change of Control Offer") to purchase all outstanding Notes at a purchase price equal to 101% of the aggregate principal amount of the outstanding Notes, plus accrued and unpaid interest to the date of purchase. The Change of Control Offer shall be deemed to have commenced upon mailing of the notice described in the next succeeding paragraph and 31 39 shall terminate 20 Business Days after its commencement, unless a longer offering period is required by law. Promptly after the termination of the Change of Control Offer (the "Change of Control Payment Date"), the Company shall purchase and mail or deliver payment for all Notes properly tendered in response to the Change of Control Offer. If the Change of Control Payment Date is on or after an interest payment record date and on or before the related interest payment date, any accrued interest will be paid to the person in whose name a Note is registered at the close of business on such record date, and no additional interest will be payable to Holders who tender Notes pursuant to the Change of Control Offer. Within 30 days after any Change of Control, the Company (with notice to the Trustee), or the Trustee at the Company's request, will mail or cause to be mailed to all Holders on the date of the Change of Control a notice of the occurrence of such Change of Control and of the Holders' rights arising as a result thereof. Such notice will contain all instructions and materials necessary to enable Holders to tender their Notes to the Company. Such notice, which shall govern the terms of the Change of Control Offer, shall state: (1) that the Change of Control Offer is being made pursuant to this Section 4.08, the events causing such Change of Control and the length of time the Change of Control Offer will remain open; (2) the purchase price and the Change of Control Payment Date; (3) that any Note not tendered will continue to accrue interest; (4) that any Note or portion thereof tendered for payment pursuant to the Change of Control Offer shall cease to accrue interest on the Change of Control Payment Date, except for any Note for which the Change of Control Payment Date falls between an interest payment record date and the related interest payment date, which shall bear interest to such latter date; and 32 40 (5) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the expiration of the Change of Control Offer, or such longer period as may be required by law, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the certificate number and the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have the Note purchased. On or before a Change of Control Payment Date, the Company shall (i) accept for payment Notes or portions thereof tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent money sufficient to pay the purchase price of all Notes or portions thereof so accepted and (iii) deliver to the Trustee Notes so accepted together with an Officers' Certificate stating the Notes or portions thereof accepted for payment by the Company. The Paying Agent shall promptly mail or deliver to Holders of Notes so accepted payment in an amount equal to the purchase price, and the Company and the Guarantors shall execute and the Trustee shall promptly authenticate and mail or deliver to Holders of Notes tendered only in part, a new Note equal in principal amount to any unpurchased portion of the Note surrendered. The Company will publicly announce the results of the Change of Control Offer on the Change of Control Payment Date. For purposes of this Section 4.08, the Trustee shall act as the Paying Agent. Section 909 Limitation on Use of Proceeds from Asset Sales. The Company and its Subsidiaries will not, directly or indirectly, consummate any Asset Sale unless (i) at least 85% of the Net Proceeds from the Asset Sale are received in cash at closing, (ii) the consideration received from such Asset Sale is at least equal to the fair market value of the property sold as determined by the Board of Directors and (iii) the Company makes an offer (the "Excess Proceeds Offer") to apply the Excess Proceeds (as defined below), once such Excess Proceeds accumulate to a sum greater than $5,000,000 (such sum, without the addition of subsequent Excess Proceeds re- 33 41 flecting subsequent Asset Sales, referred to herein as the "Asset Sale Payment"), to redeem Notes, on a date not later than 180 days after any Asset Sale which causes such Excess Proceeds to exceed $5,000,000 (the "Asset Sale Payment Date"), at a purchase price equal to 100% of the principal amount of such Notes, plus accrued and unpaid interest to the Asset Sale Payment Date. Any amount of Net Proceeds from an Asset Sale, whether received in cash at the closing of such sale or disposition or subsequently received in cash upon liquidation of non-cash Net Proceeds, shall be deemed Excess Proceeds from such sale or disposition to the extent it is not within 180 calendar days after such sale or disposition, (i) reinvested or contractually committed to be reinvested pursuant to a binding agreement in properties or assets that will be used in the lines of business of the Company and its Subsidiaries existing on the date of such sale or disposition and the Company delivers a notice of such reinvestment to the Trustee within such 180 calendar days, (ii) used for the prepayment of any Senior Indebtedness of the Company, provided, however, such prepayment causes a permanent reduction of borrowing availability under the debt instrument related to such Indebtedness and the Company delivers a notice to such effect to the Trustee within such 180 calendar days or (iii), in the case of proceeds from the sale of WYAI(FM), used for the repayment or redemption of the Junior Subordinated Notes, Series B Preferred Stock or Series C Preferred Stock. Notice of an Excess Proceeds Offer shall be mailed by the Company to all Holders not less than 30 days nor more than 60 days before the Asset Sale Payment Date at their last registered address. The Excess Proceeds Offer shall remain open from the time of mailing until five days before the Asset Sale Payment Date. The notice shall be accompanied by a copy of the most recent report furnished to the Holders pursuant to Section 4.03 hereof. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Excess Proceeds Offer. The notice, which shall govern the terms of the Excess Proceeds Offer, shall state: (1) that the Excess Proceeds Offer is being made pursuant to this Section 4.09; 34 42 (2) the Asset Sale Payment, the purchase price (including the amount of accrued interest) and the Asset Sale Payment Date; (3) that any Note not tendered or accepted for payment will continue to accrue interest; (4) that, unless the Company defaults in the making of the Asset Sale Payment, any Note accepted for payment pursuant to the Excess Proceeds Offer shall cease to accrue interest after the Asset Sale Payment Date; (5) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than three days prior to the Asset Sale Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have the Note purchased; (6) that if Notes in a principal amount in excess of the Asset Sale Payment are tendered pursuant to the Excess Proceeds Offer, the Company shall purchase Notes on a pro rata basis (with such adjustments as may be deemed appropriate by the Company and the Trustee so that only Notes in denominations of $1,000 or integral multiples of $1,000 shall be acquired); and (7) that Holders whose Notes were purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered. Before an Asset Sale Payment Date, the Company shall (i) accept for payment Notes or portions thereof tendered pursuant to the Excess Proceeds Offer (on a pro rata basis if required pursuant to paragraph (6) above), (ii) deposit with the Paying Agent money sufficient to pay the purchase price of all Notes or portions thereof 35 43 so accepted and (iii) deliver to the Trustee Notes so accepted together with an Officers' Certificate stating the Notes or portions thereof accepted for payment by the Company. The Paying Agent shall promptly mail or deliver to Holders of Notes so accepted payment in an amount equal to the purchase price, and the Company and the Guarantors shall execute and the Trustee shall promptly authenticate and mail or deliver to such Holders a new Note equal in principal amount to any unpurchased portion of the Note surrendered. Any Notes not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company will publicly announce the results of the Excess Proceeds Offer on the Asset Sale Payment Date. For purposes of this Section 4.09, the Trustee shall act as the Paying Agent. After the Asset Sale Payment Date, any Excess Proceeds not used to repurchase Notes (excluding Excess Proceeds received after the Asset Sale causing the repurchase, which shall be available for subsequent Asset Sale Payments in subsequent Excess Proceeds Offers) shall be available for general corporate purposes and shall not be applied to subsequent Excess Proceeds Offers. All cash Net Proceeds from an Asset Sale shall be invested only in Permitted Investments until reinvested, used for prepayment of debt, used to repurchase Notes or made available for general corporate purposes all in accordance with this Section 4.09. Notwithstanding the foregoing, the Company will not, and will not permit any Subsidiary to, directly or indirectly make any Asset Sale of any of the Capital Stock of a Subsidiary except pursuant to an Asset Sale of all the Capital Stock of such Subsidiary. Section 1010 Compliance with Securities Laws upon Purchase of Notes. In connection with any offer to purchase or purchase of Notes under Sections 4.08 or 4.09 hereof, the Company shall (i) comply with Rule 14e-1 under the Exchange Act and (ii) otherwise comply with all Federal and state securities laws so as to permit the rights and obligations under Sections 4.08 and 4.09 to be exercised in the time and in the manner specified in Sections 4.08 and 4.09. 36 44 Section 1111 Limitation on Liens Securing Subordinated Indebtedness. The Company will not, and will not permit any Subsidiary to, create, incur, assume or suffer to exist any Lien of any kind, other than Permitted Liens, upon any of their respective assets now owned or acquired after the date hereof or any income or profits therefrom securing (i) any Subordinated Indebtedness of the Company, unless the Company provides, and causes its Subsidiaries to provide, concurrently or immediately thereafter, that the Notes are equally and ratably secured, provided that, if such Subordinated Indebtedness is expressly subordinated to the Notes, the Lien securing such Subordinated Indebtedness shall be subordinate and junior to the Lien securing the Notes with the same relative priority as such Subordinated Indebtedness shall have with respect to the Notes, and provided, further, that this clause (i) shall not be applicable to any Liens securing any such Indebtedness which became Indebtedness of the Company pursuant to a transaction subject to the provisions of Article 5 or which constitutes Acquired Indebtedness and which Liens were in existence at the time of such transaction (unless such Indebtedness was incurred or such Lien created in connection with, or in contemplation of, such transaction), so long as such Liens do not extend to or cover any property or assets of the Company or any Subsidiary of the Company other than property or assets acquired in such transaction; or (ii) any assumption, guarantee or other liability of any Subsidiary of the Company in respect of any Subordinated Indebtedness of the Company, unless a substantially similar assumption, guarantee or other liability of such Subsidiary in respect of the Notes, concurrently or immediately thereafter, shall be equally and ratably secured, provided that if such Subordinated Indebtedness is expressly subordinated in right of payment to the Notes, the Lien securing the assumption, guarantee or other liability of such Subsidiary in respect to such Subordinated Indebtedness shall be subordinate and junior to the Lien securing the assumption, guarantee or other liability of such Subsidiary in respect of the Notes with the same relative priority as such Subordinated Indebtedness shall have with respect to the Notes, and provided, further, that this clause (ii) shall not be applicable to Liens securing any such assumption, guarantee or other liability which existed at the time such Subsidiary 37 45 became a Subsidiary of the Company or which constitutes Acquired Indebtedness of a Subsidiary and which Liens were in existence at the time of such transaction (unless such assumption, guarantee or other liability was incurred or such Lien created in connection with, or in contemplation of, such Person becoming a Subsidiary of the Company), so long as such Liens do not extend to or cover any property or assets of the Company or any Subsidiary of the Company other than the assets of such Person. Section 1212 Limitation on Other Senior Subordinated Indebtedness. The Company will not create, incur, assume, guarantee or in any manner become liable with respect to any Indebtedness (other than the Notes) that is expressly subordinate in right of payment to any Senior Indebtedness unless such Indebtedness is also pari passu with or subordinate in right of payment to the Notes, pursuant to subordination provisions substantially similar to those contained in Article 10 hereof. Section 1313 Limitation on Capital Stock of Subsidiaries. The Company will not (i) sell, pledge, hypothecate or otherwise convey or dispose of any Capital Stock of a Subsidiary (other than under the Senior Credit Facility or a successor facility or under the terms of any Specified Senior Indebtedness) or (ii) permit any of its Subsidiaries to issue any Capital Stock, other than to the Company or a wholly owned Subsidiary of the Company. The foregoing restrictions shall not apply to an Asset Sale made in compliance with Section 4.09 hereof or the issuance of Subsidiary Preferred Stock in compliance with Section 4.07 hereof. Section 1414 Limitation on Sale and Lease-Back Transactions. The Company will not, and will not permit any Subsidiary to, enter into any Sale and Lease-Back Transaction unless (i) the consideration received in such Sale and Lease-Back Transaction is at least equal to the fair market value of the property sold, as determined by a Board Resolution of the Company, and (ii) the Company 38 46 could incur Attributable Debt in respect of such Sale and Lease-Back Transaction under Section 4.07 hereof. Section 1515 Corporate Existence. Subject to Article 5, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and that of each Subsidiary and the rights (charter and statutory) and franchises of the Company and the Subsidiaries; provided, however, that the Company shall not be required to preserve any such right or franchise, or the corporate existence of any Subsidiary (except as provided in Article 11), if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and the Subsidiaries taken as a whole and that the loss thereof is not, and will not be, adverse in any material respect to the Noteholders. Section 1616 Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary and (2) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a Lien upon the property of the Company or any Subsidiary; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings if adequate reserves, if necessary, have been made for such disputed amounts. Section 1717 Notice of Defaults. In the event that the Company becomes aware of any Default or Event of Default, the Company shall promptly deliver to the Trustee an Officers' Certificate specifying such Default or Event of Default. 39 47 Section 1818 Compliance Certificates. The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company an Officers' Certificate stating whether or not the signers know of any Default or Event of Default. If they do know of such a Default or Event of Default, the Certificates shall describe the Default or Event of Default and the efforts to remedy the same. The first certificates to be delivered by the Company pursuant to this Section shall be for the fiscal year ending December 31, 1993. Section 1919 Waiver of Stay, Extension or Usury Laws. The Company and each Guarantor covenant (to the extent that they may lawfully do so) that they will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law which would prohibit or forgive the Company or such Guarantor from paying all or any portion of the principal of or interest on the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture, and (to the extent that they may lawfully do so) the Company and each Guarantor hereby expressly waive all benefit or advantage of any such law, and covenant that they will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. Section 2020 Properties. The Company shall cause all properties used in the conduct of its businesses and the business of each of the Subsidiaries to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary, so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Company from discontinuing the operation or maintenance of any of such 40 48 properties, or disposing of any of them, if such discontinuance or disposal is, in the judgment of the Board of Directors, or of an officer (or other agent employed by the Company) of the Company having managerial responsibility for any such property, desirable in the conduct of the business of the Company or the Subsidiary and not disadvantageous in any material respect to the Holders. Section 2121 Insurance. The Company shall provide, or cause to be provided, for itself and each of its Subsidiaries, insurance (including appropriate self-insurance) against loss or damage of the kinds customarily insured against by corporations similarly situated and owning like properties, including, but not limited to, products liability insurance and public liability insurance for itself and where appropriate for its Subsidiaries, with reputable insurers or with the government of the United States or an agency or instrumentality thereof, in such amounts, with such deductibles and by such methods as shall be customary for corporations similarly situated in the industry. Section 2222 Payments for Consent. Neither the Company nor any of its Subsidiaries shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Noteholder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Indenture or the Notes unless such consideration is offered to be paid or agreed to be paid to all Noteholders which so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement. ARTICLE V MERGER AND SALE OF ASSETS Section 101 When Company or Guarantor May Merge, etc. Neither the Company nor any Guarantor shall consolidate with or merge with or into, or transfer all 41 49 or substantially all of its assets in one transaction or a series of related transactions to, any Person unless: (1) either the Company or such Guarantor, as the case may be, shall be the continuing Person, or the Person (if other than the Company or such Guarantor, as the case may be) formed by such consolidation or into which the Company or such Guarantor, as the case may be, is merged or to which the properties and assets of the Company or such Guarantor, as the case may be, as an entirety or substantially as an entirety are transferred, shall be a corporation organized and existing under the laws of the United States or any state thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Notes or such Guarantor under the Guarantee and this Indenture shall remain in full force and effect; (2) the Person formed by such consolidation or surviving such merger or to which the properties and assets of the Company or such Guarantor, as the case may be, as an entirety or substantially as an entirety are transferred, shall have a Consolidated Net Worth after giving effect to such transaction (including the assumption by the successor of the Notes but excluding any write-ups of assets resulting from such transaction) equal to or greater than the Consolidated Net Worth of the Company or such Guarantor, as the case may be, immediately preceding such transaction; (3) immediately before and immediately after giving effect to such transaction, no Event of Default and no Default shall have occurred and be continuing; (4) the Company, such Guarantor or the successor, as the case may be, for the last four 42 50 full fiscal quarters preceding the date of the transaction for which financial statements are available, on a pro forma basis to give effect to the transaction, would be entitled to incur, immediately following the transaction, $1.00 of additional Indebtedness under Section 4.07 hereof; and (5) the Company or such Guarantor, as the case may be, has delivered to the Trustee an Officers' Certificate (attaching the arithmetic computations to demonstrate compliance with clauses (2) and (4)) and an Opinion of Counsel, each stating that such consolidation, merger, transfer or lease and such supplemental indenture comply with this Article and that all conditions precedent herein provided relating to such transaction have been complied with. Notwithstanding the foregoing, any Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Company or any other Subsidiary or Subsidiaries. Section 202 Successor Entity Substituted. Upon any consolidation or merger or any transfer of all or substantially all of the assets of the Company or any Guarantor, in accordance with Section 5.01, the successor Person formed by such consolidation or into which the Company or such Guarantor, as the case may be, is merged or to which such transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company or such Guarantor, as the case may be, under this Indenture with the same effect as if such successor Person had been named as the Company or such Guarantor, as the case may be, herein. When a successor Person assumes all of the obligations of the Company or any Guarantor, as the case may be, hereunder and under the Notes or the Guarantee, the predecessor shall be released from such obligation. 43 51 ARTICLE VI DEFAULTS AND REMEDIES Setion 101 Events of Default. An "Event of Default" occurs if one of the following shall have occurred and be continuing: (1) the Company defaults in the payment of (i) interest on any Note and the default continues for a period of 30 days, or (ii) the principal of or premium, if any, on any Notes when the same becomes due and payable at maturity, acceleration, on the Redemption Date, on the Change in Control Payment Date, on any Asset Sale Payment Date or otherwise; (2) The Company or any Guarantor fails to comply with any of its covenants or agreements in the Notes or this Indenture (other than those referred to in clause (1) above) and such failure continues for 30 days after receipt by the Company of a Notice of Default; (3) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Subsidiaries (or the payment of which is guaranteed by the Company or any of its Subsidiaries) whether such Indebtedness or guarantee is now existing or hereafter created, and the default relates to (a) the obligation to pay principal on such Indebtedness when due and such default is not cured or waived or paid within any grace period and such principal payment, together with any other principal amount in default, aggregates $3,000,000 or more or (b) any other obligation which results in such Indebtedness being accelerated prior to its express maturity and, in each case, the principal amount of such Indebtedness, 44 52 together with principal amount of any other such Indebtedness the maturity of which has been accelerated, aggregates $3,000,000 or more; (4) the Company or any Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case or proceeding; (B) consents to the entry of an order for relief against it in an involuntary case or proceeding; (C) consents to the appointment of a Custodian of it or for all or substantially all of its property; (D) makes a general assignment for the benefit of its creditors; or (E) admits in writing its inability to pay its debts generally as they become due; (5) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company or any Subsidiary in an involuntary case or proceeding; (B) appoints a Custodian of the Company or any Subsidiary for all or substantially all of its properties; (C) orders the liquidation of the Company or any Subsidiary; (D) and in each case the order or decree remains unstayed and in effect for 60 days; or 45 53 (6) final judgments for the payments of money which in the aggregate exceed $1,000,000 shall be rendered against the Company or any Subsidiary by a court and shall remain unstayed or undischarged for a period of 45 days. The term "Bankruptcy Law" means Title 11, U.S. Code, or any similar Federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law. A Default under clause (2) above is not an Event of Default until the Trustee notifies the Company, or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding notify the Company and the Trustee, of the default and the Company does not cure the default within the time specified in clause (2) above after receipt of such notice. The notice must specify the Default, demand that it be remedied and state that the notice is a "Notice of Default." Subject to the provisions of Sections 7.01 and 7.02, the Trustee shall not be charged with knowledge of any Event of Default unless a Trust Officer of the Trustee has actual knowledge thereof or written notice thereof shall have been given to a Trust Officer of the Trustee at the Corporate Trust Office by the Company, the Paying Agent, any Holder of a Note or an agent of such Holder. Section 202 Acceleration. If any Event of Default under clauses (1), (2), (3) or (6) occurs and is continuing, the Trustee may, by written notice to the Company, or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding may, by notice to the Company and the Trustee, and the Trustee shall, upon the request of such Holders, declare the principal of the Notes, premium, if any, and accrued interest due and payable (i) immediately if no amount is outstanding and no commitment is in effect under the Specified Senior Indebtedness or (ii) if any amount is outstanding or any commitment is in effect under the Specified Senior Indebtedness, upon the earlier of three business days after delivery of the acceleration notice to the Company by the Trustee or the Holders, as 46 54 the case may be, or acceleration of the Specified Indebtedness, and thereupon the Trustee may, at its discretion, proceed to protect and enforce the rights of the Holders of the Notes by appropriate judicial proceedings. If any Event of Default under clauses (4) or (5) occurs, all principal, premium, if any, and interest on the Notes will immediately become due and payable without any declaration or other act on the part of the Trustee or any Holder. The Holders of a majority in aggregate principal amount of the Notes then outstanding by written notice to the Trustee and to the Company may rescind an acceleration and its consequences (except an acceleration due to a default in payment of the principal and interest on any of the Notes) if all existing Events of Default have been cured or waived except non-payment of principal or interest that has become due solely because of the acceleration. Section 303 Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of, premium, if any, or interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Noteholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. Section 404 Waiver of Past Defaults. The Holders of a majority in aggregate principal amount of the Notes at the time outstanding, by notice to the Trustee (and without notice to any other Noteholder), may waive an existing Default or Event of Default and its consequences except (a) an Event of Default described in Section 6.01(1) hereof, or (b) a Default in respect of a provision that under Section 9.02 hereof cannot be amended without the consent of each Noteholder affected. When a Default is waived, it is 47 55 deemed cured and shall cease to exist, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. Section 505 Control by Majority. The Holders of a majority in aggregate principal amount of the Notes at the time outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on it. The Trustee, however, may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines in good faith is unduly prejudicial to the rights of other Noteholders or would involve the Trustee in personal liability. The Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. Section 606 Limitation on Suits. A Noteholder may not pursue any remedy with respect to this Indenture or the Notes unless: (1) the Holder gives to the Trustee written notice of a continuing Event of Default; (2) the Holders of at least 25% in aggregate principal amount of the Notes at the time outstanding make a written request to the Trustee to pursue the remedy; (3) such Holder or Holders offer to the Trustee reasonable indemnity against any loss, liability or expense; (4) the Trustee does not comply with the request within 30 days after receipt of the notice, the request and the offer of indemnity; and (5) the Holders of a majority in aggregate principal amount of the Notes at the time outstanding do not give the Trustee a direction inconsistent with the request during such 30-day period. 48 56 A Noteholder may not use this Indenture to prejudice the rights of any other Noteholder or to obtain a preference or priority over any other Noteholder. Section 707 Rights of Holders to Receive Payment. Notwithstanding any other provisions of this Indenture, the right of any Holder to receive payment of the principal amount, premium, if any, or interest, in respect of the Notes held by such Holder, on or after the respective due dates expressed in the Notes, any Redemption Date, any Change in Control Payment Date or any Asset Sale Payment Date, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected adversely without the consent of each such Holder. Section 808 Collection Suit by Trustee. If an Event of Default described in Section 6.01(1) hereof occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company, any Guarantor or any other obligor on the Notes for the whole amount owing with respect to the Notes and the amounts provided for in Section 7.07 hereof. Section 909 Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company, any Guarantor or any other obligor upon the Notes or their respective properties, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise: (1) to file and prove a claim for the whole amount of the principal amount, premium, if any, and interest on the Notes and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and 49 57 of the Holders allowed in such judicial proceeding; and (2) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 1010 Priorities. If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order: First: to the Trustee for amounts due under Section 7.07 hereof; Second: to Noteholders for amounts due and unpaid on the Notes for principal, premium, if any, and interest, ratably, without preference or priority of any kind, according to such amounts due and payable on the Notes; and Third: the balance, if any, to the Company, or its designee. The Trustee may fix a record date and payment date for any payment to Noteholders pursuant to this Section 6.10. 50 58 Section 1111 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07, or a suit by Holders of more than 10% in aggregate principal amount of the Notes at the time outstanding. ARTICLE VII TRUSTEE Section 101 Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise its rights and powers and use the same degree of care and skill in their exercise as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (1) The Trustee need perform only those duties that are specifically set forth in this Indenture and no others. (2) In the absence of bad faith on its part, the Trustee may conclusively rely as to the truth of the statements and the correctness of the opinions expressed therein upon certificates or opinions furnished to the Trustee and conforming to the 51 59 requirements of this Indenture. The Trustee, however, shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) This paragraph does not limit the effect of paragraph (b) of this Section 7.01. (2) The Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. (3) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01. (e) The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability, expense or fee. (f) The Trustee shall not be liable for interest on any money received by it. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. 52 60 Sectin 202 Rights of Trustee. Subject to Section 7.01: (1) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (2) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel, which shall conform to Section 12.05. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Certificate or Opinion. (3) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (4) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers. Section 303 Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to Sections 7.10 and 7.11. Section 404 Trustee's Disclaimer. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes, and it shall not be responsible for any statement in the Notes other than its certificate of authentication. 53 61 Section 505 Notice of Defaults or Events of Default. If a Default or an Event of Default occurs and is continuing and if it is actually known to a Trust Officer of the Trustee, the Trustee shall mail to each Noteholder notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or an Event of Default in payment of any Note, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Noteholders. Secton 606 Reports by Trustee to Holders. Within 60 days after each May 15 beginning with May 15, 1994, the Trustee shall mail to each Noteholder a brief report dated as of such May 15 that complies with TIA Section 313(a). The Trustee also shall comply with TIA Section 313(b)(2) and (c). A copy of each report at the time of its mailing to Noteholders shall be filed with the SEC and each stock exchange on which the Notes are listed. The Company agrees to notify the Trustee whenever the Notes become listed on any stock exchange. Section 707 Compensation and Indemnity. The Company shall pay to the Trustee from time to time reasonable compensation for its services (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust). The Company shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances incurred or made by it. Such expenses may include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee, its agents, employees, officers, directors and stockholders for, and hold them harmless against, any loss, liability or expense incurred by them in connection with their duties under this Indenture. The Trustee shall notify the Company promptly of any claim asserted against the Trustee for which it may seek indemnity. 54 62 The Company need not reimburse the Trustee for any expense or indemnify it against any loss or liability incurred by it through its negligence or bad faith. To secure the Company's payment obligations in this Section, the Trustee shall have a lien prior to the Notes on all money or property held or collected by the Trustee, except such money or property held in trust to pay principal and interest on particular Notes. Section 808 Replacement of Trustee. The Trustee may at any time resign by so notifying the Company. The Holders of a majority in principal amount of the Notes then outstanding may remove the Trustee by so notifying the removed Trustee and the Company and may appoint a successor Trustee with the Company's written consent. A resignation or removal of the Trustee and the appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Company may remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged a bankrupt or an insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least a majority in principal amount of the Notes then outstanding may petition any court of competent jurisdiction for the appointment of a successor Trustee. 55 63 If the Trustee fails to comply with Section 7.10, any Noteholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall, upon payment of its charges, transfer all property held by it as Trustee to the successor Trustee, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Noteholder. Section 909 Successor Trustee by Merger, etc. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust assets to, another corporation, the successor corporation without any further act shall be the successor Trustee. Section 1010 Eligibility; Disqualification. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. The Trustee is subject to TIA Section 310(b), provided, however, that there shall be excluded from the operation of TIA Section 310(b)(1) any indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Company are outstanding, if the requirements for such exclusion set forth in TIA Section 310(b)(1) are met. Section 1111 Preferential Collection of Claims against Company. The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. 56 64 ARTICLE VIII SATISFACTION AND DISCHARGE OF INDENTURE Section 101 Termination of Company's Obligations. The Company may terminate all of its obligations under the Notes and this Indenture, and the obligations of the Guarantors shall terminate, if all Notes previously authenticated and delivered (other than destroyed, lost or stolen Notes which have been replaced or paid) have been delivered to the Trustee for cancellation and the Company has paid all sums payable by it hereunder. In addition, the Company may elect to have either paragraph (a) or (b) below applied to the outstanding Notes upon compliance with the conditions set forth in paragraph (c) below. (a) Upon exercise of the option applicable to this paragraph (a), the Company and each Guarantor shall be deemed to have been released and discharged from their obligations with respect to the outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, "legal defeasance"). For this purpose, such legal defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of the Sections of and matters under this Indenture referred to in (i) and (ii) below, and to have satisfied all their other obligations under such Notes and this Indenture insofar as such Notes are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (i) the rights of Holders of outstanding Notes to receive solely from the trust fund described in paragraph (c) below and as more fully set forth in such paragraph, payments in respect of the principal of, premium, if 57 65 any, and interest on such Notes when such payments are due, (ii) the Company's obligations and, to the extent applicable, the Guarantors' obligations with respect to such Notes under Sections 2.06, 2.07 and 4.02, and, with respect to the Trustee, under Sections 7.07 and 8.03, (iii) the rights, powers, trusts, duties and immunities of the Trustee hereunder and (iv) this Section 8.01. Subject to compliance with this Section 8.01, the Company may exercise its option under this paragraph (a) notwithstanding the prior exercise of its option under paragraph (b) below with respect to the Notes. (b) Upon exercise of the option applicable to this paragraph (b), the Company and, to the extent applicable, each Guarantor shall be released and discharged from their obligations under any covenant contained in Article 5 and in Sections 4.03 through 4.07 and 4.09 through 4.14 with respect to the outstanding Notes on and after the date the conditions set forth below are satisfied (hereinafter, "covenant defeasance"), and the Notes shall thereafter be deemed to be not "outstanding" for the purpose of any direction, waiver, consent or declaration or act of Holders of Notes (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder. For this purpose, such covenant defeasance means that, with respect to the outstanding Notes, the Company and each Guarantor may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or 58 66 an Event of Default under Section 6.01, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. (c) The following shall be the conditions to the application of either paragraph (a) or (b) above to the outstanding Notes: (1) the Company irrevocably deposits in trust with the Trustee money or U.S. Government Obligations, sufficient to pay (upon initial deposit without need for reinvestment) principal and interest on the Notes to maturity or redemption, as the case may be, and to pay all other sums payable by it hereunder; (2) the Company has delivered to the Trustee an Officers' Certificate stating that (A) all conditions precedent provided for relating to either the legal defeasance under paragraph (a) above or the covenant defeasance under paragraph (b) above, as the case may be, have been complied with and (B) if any other Indebtedness of the Company shall then be outstanding or committed, such legal defeasance or covenant defeasance will not violate the provisions of the agreements or instruments evidencing such Indebtedness; (3) no Default or Event of Default shall have occurred and be continuing on the date of such deposit; (4) such legal defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a Default or Event of Default under, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound; 59 67 (5) in the case of an election under paragraph (a) above, the Company shall have delivered to the Trustee an Opinion of Counsel from nationally recognized counsel acceptable to the Trustee stating that (a) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the date of this Indenture, there has been a change in the applicable Federal income tax law, in either case to the effect that the Holders of the outstanding Notes will not recognize income, gain or loss for Federal income tax purposes as a result of such legal defeasance and will be subject to Federal income tax on the same amount and in the same manner and at the same time as would have been the case if such legal defeasance had not occurred; and (6) in the case of an election under paragraph (b) above, the Company shall have delivered to the Trustee an Opinion of Counsel from nationally recognized counsel acceptable to the Trustee to the effect that the Holders of the outstanding Notes will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amount and in the same manner and at the same time as would have been the case if such covenant defeasance had not occurred. After such irrevocable deposit, the Trustee upon request shall acknowledge in writing the discharge of the Company's and the Guarantors' obligations under the Notes, the Guarantee and this Indenture except for those surviving obligations specified above. In order to have money available on a payment date to pay principal or interest on the Notes, the U.S. 60 68 Government Obligations shall be payable as to principal of or interest on or before such payment date in such amounts as will provide the necessary money. "U.S. Government Obligations" means direct obligations of the United States for the payment of which the full faith and credit of the United States is pledged. Section 202 Application of Trust Money. The Trustee shall hold in trust money or U.S. Government Obligations deposited with it pursuant to Section 8.01. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal and interest on the Notes. Section 303 Repayment to Company. The Trustee and the Paying Agent shall promptly pay to the Company upon request any excess money or U.S. Government Obligations held by them at any time. The Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest on the Notes that remains unclaimed for two years, provided that the Company shall have first caused notice of such payment to be published once in a newspaper of general circulation in the City of New York or mailed by certified mail to each Noteholder entitled thereto no less than 30 days prior to such repayment. After that, Noteholders entitled to the money must look to the Company or the Guarantors for payment as general creditors unless otherwise provided by law. Section 404 Reinstatement. If the Trustee or the Paying Agent is unable to apply any money in accordance with Section 8.02 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's and the Guarantors' obligations under this Indenture, the Notes and the Guarantee shall be revived and reinstated as though no deposit had occurred 61 69 pursuant to Section 8.01 until such time as the Trustee or the Paying Agent is permitted to apply all such money in accordance with Section 8.02; provided that, if the Company has made any payment of interest on or principal of any Note because of the reinstatement of its obligations, the Company or the Guarantors shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or the Paying Agent. ARTICLE IX AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 101 Without Consent of Holders. The Company and the Trustee may amend this Indenture or the Notes without notice to or consent of any Noteholder: (1) to comply with Article Five; (2) to provide for uncertificated Notes in addition to or in place of certificated Notes; (3) to cure any ambiguity, defect or inconsistency, or to make any other change that does not adversely affect the rights of any Noteholder; or (4) to comply with the TIA. Section 202 With Consent of Holders. The Company and the Trustee may amend this Indenture or the Notes with the written consent of the Holders of a majority in principal amount of the Notes then outstanding. The Holders of a majority in principal amount of the Notes then outstanding may waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, without the consent of each Noteholder affected, an amendment, supplement or waiver, including a waiver pursuant to Section 6.04, may not: 62 70 (1) reduce the principal amount of Notes whose Holders must consent to an amendment or waiver; (2) reduce the rate of or extend the time for payment of interest on any Note; (3) reduce the principal of or change the fixed maturity of any Note or alter the redemption provisions with respect thereto; (4) waive a default in the payment of the principal of (or premium, if any, on) or interest on any Note (including any payment required pursuant to Sections 4.08 and 4.09); (5) make any Note payable in money other than that stated in the Note; (6) make any change in Section 6.04 or 6.07 or the third sentence of this Section; or (7) make any change in Section 4.08 or 4.09 hereof. Any amendment shall be effective upon certification to the Trustee by the Company or an agent of the Company that such amendment has been authorized by the Company and that the consent of the majority of an aggregate principal amount of the Notes has been obtained, unless such consents specify that they shall become effective at a later date, in which case such amendment shall become effective in accordance with the terms of such consent. After an amendment or waiver under this Section becomes effective, the Company shall mail to Noteholders a notice briefly describing the amendment. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any supplemental indenture. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, supplement or waiver, but 63 71 it shall be sufficient if such consent approves the substance thereof. Section 303 Compliance with Trust Indenture Act. Every amendment to or supplement of this Indenture or the Notes shall comply with the TIA as then in effect. Section 404 Revocation and Effect of Consents. Until an amendment, supplement, waiver, or other action becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note even if notation of the consent is not made on any Note. Any such Holder or subsequent Holder, however, may revoke the consent as to his Note or portion of a Note if the Trustee receives the notice of revocation before the date the amendment, supplement, waiver or other action becomes effective. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to revoke any consent previously given, whether or not such persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date. After an amendment, supplement, waiver or other action becomes effective, it shall bind every Noteholder, unless it makes a change described in any of clauses (1) through (7) of Section 9.02. In that case the amendment, supplement, waiver or other action shall bind each Holder of a Note who has consented to it and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note. 64 72 Section 505 Notation on or Exchange of Notes. If an amendment, supplement or waiver changes the terms of a Note, the Trustee may request the Holder of the Note to deliver it to the Trustee. The Trustee may place an appropriate notation on the Note about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determine, the Company in exchange for the Note shall issue and the Trustee shall authenticate a new Note that reflects the changed terms. Section 606 Trustee to Sign Amendments, etc. The Trustee shall sign any amendment or supplement authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing or refusing to sign such amendment or supplement the Trustee shall be entitled to receive and, subject to Section 7.01, shall be fully protected in relying upon, an Opinion of Counsel stating that such amendment or supplement is authorized or permitted by this Indenture. The Company may not sign an amendment or supplement until the Board of Directors approves it. ARTICLE X SUBORDINATION Section 101 Agreement to Subordinate. The Company agrees, and each Noteholder by accepting a Note agrees, that the Indebtedness evidenced by the Notes (including principal, premium, if any, and interest) is subordinated in right of payment, to the extent and in the manner provided in this Article 10, to the prior payment in full of all Senior Indebtedness, and that the subordination is for the benefit of the holders of the Senior Indebtedness. Section 202 Liquidation; Dissolution; Bankruptcy. Upon any distribution to creditors of the Company in a total or partial liquidation or any dissolu- 65 73 tion or winding up of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property or in an assignment for the benefit of creditors or any marshalling of the assets and liabilities of the Company, whether voluntary or involuntary: (1) holders of Senior Indebtedness shall be entitled to receive payment in full in cash of the principal and interest (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Indebtedness, whether or not such interest is allowed as a claim after commencement of any such proceeding) to the date of payment on the Senior Indebtedness before Noteholders shall be entitled to receive any payment of principal of, interest on or otherwise in respect of the Notes; and (2) until the Senior Indebtedness (as provided in subsection (1) above) is paid in full in cash, any distribution to which Noteholders would be entitled but for this Article 10 (including any payment which may be payable by reason of the payment of any other Indebtedness of the Company being subordinated to the payment of the Notes) shall be made to holders of Senior Indebtedness, as their interests may appear, except that Noteholders may receive Capital Stock or securities that are subordinated, to at least the same extent as the Notes, to (a) Senior Indebtedness and (b) any securities issued in exchange for Senior Indebtedness. For purposes of this Article 10, a distribution may consist of cash, securities or other property, by setoff or otherwise. Section 303 Default on Senior Indebtedness. Upon the final maturity of any Senior Indebtedness by lapse of time, acceleration or otherwise, all such Senior Indebtedness shall first be paid in full or 66 74 such payment duly provided for in cash or in a manner satisfactory to the holders of such Senior Indebtedness, before any payment is made by the Company or any person acting on behalf of the Company on account of the principal, interest or other charges in respect of the Notes. The Company may not pay principal of or interest on the Notes or make any other direct or indirect payment or distribution on or in respect of the Notes (including any payment which may be payable by reason of the payment of any other Indebtedness of the Company being subordinated to the payment of the Notes) and may not acquire any Notes for cash or property (other than Capital Stock of the Company or other securities of the Company that are subordinated, to at least the same extent as the Notes, to (a) Senior Indebtedness and (b) any securities issued in exchange for Senior Indebtedness) if: (1) a default in the payment of the principal of or interest on any Specified Senior Indebtedness occurs and is continuing that then permits the holders (or the agent) of such Specified Senior Indebtedness to accelerate its maturity or on the basis of which the maturity of such Specified Senior Indebtedness has been accelerated; or (2) a default, other than a payment default, on any Specified Senior Indebtedness occurs and is continuing that then permits the holders (or the agent) of such Specified Senior Indebtedness to accelerate its maturity, and either such default is the subject of judicial proceedings or the Trustee or Paying Agent receives a notice of the default from a person who may give it pursuant to Section 10.11 hereof at least two business days prior to the relevant payment date. If the Company receives any such notice, a subsequent notice received within 365 days thereafter shall not be effective for purposes of this Section 10.03(2). No non-payment default which existed or was continuing on the date of delivery of any such notice shall be, or be made, the basis for a sub- 67 75 sequent notice unless such default shall have been cured or waived for a period of not less than 90 days. The Company shall resume payments on the Notes (including any missed payments and interest thereon) and may acquire them upon the earlier of: (a) the default under Specified Senior Indebtedness is cured or waived, or (b) in the case of a default referred to in Section 10.03(2) above, 179 days pass after the notice is given if the default is not the subject of judicial proceedings, if this Article 10 otherwise permits the payment or acquisition at that time. Secton 404 Acceleration of Notes. If payment of the Notes is accelerated because of an Event of Default, the Company shall immediately notify holders of Senior Indebtedness of the acceleration. The Company may pay the Notes three business days after the delivery of the acceleration notice if this Article 10 permits the payment at that time; provided, however, that if no Senior Indebtedness is outstanding at the time of such acceleration, the Company shall pay the Notes in accordance with the provisions of Article 6 hereof. Section 505 When Distribution Must Be Paid Over. In the event that the Company shall make any payment to the Trustee on account of the principal and interest on the Notes at a time when such payment is prohibited by Section 10.02 or 10.03 hereof and the Trustee has received notice thereof, such payment shall be held by the Trustee, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to, the holders of Senior Indebtedness (pro rata as to each of such holders on the basis of the respective amounts of Senior Indebtedness held by them) or their representative, as their respective interests may appear, for application to the payment of all Senior Indebtedness in full in accordance with their terms, after giving 68 76 effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. If a distribution is made to Noteholders that because of this Article 10 should not have been made to them, the Noteholders who receive the distribution shall hold it in trust for holders of Senior Indebtedness (pro rata as to each of such holders on the basis of the respective amounts of Senior Indebtedness held by them) or their representative, as their respective interests may appear, for application to the payment of all Senior Indebtedness remaining unpaid to the extent necessary to pay all Senior Indebtedness in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. Section 606 Notice by the Company. The Company shall promptly notify the Trustee and the Paying Agent of any facts known to the Company that would cause a payment of principal of or interest on the Notes to violate this Article 10, but failure to give such notice shall not affect the subordination of the Notes to the Senior Indebtedness provided in this Article 10. Nothing in this Article 10 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. Section 707 Subrogation. After all Senior Indebtedness is paid in full and until the Notes are paid in full, Noteholders shall be subrogated (equally and ratably with all other Indebtedness pari passu with the Notes, if any) to the rights of holders of Senior Indebtedness to receive distributions applicable to Senior Indebtedness. A distribution made under this Article 10 to holders of Senior Indebtedness which otherwise would have been made to Noteholders is not, as between the Company and the Noteholders, a payment by the Company on Senior Indebtedness. Section 808 Relative Rights. This Article 10 defines the relative rights of Noteholders and holders of Senior Indebtedness. Nothing in this Indenture shall: 69 77 (1) impair, as between the Company and Noteholders, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Notes in accordance with their terms; (2) affect the relative rights of Noteholders and creditors of the Company other than holders of Senior Indebtedness; or (3) prevent the Trustee or any Noteholder from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders of Senior Indebtedness to receive distributions otherwise payable to Noteholders. If the Company fails because of this Article 10 to pay principal of or interest on a Note on the due date, the failure is still a Default or Event of Default. Notwithstanding the foregoing, any acceleration of the maturity of the Notes due to the default by the Company to make a payment required by Sections 6.01(1) and (2) hereof resulting from the operation of Section 10.03 hereof shall be automatically rescinded to the extent permitted by applicable law and all Events of Default which permitted the acceleration of the Notes or the pursuit of other remedies hereunder and under applicable law shall be deemed to be automatically and permanently cured to the extent permitted by applicable law if (i) all defaults on Specified Senior Indebtedness are permanently cured or waived and (ii) the payment or payments, the omission of which gave rise to the Event of Default, is or are made within 179 days after the date on which the Trustee or the Paying Agent received notice of the default or defaults on the Specified Senior Indebtedness; and provided further that at the time of such automatic rescission no other Event of Default or Defaults shall have occurred and be continuing. Such automatic rescission shall be effective as of the date both conditions specified in clauses (i) and (ii) above are satisfied. Section 909 Subordination May Not Be Impaired by the Company. No right of any holder of Senior Indebtedness to enforce the subordination of the Indebtedness evi- 70 78 denced by the Notes shall be impaired by any act or failure to act by the Company or by its failure to comply with this Indenture. Section 1010 Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness, the distribution may be made and the notice given to their representative. Upon any payment or distribution of assets of the Company referred to in this Article 10, the Trustee and the Noteholders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such representative or of the liquidating trustee or agent or other person making any distribution to the Trustee or to the Noteholders for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. Section 1111 Rights of Trustee and Paying Agent. The Trustee or Paying Agent may continue to make payments on the Notes until it receives notice of facts that would cause the payment of principal of or interest on the Notes to violate this Article 10. Only the Company or a representative or a holder of Senior Indebtedness may give the notice. The Trustee in its individual or any other capacity may hold Senior Indebtedness with the same rights it would have it if were not Trustee. Section 1212 Authorization to Effect Subordination. Each Holder of a Note by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 10, and appoints the Trustee as attorney-in-fact for any and all purposes. 71 79 Section 1313 Miscellaneous. (a) All rights and interests under this Article 10 of the holders of Specified Senior Indebtedness and Senior Indebtedness, and all agreements and obligations of the Holders, the Trustee and the Company under this Article 10, shall remain in full force and effect irrespective of: (i) any lack of validity or enforceability of the Senior Credit Facility, the notes or security instruments issued pursuant thereto or any other agreement or instrument relating thereto; (ii) any exchange, release or non-perfection of any Lien securing Senior Indebtedness, or any sale of or realization upon any property subject to such Lien, or any release or amendment or waiver of or consent to departure from any guarantee, for all or any of the Senior Indebtedness; (iii) any change in the manner, place or terms of payment or extension of the time of payment of, or renewal or alteration or increase of, Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (iv) any release of any Person liable in any manner for the collection of Senior Indebtedness; (v) any exercise or failure to exercise any rights against the Company and any other Person; or (vi) any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Company in respect of Senior Indebtedness or the Trustee in respect of this Indenture. (b) The provisions of this Article 10 constitute a continuing agreement and shall (i) remain in full force and effect until the Senior Indebtedness shall 72 80 have been paid in full in cash, (ii) be binding upon the holders and the Trustee, the Company and their successors and assigns, and (iii) inure to the benefit of and be enforceable by each other holder of Specified Senior Indebtedness and Senior Indebtedness and their successors, transferees and assigns. ARTICLE XI GUARANTEE OF SECURITIES Section 101 Guarantee. Subject to the provisions of this Article 11, each Guarantor hereby guarantees, on a senior subordinated basis, to each Holder of a Note authenticated and delivered by the Trustee (i) the due and punctual payment of the principal of, premium, if any, and interest on such Note, when and as the same shall become due and payable, whether at maturity, by acceleration or otherwise, the due and punctual payment of interest on the overdue principal of, and interest on, the Note, to the extent lawful, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms of such Note and of this Indenture, and (ii) in the case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, at stated maturity, by acceleration or otherwise. In case of the failure of the Company punctually to make any such payment of principal or interest, each Guarantor hereby agrees to cause any such payment to be made punctually when and as the same shall become due and payable, whether at maturity, by acceleration or otherwise, and as if such payment were made by the Company. Each Guarantor hereby agrees that its obligations hereunder shall be absolute and unconditional, irrespective of, and shall be unaffected by, any invalidity, irregularity or unenforceability of any such Note or this Indenture, any failure to enforce the provisions of any such Note or this Indenture, any waiver, modification or indulgence granted to the Company with respect thereto, by the Holder of such Note or the Trustee, or any 73 81 other circumstances which may otherwise constitute a legal or equitable discharge of a surety or guarantor. Each Guarantor hereby waives diligence, presentment, filing of claims with a court in the event of merger or bankruptcy of the Company, any right to require a proceeding first against the Company, the benefit of discussion, protest or notice with respect to any such Note or the Indebtedness evidenced thereby and all demands whatsoever, and covenants that the Guarantees will not be discharged as to any such Note except by payment in full of the principal thereof and interest thereon and as provided in Sections 8.01 and 11.03. Each Guarantor further agrees that, as between such Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (i) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of the Guarantees, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (ii) in the event of any declarations of acceleration of such obligations as provided in Article 6 hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by such Guarantor for the purpose of the Guarantees. In addition, without limiting the foregoing provisions, upon the effectiveness of an acceleration under Article 6, the Trustee shall promptly make a demand for payment on the Notes under each Guarantee provided for in this Article 11 and not discharged. The Guarantor shall be subrogated to all rights of the Holders against the Company in respect of any amounts paid by the Guarantor pursuant to the provisions of the Guarantee or this Indenture; provided, however, that the Guarantor shall not be entitled to enforce or to receive any payments arising out of, or based upon, such right of subrogation until the principal of and interest on all Notes issued hereunder shall have been paid in full. Section 202 Agreement to Subordinate. Each Guarantor agrees, and each Noteholder by accepting a Note agrees, that all payments pursuant to the Guarantee by such Guarantor are subordinated in right of payment to the prior payment in full of all Senior Indebtedness of the Guarantors, to the same extent and manner that all payments pursuant to the Notes are subor- 74 82 dinated in right of payment to the prior payment in full of all Senior Indebtedness of the Company. This Section 11.02 is intended to be for the benefit of the holders of Senior Indebtedness of the Guarantors. "Senior Indebtedness of the Guarantor" means, with respect to any Guarantor, the principal of, premium, if any, and accrued and unpaid interest on Indebtedness of the Guarantor, contingent or otherwise, in respect of borrowed money or otherwise, whether outstanding on the date of the Indenture or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Guarantee. Notwithstanding the foregoing, "Senior Indebtedness of the Guarantor" shall not include (i) Indebtedness that is expressly subordinate or junior in right of payment to any Indebtedness of such Guarantor, (ii) any liability for federal, state, local or other taxes owed or owing by such Guarantor, (iii) Indebtedness of or amounts owed by such Guarantor for compensation to employees and for services, (iv) Indebtedness of such Guarantor to a Subsidiary of the Company or any other Affiliate of the Company or any of such Affiliate's subsidiaries, (v) amounts owing under leases (other than Capital Lease Obligations) and (vi) any Indebtedness which at the time of issuance is issued in violation of this Indenture (but, as to any such Indebtedness, no such violation shall be deemed to exist for purposes of this definition if the holder(s) of such obligation or their representative or the Company shall have furnished to the Trustee an opinion of independent legal counsel unqualified in all material respects, addressed to the Trustee (which legal counsel may, as to matters of fact, rely upon an officers' certificate of the Company) to the effect that the incurrence of such Indebtedness does not violate the provisions of the Indenture). Section 303 Release of Guarantor. A Guarantor shall be released from all of its obligations under its Guarantee if all or substantially all of its assets are sold or all of its Capital Stock are sold, in each case in a transaction in compliance with Section 4.09 hereof, or the Guarantor merges with or 75 83 into or consolidates with, or transfers all or substantially all of its assets to, the Company or another Guarantor in a transaction in compliance with Article 5 hereof, and such Guarantor has delivered to the Trustee an Officers' Certificate and Opinion of Counsel, each stating that all conditions precedent herein provided for relating to such transaction have been complied with. Section 404 Limitation on Guarantee. Notwithstanding the other provisions of this Article 11, the maximum liability of a Guarantor pursuant to its Guarantee shall in no event exceed the Maximum Guaranteed Amount (as defined below). The "Maximum Guaranteed Amount" with respect to a Guarantor shall mean the greater of: (i) the amount received by such Guarantor in respect of all loans, advances or capital contributions made to such Guarantor with proceeds from the Notes ("Note Proceeds"); all debts and/or equity securities of such Guarantor acquired, repaid, redeemed or otherwise discharged with Note Proceeds; and the fair market value of all property acquired with Note Proceeds and transferred to such Guarantor; and (ii) ninety-five percent (95%) of the Adjusted Net Worth of such Guarantor as of the earlier of (A) the date of the commencement of a case under Title 11 of the United States Code in which such Guarantor is a debtor or (B) the date enforcement hereunder is sought (the "Guarantee Date"). The "Adjusted Net Worth" of a Guarantor as of the Guarantee Date shall mean the excess of (a) the amount of the fair saleable value of the assets of such Guarantor as of such date determined in accordance with applicable Federal and state laws governing determinations of the insolvency of debtors over (b) the amount of all liabilities of such Guarantor, contingent or otherwise, as of the Guarantee Date, determined on the basis provided in clause (a) above (excluding all liabilities under the Guarantees). 76 84 Section 505 Successors. The Guarantee shall be binding upon each Guarantor and its successors and assigns and shall inure to the benefit of the successors and assigns of the Holders and, in the event of any transfer or assignment of rights by any Holder, the rights and privileges herein conferred upon the party shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. ARTICLE XII MISCELLANEOUS Section 101 Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. Section 202 Notices. Any notice or communication shall be given in writing and delivered in person or by telex, by telecopier or registered or certified mail, postage prepaid, return receipt requested, addressed as follows: if to the Company or any Guarantor: c/o NewCity Communications, Inc. 10 Middle Street Bridgeport, Connecticut 06604-4277 Attention: President 77 85 if to the Trustee: Shawmut Bank Connecticut, National Association 777 Main Street Hartford, Connecticut 06115 Attention: Corporate Trust Administration Any notice or communication to the Company, any Guarantor or the Trustee shall be deemed to have been given or made as of the date so delivered if personally delivered; when answered back, if telexed; when receipt is acknowledged, if telecopied; and five calendar days after mailing if sent by registered or certified mail (except that a notice of change of address shall not be deemed to have been given until actually received by the addressee and except that a mailed notice to the Trustee shall not be deemed to have been given until actually received by the Trustee). The Company, the Guarantors or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Noteholder shall be mailed by first-class mail or other equivalent means to his address shown on the register kept by the Registrar. Failure to mail a notice or communication to a Noteholder or any defect in it shall not affect its sufficiency with respect to other Noteholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. If the Company or any Guarantor mails a notice or communication to Noteholders, it shall mail a copy to the Trustee and each agent at the same time. In case by reason of the suspension of regular mail service, or by reason of any other cause, it shall be impossible to mail any notice as required by this Indenture, then such method of notification as shall be made with the approval of the Trustee shall constitute a sufficient mailing of such notice. 78 86 Section 303 Communication by Holders with Other Holders. Noteholders may communicate pursuant to TIA Section 312(b) with other Noteholders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). Section 404 Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate (which shall include the statements set forth in Section 12.05) stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel (which shall include the statements set forth in Section 12.05) stating that, in the opinion of such counsel, all such conditions precedent have been complied with. Setion 505 Statements Required in Certificate or Opinion. Each Officers' Certificate and Opinion of Counsel with respect to compliance with a condition or covenant provided for in this Indenture shall include: (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; 79 87 (3) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such person, such covenant or condition has been complied with; provided, however, that with respect to matters of law, an Officers' Certificate may be based upon an Opinion of Counsel, unless the signers know that such Opinion of Counsel is erroneous, and provided, further, that with respect to matters of fact, an Opinion of Counsel may rely on an Officers' Certificate or certificates of public officials, unless the signer knows that any such document is erroneous. Section 606 When Treasury Notes Disregarded. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, any Guarantor or any other obligor on the Notes or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, such Guarantor or such obligor shall be disregarded, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes which the Trustee knows are so owned shall be so disregarded. Notes so owned which have been pledged in good faith shall not be disregarded if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to the Notes and that the pledgee is not the Company, a Guarantor or any other obligor upon the Notes or any person directly or indirectly controlling or controlled by or under direct common control with the Company, such Guarantor or such obligor. Section 707 Rules by Trustee and Agents. The Trustee may make reasonable rules for action by or at a meeting of Noteholders. The Registrar 80 88 or Paying Agent may make reasonable rules and set reasonable requirements for its functions. Section 808 Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday, a legal holiday or a day on which banking institutions are not required to be open in either the State of New York or the State of Connecticut. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. Section 909 Governing Law. The laws of the State of New York shall govern this Indenture and the Notes and Guarantees, without regard to conflicts of laws and rules thereof. Section 1010 No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or a Subsidiary. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. Secton 1111 No Recourse against Others. No stockholder, officer, director or incorporator, as such, past, present or future, of the Company or any Guarantor shall have any personal liability under the Notes or the Guarantee by reason of his or its status as such stockholder, officer, director or incorporator. Each Noteholder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes and the Guarantee. Section 1212 Successors. All agreements of the Company or a Guarantor in this Indenture, the Notes and the Guarantee shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor. 81 89 Section 1313 Multiple Counterparts. The parties may sign multiple counterparts of this Indenture. Each signed counterpart shall be deemed an original, but all of them together represent the same agreement. Section 1414 Table of Contents, Headings, etc. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. Section 1515 Severability. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 82 90 SIGNATURES NEWCITY COMMUNICATIONS, INC. as Issuer (SEAL) By:/s/ John Riccardi ------------------------------------------ Title: VP-CFO Attest: /s/ James T. Morley - ---------------------------- NEWCITY BROADCASTING COMPANY, INC. NEWCITY COMMUNICATIONS OF ALABAMA, INC. NEWCITY COMMUNICATIONS OF ATLANTA, INC. NEWCITY COMMUNICATIONS OF CONNECTICUT, INC. NEWCITY COMMUNICATIONS OF DAYTONA, INC. NEWCITY COMMUNICATIONS OF FLORIDA, INC. NEWCITY COMMUNICATIONS OF FULTON, INC. NEWCITY COMMUNICATIONS OF MASSACHUSETTS,INC. NEWCITY COMMUNICATIONS OF SAN ANTONIO, INC. NEWCITY COMMUNICATIONS OF SYRACUSE, INC. NEWCITY COMMUNICATIONS OF TULSA, INC. BIRMINGHAM COMMUNICATIONS,INC. NEWCITY TULSA TOWER, INC. as Guarantors By:/s/ John Riccardi ------------------------------------------ Title: Treasurer VP-CFO Attest: /s/ James T. Morley - ---------------------------- AMERICAN COMEDY NETWORK, INC. COMMERCIALWORKS, INC. PARKCITY PRODUCTIONS, INC. as Guarantors By:/s/ John Riccardi ------------------------------------------ Title: VP-CFO Treasurer Attest: /s/ James T. Morley - ---------------------------- 83 91 SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION as Trustee (SEAL) By:/s/ E.C. Hammer ------------------------------------------ Title: Vice President Attest: /s/ Michelle K. Belzard - ---------------------------- 84 EX-21 5 SUBSIDIARIES OF THE REGISRANT 1 EXHIBIT 21 Subsidiaries of Cox Radio, Inc.(1) Cox Kentucky, Inc. KFI, Inc. WCKG, Inc. WHIO, Inc. WSB, Inc. WWRM, Inc. - ------------ (1) Assumes completion of Cox Radio Consolidation. EX-23.1 6 CONSENT & REPORT ON SCHEDULE OF DELOITTE & TOUCHE 1 INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE To the Board of Directors and Shareholders of Cox Radio, Inc. Atlanta, Georgia We consent to the use in this Registration Statement of Cox Radio, Inc. on Form S-1 of our report dated July 18, 1996 (which expresses an unqualified opinion and includes an explanatory paragraph relating to changes in the methods of accounting for postretirement benefits other than pension, income taxes, and postemployment benefits), appearing in the Prospectus, which is part of this Registration Statement, and to the reference to us under the heading "Experts" in such Prospectus. Our audits of the consolidated financial statements referred to in an aforementioned report also included the consolidated financial statement schedule of Cox Radio, Inc., listed in Item 16(b). This consolidated financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based or our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP Atlanta, Georgia July 24, 1996 EX-23.2 7 CONSENT OF ERNST & YOUNG LLP 1 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and to the use of our report dated March 1, 1996, with respect to the financial statements and schedule of NewCity Communications, Inc. included in the Registration Statement (Form S-1) and related Prospectus of Cox Radio, Inc. for the registration of shares of its common stock. ERNST & YOUNG LLP Stamford, CT July 22, 1996 EX-23.3 8 CONSENT OF DELOITTE & TOUCHE LLP 1 INDEPENDENT AUDITORS CONSENT We consent to the use in this Registration Statement of Cox Radio, Inc. on Form S-1 of our report dated July 19, 1996 (relating to the financial statements of Infinity Holdings Corp. of Orlando), appearing in the Prospectus, which is part of this Registration Statement. We also consent to the reference to us under the heading "Experts" in such Prospectus. DELOITTE & TOUCHE LLP Atlanta, Georgia July 24, 1996 EX-27.1 9 FINANCIAL DATA SCEDULE
5 1,000 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 1,691 0 31,441 774 0 35,647 49,717 (21,697) 191,767 12,075 0 0 0 1 47,169 191,767 123,572 123,572 0 89,962 13,100 0 5,974 14,389 6,226 8,163 0 0 0 8,163 0 0
-----END PRIVACY-ENHANCED MESSAGE-----